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IMTX Immatics

Filed: 31 Jul 20, 4:30pm
Table of Contents

As filed with the Securities and Exchange Commission on July 31, 2020

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Immatics N.V.

(Exact Name of Registrant as specified in its charter)

 

 

 

The Netherlands 2836 Not Applicable
(State or other jurisdiction of
incorporation or organization)
 (Primary Standard Industrial
Classification Code Number)
 (I.R.S. Employer
Identification Number
)

Paul-Ehrlich-Straße 15

72076 Tübingen, Federal Republic of Germany

Tel: +49 (7071) 5397-0

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Edward A. Sturchio

Immatics US, Inc.

2130 W. Holcombe Blvd., Suite 900

Houston, Texas 77030

(281) 810-7545

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Mitchell S. Bloom, Esq.
Edwin M. O’Connor, Esq.
Goodwin Procter LLP
100 Northern Avenue
Boston, Massachusetts 02210
(617) 570-1000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 7(a)(2)(B) of the Securities Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered(1)

 

Proposed

Maximum

Offering Price

Per Security(2)

 

Proposed

Maximum

Aggregate

Offering Price(2)

 

Amount of

Registration Fee

Ordinary shares, nominal value of €0.01 per share

 39,332,281 $10.29 $404,532,510.09 $52,508.32

 

 

(1) 

Represents ordinary shares offered by the selling securityholders identified in this prospectus. Includes an indeterminable number of additional ordinary shares that, pursuant to Rule 416 under the Securities Act of 1933, as amended, may be issued to prevent dilution from stock splits, stock dividends or similar transactions that could affect the ordinary shares to be offered by the selling securityholders.

(2) 

Pursuant to Rule 457(c) under the Securities Act of 1933, as amended, and solely for the purpose of calculating the registration fee, the proposed maximum offering price is $10.29, which is the average of the high and low prices of the registrant’s ordinary shares on July 27, 2020 on The Nasdaq Stock Market LLC.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. Neither we nor the selling securityholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated July 31, 2020

PRELIMINARY PROSPECTUS

Immatics N.V.

 

 

LOGO

39,332,281 ordinary shares

 

 

This prospectus relates to the offer and sale from time to time by the selling securityholders or their permitted transferees (collectively, the “selling securityholders”) of up to 39,332,281 of our ordinary shares, €0.01 nominal value per share. This prospectus also covers any additional securities that may become issuable by reason of share splits, share dividends or other similar transactions.

The shares covered by this prospectus include (i) 28,917,281 ordinary shares issued to certain selling securityholders in connection with the closing of the business combination (the “Business Combination”) between us, ARYA Sciences Acquisition Corp., a Cayman Islands exempted company, Immatics Biotechnologies GmbH, a German limited liability company, Immatics Merger Sub 1, a Cayman Islands exempted company, and Immatics Merger Sub 2, a Cayman Islands exempted company, and (ii)                  10,415,000 ordinary shares issued to certain securityholders in connection with the closing of a private placement offering at a price per share of $10.00, for gross proceeds of approximately $104.2 million, both of which closed on July 1, 2020.

We are registering the offer and sale of the securities described above to satisfy certain registration rights we have granted. We are registering these securities for resale by the selling securityholders named in this prospectus, or their transferees, pledgees, donees or assignees or other successors-in-interest that receive any of the shares as a gift, distribution, or other non-sale related transfer. The selling securityholders may offer all or part of the securities for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. These securities are being registered to permit the selling securityholders to sell securities from time to time, in amounts, at prices and on terms determined at the time of offering. The selling securityholders may sell these securities through ordinary brokerage transactions, directly to market makers of our shares or through any other means described in the section titled “Plan of Distribution”. In connection with any sales of ordinary shares offered hereunder, the selling securityholders, any underwriters, agents, brokers or dealers participating in such sales may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

All of the ordinary shares offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from such sales.

We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “Plan of Distribution”.

Our ordinary shares are listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “IMTX”. On July 30, 2020, the last reported sale price of our ordinary shares as reported on Nasdaq was $11.10 per share.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.

We are an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 and, as such, are subject to reduced public company reporting requirements.

Our principal executive offices are located at Paul-Ehrlich-Straße 15, 72076 Tübingen, Federal Republic of Germany.

 

 

Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of material risks of investing in our securities in “Risk Factors” beginning on page 14 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

Prospectus dated                 , 2020


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TABLE OF CONTENTS

 

PROSPECTUS SUMMARY

   1 

THE OFFERING

   7 

SELECTED CONSOLIDATED HISTORICAL AND OTHER FINANCIAL INFORMATION

   8 

SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

   12 

RISK FACTORS

   14 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

   75 

USE OF PROCEEDS

   77 

DIVIDEND POLICY

   78 

CAPITALIZATION

   79 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

   80 

BUSINESS

   90 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   153 

MANAGEMENT

   169 

EXECUTIVE COMPENSATION

   180 

DESCRIPTION OF SECURITIES

   188 

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

   199 

PRINCIPAL SECURITYHOLDERS

   201 

SELLING SECURITYHOLDERS

   204 

TAXATION

   207 

PLAN OF DISTRIBUTION

   227 

SHARES ELIGIBLE FOR FUTURE SALE

   232 

LEGAL MATTERS

   236 

EXPERTS

   236 

WHERE YOU CAN FIND MORE INFORMATION

   237 

INDEX TO FINANCIAL STATEMENTS

   F-1 

You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. Neither we, nor the selling securityholders, have authorized any other person to provide you with different or additional information. Neither we, nor the selling securityholders, take responsibility for, nor can we provide assurance as to the reliability of, any other information that others may provide. The selling securityholders are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus or such other date stated in this prospectus, and our business, financial condition, results of operations and/or prospects may have changed since those dates.

Except as otherwise set forth in this prospectus, neither we nor the selling securityholders have taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.

 

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IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES

The audited financial statements of Immatics Biotechnologies GmbH are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).

CONVENTIONS THAT APPLY TO THIS PROSPECTUS

In this prospectus, unless otherwise specified or the context otherwise requires:

 

  

“$”, “USD” and “U.S. dollar” each refer to the United States dollar; and

 

  

“€”, “EUR” and “Euro” each refer to the Euro.

The exchange rate used for conversion between U.S. dollars and Euros is based on the ECB euro reference exchange rate published by the European Central Bank.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

The Immatics logoLOGO , Immatics®, XPRESIDENT®, ACTengine®, ACTallo®, ACTolog®, XCEPTOR, TCER, AbsQuant, IMADetect and other trademarks or service marks of Immatics appearing in this prospectus are the property of the company. Solely for convenience, some of the trademarks, service marks, logos and trade names referred to in this prospectus are presented without the ® and symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names. This prospectus contains additional trademarks, service marks and trade names of others. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

 

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PROSPECTUS SUMMARY

This summary highlights certain information about us, this offering and selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in the securities covered by this prospectus. For a more complete understanding of the our company and this offering, we encourage you to read and consider carefully the more detailed information in this prospectus, any related prospectus supplement and any related free writing prospectus, including the information set forth in the section titled “Risk Factors” in this prospectus, any related prospectus supplement and any related free writing prospectus in their entirety before making an investment decision.

Unless otherwise stated or the context otherwise indicates, (i) references to the “company”, “we”, “our” or “us” refer to Immatics N.V., together with its subsidiaries, including Immatics Biotechnologies GmbH; (ii) references to “Immatics” refer solely to Immatics N.V.; and (iii) references to “Immatics OpCo” refer solely to Immatics Biotechnologies GmbH. Immatics N.V. is a Dutch public limited liability company (naamloze vennootschap) incorporated on March 10, 2020 and the holding company of Immatics Biotechnologies GmbH, a German biopharmaceutical company incorporated in 2000 focused on the development of T cell receptor-based immunotherapies for the treatment of cancer. Immatics Biotechnologies GmbH holds all material assets and conducts all business activities and operations of Immatics N.V.

Our Company

We combine the discovery of true targets for cancer immunotherapies with the development of the right T cell receptors (“TCRs”) with the goal of enabling a robust and specific T cell response against these targets. This deep know-how is the foundation for our pipeline of Adoptive Cell Therapies and TCR Bispecifics, as well as for our collaborations with global leaders in the pharmaceutical industry. We are committed to delivering the power of T cells and to unlocking new avenues for patients in our fight against cancer.

Pioneering Therapies

Our pipeline consists of two lead product classes, engineered Adoptive Cell Therapies (ACTengine) and antibody-like TCR Bispecifics (TCER). Each therapeutic modality has distinct attributes to produce the desired therapeutic effect for patients at different disease stages and with different types of tumors focusing on particularly hard-to-treat solid cancers. With this approach, we believe that we are well positioned to expand the potential therapeutic value for patients across a broad range of tumor types and stages. In addition, we are developing strategies designed to advance commercial viability, safety and clinical efficacy via process optimization for Adoptive Cell Therapy (ACT) programs and implementing next-generation ACT approaches including allogeneic cell therapies (ACTallo) and a novel ultra-personalized approach to immunotherapy. We are developing the following product candidates: ACTengine IMA201, IMA202, IMA203 programs are in Phase 1 clinical trials and IMA204 is in preclinical development. In addition, we are developing one preclinical stage ACTallo product candidate (IMA301). ACTolog, currently in a Phase 1 clinical trial, is our clinical pilot trial (IMA101) for multi-target ACT. ACTolog (IMA101) is a clinical pilot trial (not intended to be developed as a product candidate) delivering a proof-of-principle for our next-generation multi-TCR-T approach. Within its TCER modality, we are advancing two preclinical TCR Bispecifics candidates towards the IND stage of development and first-in-human clinical trials, IMA401 and IMA402.

Competitive Advantage

We aim to cover all required areas key to developing effective TCR-based cancer immunotherapies in one company. Our two proprietary technology discovery platforms enabling identification of true targets and



 

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development of right TCRs are a unique strength to this end. We believe that our systematic application of the XPRESIDENT platform over more than a decade has created the largest peptide-HLA (pHLA) target database known in the industry and enables identification of otherwise inaccessible and intracellular drug targets with very high sensitivity. From this large pool of targets, we have recently focused on a prioritized short-list of over 200 cancer targets and have developed an extensive intellectual property portfolio to protect our discoveries. The proprietary XCEPTOR technology platform is designed to facilitate the fast and efficient discovery, engineering and validation of TCRs with high affinity and high specificity and benefits from a unique interplay with the XPRESIDENT target database. We believe that our technology platforms, therapeutic modalities and scientific knowledge provide us with a significant competitive advantage.

Intellectual Property Portfolio

We intend to continue building on our extensive intellectual property portfolio in the field of cancer targets, TCRs and technologies. Our portfolio currently includes over 3,000 worldwide active patent applications and more than 1,550 secured patents, of which over 230 are granted in the United States. We own patent applications directed to its IMA202 (MAGEA1) product candidate and patents and applications directed to its IMA201 (MAGE4/8), IMA203 (PRAME), IMA204 (COL6A3 exon 6), IMA301 (cancer testis antigen), and IMA401 (cancer testis antigen) product candidates. The protection of our assets is a key element of our ability to not only strengthen our product pipeline, but also to successfully defend and expand our position as a leader in the field of TCR therapies.

Collaborations with Global Leaders

The differentiated nature of our discovery programs has been validated by our recent collaborations, including with Amgen, Genmab, Bristol Myers Squibb and GlaxoSmithKline, which involve a total of 10 Immatics targets. We will seek to capitalize on the respective collaborator’s drug development and regulatory expertise and commercial capabilities to bring our collaboration product candidates to market. We do not rely or depend on any of the above-mentioned collaborations, however, and we do not consider them material for our proprietary pipeline. We established material collaborations and/or licenses with MD Anderson Cancer Center, UTHealth and Sanquin and consider them important for further development of our clinical pipeline.

Highly Experienced Global Leadership Team

We have a highly experienced global leadership team that operates seamlessly between our locations in Germany and the United States. Our management consists of an interdisciplinary team that includes medical and scientific experts, as well as accomplished business leaders, and collectively has multiple decades of experience in the pharmaceutical and biotechnology industries. In addition, our management team includes the creators and developers of our core technologies, and benefits from their continued contributions. From its research and development origins in Tübingen, Germany, to its cell therapy research and development and manufacturing center in Houston, Texas, our global team is committed to developing and advancing the our therapeutic pipeline and supporting our collaboration programs to address significant unmet medical needs in oncology.

Recent Developments

Closing of the Business Combination

On July 1, 2020 (the “Closing Date”), we closed the previously announced business combination (the “Business Combination”) pursuant to the Business Combination Agreement, dated as of March 17, 2020, as amended by Amendment No. 1, dated June 7, 2020 (as amended, the “Business Combination Agreement”), by and among Immatics, Immatics OpCo, ARYA Sciences Acquisition Corp., a Cayman Islands exempted company (“ARYA”), Immatics Merger Sub 1, a Cayman Islands exempted company (“ARYA Merger Sub”), and Immatics Merger Sub 2, a Cayman Islands exempted company (“IB Merger Sub”).



 

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On the Closing Date, Immatics issued (i) 52,493,617 ordinary shares to securityholders of Immatics OpCo and ARYA in exchange for their securities in Immatics OpCo and ARYA, and (ii) 7,187,500 public warrants to certain warrant holders of ARYA in exchange for outstanding public warrants of ARYA.

Prior to the Business Combination, Immatics did not conduct any material activities other than those incident to its formation and the matters contemplated by the Business Combination Agreement, such as the making of certain required securities law filings, and the establishment of ARYA Merger Sub and IB Merger Sub. Upon the closing of the Business Combination, Immatics OpCo became the direct, wholly owned subsidiary of Immatics, and holds all material assets and conducts all business activities and operations of Immatics.

Our ordinary shares and public warrants began trading on Nasdaq under the symbols “IMTX” and “IMTXW”, respectively, on July 2, 2020.

PIPE Financing

On March 17, 2020, concurrently with the execution of the Business Combination Agreement, Immatics and ARYA entered into Subscription Agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such PIPE Investors, an aggregate of 10,415,000 ordinary shares (the “PIPE Shares”) at a price of $10.00 per share, for gross proceeds of approximately $104.2 million (the “PIPE Financing”) on the Closing Date, $25.0 million of which was funded by an affiliate of ARYA Sciences Holdings, a Cayman Islands exempted company and an affiliate of ARYA (the “ARYA Sponsor”). The PIPE Financing closed concurrently with the Business Combination.

The PIPE Shares were not registered under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Regulation D or Regulation S promulgated thereunder without any form of general solicitation or general advertising.

Coronavirus (COVID-19) Pandemic

On January 30, 2020, the World Health Organization declared the outbreak of coronavirus (“COVID-19”) to be a public health emergency of international concern. The COVID-19 outbreak has severely restricted the level of economic activity around the world. In response to this coronavirus outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes.

We are monitoring developments surrounding the COVID-19 pandemic and have taken steps to identify and mitigate the adverse effects and risks to the company as a result of the pandemic. As a result, we have modified our business practices, including implementing work from home arrangements for employees able to perform their duties remotely, restricting nonessential travel, and practicing safe social distancing in our laboratory operations. We expect to continue to take actions as may be required or recommended by government authorities or in the best interests of our employees and business partners. To date, the pandemic has resulted in a slowdown in activities related to our laboratory operations and at some of our suppliers. The ongoing spread of COVID-19 may also negatively impact our clinical trials in the future, including potential delays and restrictions on our ability to recruit and retain patients, principal investigators and healthcare employees. COVID-19 could also affect the operations of contract research organizations (“CROs”), or other contracted suppliers which may result in delays or disruptions in the supply of product candidates.

As a result of the COVID-19 pandemic, we have also experienced delays in research activities performed under our collaboration agreements. Consequently, we recognized less revenue under these agreements during the first



 

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quarter of 2020 than previously planned. We believe that declines in revenue associated with the delay in research activities are largely temporary, as revenue is primarily associated with non-refundable upfront payments recognized as this project plan is implemented and costs are incurred. The COVID-19 pandemic may continue to impact the timing and amount of revenue recognized under these agreements in the future.

The COVID-19 pandemic remains a rapidly evolving situation and we do not yet know the full extent of its potential impact on our business operations. We will continue to closely monitor the effects of the pandemic. For additional information on risks posed by the COVID-19 pandemic, refer to the section titled “Risk Factors” included elsewhere in this prospectus.

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we will take advantage of certain exemptions from specified disclosure and other requirements that are otherwise generally applicable to public companies. These exemptions include:

 

  

not being required to comply with the auditor attestation requirements for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002;

 

  

reduced disclosure obligations regarding executive compensation; and

 

  

not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved.

We will take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer”, with at least $700 million of equity securities held by non-affiliates; (iii) the issuance, in any three-year period, by our Company of more than $1.0 billion in non-convertible debt securities; or (iv) the last day of the fiscal year ending after the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement.

We are also considered a “foreign private issuer” subject to reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as a non-U.S. company with foreign private issuer status. This means that, even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

  

the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

 

  

the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;

 

  

the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission (the “SEC”) of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and

 

  

the SEC rules on disclosure of compensation on an individual basis unless individual disclosure is required in our home country (the Netherlands) and is not otherwise publicly disclosed by us.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are



 

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held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

We may choose to take advantage of some but not all of these reduced reporting requirements of which we have taken advantage of in this prospectus. Accordingly, the information contained herein may be different from the information you receive from our competitors that are U.S. domestic filers, or other U.S. domestic public companies in which you have made an investment.

Risk Factors

Investing in our securities entails a high degree of risk as more fully described in the “Risk Factors” section beginning on page 14. These risks include, among others, the following:

 

  

We have a history of operating losses, expect to continue to incur losses and may never be profitable.

 

  

We will need additional financing to fund our operations and complete the development and commercialization of our various product candidates, and if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our product candidates. Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

 

  

We have limited experience in operating our current business, which makes it difficult to evaluate our business plan and our prospects.

 

  

We are substantially dependent on the success of our product candidates and cannot guarantee that these product candidates will successfully complete development, receive regulatory approval, or be successfully commercialized.

 

  

We are subject to extensive regulation, and the regulatory approval processes in the U.S., Europe and other countries or regions are costly, lengthy and time-consuming. We may also experience significant delays in the regulatory approval of our product candidates.

 

  

Clinical trials are expensive, time-consuming and difficult to design and implement, and our clinical trial costs may be higher than for more conventional therapeutic technologies or drug products.

 

  

The results of preclinical studies and early clinical trials of our product candidates with small patient populations may not be predictive of the results of later-stage clinical trials.

 

  

Because our current products represent, and our other potential product candidates will represent novel approaches to the treatment of diseases, there are many uncertainties regarding the development, the market acceptance, third-party reimbursement coverage and the commercial potential of our product candidates.

 

  

We have limited experience in large-scale or commercial manufacturing, and there can be no assurance that we will be able to effectively manufacture clinical or commercial quantities of our products.

 

  

Our existing therapeutic collaborations are important to our business, and future collaborations may also be important to our company. If we are unable to maintain any of these collaborations, or if these collaborations are not successful, our business could be adversely affected.

 

  

If third parties claim that our activities or products infringe upon their intellectual property, our operations could be adversely affected.

 

  

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



 

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We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

 

  

We are organized and existing under the laws of the Netherlands, and, as such, the rights of our shareholders and the civil liability of our directors and executive officers will be governed in certain respects by the laws of the Netherlands.

 

  

We do not anticipate paying dividends on our ordinary shares.

 

  

We are an “emerging growth company”, and it cannot be certain if the reduced SEC reporting requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors, which could have a material and adverse effect on us, including on our growth prospects.

 

  

COVID-19 may materially and adversely affect our business and financial results.

Corporate Information

We were incorporated as a Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) under the name Immatics B.V. on March 10, 2020 solely for the purpose of effectuating the Business Combination. Upon the closing of the Business Combination on July 1, 2020, we converted into a Dutch public limited liability company (naamloze vennootschap) and changed our name to Immatics N.V.

Prior to the Business Combination, we did not conduct any material activities other than those incident to our formation and certain matters related to the Business Combination, such as the making of certain required securities law filings and the establishment of subsidiaries to effect the Business Combination. Upon the closing of the Business Combination, Immatics OpCo became the direct, wholly owned subsidiary of Immatics, and holds all material assets and conducts all business activities and operations of Immatics.

We are registered in the Commercial Register of the Chamber of Commerce (Kamer van Koophandel) in the Netherlands under number 77595726. We have our corporate seat is in Amsterdam, the Netherlands and our registered office is at Paul-Ehrlich-Straße 15, 72076 Tübingen, Federal Republic of Germany and our telephone number is +49 (7071) 5397-0. Our executive office in the United States is located at Immatics US, Inc., 2130 W. Holcombe Boulevard, Houston, Texas 77030 and our telephone number is +1 (346) 204-5400.

We maintain a website at www.immatics.com, where we regularly post copies of our press releases as well as additional information about us. Our filings with the SEC are available free of charge through the website as soon as reasonably practicable after being electronically filed with or furnished to the SEC. Information contained in our website is not a part of, nor incorporated by reference into, this prospectus or our other filings with the SEC, and should not be relied upon.

All trademarks, service marks and trade names appearing in this prospectus are the property of their respective holders. Use or display by us of other parties’ trademarks, trade dress, or products in this prospectus is not intended to, and does not, imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owners.



 

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THE OFFERING

 

Ordinary shares that may be offered and sold from time to time by the selling securityholders

39,332,281 ordinary shares

 

 

Ordinary shares outstanding

62,908,617 ordinary shares

 

Offering price

The ordinary shares offered by this prospectus may be offered and sold at prevailing market prices, privately negotiated prices or such other prices as the selling securityholders may determine. See the section titled “Plan of Distribution”.

 

Use of proceeds

All of the ordinary shares offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from such sales.

 

Transfer restrictions

Pursuant to the Business Combination Agreement and related agreements, the selling securityholders who received ordinary shares in connection with the Business Combination agreed not to sell, transfer, pledge or otherwise dispose of such shares for 180 days from the closing of the Business Combination, subject to certain limited exceptions. See the section titled “Description of Securities — Transfer Restrictions”.

 

Dividend policy

We have never declared or paid any cash dividends and have no plan to declare or pay any dividends on our ordinary shares in the foreseeable future. We currently intend to retain any earnings for future operations and expansion.

 

 We will have the power to make distributions to shareholders only to the extent that our equity exceeds the aggregate amount of the issued share capital and the reserves that must be maintained pursuant to Dutch law or by our articles of association. Any future distributions will be at the discretion of our Management Board and Supervisory Board, as applicable. See the section titled “Dividend Policy”.

 

Market for our ordinary shares

Our ordinary shares are listed on Nasdaq under the symbol “IMTX”.

 

Risk factors

Investing in our securities involves substantial risks. See “Risk Factors” beginning on page 14 of this prospectus for a description of certain of the risks you should consider before investing in our ordinary shares or warrants.


 

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SELECTED CONSOLIDATED HISTORICAL AND OTHER FINANCIAL INFORMATION

Selected Historical Financial Data of Immatics OpCo

The following tables set forth selected historical financial information and operating data for Immatics OpCo as of and for the three months ended March 31, 2020 and 2019 as well as of and for the years ended December 31, 2019 and 2018. You should read the following selected historical financial information and operating data in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Immatics OpCo’s unaudited interim condensed consolidated financial statements and related notes thereto and Immatics OpCo’s consolidated financial statements and related notes, all included elsewhere in this prospectus. The consolidated statement of operations data and consolidated cash flow data for the years ended December 31, 2019 and 2018 and the consolidated balance sheet data as of December 31, 2019 and 2018 have been derived from Immatics OpCo’s audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statement of operations data and cash flow data for the three months ended March 31, 2020 and 2019 and the consolidated balance sheet data as of March 31, 2020 have been derived from Immatics OpCo’s unaudited consolidated financial statements appearing elsewhere in this prospectus and have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial information in those statements. Immatics OpCo’s historical results may not be indicative of the results that may be achieved in the future.

Consolidated Statement of Operations Data:

 

   Three Months Ended March 31,  Year Ended December 31, 
Euros in thousands, except share and per share data          2020                  2019          2019  2018 

Revenue from collaboration agreements

  7,040  3,626  18,449  3,770 

Research and development expenses

   (12,246  (7,990  (40,091  (33,971

General and administrative expenses

   (6,188  (2,275  (11,756  (7,666

Other income

   113   3   385   3,458 
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating result

   (11,281  (6,636  (33,013  (34,409

Financial income

   2,730   825   790   2,215 

Financial expenses

   (29  (70  (264  (161
  

 

 

  

 

 

  

 

 

  

 

 

 

Financial result

   2,701   755   526   2,054 
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before taxes

   (8,580  (5,881  (32,487  (32,355

Taxes on income

   —     —     —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  (8,580 (5,881 (32,487 (32,355
  

 

 

  

 

 

  

 

 

  

 

 

 

Attributable to:

     

Equityholders of the parent

   (8,306  (5,684  (31,571  (31,444

Non-controlling interest

   (274  (197  (916  (911

Net Loss

  (8,580 (5,881 (32,487 (32,355
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss per share — basic and diluted(1)

  (7.14 (4.89 (27.13 (27.02

Weighted average shares outstanding — basic and diluted

   1,163,625   1,163,625   1,163,625   1,163,625 

 

(1) 

For more information on the calculation of basic and diluted net loss per share attributable to equityholders of the parent for the years ended December 31, 2019 and 2018, see Note 25 to Immatics OpCo’s consolidated financial statements included elsewhere in this prospectus.



 

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Consolidated Balance Sheet Data:

 

   As of
March 31,
2020
   As of December 31, 
Euros in thousands  2019   2018 

Cash and cash equivalents

  72,202   103,353   39,367 

Total current assets

   109,737    124,000    55,288 

Total non-current assets

   12,032    10,277    6,030 

Total current liabilities

   77,263    69,296    26,838 

Total non-current liabilities

   94,537    105,816    43,651 

Total shareholders’ deficit

  (50,031  (40,835  (9,171

Consolidated Cash Flow Data:

 

   Three Months Ended
March 31,
   Year Ended December 31, 
Euros in thousands    2020       2019           2019               2018       

Net cash (used in) provided by operating activities

  (28,286  (248  68,045   7,583 

Net cash used in investing activities

   (2,387   (333   (2,137   (413

Net cash (used in) provided by financing activities

   (611   (446   (1,862   23,648 


 

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Selected Historical Financial Data of ARYA

The following tables contain summary historical financial data for ARYA. Such data as of December 31, 2019 and 2018, for the year ended December 31, 2019 and for the period from June 29, 2018 (inception) through December 31, 2018 has been derived from the audited financial statements of ARYA included elsewhere in this prospectus. The summary historical financial data for ARYA as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 are derived from ARYA’s unaudited interim financial statements included in this statement prospectus.

The information below is only a summary and should be read in conjunction with ARYA’s financial statements, and the notes and schedules related thereto, which are included elsewhere in this prospectus.

 

   Three Months Ended
March 31,
  Year
Ended
December 31,
2019
(audited)
  Period
from June 29,
2018
(inception) to
December 31,
2018
(audited)
 
   2020
(unaudited)
  2019
(unaudited)
 

Statement of Operations Data:

     

General and administrative costs

  $4,127,299  $153,570  $774,607  $111,684 
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss from operations

   (4,127,299  (153,570  (774,607  (111,684

Investment income on Trust Account

   857,447   872,335   3,353,229   738,284 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

  $(3,269,852 $718,765  $2,578,622  $626,600 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average shares outstanding of Class A ordinary shares(1)

   14,375,000   14,375,000   14,375,000   14,375,000 
  

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted net income per share, Class A ordinary shares

  $0.06  $0.06  $0.23  $0.05 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average shares outstanding of Class B ordinary shares

   3,593,750   3,593,750   3,593,750   3,593,750 
  

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted net loss per share, Class B ordinary shares

  $(1.15 $(0.04 $(0.22 $(0.03
  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1) 

Including 13,545,245, 13,686,244, 13,872,230 and 13,614,368 ARYA Class A ordinary shares subject to possible redemption as of March 31, 2020 and 2019 and December 31, 2019 and 2018, respectively.

 

   March 31, 2020
(unaudited)
  As of
December 31,
2019
(audited)
   December 31,
2018
(audited)
 

Condensed Balance Sheet Data (At Period End):

     

Working capital(1)

  $(3,574,634 $552,665   $1,327,272 

Total assets

  $149,483,579  $148,776,423   $145,820,556 

Total liabilities

  $9,031,128  $5,054,120   $4,676,875 

Class A ordinary shares subject to possible redemption(2)

  $135,452,450  $138,722,300   $136,143,680 

Total shareholders’ equity

  $5,000,001  $5,000,003   $5,000,001 

 

(1) 

Working capital calculated as current assets less current liabilities.

(2) 

13,545,245, 13,872,230 and 13,614,368 ARYA Class A ordinary shares subject to possible redemption at redemption value at March 31, 2020, December 31, 2019 and 2018, respectively.



 

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   Three Months Ended
March 31,
  Year
Ended
December 31, 2019
(audited)
  Period
from June 29,
2018 (inception) to
December 31, 2018
(audited)
 
   2020
(audited)
  2019
(unaudited)
 

Cash Flow Data:

     

Net cash used in operating activities

  $(172,676 $(122,436 $(323,980 $(238,298

Net cash used in investing activities

   —     —     —     (143,750,000

Net cash provided by financing activities

   —     —     —     145,186,604 


 

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SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION

The following selected pro forma statement of financial positions as of March 31, 2020 and the combined statements of loss for the three months ended March 31, 2020 and the year ended December 31, 2019 are based on Immatics’ historical consolidated financial statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and ARYA’s historical financial statements and gives effect to all of the transactions contemplated by the Business Combination Agreement and the PIPE Financing (together, the “Transaction”).

The historical financial information has been adjusted to give effect to the events that are related and/or directly attributable to the Transaction, are factually supportable and are expected to have a continuing impact on the combined results. The adjustments presented in the selected unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the Transaction.

This selected unaudited pro forma condensed combined financial information should be read together with Immatics’s and ARYA’s financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this prospectus.

The selected unaudited pro forma condensed combined financial information is presented for illustrative purposes only. Such information is only a summary and should be read in conjunction with the section titled “Unaudited Pro Forma Condensed Combined Financial Statements.” The assumptions and estimates underlying the unaudited pro forma adjustments are described in the notes to the accompanying unaudited pro forma condensed combined financial information. The financial results may have been different if the companies always had been combined. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.



 

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Selected Unaudited Pro Forma Condensed Financial Information

 

(Euros in thousand)  Immatics  ARYA  Pro
Forma*
 

Statement of Financial Position Data as of March 31, 2020

    

Cash and cash equivalents and term deposits

  72,202  640  303,628 

Total assets

   121,769   136,440   352,760 

Total equity

   (50,031  4,564   146,887 

Total liabilities

   171,800   8,243   205,874 

Statement of Income Data Three Months Ended March 31, 2020

    

Revenue from collaboration agreements

  7,040  —    7,040 

Operating result

   (11,281  (3,743  (14,018

Net loss

   (8,580))   (2,966  (10,540)) 

Net loss per share — basic and diluted

  (7.14  (0.17

Statement of Income Data Year Ended December 31, 2019

    

Revenue from collaboration agreements

  18,449    18,449 

Operating result

   (33,013  (692  (40,380

Net loss

   (32,487))   2,303   (36,859

Net loss per share — basic and diluted

  (27.13  (0.59

 

*

The pro forma column gives effect to the actual amount of redemptions by stockholders of ARYA at the closing of the Transaction. For details regarding all of the pro forma adjustments made, please see the section entitled “Unaudited Pro Forma Combined Financial Information.”



 

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RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. In addition to the other information set forth in this prospectus, you should carefully consider the risk factors discussed below when considering an investment in our ordinary shares and any risk factors that may be set forth in the applicable prospectus supplement, any related free writing prospectus, as well as the other information contained in this prospectus, any applicable prospectus supplement and any related free writing prospectus. If any of the following risks occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that case, the market price of our ordinary shares could decline and you could lose some or all of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to Our Financial Position and Need for Additional Capital

We have a history of operating losses, expect to continue to incur losses and may never be profitable.

We are a clinical-stage biopharmaceutical company active in the development and discovery of potential T cell redirecting immunotherapies for the treatment of cancer. We do not have products approved for commercial sale and have not generated revenue from operations. We have incurred net losses in each year since 2000, including consolidated net losses of €32.5 million and €32.4 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, we had accumulated consolidated losses of €233.2 million. We do not expect to generate any meaningful product sales or royalty revenues for the foreseeable future. We expect to incur significant additional operating losses in the future as we expand our development and clinical trial activities in support of demonstrating the effectiveness of our products.

Our ability to achieve long-term profitability is dependent upon obtaining regulatory approvals for our products and successfully commercializing our products alone or with third parties. However, our operations may not be profitable even if any of our products under development are successfully developed and produced and thereafter commercialized.

We will need additional financing to fund our operations and complete the development and commercialization of our various product candidates, and if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our product candidates. Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Our operations have consumed substantial amounts of cash since inception. Our research and development and our operating costs have also been substantial and are expected to increase. While we have been successful in the past in obtaining financing, we expect to continue to spend substantial amounts to continue the clinical development of our product candidates. As of December 31, 2019, we had $133 million in cash and cash equivalents.

Accordingly, we believe that our existing cash and cash equivalents will be sufficient to fund our operations until the third quarter of 2021. With this level of funding we plan to continue development of our clinical stage programs IMA201, IMA202, IMA203, and IMA101, the development of our preclinical stage programs IMA204, IMA401 and IMA402, and to perform further technology advancement and research activities that may lead to new product candidates. See the section titled “Business”. It is difficult to estimate how far into the development of the current product candidates we will reach with the current level of funding. However, in order to complete the development of our current product candidates, and in order to effectuate our business plan, we anticipate that we will have to spend more than the funds currently available to us. Additional funding will be required for all programs, including clinical and preclinical programs, prior to market approval and commercialization. Furthermore, changing circumstances may cause us to increase our spending significantly

 

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faster than we currently anticipate, and we may require additional capital for the further development and commercialization of our product candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate. Moreover, our fixed expenses such as rent, minimum payments to our contract manufacturers, and other contractual commitments, including those for our research collaborations, are substantial and are expected to increase in the future.

We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our product candidates. Our future funding requirements will depend on many factors, including, but not limited to:

 

  

progress, timing, scope and costs of our clinical trials, including the ability to timely initiate clinical sites, enroll subjects and manufacture Adoptive Cell Therapy (“ACT”) and bispecific T cell engaging receptor (“TCR Bispecific”) product candidates for our ongoing, planned and potential future clinical trials;

 

  

time and cost to conduct investigational new drug application (“IND”) or clinical trial application (“CTA”) enabling studies for our preclinical programs;

 

  

time and costs required to perform research and development to identify and characterize new product candidates from our research programs;

 

  

time and cost necessary to obtain regulatory authorizations and approvals that may be required by regulatory authorities to execute clinical trials or commercialize our products;

 

  

our ability to successfully commercialize our product candidates, if approved;

 

  

our ability to have clinical and commercial products successfully manufactured consistent with U.S. Food and Drug Administration (“FDA”), European Medicines Agency (“EMA”), and other authorities’ regulations;

 

  

amount of sales and other revenues from product candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party coverage and reimbursement for patients;

 

  

sales and marketing costs associated with commercializing our products, if approved, including the cost and timing of building our marketing and sales capabilities;

 

  

cost of building, staffing and validating our manufacturing processes, which may include capital expenditure;

 

  

terms and timing of our current and any potential future collaborations, licensing or other arrangements that we have established or may establish;

 

  

cash requirements of any future acquisitions or the development of other product candidates;

 

  

costs of operating as a public company;

 

  

time and cost necessary to respond to technological, regulatory, political and market developments;

 

  

costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and

 

  

costs associated with any potential business or product acquisitions, strategic collaborations, licensing agreements or other arrangements that we may establish.

Unless and until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. We have no committed source of additional capital and if we are unable to raise

 

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additional capital in sufficient amounts or on acceptable terms to us, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts. Our current license and collaboration agreements may also be terminated if we are unable to meet our obligations to perform contractually agreed research and development work under those agreements. As a result, we may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic collaborations and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.

We have limited experience in operating our current business, which makes it difficult to evaluate our business plan and our prospects.

We have only a limited operating history in our current line of business on which a decision to invest in us can be based. Our future currently is dependent upon our ability to implement our business plan, as that business plan may be modified from time to time by our Management and Supervisory Boards. While we believe that we have a reasonable business plan and research and development strategy, we have only a limited operating history against which we can test our plans and assumptions, and investors therefore cannot evaluate the likelihood of our success based on previous experience.

We face the problems, expenses, difficulties, complications and delays normally associated with a pre-commercial biopharmaceutical company, many of which are beyond our control. Accordingly, our prospects should be considered in light of the risks, expenses and difficulties frequently encountered in the establishment of a new business developing technologies in an industry that is characterized by a number of market entrants and intense competition. Because of our size and limited resources, we may not possess the ability to successfully overcome many of the risks and uncertainties frequently encountered by pre-commercial companies involved in the rapidly evolving field of immunotherapy. If our research and development efforts are successful, we may also face the risks associated with the shift from development to commercialization of new products based on innovative technologies. There can be no assurance that we will be successful in developing and commercialization of our product candidates.

We are substantially dependent on the success of our product candidates and cannot guarantee that these product candidates will successfully complete development, receive regulatory approval, or be successfully commercialized.

We currently have no products approved for commercial sale. We have invested a significant portion of our efforts and financial resources in the development of our current product candidates and expect that we will continue to invest heavily in our current product candidates, as well as in any future product candidates we may develop. Our business depends entirely on the successful development and commercialization of our product candidates, which may never occur. Our ability to generate revenues in the future is substantially dependent on our ability to develop, obtain regulatory approval for, and then successfully commercialize our product candidates. We currently generate no revenue from the sale of any products, and we may never be able to develop or commercialize a marketable product.

Our product candidates will require additional clinical and non-clinical development, regulatory approval, commercial manufacturing arrangements, establishment of a commercial organization, significant marketing

 

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efforts, and further investment before we generate any revenue from product sales. We cannot assure you that we will meet our timelines for our current or future clinical trials, which may be delayed or not completed for a number of reasons.

We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable regulatory authorities in other countries, and we may never receive such regulatory approval for any of our product candidates or regulatory approval that will allow us to successfully commercialize our product candidates. If we do not receive regulatory approval with the necessary conditions to allow successful commercialization, and then successfully commercialize our product candidates, we will not be able to generate revenue from those product candidates in the United States or other countries in the foreseeable future, or at all. Any significant delays in obtaining approval for and commercializing our product candidates will have a material adverse impact on our business and financial condition.

We have not previously submitted a biologics license application (“BLA”) to the FDA, or similar marketing application to comparable foreign authorities, for any product candidate, and we cannot be certain that our current or any future product candidates will be successful in clinical trials or receive regulatory approval.

Our product candidates are susceptible to the risks of failure inherent at any stage of product development, including the appearance of unexpected adverse events or failure to achieve primary endpoints in clinical trials. Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials.

We will be unable to commercialize our products if our trials are not successful.

Our research and development programs are at an early stage. We must demonstrate our products’ safety and effectiveness in humans through extensive clinical testing. We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of our products, including but not limited to the following:

 

  

after reviewing trial results, we or our collaborators may abandon projects that we might previously have believed to be promising;

 

  

we, our collaborators or regulators may suspend or terminate clinical trials if the participating subjects or patients are being exposed to unacceptable health risks;

 

  

the effects our potential products have may not be the desired effects or may include undesirable side effects or other characteristics that preclude regulatory approval or limit their commercial use if approved;

 

  

manufacturers may not meet the necessary standards for the production of the product candidates or may not be able to supply the product candidates in a sufficient quantity;

 

  

regulatory authorities may find that our clinical trial design or conduct does not meet the applicable approval requirements; and

 

  

safety and efficacy results in various human clinical trials reported in scientific and medical literature may not be indicative of results we obtain in our clinical trials.

Clinical testing is very expensive, can take many years, and the outcome is uncertain. It could take several years before we learn the results from any clinical trial using ACT or TCR Bispecifics. The data collected from our clinical trials may not be sufficient to support approval by the FDA, EMA, or regulatory authorities in other countries of our ACT- or TCR Bispecifics-based product candidates for the treatment of tumors. The clinical trials for our products under development may not be completed on schedule and the FDA, EMA or regulatory authorities in other countries may not ultimately approve any of our product candidates for commercial sale. If we fail to adequately demonstrate the safety and effectiveness of any product candidate under development, we may not receive regulatory approval for those products, which would prevent us from generating revenues or achieving profitability.

 

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Our Business and the Development, Regulatory Review and Approval of our Product Candidates

The FDA regulatory pathways can be difficult to predict, and whether, for example, the FDA’s Accelerated Approval pathway is available or further unanticipated clinical trials are required will depend on the data obtained in our ongoing clinical trials.

The regulatory approval pathway and the amount of time it takes us to obtain regulatory approvals for our product candidates will depend on the data that are obtained in our ongoing clinical trials and any future clinical trials, including future registrational or pivotal clinical trials. We may attempt to seek approval on a per indication basis for our product candidates on the basis of a single pivotal trial or on the basis of data from one or more uncontrolled trials. While the FDA requires in most cases two adequate and well-controlled pivotal clinical trials to demonstrate the efficacy of a product candidate, a single trial with strong confirmatory evidence may be sufficient in instances where the trial is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and if confirmation of the result in a second trial would be practically or ethically impossible. In rare cancer indications with very limited treatment options, a large and/or controlled trial is often not feasible and thus data from smaller and even uncontrolled trials may be sufficient for regulatory approval. Depending on the data we obtain, the FDA or other regulatory authorities may require additional clinical trials to be carried out or further patients to be treated prior to the granting of any regulatory approval for marketing of our product candidates. It is difficult for us to predict with such a novel technology exactly what will be required by the regulatory authorities in order to take our product candidates to market or the timeframes under which the relevant regulatory approvals can be obtained.

The FDA has various programs that are intended to facilitate and expedite development and review of new drugs to address unmet medical need in the treatment of serious or life-threatening conditions. These expedited programs help ensure that therapies for serious conditions are available as soon as it can be concluded that the therapies’ benefits justify their risks, taking into account the seriousness of the condition and the availability of alternative treatment. These programs include Breakthrough Therapy designation, Fast Track designation, Accelerated Approval, and Priority Review designation. Depending on the data that is we obtain in our current and future clinical trials for our wholly owned product candidates, we may seek Breakthrough Therapy or Fast Track designation, Priority Review, or Accelerated Approval from the FDA for our product candidates and equivalent accelerated approval procedures in other countries. However, given the novel nature of our product candidates, it is difficult for us to predict or guarantee whether the FDA or other regulatory authorities will approve such requests or what further clinical or other data may be required to support an application for such accelerated approval procedures. Even if we obtain Breakthrough Therapy designation, the FDA may decide to rescind the designation if, for example, the designation is no longer supported by clinical data obtained after designation.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. For example, clinical trials may be required in pediatric populations before any marketing approval can be obtained, which can be time-consuming and costly. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and foreign regulatory authorities also have substantial discretion in the drug and biologics approval processes. The number and types of preclinical programs and clinical trials that will be required for regulatory approval varies depending on the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any particular product candidate. Approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, and there may be varying interpretations of data obtained from preclinical programs or clinical trials, either of which may cause delays or limitations in the approval or the

 

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decision not to approve an application. In addition, approval of our product candidates could be delayed or refused for many reasons, including the following:

 

  

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our or our collaborators’ clinical trials;

 

  

we or our collaborators may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates are safe, pure, potent and have a favorable risk/benefit profile 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;

 

  

the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical programs or clinical trials;

 

  

the data collected from clinical trials of 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 the United States or elsewhere;

 

  

our manufacturing processes or facilities or those of the third-party manufacturers we use may not be adequate to support approval of our product candidates; and

 

  

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

It is possible that no product candidates will ever obtain the appropriate regulatory approvals necessary to commercialize one of our ACT and TCR Bispecific therapies. Any delay in obtaining, or failure to obtain, required approvals would materially adversely affect our ability to generate revenue from the particular product candidate, which would result in significant harm to our business.

We are subject to extensive regulation, and the regulatory approval processes in the U.S., Europe and other countries or regions are costly, lengthy and time-consuming. We may also experience significant delays in the regulatory approval of our product candidates.

Our potential products, cell processing and manufacturing activities, are subject to comprehensive regulation by the FDA in the United States and by comparable authorities in other countries. The process of obtaining FDA and other required regulatory approvals, including foreign approvals, is expensive and often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved.

We have not previously submitted a BLA to the FDA, or similar approval submissions to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish that the product candidate meets the prescribed requirements of safety, purity and potency for each desired indication. The BLA must also include detailed information regarding the chemistry, manufacturing and controls for the product. International marketing authorization applications equivalent to a BLA must contain similar types of data and information. We expect the novel nature of our product candidates to create additional challenges in obtaining regulatory approval. For example, the FDA has limited experience with commercial development of T cell directed therapies for cancer. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive and lengthy, and approval may not be obtained. Requirements and requests for additional information can occur for any clinical trial of any of our product candidates. Such request can result in delays of the start of our clinical trials or in clinical holds being imposed on ongoing trials, and there is no guarantee that the FDA will not continue to require further or additional information ahead of permitting any trial to proceed, whether from our collaborators or from us.

If we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may face a number of regulatory consequences, including refusal to approve pending applications, license

 

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suspension or revocation, withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, modification of promotional materials or labeling, provision of corrective information, imposition of post-marketing requirements and commitments including the need for additional testing, imposition of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy (“REMS”), product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution, FDA debarment, injunctions, fines, consent decrees, corporate integrity agreements, debarment from receiving government contracts, and new orders under existing contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement, or civil or criminal penalties, including fines and imprisonment, and adverse publicity, among other adverse consequences. Additionally, we may not be able to obtain the labeling claims necessary or desirable for the promotion of our products.

We or our collaborators could also encounter delays 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 or a collaborator, Institutional Review Boards (“IRBs”) for the institutions in which such trials are being conducted or by responsible Ethics Committees (“ECs”), the Data Monitoring Committee for such 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 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. If we or our collaborators experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenue will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow our product development and approval process and jeopardize our ability to commence product sales and generate revenue.

Additionally, we have limited experience in conducting clinical trials with adoptive cellular therapies and T cell engaging biologics and in conducting clinical trials through to regulatory approval. Because of this lack of experience, we cannot be certain that planned clinical trials will begin or be completed on time, if at all. Large-scale trials would require significant additional financial and management resources, and reliance on third-party clinical investigators, contract research organizations (“CROs”), or consultants.

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.

We are subject to manufacturing risks that could substantially increase our costs and limit supply of our products. The manufacture of our product candidates is complex, and we may encounter difficulties in production, particularly with respect to process development, quality control, upscaling or scaling-out of our manufacturing capabilities. If we, or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

Our product candidates are cellular products or biologics and the process of manufacturing our products is complex, highly regulated and subject to multiple risks.

The manufacture of our cellular product candidates involves complex processes, including, for example, for ACTengine genetically modified autologous T cell products (IMA201, IMA202, IMA203, and IMA204), harvesting and transporting blood cells from every patient for T cell isolation, engineering of the T cells to express a specific T cell receptor for a tumor target, ex vivo multiplying the T cells to obtain the desired cell numbers for the dose, and finally transporting of the T cell product back to the patient for infusing the modified

 

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T cells back into the same patient. As a result of the complexities, the cost to manufacture cellular products per dose is generally higher than traditional small molecule chemical compounds or biologics, and the manufacturing process is less reliable, more variable and is more difficult to reproduce. Our manufacturing process may be susceptible to product loss or failure due to logistical issues associated with the collection of patients’ blood cells, shipping such material to the manufacturing site, shipping the final product back to the patient, and infusing the patient with the product. Product loss or failure may also be caused by manufacturing issues associated with the variability in patient starting material especially from heavily treated cancer patients, interruptions in the manufacturing process, contamination, equipment failure, assay failures, improper installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product characteristics. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, and other supply disruptions. If for any reason we lose a patient’s starting material, or any intermediate product at any point in the process, or if any product does not meet the preset specifications, the manufacturing process for that patient will need to be restarted, sometimes including re-collection of blood cells from the patient, and the resulting delay may adversely affect that patient’s outcome. It may even happen, that failed product manufacture may prevent a patient from getting a T cell product. If microbial, environmental or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. If such contaminations or other product quality issues are not discovered and if as a result thereof patients are exposed to a health risk, we may be held liable. Our insurance may not cover those cases, or the financial coverage may not be sufficient.

Because our ACTengine cellular product candidates are manufactured specifically for each individual patient, we will be required to maintain a chain of identity with respect to the patient’s cellular material as it moves from the patient to the manufacturing facility, through the manufacturing process, and back to the patient. Maintaining such a chain of identity is difficult and complex, and failure to do so could result in adverse patient outcomes, loss of product, or regulatory action including withdrawal of our products from the market. Further, as product candidates are developed through preclinical to late stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials or otherwise necessitate the conduct of additional studies, including bridging clinical trials, which can be costly and time-consuming.

Currently, our cellular product candidates are manufactured using processes developed or modified by us but based on current industry standards and are designed to deliver a clinical proof of concept (“PoC”). We have selected an open process as the manufacturing process for early stage clinical trials through PoC. However, we are currently developing a second-generation process that is closed, partially automated and viable for advanced clinical trials through product registration, and all ongoing and future company-sponsored clinical trials. Although we believe that the 2nd generation process is commercially viable, there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others, cost overruns, potential problems with process upscaling, scale-out, process reproducibility, technology transfer, stability issues, lot consistency, and timely availability of raw materials. This includes potential risks associated with FDA not agreeing with all of the details of our validation data or our potency assay for our Phase 1 or future Phase 2 clinical trials. Furthermore, some of our contract manufacturing organizations (“CMOs”) may not be able to establish comparability of their products with the ACT products used in our Phase 1 or future Phase 2 clinical trials or may not be fully validated prior to starting our pivotal or registration clinical trial. As a result of these challenges, we may experience delays in our clinical development and/or commercialization plans. We may ultimately be unable to reduce the cost of goods for our product candidates to levels that will allow for an attractive return on investment if and when those product candidates are commercialized.

Our manufacturing capabilities for our allogenic cellular therapy product candidate IMA301 are still in the process of being developed. We may not successfully establish a robust production process that fulfills the

 

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requirements of the FDA and other regulatory authorities. If we fail to establish such a manufacturing process, we may not be able to commence clinical trials in IMA301 or clinical trials may be delayed. We also cannot guarantee that the production process we are currently developing for IMA301 is viable and can be effectively scaled up or transferred to an CMO for later phase clinical testing and commercialization. For example, there is insufficient experience in the field regarding vectors for transduction of the gd T cells used to manufacture IMA301. If it turns out that we cannot generate a suitable and GMP-compliant vector, the IMA301 manufacturing process may be endangered. If we fail to develop a process that can be used throughout the life cycle of the product candidate, commercialization of IMA301 may be delayed or may not occur.

Manufacturing of TCR Bispecifics (TCER), such as IMA401, IMA402 and potential future product candidates, is susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, vendor or operator error, inconsistency in yields, issues with purity, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, inacceptable purity, product defects, loss of production batches and other supply disruptions. In such cases, our development program may experience major delays and we may have to produce a new batch of a given TCER. This will be costly and will delay our TCER development program. In particular, production of a new GMP batch may be time-consuming, as it relies on the availability of facilities with GMP capabilities at our CMO, and such facilities must be booked far in advance. We may also experience failure of production of the master cell bank that is used to produce our TCER molecules. For example, missing clonality of the cell line or non-sterility of the cell bank may require production of a new master cell bank which would be associated with additional costs and delays.

Any failure to follow current Good Manufacturing Practice (“cGMP”) or other regulatory requirements or any delay, interruption or other issues that arise in the manufacture, fill and finish, packaging, or storage of our product candidates as a result of a failure of our facilities or the facilities or operations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and commercialize our product candidates, including leading to significant delays in the availability of drug product for our clinical trials or the termination of or hold on a clinical trial, or the delay or prevention of a filing or approval of marketing applications for our product candidates.

Our TCR Bispecific product candidates that have been produced and are stored for later use may degrade, become contaminated or suffer other quality defects, which may cause the affected product candidates to no longer be suitable for their intended use in clinical trials or other development activities. If the defective product candidates cannot be replaced in a timely fashion, we may incur significant delays in our development programs that could adversely affect the value of such product candidates.

In September 2015, we entered into a lease agreement with the University of Texas Health (“UTH”) facility in Houston, Texas for clinical production of ACT products, including our product candidates IMA101, IMA201, IMA202, and IMA203 for clinical trials, and we also intend to manufacture IMA204, IMA301 and potentially also future cellular therapy product candidates in this facility once INDs or CTAs have been approved for these product candidates, especially for early stage clinical trials, by the respective regulatory bodies. We would expect that development and construction of our own manufacturing facility would provide us with enhanced control of material supply for both clinical trials and the commercial market, enable a more efficient implementation of process changes, and allow for better long-term margins. However, we have no experience as a company in developing a large manufacturing facility, and we may not be successful in finalizing the development of our own manufacturing facility or capability. We may establish multiple manufacturing facilities as we expands our commercial footprint to multiple geographies, which may lead to regulatory delays or prove costly. Even if we are successful, our manufacturing capabilities could be affected by cost-overruns due to idle capacity, unexpected delays, equipment failures, labor shortages, natural disasters, epidemics, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business. The manufacture of cell therapy products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

 

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Manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields, quality control, including stability, patient to patient variability of the product candidate and quality assurance testing, shortages of qualified personnel, and compliance with strictly enforced federal, state, local and foreign regulations.

Any problems or delays we or our CMOs experience in preparing for commercial scale manufacturing of a cell therapy or biologic product candidate or component may result in a delay in the FDA approval of the product candidate or may impair our ability to manufacture commercial quantities or such quantities at an acceptable cost, which could result in the delay, prevention, or impairment of clinical development and commercialization of our product candidates and could adversely affect our business. Furthermore, if we or our commercial manufacturers fail to deliver the required commercial quantities or supply of our product candidates on a timely basis and at reasonable costs, we would likely be unable to meet demand for our products, and we would lose potential revenues.

In addition, the manufacturing process and facilities for any products that we may develop is subject to FDA and/or foreign regulatory authority approval processes, and we our our CMOs will need to meet all applicable regulatory authority requirements, including cGMP and current Good Tissue Practices (“cGTP”) requirements, on an ongoing basis, including requirements pertaining to quality control, quality assurance, and the maintenance of records and documentation. The FDA and other regulatory authorities enforce these requirements through facility inspections. Manufacturing facilities must be approved by the FDA pursuant to inspections that will be conducted after we submit our marketing applications. Manufacturers are also subject to continuing FDA and other regulatory authority inspections following marketing approval. Further, we, in cooperation with our CMOs, must supply all necessary chemistry, manufacturing, and control documentation in support of a BLA on a timely basis.

We, or our CMOs’ manufacturing facilities, may be unable to comply with our specifications, cGMP and cGTP requirements, and with other FDA, state, and foreign regulatory requirements. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of product candidates that may not be detectable in final product testing. If we or our CMOs are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, or in accordance with the strict regulatory requirements, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Deviations from manufacturing requirements may further require remedial measures that may be costly and/or time-consuming for us or a third party to implement and may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

Even to the extent we use and continue to use CMOs, we are ultimately responsible for the manufacture of our products and product candidates. A failure to comply with these requirements may result in regulatory enforcement actions against our manufacturers or us, including fines and civil and criminal penalties, which could result in imprisonment, suspension or restrictions of production, suspension, injunctions, delay or denial of product approval or supplements to approved products, clinical holds or termination of clinical trials, warning or untitled letters, regulatory authority communications warning the public about safety issues with the biologic, refusal to permit the import or export of the products, product seizure, detention, or recall, operating restrictions, suits under the civil False Claims Act (“FCA”), corporate integrity agreements, consent decrees, or withdrawal of product approval.

Challenges we may face could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates, impair

 

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commercialization efforts, increase our cost of goods, cause a lack of patient participation in clinical trials and have an adverse effect on our business, financial condition, results of operations and growth prospects.

We are engaged in preclinical development to identify, generate and characterize new product candidates for potential clinical development. Drug development is expensive, time-consuming and we are uncertain that such development programs will lead to new drug candidates that may continue to be tested in clinical trials and receive regulatory approval.

A significant portion of our research activities focus on the identification, generation and characterization of new product candidates. These activities are expensive, time-consuming and costly, and may never lead to a product candidate that shows appropriate safety and efficacy data in preclinical studies to enter clinical development. This means that success from research and development is uncertain, early programs may not reach clinical development and we may never produce revenues from our preclinical development activities. If the target criteria for a product candidate are not met, we may also decide to prolong preclinical development to improve the profile of a product candidate. In addition, if new treatment options are approved for the same indications as our preclinical product candidates, we may discontinue such early development programs.

The targets addressed by IMA201, IMA202, IMA203, IMA301, IMA401, IMA402 belong to the class of cancer testis antigens that are well-established immunotherapy targets. Future targets for product development may not belong to well-known target proteins and generation of such product candidates may be challenging. For example, IMA204 is directed against a tumor stroma target. We are not aware of a comparable product candidate currently in preclinical or clinical development. We may find out during preclinical development that targets like the one addressed by IMA204 cannot be safely addressed by immunotherapy. We cannot guarantee that we will be able to show safety and efficacy for product candidates addressing new target classes like the one addressed by IMA204, and we may not be able to enter clinical testing with or to successfully market IMA204 or similar future product candidates.

Development of a product candidate intended for use in combination with an already approved product may present more or different challenges than development of a product candidate for use as a single agent.

We are currently developing IMA201, IMA202, IMA203, IMA204, IMA101, IMA301, IMA401, and IMA402. We and our collaborators are also studying or intending to study ACT product candidates and TCR Bispecifics product candidates along with other products, such as checkpoint inhibitor immunotherapies. The development of product candidates for use in combination with another product may present challenges. For example, the FDA may require us to use more complex clinical trial designs, in order to evaluate the contribution of each product and product candidate to any observed effects. It is possible that the results of these trials could show that most or any positive results are attributable to the already approved product. Moreover, following product approval, the FDA may require that products used in conjunction with each other be cross-labeled. To the extent that we do not have rights to already approved products, this may require us to work with another company to satisfy such a requirement. Moreover, developments related to the already approved products may impact our clinical trials for the combination as well as our commercial prospects should we receive marketing approval. Such developments may include changes to the approved product’s safety or efficacy profile, changes to the availability of the approved product, and changes to the standard of care.

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

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients. Despite diligent planning of our clinical trials and analysis of their feasibility regarding patient recruitment, we may experience difficulties, delays or inability in patient enrollment in our clinical trials for a variety of reasons, including:

 

  

the size and nature of the patient population;

 

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the severity and incidence of the disease under investigation;

 

  

the general health condition of the patient population;

 

  

the patient eligibility criteria and study procedures defined in the protocol;

 

  

the size of the study population required for analysis of the trial’s primary endpoints;

 

  

the proximity of patients to trial sites;

 

  

the design of the trial and the complexity for patients and clinical sites;

 

  

the screening procedures and the rate of patients failing screening procedures;

 

  

the duration required for screening and manufacturing of the patients’ investigational products;

 

  

the risk that patients’ general health conditions do not allow the conduct of study/screening procedures (for example, tumor biopsy, or leukapheresis) or application of lymphodepletion regimen;

 

  

the ability to manufacture patient products appropriately (for example, at a sufficient high dose, or with sufficiently active T cells);

 

  

insufficient manufacturing capacities;

 

  

the ability to establish appropriate drug substance or drug product logistics/transportation;

 

  

the ability to obtain approval (regulatory and ethical approval and approval according to local law) for the conduct of the clinical trial in a sufficient number of countries;

 

  

the ability to recruit appropriate clinical sites;

 

  

the ability to provide appropriate screening assays;

 

  

the ability to recruit clinical trial investigators with the appropriate competencies and experience;

 

  

the efforts to facilitate timely enrollment in clinical trials and the effectiveness of recruiting publicity;

 

  

the patient referral practices of physicians within the same hospital as well as within other hospitals or private practices;

 

  

competing clinical trials for similar therapies, other new therapeutics, new combination treatments, new medicinal products;

 

  

approval of new indications for existing therapies or approval of new therapies in general or changes in standard of care;

 

  

the implementation of surgical measures leading to a higher cure rate of patients;

 

  

the implementation of preventive measures leading to early detection of the disease under investigation and a higher cure rate;

 

  

the implementation of measures (for example, prophylactic vaccines) leading to a dramatic reduction in incidence of the disease under investigation;

 

  

clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies, including any new drugs or treatments that may be approved or become standard of care for the indications we are investigating;

 

  

clinical investigators enrolling patients who do not meet the enrollment criteria, requiring the inclusion of additional patients in clinical trials;

 

  

the ability to obtain and maintain patient consents;

 

  

the risk that patients having received a single anti-tumor infusion in clinical trials start additional anti-tumor treatments despite of not having experienced progression of tumor disease; and

 

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inability of clinical sites to enroll patients as health care capacities are required to cope with natural disasters, epidemics or other health system emergencies, such as the COVID-19 pandemic.

Our clinical trials will compete with other 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 to us because some eligible patients may instead opt to enroll in a competitor’s trial. Because the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Enrolling patients at the same sites as our competitors may compromise the quality and conclusiveness of our clinical data by introducing bias. Moreover, because our product candidates 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 approved immunotherapies, rather than enroll patients in any clinical trial. In addition, potential enrollees in our ACT trials with IMA101, IMA201, IMA202, IMA203 or IMA204 may opt to participate in other clinical trials because of the length of time between the time that their tumor is excised and the ACT is infused back into the patient. Amendments to our clinical protocols may affect enrollment in, or results of our trials, including amendments we have made to further define the patient populations to be studied.

Not all patients suffering from a specific cancer that is in principle addressable by our product candidates are eligible for our trials and therapies. First, patients have to express a specific genetic marker called HLA-A*02. While this marker is found on approximately 40-50% of individuals in North America and Europe, it is less frequent in other populations, such as China or Japan. If human leukocyte antigen (“HLA”) screening for a patient shows that HLA-A*02 is not expressed, he or she cannot be treated with our current product candidates. Second, the prevalence of the targets addressed by IMA201, IMA202, IMA203 and IMA204 differs between different tumor entities. For a given patient, a biomarker assay must be performed in order to find out whether he or she expresses one of the targets and can be treated with one of our product candidates. We cannot be certain that the anticipated and assumed target prevalence are confirmed in the patient populations of our Phase 1 trials, and lower target prevalences may be experienced. Third, further eligibility criteria are in place to ensure that the patients can tolerate and potentially benefit from the treatment. Thus, only a fraction of patients screened for our clinical trials will finally receive cellular products. Patients may therefore be hesitant to consent to our trials, and overall many more patients will have to be screened to treat the targeted number of patients. This may hinder recruitment for our trials and may delay our development timelines. It is uncertain how many more patients we will be required to screen. If the required number of patient screenings is much higher than anticipated, our clinical trial costs may increase. We may combine two or more product candidates into multi-target trials to mitigate this risk. However, we cannot be certain whether this measure will be effective in enhancing recruitment. Multi-target trials may also be more difficult to implement and to be permitted to proceed by FDA or other competent authority outside the U.S.

Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment or small population size may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.

The FDA may disagree with our regulatory plan, and we may fail to obtain regulatory approval of our product candidates.

If and when our ongoing Phase 1 clinical trials for IMA201, IMA202, IMA203, and IMA101 are completed and, assuming positive data, we expect to advance to potential registrational trials. The general approach for FDA approval of a new biologic or drug is for the sponsor to provide dispositive data from two well-controlled, Phase 3 clinical studies of the relevant biologic or drug in the relevant patient population. Phase 3 clinical studies typically involve hundreds of patients, have significant costs and take years to complete. We anticipate pursuing registrational trials, for example for IMA201, IMA202, and IMA203, as single agents or in combination that are

 

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designed to evaluate the efficacy of the respective product candidate in a single open-label, non-comparative, two-stage, pivotal, multicenter, single-arm clinical trials in patients who have exhausted available treatment options. We plan to discuss our proposed trial designs with the FDA and other authorities prior to submission of INDs and CTAs. If the trial results are sufficiently compelling, we intend to discuss with the FDA submission of a BLA for the relevant product candidate. Further, we plan to have discussions with other authorities, such as the EMA in Europe or Health Canada in Canada regarding any planned marketing authorization submissions. It cannot be guaranteed that FDA and other regulatory authorities will agree to move to a registrational trial on the basis of data generated from a single completed Phase 1 trial. Authorities may ask for additional early stage or Phase 2 clinical data first. Even if the FDA agrees with the design and implementation of the clinical trials set forth in an IND, we cannot guarantee that the FDA will not change their requirements in the future. For example, the FDA may require that we conduct a comparative trial against an approved therapy including potentially an approved autologous T cell therapy, which would significantly delay our development timelines and require substantially more resources. In addition, the FDA may only allow us to evaluate patients that have already failed autologous therapy or very late stage patients, which are extremely difficult patients to treat and patients with advanced and aggressive cancer, and our product candidates may fail to improve outcomes for such patients.

We may pursue an approval under FDA’s Accelerated Approval pathway, and we believe our Accelerated Approval strategy is warranted given the limited alternatives for patients with relapsed and/or refractory cancers. However, the FDA may ultimately require a Phase 3 clinical trial prior to approval, particularly since our product candidates represent a novel treatment. In addition, the standard of care may change with the approval of new products, which may result in the FDA requiring a demonstration of meaningful therapeutic benefit to patients over such existing treatments.

As a condition of approval, the FDA may require that we implement various post-marketing requirements and conduct post-marketing studies, any of which would require a substantial investment of time, effort, and money, and which may limit our commercial prospects.

As a condition of biologic licensing, the FDA is authorized to require that sponsors of approved BLAs implement various post-market requirements, including a REMS, and/or one or more Phase 4 studies. For example, when the FDA approved Novartis’ Kymriah in August 2017, a CAR-T cell therapy for the treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia (“ALL”) that is refractory or in second or later relapse, the FDA required significant post-marketing commitments, including a Phase 4 trial, revalidation of a test method, and a substantial REMS program that included, among other requirements, the certification of hospitals and their associated clinics that dispense Kymriah, which certification includes a number of requirements, the implementation of a Kymriah training program, and limited distribution only to certified hospitals and their associated clinics. If we receive approval of our product candidates, the FDA may determine that similar or additional post-approval requirements are necessary. To the extent that we are required to establish and implement any post-approval requirements, we will likely need to invest a significant amount of time, effort, and money. Such post-approval requirements may also limit the commercial prospects of our product candidates.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

In order to market and sell our products outside the United States, we or our third-party collaborators are required to obtain separate marketing approvals and comply with numerous and varying regulatory requirements. Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Approval policies and requirements may vary among jurisdictions. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval

 

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procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval. We or our collaborators may not be able to file for regulatory approval of our product candidates in international jurisdictions or obtain approvals from regulatory authorities outside the United States on a timely basis, if at all.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

We may not be able to file applications to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA or applicable competent authorities may not permit us to proceed.

We plan to submit INDs for additional product candidates to the FDA in the future. We also plan to submit applications to start clinical trials of additional product candidates outside the U.S. to the national competent authorities (for example, CTA to Paul-Ehrlich Institute (“PEI”) in Germany).

The filing of INDs to the FDA and the filing of applications outside the U.S. is dependent on additional data that have to be generated to support such regulatory filings. Hence, these filings may be delayed if the tests to generate those data show unexpected results or if technical issues arise in generating those data in the first place.

We cannot be sure that submission of an IND, IND amendment or CTA will result in the FDA or any other competent authority outside the U.S. allowing testing and clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such clinical trials. The manufacturing and preclinical safety and efficacy testing requirements of both ACT and TCR Bispecifics remain emerging and evolving fields. Accordingly, we expect chemistry, manufacturing and control related topics, including product specification, as well as preclinical safety testing, will be a focus of IND reviews, which may delay the allowance of INDs by the FDA or CTA approval by other competent authorities outside the U.S.

Certain of our current clinical trials are being conducted outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

Certain current clinical trials of our drug candidates are being conducted or planned to be conducted partially outside the United States. We may also conduct future clinical trials for our drug candidates partially or fully outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles and good clinical practice (“GCP”) requirements. Further, the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In general, the patient population for any clinical trials conducted outside of the United States must be representative of the population for whom we intend to label the product in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations.

Conducting clinical trials outside the United States also exposes us to additional risks, including risks associated with:

 

  

additional foreign regulatory requirements;

 

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foreign exchange fluctuations;

 

  

compliance with foreign manufacturing, customs, shipment and storage requirements;

 

  

an inability to negotiate the terms of clinical trial agreements at arms’ length in countries where a template agreement for such trials is required by law;

 

  

cultural differences in medical practice and clinical research; and

 

  

diminished protection of intellectual property in some countries.

We cannot assure you that the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from such clinical trials, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of our drug candidates.

It may take longer and cost more to complete our clinical trials than we project, or we may not be able to complete them at all.

For budgeting and planning purposes, we have projected the date for the commencement of future trials, and continuation and completion of our ongoing clinical trials. However, a number of factors, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, and unanticipated adverse events may cause significant delays. We may even not be able to complete clinical trials involving any of our products at all or as projected. Delays in clinical trials are associated with significant costs to maintain the necessary services, infrastructure and to pay running obligations to internal staff, clinical sites and service providers.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us because some patients who might have opted to enroll in our trials may instead opt to enroll in a competitor’s trial. Accordingly, we cannot guarantee that our trials will progress as planned or as scheduled. Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our ongoing and planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our product candidates.

We expect to rely on outside vendors (for example, independent contractors and contract research organizations) to conduct, supervise or monitor some or all aspects of clinical trials involving our products. We will have less control over the timing and other aspects of these clinical trials than if we conducted them entirely on our own. If we fail to commence or complete, or experience delays in, any of our planned clinical trials, our stock price and our ability to conduct our business as currently planned could be harmed.

We currently anticipate that we will have to rely on CMOs to manufacture our adoptive cell therapy products for clinical trials. If they fail to commence or complete, or experiences delays in, manufacturing our adoptive cell therapy products, our planned clinical trials will be delayed, which will adversely affect our stock price and our ability to conduct our business as currently planned.

Clinical trials are expensive, time-consuming and difficult to design and implement, and our clinical trial costs may be higher than for more conventional therapeutic technologies or drug products.

Clinical trials are expensive and difficult to design, implement and conduct, in part because they are subject to rigorous regulatory requirements. Because our ACT product candidates are based on new cell therapy technologies and manufactured on a patient-by-patient basis, we expect that such candidates will require

 

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extensive research and development and have substantial manufacturing costs per dose. Our TCR Bispecific product candidates also require extensive research and development, as the applicable technology is new and experience with developing such biologics is rare in the field. Moreover, the development of a companion diagnostic will also require extensive research and development, and such companion diagnostic must be suitable to support both enrollment into larger clinical trials and routine hospital procedures after marketing approval. Any failure or delay in developing a suitable companion diagnostic will delay or make it impossible to conduct larger clinical trials for ACT product candidates and/or TCR Bispecific product candidates. In addition, costs to treat patients with recurrent and/or refractory cancer and to treat potential side effects that may result from our product candidates, non-investigational medicinal products, rescue or prophylactic medication applied in our clinical trials can be significant. Some clinical trial sites do not bill or obtain coverage from Medicare, Medicaid, health insurance or other third-party payors for some or all of these costs for patients enrolled in our clinical trials, and we can be required by those trial sites to pay such costs. In countries outside the U.S., it is expected that all costs related to the clinical trial and to the management of study patients (for example, management of adverse reactions or hospitalization) are paid by the sponsor of the clinical trial. As trial designs for development of our product candidates are complex, our clinical trial costs are likely to be significantly higher per patient than those of more conventional therapeutic technologies or drug products. We aim to combine two or more of our ACT product candidates within one clinical trial or within a multi-TCR-T concept in order to achieve durable clinical efficacy results and to increase the patient population. The set up and conduct of such multi-TCR-T clinical trials is expensive and may bear unknown risks, such as regulatory, preclinical, safety and manufacturing risks. In addition, our proposed personalized product candidates involve several complex and costly manufacturing and processing steps, the costs of which will be borne by us. We are also responsible for the manufacturing costs of products for patients that do not receive the product due to any reason (for example, rapid degradation of general health status, not meeting inclusion/exclusion criteria for infusion). Depending on the number of patients that we ultimately screen and enroll in our trials, the number of trials that we may need to conduct, and the companion diagnostic we need to develop, our overall clinical trial costs may be higher than for more conventional treatments.

Our clinical trials may fail to demonstrate adequately the safety and efficacy of our product candidates, which would prevent or delay regulatory approval and commercialization.

The clinical trials of our product candidates are, and the manufacturing and marketing of our products will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and market our product candidates. Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are safe and efficacious for use in each target indication or use in a biomarker driven population. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for product licensure will vary depending on these factors and may include not only the ability to show tumor shrinkage, but also adequate duration of response, a delay in the progression of the disease, and/or an improvement in survival. For example, response rates from the use of our product candidates may not be sufficient to obtain regulatory approval unless we can also show an adequate improvement of survival.

Even if we are able to show anti-tumor efficacy for one or several of our product candidates, the risk/benefit profile may be negatively impacted by an unfavorable safety profile, which could force us to discontinue a development program. This may happen if the risk for patients is deemed unacceptable based on the number or severity of adverse events, or the number of patient deaths related to the clinical trial treatment.

Regulatory authorities may ultimately disagree with our chosen endpoints or may find that our studies or study results do not support product approval. We cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory

 

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authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.

The results of preclinical studies and early clinical trials of our product candidates with small patient populations may not be predictive of the results of later-stage clinical trials.

We have opened enrollment into four Phase 1 clinical trials investigating cellular product candidates. The primary objectives of these clinical trials are to establish safety and tolerability and, for our ACTengine clinical trials, to determine the recommended Phase 2 dose. Preliminary, single cohort, or top-line results from those and future early stage studies may not be representative of the final study results.

We have reported preliminary results for clinical trials of our product candidates, including ACT for the treatment of recurrent and/or refractory solid tumors. We may also report preliminary results from future clinical trials. These preliminary results are subject to substantial risk of change due to small sample sizes and may change as patients are evaluated or as additional patients are enrolled in these or newly set up clinical trials. These outcomes may be unfavorable, deviate from our earlier reports, and/or delay or prevent regulatory approval or commercialization of our product candidates, including candidates for which we have reported preliminary favorable safety and efficacy results. In clinical studies where a staged expansion is expected, such as studies using a Simon’s two stage design, these outcomes may result in the failure to meet an initial efficacy threshold for the first stage. Furthermore, other measures of efficacy for these clinical trials and product candidates may not be as favorable.

Moreover, initial trial (for example, Phase 1 or Phase 2a) results may not be representative of later-stage trial results (for example, Phase 2b or Phase 3), even if conducted in a very similar trial population. The results of studies in one set of patients or line of treatment may not be predictive of those obtained in another and the results in various human clinical trials reported in scientific and medical literature may not be indicative of results we obtain in our clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Additional non-clinical studies may also reveal unfavorable product candidate characteristics, including safety concerns.

For example, our studies of cellular therapies in patients without any indicated standard-of-care treatment utilize an “open-label, single arm, dose-escalation/de-escalation” trial design. An open-label, single arm, dose-escalation/de-escalation trial is one where both the patient and investigator know what investigational treatment (monotherapy or combination) at which dose the patient is receiving. This trial design has the potential to create selection bias by encouraging the investigators to enroll a more favorable patient population (for example, indications better suitable for immunotherapies, fitter patients, less prior therapies) compared to a more broader patient population. In our current Phase 1 clinical trials investigators have significant discretion over the selection of patient participants. Although preliminary data from these trials was generally positive, that data may not necessarily be representative of interim or final results, as new patients are cycled through the applicable treatment regimens. As the trials continue, the investigators may prioritize patients with more progressed forms of cancer and/or worse general health condition than the initial patient population, based on the safety/success or perceived safety/success of that initial population. Patients with more progressed forms of cancer or worse general health conditions may experience more and/or worse adverse events or be less responsive to treatment, and accordingly, interim or final safety and efficacy data may show an increase in frequency or severity of adverse events and/or a decline in patient response rate or change in other assessment metrics. As the trials continue or in subsequent trials, investigators may shift their approach to the patient population, which may ultimately experience more and/or worse adverse events and/or result in a decline in both interim and final efficacy data from the preliminary data, or conversely, a decrease in frequency and/or severity of adverse events or an increase in final efficacy data following a decline in the interim efficacy data, as patients with more progressed forms of cancer or worse general health condition are cycled out of the trials and replaced by patients with less advanced forms of cancer or with better general health conditions. This opportunity for investigator

 

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selection bias in our trials as a result of open-label design, which is standard in dose-escalation/de-escalation trials, may not be adequately handled and may cause a decline in or distortion of clinical trial data from our preliminary results. Any future trial which utilizes an open-label design is similarly susceptible to such bias. Depending on the outcome of our open-label studies, we may need to conduct one or more follow-up or supporting studies in order to successfully develop our products for FDA approval. Many companies in the biotechnology, pharmaceutical and medical device industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we cannot be certain that we will not face such setbacks.

We expect there may be greater variability in results for products processed and administered on a patient-by-patient basis, as anticipated for our cellular therapy product candidates, than for “off-the-shelf” products, like many other drugs. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. Many companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. Our current and future clinical trial results may not be successful. Moreover, should there be a flaw in a clinical trial, it may not become apparent until the clinical trial is well advanced. In the case that we decide to develop our product candidates for use with other oncology products, or combine more than one ACT product candidate, the design, implementation, and interpretation of the clinical trials necessary for marketing approval will be more complex than if we would have developed our product candidates alone.

The deviations in our proposed new products from existing products may require us to perform additional testing, which will increase the cost, and extend the time for obtaining approval.

Our ACT based therapy is based on first-generation adoptive cell therapy technology suitable for delivering for small early phase clinical trials. These current methods of treatment are very labor intensive and expensive, which has limited their widespread application. We have developed new processes that we anticipate will enable more efficient manufacturing of ACT. We may have difficulty demonstrating that the products produced from our new processes are comparable to the existing products. The FDA and regulatory authorities in other countries may require additional clinical testing before permitting a larger clinical trial with the new processes, and the product may not demonstrate the desired activity in new clinical trials. Cellular products are not considered as well characterized products because there are hundreds of markers present on these cells, and even small changes in manufacturing processes could alter the cell types. It is unclear at this time which of those markers are critical for success of these cells to combat cancer, so our ability to predict the outcomes with newer manufacturing processes is limited. The changes that we have made to the historical manufacturing process may require additional testing, which may increase costs and timelines associated with these developments.

Our TCR Bispecific product candidates contain features that have not been previously tested in this composition in clinical trials or marketed products. Regulatory authorities (for example, the FDA or EMA) may require additional non-clinical studies before permitting us to enter clinical trials with our product candidates. Regulatory authorities may also ask for additional early-stage trials or production of additional batches of TCR Bispecific products before permitting larger clinical trials or registration trials. To comply with those requests would increase costs and timelines for the development of our TCR Bispecifics.

 

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We are, and if we receive regulatory approval of our product candidates, will continue to be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

Any regulatory approvals that we receive for our product candidates will require surveillance to monitor the safety and efficacy of such product candidate(s). The FDA may also require a REMS 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. The FDA may also require post-approval Phase 4 studies. Moreover, the FDA and comparable foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA or comparable foreign regulatory authorities become aware of new safety information after approval of any of our product candidates, they may withdraw approval, require labeling changes or establishment of a REMS or similar strategy, impose significant restrictions on a product’s indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. Any such restrictions could limit sales of the product.

In addition, we, our contractors, and our collaborators are and will remain responsible for FDA compliance, including requirements related to product design, testing, clinical and preclinical trials approval, manufacturing processes and quality, labeling, packaging, distribution, adverse event and deviation reporting, storage, advertising, marketing, promotion, sale, import, export, submissions of safety and other post-marketing information and reports such as deviation reports, registration, product listing, annual user fees, and recordkeeping for our product candidates. We and any of our collaborators, including our contract manufacturers, could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with regulatory requirements. Application holders must further notify the FDA, and depending on the nature of the change, obtain FDA pre-approval for product and manufacturing changes. The cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, that the product is less effective than previously thought, problems with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

 

  

restrictions on the marketing, distribution, or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory product recalls;

 

  

restrictions on the labeling of our product candidates, including required additional warnings, such as black box warnings, contraindications, precautions, and restrictions on the approved indication or use;

 

  

modifications to promotional pieces;

 

  

changes to product labeling or the way the product is administered;

 

  

liability for harm caused to patients or subjects;

 

  

fines, restitution, disgorgement, warning letters, untitled letters, or holds on or termination of 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;

 

  

product seizure or detention, or refusal to permit the import or export of our product candidates;

 

  

injunctions or the imposition of civil or criminal penalties, including imprisonment;

 

  

FDA debarment, debarment from government contracts, and refusal of future orders under existing contracts, exclusion from federal healthcare programs, consent decrees, or corporate integrity agreements;

 

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regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about the product candidate;

 

  

reputational harm; or

 

  

the product becoming less competitive.

Any of these events could further have other material and adverse effects on our operations and business and could adversely impact our stock price and could significantly harm our business, financial condition, results of operations, and prospects.

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 United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, be subject to other regulatory enforcement action, and may not achieve or sustain profitability.

The regulatory landscape that will govern our product candidates is still evolving; regulations relating to more established gene therapy and cell therapy products and TCR Bispecific products are still developing, and changes in regulatory requirements could result in delays or discontinuation of development of our product candidates or unexpected costs in obtaining regulatory approval.

Because we are developing novel cell immunotherapy product candidates that are unique biological entities, the regulatory requirements to which we will be subject are not entirely clear. Even with respect to more established products that fit into the categories of gene therapies or cell therapies, the regulatory landscape is still developing. For example, regulatory requirements governing gene therapy products and cell therapy products have become more stringent and comprehensive frequently and may continue to extend in the future. Moreover, there is substantial, and sometimes uncoordinated, overlap in those responsible for regulation of existing gene therapy products and cell therapy products. For example, in the United States, the FDA has established the Office of Tissues and Advanced Therapies (“OTAT”), formerly known as the Office of Cellular, Tissue and Gene Therapies (“OCTGT”), within its Center for Biologics Evaluation and Research (“CBER”) to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. Gene therapy clinical trials in the U.S. are also subject to review and oversight by an institutional biosafety committee (“IBC”), a local institutional committee that reviews and oversees basic and clinical research conducted at the institution participating in the clinical trial. Similar regulatory bodies exist in Europe and other jurisdictions. Although the FDA or specific regulatory authorities in other countries (for example, EMA or PEI) decides whether individual gene therapy protocols may proceed, review process and determinations of other reviewing bodies can impede or delay the initiation of a clinical study, even if for example, the FDA has reviewed the study and approved its initiation. Conversely, the FDA can place an IND application on clinical hold even if such other entities have provided a favorable review. Furthermore, each clinical trial must be reviewed and approved by an independent IRB at or servicing each institution at which a clinical trial will be conducted; equivalent processes are in place in other regions of the world. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of our product candidates.

While there is already a T cell engaging bispecific molecule approved and regulatory guidelines have been issued for this class of drugs, bispecific therapeutics are still new in the field and regulators have even less experience with TCR Bispecifics. Thus, guidance for development and regulatory approval of such drugs may change.

Complex regulatory environments exist in the different jurisdictions in which we might consider seeking regulatory approvals for our product candidates, further complicating the regulatory landscape. For example, in

 

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the EU a special committee called the Committee for Advanced Therapies was established within the EMA in accordance with Regulation (EC) No. 1394/2007 on advanced therapy medicinal products (“ATMPs”) to assess the quality, safety and efficacy of ATMPs, and to follow scientific developments in the field. ATMPs include gene therapy products as well as somatic cell therapy products and tissue engineered products.

These various regulatory review committees and advisory groups and new or revised guidelines that they promulgate from time to time may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. Because the regulatory landscape for our cell immunotherapy product candidates is new, it may face even more cumbersome and complex regulations than those emerging for other gene therapy products and cell therapy products. Furthermore, even if our product candidates obtain required regulatory approvals, such approvals may later be revoked, suspended or otherwise withdrawn as a result of changes in regulations or the interpretation of regulations by applicable regulatory agencies.

Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue to maintain our business.

Because our current products represent, and our other potential product candidates will represent novel approaches to the treatment of diseases, there are many uncertainties regarding the development, the market acceptance, third-party reimbursement coverage and the commercial potential of our product candidates.

Human immunotherapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel therapeutic interventions, there are many uncertainties related to development, marketing, reimbursement, and the commercial potential for our product candidates. There can be no assurance as to the number of required clinical trials, the length of the trial period, the number of patients the FDA and regulatory authorities in other jurisdictions will require to be enrolled in the trials in order to establish the safety and efficacy of immunotherapy products, or that the data generated in these trials will be acceptable to the FDA to support marketing approval. The FDA and comparable foreign regulatory may take longer than usual to come to a decision on any BLA or similar marketing application that we submit and may ultimately determine that there is not enough data, information, or experience with our product candidates to support an approval decision. Regulatory authorities may also require that we conduct additional post-marketing studies or implement risk management programs. For example, the FDA may require a REMS until more experience with our product candidates is obtained. Finally, after increased usage, we may find that our product candidates do not have the intended effect or have unanticipated side effects, potentially jeopardizing initial or continuing regulatory approval and commercial prospects.

We may also find that the manufacture of our product candidates is more difficult or more expensive than anticipated, resulting in an inability to produce a sufficient amount of our product candidates for our clinical trials or, if approved, commercial supply. Moreover, because of the complexity and novelty of our manufacturing process, there are only a limited number of manufacturers who have the capability of producing our product candidates. Should any of our contract manufacturers no longer produce our product candidates, it may take us significant time to find a replacement, if we are able to find a replacement at all.

We may also find that the development of a companion diagnostic for our product candidates is more difficult or more expensive than anticipated, resulting in an inability to provide the required diagnostic testing for our clinical trials, or if approved, for the market. Moreover, because of the complexity and novelty of our companion diagnostic biomarker, there are only a limited number of providers who have the capability of supporting the development of a companion diagnostic. Should any of our CRO partners fail to meet our development goals, it may take us significant time to find a replacement, if we are able to find a replacement at all.

There is no assurance that the approaches offered by our products will gain broad acceptance among doctors or patients or that governmental agencies or third-party medical insurers will be willing to provide reimbursement

 

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coverage for proposed product candidates. Moreover, we do not have verifiable internal marketing data regarding the potential size of the commercial market for our product candidates, nor have we obtained current independent marketing surveys to verify the potential size of the commercial markets for our current product candidates or any future product candidates. Since our current product candidates and any future product candidates will represent novel approaches to treating various conditions, it may be difficult, in any event, to accurately estimate the potential revenues from these product candidates. Accordingly, we may spend significant capital trying to obtain approval for product candidates that have an uncertain commercial market. The market for any products that we successfully develop will also depend on the cost of the product. We do not yet have sufficient information to reliably estimate what it will cost to commercially manufacture our current product candidates, and the actual cost to manufacture these products could materially and adversely affect the commercial viability of these products. Our goal is to reduce the cost of manufacturing and providing our therapies. However, unless we can reduce those costs to an acceptable amount, we may never be able to develop a commercially viable product. If we do not successfully develop and commercialize products based upon our approach or find suitable and economical sources for materials used in the production of our products, we will not become profitable, which would materially and adversely affect the value of our common stock.

Our ACT product candidate may be provided to patients in combination with other agents provided by third parties. The cost of such combination therapy may increase the overall cost of ACT therapy and may result in issues regarding the allocation of reimbursements between our therapy and the other agents, all of which may affect our ability to obtain reimbursement coverage for the combination therapy from third party medical insurers.

COVID-19 may materially and adversely affect our business and financial results.

Our business could be adversely affected by health epidemics in regions where we have clinical trial sites or other business operations; epidemics could also cause significant disruptions in the operations of third-party manufacturers and CROs upon whom we rely. In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and governments imposed restrictions on travel between the United States, Europe and certain other countries. Further, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. In Germany and many other European countries, governmental orders became effective in March 2020 to reduce virus transmission by social distancing. Those measures impact social and working life and travel.

The effects of these and other governmental orders, as well as shelter-in-place or work-from-home policies may negatively impact productivity, disrupt our and our partners’ business and delay our clinical programs and timelines (including our ACTengine genetically modified autologous T cell products), the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, financial condition and results of operations, including our ability to obtain financing.

Quarantines, shelter-in-place and similar government orders, or the perception that further orders, shutdowns or other restrictions on the conduct of business operations could occur related to COVID-19 and could impact personnel at our company, at suppliers, our collaborators or at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. Our operations, including research and manufacturing, could also be disrupted due to staff absences as a result of self-isolation procedures or extended illness at our company or at suppliers or collaborators.

 

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In addition, our clinical trials may be affected by the COVID-19 pandemic, including:

 

  

delays or difficulties in enrolling patients in clinical trials, including that patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services;

 

  

delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

 

  

diversion or prioritization of healthcare resources away from the conduct of clinical trials and towards the COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, who, as healthcare providers, may have heightened exposure to COVID-19;

 

  

interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal, state or provincial governments, employers and others; and

 

  

limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.

In addition to the risks listed above, we may also experience the following adverse impacts for our clinical trials:

 

  

delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

 

  

delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;

 

  

interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product and patient specimens used in our clinical trials;

 

  

changes in local regulations as part of a response to the COVID-19 coronavirus outbreak, which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

 

  

delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

 

  

the refusal of the FDA or other regulatory agencies to accept data from clinical trials from strongly affected geographies.

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

Risks Related to Our Reliance on Third Parties

Independent clinical investigators and CROs that we engage to conduct our clinical trials may not devote sufficient time or attention to our clinical trials or be able to repeat their past success.

We expect to continue to depend on independent clinical investigators and CROs to conduct our clinical trials. CROs may also assist us in the collection and analysis of data. Identifying, qualifying and managing performance of third-party service providers can be difficult, time-consuming and cause delays in our development programs. These investigators and CROs will not be our employees and we will not be able to control, other than by

 

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contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any product candidates that we develop. In addition, the use of third-party service providers may require us to disclose some of our proprietary information to these parties, which could increase the risk that this information will be misappropriated. Further, regulatory agencies require that we comply with GCP requirements for conducting, recording and reporting clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial subjects are protected. Failure of clinical investigators or CROs to meet their obligations to us or comply with GCP requirements could adversely affect, for example, the costs and timelines of the clinical development of our product candidates and harm our business. Not fulfilling GCP requirements by investigators or CROs could even lead to denial of a BLA or similar marketing application to comparable foreign authorities.

Failure of third-party contractors to successfully develop and commercialize companion diagnostics for use with our product candidates could harm our ability to commercialize our product candidates.

We plan to develop companion diagnostics for our product candidates where appropriate. Such developments are expensive and time-consuming. The FDA and similar regulatory authorities outside the United States may request or require the development and regulatory approval of a companion diagnostic as a condition to approving one or more of our product candidates, including, for example, IMA201, IMA202, IMA203, IMA204, and IMA401. We do not have experience or capabilities in developing, seeking regulatory approval for or commercializing diagnostics and plan to rely in large part on third parties to perform these functions.

We will likely outsource the development, production and commercialization of companion diagnostics to third parties. By outsourcing these companion diagnostics to third parties, we become dependent on the efforts of our third-party contractors to successfully develop and commercialize these companion diagnostics. Our contractors:

 

  

may not perform their obligations as expected;

 

  

may encounter production difficulties that could constrain the supply of the companion diagnostic;

 

  

may encounter difficulties in obtaining regulatory approval;

 

  

may have difficulties gaining acceptance of the use of the companion diagnostic in the clinical community;

 

  

may not commit sufficient resources to the marketing and distribution of such product; and

 

  

may terminate their relationship with us.

We rely on third parties to obtain reagents and raw materials.

The manufacture of our product candidates by us or any of our CMOs requires access to a number of reagents and other critical raw materials from third-party suppliers. Such third parties may refuse to supply such reagents or other raw materials or alternatively refuse to supply on commercially reasonable terms. There may also be capacity issues at such third-party suppliers that impact our ability to increase production of our product candidates.

Some of the materials used in the manufacture and processing of our product candidates may only be supplied by one or a few vendors, which means that, should those vendors be unable to supply, for whatever reason, our ability to manufacture product candidates and progress product candidates through clinical trials could be severely impacted and result in additional delays. Such failure to supply could also impact other supply relationships with other third parties and potentially result in additional payments being made or required in relation to such delays. In addition, where any raw material or precursor material (including, for example, lentiviral vector, cell culture medium, chromatographic column material or other essential raw material) is

 

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currently supplied by one or a few vendors, replacing such raw material or precursor or finding alternative vendors may not be possible or may significantly impact on the timescales for manufacture and supply of our product candidates. Even where alternative materials or precursors or alternative vendors are identified, such alternative materials, precursors or vendors and their materials will need to be properly assessed and qualified and additional regulatory approvals may also need to be obtained all of which could result in significant delays to the supply of our product candidates or an inability to supply product candidates within anticipated timescales, if at all.

We have contracted and expect to contract additional third parties for the manufacture of some of our product candidates for clinical testing in the future, and we expect to do so for commercialization. Third-party contractors are also important to supply us or our CMOs with important materials required for our product candidates or to develop and perform services essential for the manufacturing process. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost and when needed, which could delay, prevent or impair our development or commercialization efforts.

Currently, our ACT product candidates are manufactured by our personnel at the UTH facility. We expect to continue to manufacture product candidates for early phase trials using our personnel at the UTH facility; but we are currently negotiating contracts with larger CMOs with experience in cell therapy development and manufacturing to manufacture our products for late stage clinical trials, including any pivotal trials. The process will involve the development of a given manufacturing process in house using our personnel followed by technology transfer of each manufacturing process to the CMO. Our manufacturing strategy for bispecific T cell engagers includes CMOs for cell line development, process development, formulation development, cGMP manufacturing, analytics, release testing, fill and finish, packaging and storage.

We may not succeed in maintaining our relationships with current CMOs or establishing relationships with additional or alternative CMOs. Our product candidates may compete with other products and product candidates for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP and, for cellular products, also under cGTP regulations and that are both capable of manufacturing for us and willing to do so. In addition, there are limited CMOs specialized in the manufacturing of cellular therapy products. If our current and/or future CMOs for any of our product candidates or products that obtain approval should cease manufacturing for us, we would experience delays in obtaining sufficient quantities of our product candidates for clinical trials and, if approved, commercial supply. Further, our CMOs may breach, terminate, or not renew these agreements. If we were to need to find alternative manufacturing facilities, it would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. The commercial terms of any new arrangement could be less favorable than our existing arrangements and the expenses relating to the transfer of necessary technology and processes and obtaining applicable regulatory approvals could be significant.

Reliance on third-party manufacturers entails exposure to risks to which we would not be subject if we manufactured the product candidate ourselves, including:

 

  

inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

 

  

reduced day-to-day control over the manufacturing process for our product candidates as a result of using third-party manufacturers for all aspects of manufacturing activities, which can result in significant delays of drug supply to any clinical trial or commercial product;

 

  

any new manufacturer would have to be educated in processes for the production of our product candidates;

 

  

contract manufacturers may not be able to execute manufacturing of our product candidates and other logistical support requirements appropriately;

 

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the development of processes or the supply with materials important for the manufacturing of our product candidates may be delayed. This may lead to a situation that manufacturing of our product candidates may not be possible at a preplanned and booked manufacturing slot at one of our CMOs. In this case, we may be held liable for significant cancelation fees, and reservation of a new manufacturing slot may delay manufacturing by several months and may thereby impact our development timelines;

 

  

manufacturers are subject to ongoing periodic unannounced inspection by the FDA, by authorities from other jurisdictions and corresponding state agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards, and FDA or regulatory authorities from other countries further inspect any manufacturers for current cGMP and, if applicable, cGTP compliance as part of any marketing application we submit. We do not have control over third-party manufacturers’ compliance with these regulations and standards;

 

  

reduced control over the protection of our trade secrets and know-how from misappropriation or inadvertent disclosure;

 

  

termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that may be costly or damaging to us or result in delays in the development or commercialization of our product candidates; and

 

  

disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier.

Any of these factors could cause the delay of approval or commercialization of our product candidates, cause us to incur higher costs or prevent us from commercializing our product candidates successfully.

Furthermore, if any of our product candidates are approved and contract manufacturers fail to deliver the required commercial quantities of finished product on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volumes and quality and on a timely basis, we would likely be unable to meet demand for our products and could lose potential revenue. It may take several years to establish an alternative source of supply for our product candidates and to have any such new source approved by the FDA or any other relevant regulatory authorities.

At some point in the future, we may decide to operate our own manufacturing facility for our ACT product candidates in late-stage clinical testing and for our marketed products, which would require significant resources and we may fail to successfully operate our facility, which could adversely affect our clinical trials and the commercial viability of our product candidates.

Currently, we have no immediate plans to operate our own manufacturing facility for our product candidates in late-stage clinical testing or for our marketed products. However, we may not be able to achieve clinical or commercial manufacturing and cell processing at a scale to satisfy demands for late stage clinical trials or commercialization on our own or with a CMO and thus may decide to operate a manufacturing facility for our product candidates. While we believe the manufacturing and processing approaches are appropriate to support our clinical product development, we have limited experience in managing a large-scale manufacturing facility. We cannot be sure that the manufacturing processes we employ or the technologies that we incorporate for manufacturing will result in TCR-T cell product candidates suitable for clinical trials or commercialization.

We have exclusive access to the early stage facility at UTH designed for the manufacturing of cellular products comprised of three fully functional GMP suites and support areas where our hired and trained personnel perform all manufacturing related activities. The current lease extends through the end of 2021 with negotiations in place to extend the lease through the end of 2024. In case, the lease is not prolonged, we may decide to run our own manufacturing facility. There can be no assurance that we will complete the build-out of our manufacturing

 

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facility in a timely manner or at all. We also do not yet have sufficient information to reliably estimate the cost of the clinical and commercial manufacturing and processing of our product candidates, and the actual cost to manufacture and process our product candidates could materially and adversely affect the commercial viability of our product candidates. In addition, the ultimate clinical and any commercial dose will affect our ability to scale our costs per dose. As a result, we may never be able to develop a commercially viable product. The commercial manufacturing facility we may build will also require regulatory approval, including from FDA, which we may never obtain. Even if approved, we would be subject to ongoing periodic unannounced inspection by the FDA or authorities from other jurisdictions, the Drug Enforcement Administration and corresponding state agencies to ensure strict compliance with cGMP and cGTP requirements, and other government regulations.

If we were to decide in the future to own and operate a manufacturing facility, the designing and building process would be time-consuming, expensive, and we may not realize the benefit of this investment. As a manufacturer of pharmaceutical products, we are required to demonstrate and maintain compliance with cGMP and cGTP requirements, which include requirements related to production processes, quality control and assurance and recordkeeping. Furthermore, establishing and maintaining manufacturing operations requires a reallocation of other resources, particularly the time and attention of certain of our senior management. Any failure or delay in our manufacturing capabilities could adversely impact the clinical development or commercialization of our or our collaborators’ product candidates.

The manufacture of biopharmaceutical products, especially of those cellular in nature like our ACT product candidates, is complex and requires significant expertise, including the development of advanced manufacturing techniques and process controls. Manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling out and validating initial production and ensuring the absence of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. The application of new regulatory guidelines or parameters, such as those related to release testing, may also adversely affect our ability to manufacture our product candidates. Furthermore, if contaminants are discovered in our supply of product candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure that any stability or other issues relating to the manufacture of our product candidates will not occur in the future.

We or any of our CMOs may fail to manage the logistics of storing and shipping our raw materials and product candidates. Storage failures and shipment delays and problems caused by us, our vendors or other factors not in our control, such as weather, could result in the inability to manufacture product, the loss of usable product or prevent or delay the delivery of product candidates to patients.

We may also experience manufacturing difficulties due to resource constraints or as a result of labor disputes. If we were to encounter any of these difficulties, our ability to provide our product candidates to patients would be jeopardized.

We have limited experience in large-scale or commercial manufacturing, and there can be no assurance that we will be able to effectively manufacture clinical or commercial quantities of our products.

In September 2015, we entered into a collaboration agreement with UTH to gain exclusive access to a cGMP facility specialized in the manufacturing of cellular products. This facility is used exclusively for the manufacturing of our product candidates by our hired and trained personnel.

Although some of our employees have experience in the manufacturing of pharmaceutical products from prior employment at other companies, we as a company do not have experience in large-scale or commercial manufacturing.

 

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We may not succeed in scaling up our production processes for ACT and/or biologics for pivotal trials and/or commercial supply. We may need a larger scale manufacturing process for any TCR Bispecifics molecule than what we have planned, depending on the dose and regimen that is to be determined in our Phase 1 and future Phase 2 studies. Any changes in our manufacturing processes, including those utilized by our CMOs, as a result of scaling up may result in the need to obtain additional regulatory approvals. Difficulties in achieving commercial-scale production or the need for additional regulatory approvals could delay the development and regulatory approval of our product candidates and ultimately affect our success.

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

Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, potentially infectious material and genetically modified cells. We and our suppliers are subject to federal, state and local laws and regulations in the United States and Germany governing the use, manufacture, storage, handling and disposal of such hazardous materials. Although we believe that we and our suppliers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, and that we and our suppliers have all necessary permits, we and our suppliers cannot completely eliminate the risk of contamination or injury resulting from hazardous chemical or biological materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We have insurance in place for liabilities arising from handling biological and hazardous substances, but it may not or may not fully cover all costs from such accidents. 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 impact our business, prospects, financial condition or results of operations.

Our relationships with customers, physicians, and third-party payors are subject, directly or indirectly, to federal, state, local and foreign healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we could face substantial penalties.

These laws may impact, among other things, our clinical research program, as well as our proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services is subject to extensive laws and regulations 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, sales commission, customer incentive and other business arrangements. We may also be subject to federal, state and foreign laws governing the privacy and security of identifiable patient information. The U.S. healthcare laws and regulations that may affect our ability to operate include, but are not limited to:

 

  

the federal Anti-Kickback Statute, which 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, the purchasing, leasing, ordering or arranging for the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. Although 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 require strict compliance in order to offer protection. Practices that may be alleged to be intended to induce prescribing, purchases or recommendations, include any payments of more than fair market value, and may be subject to scrutiny if they do not qualify for an

 

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exception or safe harbor. In addition, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert 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 False Claims Act and the Civil Monetary Penalties Statute;

 

  

federal civil and criminal false claims laws and civil monetary penalty laws, including the federal civil False Claims Act, 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 federal government programs 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, including federal healthcare programs;

 

  

the federal Health Insurance Portability and Accountability Act of 1996 (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, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by any trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

  

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (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, relating to the privacy, security and transmission of individually identifiable health information;

 

  

the federal Physician Payments Sunshine Act, 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 United States Department of Health and Human Services’ (HHS) Centers for Medicare & Medicaid Services (CMS) information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and

 

  

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.

Additionally, we may be subject to state, local and foreign equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope. For example, we may be subject to the following: state anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers, or that apply regardless of payor; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require the reporting of information related to drug pricing; state and local laws requiring the registration of pharmaceutical sales and medical representatives; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

 

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Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities, or our arrangements with physicians, some of whom receive stock options as compensation, could be subject to challenge under one or more of such laws. If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we may be subject to investigations, enforcement actions and/or significant penalties. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct or business noncompliance, 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 United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Our existing therapeutic collaborations are important to our business, and future collaborations may also be important to us. If we are unable to maintain any of these collaborations, or if these collaborations are not successful, our business could be adversely affected.

We have limited capabilities for drug development and does not yet have any capability for sales, marketing or distribution. We have entered into collaborations with other companies that we believe can provide such capabilities, including our collaboration and license agreements with, for example, MD Anderson, Amgen, Genmab, Celgene Corporation, a Bristol-Myers Squibb Company (“BMS”), and GlaxoSmithKline (“GSK”). These collaborations have also provided us with important funding for our development programs and technology platforms, and we expect to receive additional funding under these collaborations in the future. Our existing therapeutic collaborations, and any future collaborations we enter into, may pose a number of risks, including the following:

 

  

collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

 

  

collaborators may not perform their obligations as expected;

 

  

collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

 

  

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

 

  

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; this may also happen if the collaborators’ development of competing products is substantially faster than our development timelines;

 

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collaborators may not further develop product candidates developed by us or co-developed with us under the collaboration;

 

  

product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;

 

  

a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products;

 

  

disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive;

 

  

collaborators have certain defined rights to change or expand the scope of development programs during the course of the collaboration. This may lead to additional research work for us that may be time-consuming and expensive. Such work may compete with our own development programs and may delay timelines to market or proof-of-concept for our product candidates. If development programs under the collaboration turn out to be more costly and time-consuming, such unanticipated costs and work could likewise compete with our internal development programs;

 

  

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

 

  

collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; we may also be held liable by the collaborator for potential infringement of third party intellectual property during the research and development work for the collaboration;

 

  

certain collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates. For example, certain of our collaboration and license agreements may be terminated for convenience upon the completion of a specified notice period; and

 

  

collaborators may discontinue the development of product candidates within the collaboration, for example if they consider the results achieved so far or the product candidates not promising enough or if their development strategies change.

If our therapeutic collaborations do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (“Roche”) recently informed us that it did not intend to continue development as contemplated under the collaboration agreement of April 26, 2016 and terminated the agreement as of September 30, 2020; as a result, we will not receive any milestone or royalty payments under the collaboration. All of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of our program collaborators.

Additionally, subject to its contractual obligations to us, if one of our collaborators is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, it may find it more difficult to attract new collaborators.

 

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For some of our product candidates, we may in the future determine to collaborate with additional pharmaceutical and biotechnology companies for development and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, and the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.

Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that reduced the number of potential future collaborators. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay one or more of our other development programs, delay our potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our technology platforms and our business may be materially and adversely affected.

We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potential collaborators. Subject to certain specified exceptions, each of our existing therapeutic collaborations contains an exclusivity restriction on our engaging in activities that are the subject of the collaboration with third parties for specified periods of time.

We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

We may form or seek strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing shareholders or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic collaborations and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish strategic collaborations or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. Any delays in entering into new strategic collaboration agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.

 

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We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

We are dependent or may depend in the future on patents, know-how and proprietary technology, both our own and licensed from others. We may also enter into additional license agreements that are material to the development of our product candidates.

Disputes may also arise between us and our licensors and licensees regarding intellectual property subject to a license agreement, including those related to:

 

  

the scope of rights granted under the license agreement and other interpretation-related issues;

 

  

whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the 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 us, our licensors, and our collaborators.

If disputes over intellectual property that we have licensed, or will license in the future, prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

We are generally also subject to all of the same risks with respect to protection of intellectual property that we license, as it is for intellectual property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize products could suffer.

Risks Related to Our Intellectual Property

If third parties claim that our activities or products infringe upon their intellectual property, our operations could be adversely affected.

There is a substantial amount of litigation, both within and outside the United States, involving patents and other intellectual property rights in the pharmaceutical industry. We may, from time to time, be notified of claims that we or our third party suppliers are infringing upon patents, trademarks, copyrights, or other intellectual property rights owned by third parties, and we cannot provide assurances that other companies will not, in the future, pursue such infringement claims against us or any third-party proprietary technologies we have licensed. If we or our third party suppliers were found to infringe upon a patent or other intellectual property right, or if we failed to obtain or renew a license under a patent or other intellectual property right from a third party, or if a third party that we were licensing technologies from was found to infringe upon a patent or other intellectual property rights of another third party, we may be required to pay damages, including triple damages if the infringement is found to be willful, suspend the manufacture of certain product candidates or reengineer or rebrand our product candidates, if feasible, or we may be unable to enter certain new product markets. Any such claims could also be expensive and time-consuming to defend and divert management’s attention and resources. Our competitive position could suffer as a result. In addition, if we have declined to enter into a valid non-disclosure or assignment agreement for any reason, we may not own an invention or intellectual property rights and may not be adequately protected. Although we have reviewed certain third-party patents and patent filings that we believe may be relevant to our product candidates, we have not conducted a full freedom-to-operate search or analysis for such product candidates, and we may not be aware of patents or pending or future patent applications that, if

 

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issued, would block us from commercializing our product candidates. Thus, we cannot guarantee that we can successfully commercialize product candidates in a way that will not infringe any third party’s intellectual property.

Where we license certain technology from a third party, the prosecution, maintenance and defense of the patent rights licensed from such third party may be controlled by the third party which may impact the scope of patent protection which will be obtained or enforced.

Where we license patent rights or technology from a third-party, control of such third-party patent rights may vest in the licensor, particularly where the license is non-exclusive or field restricted. This may mean that we are not able to control or affect the scope of the claims of any relevant third-party patent or have control over any enforcement of such a patent. Where a licensor brings an enforcement action, this could negatively impact our business or result in additional restrictions being imposed on the license we have and the scope of such license, or result in invalidation or limitation of the scope of the licensed patent. In addition, should we wish to enforce the relevant patent rights against a third person, we may be reliant on consent from the relevant licensor or the cooperation of the licensor. The licensor may refuse to bring such action and leave us unable to restrict competitor entry into the market.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, or lawsuits accusing our products of patent infringement, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe 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 patents 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. In the event of a successful claim of infringement against us, we may be enjoined from manufacturing, use, and marketing our products, or 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.

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

Periodic maintenance fees on any issued patent are due to be paid to the United States Patent and Trademark Office (“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 several 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. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

 

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We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial. Some of our competitors may be better able to sustain the costs of complex patent litigation because they have substantially greater resources. If there is litigation against us, we may not be able to continue to operate.

Should third parties file patent applications or be issued patents claiming technology we also use or claim, we may be required to participate in interference proceedings in the USPTO to determine priority of invention. We may be required to participate in interference proceedings involving our issued patents and pending applications. We may be required to cease using the technology or to license rights from prevailing third parties as a result of an unfavorable outcome in an interference proceeding. A prevailing party in that case may not offer us a license on commercially acceptable terms or at all.

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 collaborators initiates 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 United States, 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 United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes and post grant review, and equivalent proceedings in foreign jurisdictions (for example, opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

Our agreements with employees and our personnel policies also generally provide that any inventions conceived by such individuals in the course of rendering services to us shall be our exclusive property or that we may obtain full rights to such inventions, at our election. However, we may not obtain these agreements in all circumstances, and individuals with whom we have these agreements may not comply with their terms. We may be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patents or other intellectual property (“IP”). Ownership disputes may arise, for example, from conflicting obligations of consultants or others who are involved in developing our development candidates. We also face the risk that present or former employees could continue to hold rights to intellectual property we use, may demand the registration of intellectual property rights in their name and demand damages pursuant to the German Employee Invention Act. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable IP rights, such as exclusive ownership of, or right to use, valuable IP. Such an outcome could have a material adverse impact on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

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Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.

In addition to the protection afforded by patents, we seek to 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. Trade secrets, however, may be difficult to protect. Although we require all of our employees to assign their inventions to us, and require all of our employees and key consultants who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently 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 United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

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

We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. In addition, our employees involved in our strategic collaborations have access to certain joint confidential information or such information from the collaborator. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, from time to time we may be subject to claims that we, or our employees, consultants, or independent contractors, have inadvertently or otherwise used or disclosed IP, including trade secrets or other proprietary information, of any of our employees’ former employers or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable IP rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Such liability can also occur if we publish or disclose confidential information from our collaboration without permission of the respective collaborator.

Changes in U.S. or foreign countries’ 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 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 United States 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. 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, nor can we predict changes in international patent law.

 

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

The legal protection afforded to inventors and owners of intellectual property in countries outside of the United States may not be as protective or effective as that in the United States and we may, therefore, be unable to acquire and enforce intellectual property rights outside the United States to the same extent as in the United States. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents.

In addition, our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from utilizing our technologies or from developing or commercializing competing products. Furthermore, others may independently develop or commercialize similar or alternative technologies or therapies, or design around our patents. Our patents may be challenged, invalidated, circumvented or narrowed, or fail to provide us with any competitive advantages. In many foreign countries, patent applications and/or issued patents, or parts thereof, must be translated into the native language. If our patent applications or issued patents are translated incorrectly, they may not adequately cover our technologies; in some countries, it may not be possible to rectify an incorrect translation, which may result in patent protection that does not adequately cover our technologies in those countries.

Filing, prosecuting, enforcing, 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 United States are less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and certain state laws in the United States. Consequently, we may not be able to prevent third parties from utilizing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies, or technology that we license, in jurisdictions where we have not obtained patent protection to develop our own products and, further, may export otherwise infringing products to territories where we has patent protection, but enforcement is not as strong as that in the United States. These products may compete with our lead product candidate or any other current or future product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

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

Patent terms may be inadequate to protect our competitive position on our product candidate or any future product candidates for an adequate amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from our earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates or any future product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products. Given the amount of time required for the development, testing, and

 

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regulatory review of new product candidates, patents protecting our current product candidates or any future product candidates might expire before or shortly after we or our collaborators commercialize those candidates. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

Risks Related to Our Business and Industry

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel, including our Chief Executive Officer and other executive officers in our senior management. The loss of the services of any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements could result in delays in product development and harm our business.

We conduct substantially all of our operations at our facilities in Tübingen, Germany, Houston, Texas and Munich, Germany where many other biopharmaceutical companies, academic and research institutions have facilities and/or headquarters which substantially increases our competition for skilled personnel in our market and may limit our ability to hire and retain highly qualified personnel.

To induce current valuable employees to remain with us through salary and cash incentives, we have provided stock appreciation rights which have been converted into a new employee incentive scheme. Despite our efforts to retain valuable employees, members of our management, scientific and development teams could always terminate their employment with us on short notice. Even though we have employment agreements in place with all our employees including key personnel, these employment agreements provide for at-will employment, which means that any of our employees could leave us at any time, subject to notice periods and non-competition clauses. If key employees leave us, this may result in delays in the development of our product candidates or may endanger the proper and regulation compliant conduct of our clinical trials. Our success highly depends on our ability to continue to attract, retain and motivate highly skilled junior-, mid- and senior-level personnel as well as scientific and medical personnel.

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 fraud or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties may 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 United States 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 for any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and the costs associated with compliance with such laws are also likely to increase. Failure to comply with 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 and regulations 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

 

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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.

We have adopted a Code of 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 comply 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 we, or our employees’, consultants’, collaborators’, contractors’, or vendors’ 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 civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, compliance agreements, withdrawal of product approvals, and curtailment of our operations, among other things, 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 United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

Our operations are dependent upon the services of our executives and our employees who are engaged in research and development. The loss of the services of our executive officers or senior research personnel could delay our product development programs and our research and development efforts. In order to develop our business in accordance with our business plan, we will have to hire additional qualified personnel, including in the areas of research, manufacturing, clinical trials management, regulatory affairs, and sales and marketing. We are continuing our efforts to recruit and hire the necessary employees to support our planned operations in the near term. However, competition for qualified employees among companies in the biotechnology and biopharmaceutical industry is intense, and no assurance can be given that we will be able to attract, hire, retain and motivate the highly skilled employees that we need. Future growth will impose significant added responsibilities on members of management, including:

 

  

identifying, recruiting, integrating, maintaining, and motivating additional employees;

 

  

managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and

 

  

improving our operational, financial and management controls, reporting systems, and procedures.

Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of our attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality, compliance or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able

 

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to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development, and commercialization goals on a timely basis, or at all.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. We may also still face risks from previous research and development activities. For example, IMA950, a multi-peptide vaccine we previously developed, is still in clinical use under the responsibility of clinical investigators outside of our clinical trials (investigator-initiated trials). While any sponsor responsibility is with the investigator, we cannot fully be sure that we will not be held liable in the future for any potential product defects.

Any 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. Large judgements have also been awarded in class action lawsuits based on therapeutics that had unanticipated side effects. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

 

  

decreased demand for our product candidates;

 

  

injury to our reputation;

 

  

withdrawal of clinical trial participants or sites and potential termination of clinical trial sites or entire clinical programs;

 

  

initiation of investigations by regulators, refusal to approve marketing applications or supplements, and withdrawal or limitation of product approvals;

 

  

costs to defend the related litigation;

 

  

a diversion of management’s time and our resources;

 

  

substantial monetary awards to trial participants or patients;

 

  

product recalls, withdrawals or labeling, marketing or promotional restrictions;

 

  

loss of revenue;

 

  

significant negative media attention;

 

  

decrease in the price of our stock and our overall value;

 

  

exhaustion of our available insurance coverage and our capital resources; or

 

  

the inability to commercialize our product candidates.

Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with

 

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corporate collaborators. Our insurance policies may also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. While we have obtained clinical trial insurance for our Phase 1 clinical trials and will also seek to obtain such insurance for future trials, we may have to pay 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.

If we fail to comply with federal and state healthcare and promotional laws, including fraud and abuse and information privacy and security laws, we could face substantial penalties and our business, financial condition, results of operations, and prospects could be adversely affected.

As a biopharmaceutical company, we are subject to many federal and state healthcare laws, including the federal Anti-Kickback Statute, the federal civil and criminal False Claims Act (“FCA”), the civil monetary penalties statute, the Medicaid Drug Rebate statute and other price reporting requirements, the Veterans Health Care Act of 1992, the federal Health Insurance Portability and Accountability Act of 1996 (as amended by the Health Information Technology for Economics and Clinical Health Act), the Foreign Corrupt Practices Act of 1977, the Patient Protection and Affordable Care Act of 2010, and similar state laws. Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid, or other third-party payors, certain healthcare laws (for example, federal, state and European laws) and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. If we do not comply with all applicable fraud and abuse laws, we may be subject to healthcare fraud and abuse enforcement.

Laws and regulations require calculation and reporting of complex pricing information for prescription drugs, and compliance will require us to invest in significant resources and develop a price reporting infrastructure or depend on third parties to compute and report our drug pricing. Pricing reported to CMS must be certified. Non-compliant activities expose us to FCA risk if they result in overcharging agencies, underpaying rebates to agencies, or causing agencies to overpay providers.

If we or our operations are found to be in violation of any federal or state healthcare law, or any other governmental regulations that apply to it, we may be subject to penalties, including civil, criminal, and administrative penalties, damages, fines, disgorgement, debarment from government contracts, refusal of orders under existing contracts, exclusion from participation in U.S. federal or state health care programs, corporate integrity agreements, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results. If any of the physicians or other healthcare providers or entities with whom we expect to do business, including our collaborators, is found not to be in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including but not limited to, exclusions from participation in government healthcare programs, which could also materially affect our business.

In the United States, engaging in the impermissible promotion of our products, following approval, for off-label uses can also subject us to false claims and other litigation under federal and state statutes, including fraud and abuse and consumer protection laws, which can lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which we promote or distribute therapeutic products and do business through, for example, corporate integrity agreements, suspension or exclusion from participation in federal and state healthcare programs, and debarment from government contracts and refusal of future orders under existing contracts. These false claims statutes include the federal civil False Claims Act, which allows any individual to bring a lawsuit against a biopharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims or causing others to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government decides to intervene and prevails in the lawsuit, the individual will share in the proceeds from any fines or settlement funds. If the government declines to intervene, the individual may pursue the case alone. These False Claims Act lawsuits

 

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against manufacturers of drugs and biologics have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements, up to $3.0 billion, pertaining to certain sales practices and promoting off-label uses. In addition, False Claims Act lawsuits may expose manufacturers to follow-on claims by private payors based on fraudulent marketing practices. This growth in litigation has increased the risk that a biopharmaceutical company will have to defend a false claim action, pay settlement fines or restitution, as well as criminal and civil penalties, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid, or other federal and state healthcare programs. If we or our future collaborators do not lawfully promote our approved products, if any, we may become subject to such litigation and, if we do not successfully defend against such actions, those actions may have a material adverse effect on our business, financial condition, results of operations and prospects.

Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal and state fraud laws may prove costly. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research and development involves, and may in the future involve, the use of potentially hazardous materials, including chemicals, potentially infectious biological substances and genetically modified organisms. Our operations produce hazardous waste products. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards mandated by local, state and federal laws and regulations, the risk of accidental contamination or injury from these materials cannot be fully eliminated. If an accident occurs, we could be held liable for resulting damages. We are also subject to numerous environmental, health and workplace safety laws and regulations and fire and building codes, including those governing laboratory procedures, exposure to blood-borne, potentially infectious pathogens, use and storage of flammable agents and the handling of biohazardous materials and genetically modified organisms. Although we maintain workers’ compensation insurance as prescribed by Texas and German laws to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against all potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.

Negative public opinion and increased regulatory scrutiny of genetic research and therapies involving gene editing and research done on animals may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

The gene-editing technologies that we use are novel. Public perception may be influenced by claims that gene editing is unsafe, and products incorporating gene editing may not gain the acceptance of the public or the medical community. The development of some of our product candidates included research on animals or may in future require animal experiments. We try to limit the use of animal studies in the development of our products to the extent possible. However, FDA and regulatory authorities in other countries asked and may also ask in the future for some aspects of our products to be studied using animal experiments, and certain aspects of product development require animal studies by applicable regulations and laws. Public perception of our business may also be influenced by claims that studies on animals are unethical. In particular, our success will depend upon physicians specializing in our targeted diseases prescribing our product candidates as treatments in lieu of, or in addition to, existing, more familiar, treatments for which greater clinical data may be available. Any increase in negative perceptions of gene editing and animal studies may result in fewer physicians prescribing our treatments or may reduce the willingness of patients to utilize our treatments or participate in clinical trials for our product

 

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candidates. In addition, given the novel nature of gene-editing and cell therapy technologies, governments may place import or export restrictions in order to retain control of the technologies. Increased negative public opinion or more restrictive government regulations in the United States, Europe or internationally would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for such product candidates.

Our internal computer systems, or those used by our contract research organizations or other contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems and those of our contract research organizations and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized and authorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event was to occur and cause interruptions in our operations, it could result in a disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing clinical trials for a product candidate could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of any product candidates could be delayed. Loss of XPRESIDENT raw data, the XPRESIDENT database or target information could result in disruption of drug discovery and product candidate development activities. Unauthorized access to the aforementioned could limit development options and value potential for future target candidates or proprietary programs.

We are dependent on information technology systems, infrastructure and data.

We are dependent upon information technology systems, infrastructure and data. The multitude and complexity of our computer systems make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack. Likewise, data privacy or security breaches by third parties, employees, contractors or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, or other business partners may be exposed to unauthorized persons or to the public. Cyberattacks are increasing in their frequency, sophistication and intensity. Cyberattacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our business and technology partners face similar risks and any security breach of their systems could adversely affect our security posture. While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, there can be no assurance that our efforts, or the efforts of our partners and vendors, will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.

Business disruptions could seriously harm our future revenue and financial condition and increase costs and expenses.

Our operations and those of our third-party suppliers and collaborators could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes or other extreme weather conditions, medical epidemics, labor disputes or other business interruptions. Although we have limited business interruption insurance policies in place, any interruption could come with high costs for us, as salaries and loan payments would usually continue. Moreover, any interruption could seriously harm our ability to timely proceed with any clinical programs or to supply product candidates for use in our clinical programs or during commercialization. For example, the current COVID-19 pandemic is causing an interruption in our clinical trial activities. Specifically, we had to reduce our business activities including those in the laboratory according to governmental orders in the U.S. as well as in Germany. Additionally, supply chains disruptions impact and may continue to

 

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impact our research activities. Clinical sites involved may not be able to enroll patients into our trials as they have to keep free or use capacities for the treatment of COVID-19 patients. Any of the sites where we conduct clinical trials may announce that they will not enroll further patients into clinical trials until further notice. We currently do not know, how substantial the delay for the development of our product candidates will be. Even if the situation improves in the U.S. and/or Europe, the impact on supply chains and patient recruitment may last longer.

If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:

 

  

increased operating expenses and cash requirements;

 

  

the assumption of additional indebtedness or contingent liabilities;

 

  

assimilation of operations, intellectual property and products of an acquired company or product, including difficulties associated with integrating new personnel;

 

  

the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;

 

  

retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

 

  

risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and

 

  

our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.

Depending on the size and nature of future strategic acquisitions, we may acquire assets or businesses that require us to raise additional capital or to operate or manage businesses in which we have limited experience. Making larger acquisitions that require us to raise additional capital to fund the acquisition will expose us to the risks associated with capital raising activities. Acquiring and thereafter operating larger new businesses will also increase our management, operating and reporting costs and burdens. In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

The global credit and financial markets have experienced extreme volatility and disruptions in the past, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Our portfolio of corporate and government bonds would also be adversely impacted. Failure to secure any

 

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necessary financing in a timely manner and on favorable terms could have a material adverse effect on our operations, growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.

We are exposed to risks related to currency exchange rates.

We conduct a significant portion of our operations within Germany in both U.S. dollars and Euros and our arrangements with, for example, MD Anderson, Amgen, Genmab, BMS, and GSK are denominated in U.S. dollars or Euros. Changes in currency exchange rates have had and could have a significant effect on our operating results. Exchange rate fluctuations between U.S. dollars and local currencies create risk in several ways, including the following: weakening of the Euro may increase the cost of overseas research and development expenses and other costs outside of Germany; strengthening of the U.S. dollar may decrease the value of any future revenues denominated in other currencies. Effects of exchange rates on transactions and cash deposits held in a currency other than the functional currency of a subsidiary can distort our financial results; and commercial pricing and profit margins are affected by currency fluctuations. For example, international crises, conflicts or disasters such as the current COVID-19 pandemic may result in substantial instability in international financial markets, including with respect to exchange rates.

A variety of risks associated with conducting research and clinical trials in multiple countries and marketing our product candidates internationally could materially adversely affect our business.

Clinical trials are currently being conducted in the United States and in Germany, and we plan to globally develop our current and future product candidates. Accordingly, we expect that we will be subject to additional risks related to operating in foreign countries, including:

 

  

differing regulatory requirements in foreign countries;

 

  

unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

 

  

differing standards for the conduct of clinical trials;

 

  

increased difficulties in managing the logistics and transportation of storing and shipping product candidates produced in the United States or elsewhere and shipping the product candidate to patients in other countries;

 

  

import and export requirements and restrictions;

 

  

economic weakness, including inflation, or political instability in foreign economies and markets;

 

  

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

 

  

foreign taxes, including withholding of payroll taxes;

 

  

foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

 

  

difficulties staffing and managing foreign operations;

 

  

workforce uncertainty in countries where labor unrest is more common than in the United States or Germany;

 

  

differing payor reimbursement regimes, governmental payors or patient self-pay systems, and price controls;

 

  

potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;

 

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challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States or Germany;

 

  

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

 

  

business interruptions resulting from geo-political actions, including war and terrorism.

These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.

Our projections regarding the market opportunities for our product candidates may not be accurate, and the actual market for our products may be smaller than we estimate.

Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers who are in a position to receive second- or third-line therapy, and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research by third parties, and may prove to be incorrect. Further, new studies or approvals of new therapeutics may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates and may also be limited by the cost of our treatments and the reimbursement of those treatment costs by third-party payors. Even if we obtain significant market share for our product candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications.

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

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. In order to obtain orphan drug designation, the request must be made before submitting a BLA. In the European Union, EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval of that particular product 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 BLA, to market the same biologic (meaning, a product with the same principal molecular structural features) for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority to the product with orphan drug exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or

 

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condition for which the drug was designated. As a result, even if one of our product candidates receives orphan exclusivity, the FDA can still approve other biologics that do not have the same principal molecular structural features for use in treating the same indication or disease or the same biologic for a different indication or disease during the exclusivity period. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of our product or if a subsequent applicant demonstrates clinical superiority over our product.

We may seek orphan drug designations for some or all of our product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products. Even if we obtain orphan drug designations, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition, or if a subsequent applicant demonstrates clinical superiority over our products, if approved. In addition, although we may seek orphan drug designation for other product candidates, we may never receive such designations. Even with respect to the indications for which we received orphan designation, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products, and thus approval of our product candidates could be blocked for seven years if another company previously obtained approval and orphan drug exclusivity for the same drug and same condition.

We may seek Breakthrough Therapy or Fast Track designations and may pursue Accelerated Approval for some or all of our current product candidates, but we may be unable to obtain such designations or, where obtained, we may be unable to maintain Breakthrough Therapy designation or obtain or maintain the benefits associated with such designations.

In 2012, the FDA established a Breakthrough Therapy designation which is intended to expedite the development and review of products that treat serious or life-threatening diseases when “preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.” The designation of a product candidate as a Breakthrough Therapy provides potential benefits that include intensive guidance on an efficient drug development program, beginning as early as Phase 1, organizational commitment involving senior managers; and eligibility for rolling review and priority review.

Breakthrough Therapy designation does not change the standards for product approval. There can be no assurance that we will receive Breakthrough Therapy designation for any product candidate or any particular indication. Additionally, other treatments from competing companies may obtain the designations and impact our ability to develop and commercialize our product candidates, which may adversely impact our business, financial condition or results of operation.

We may also seek Fast Track designation. If a drug or biologic candidate is intended for the treatment of a serious or life-threatening condition or disease and the drug demonstrates the potential to address unmet medical needs for the condition, the sponsor may apply for Fast Track designation. Under the Fast Track program, the sponsor of a new drug or biologic candidate may request that the FDA designate the candidate for a specific indication as a Fast Track drug or biologic concurrent with, or after, the submission of the IND for the candidate. The FDA must determine if the drug or biologic candidate qualifies for Fast Track designation within 60 calendar days of receipt of the sponsor’s request. Even if we do apply for and receive Fast Track designation, we may not experience a faster development, review or approval process compared to conventional FDA procedures. The FDA may rescind Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.

We may also seek Accelerated Approval under the FDA’s Accelerated Approval programs. The FDA may approve a drug or biologic for a serious or life-threatening disease or condition that generally provides

 

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meaningful advantages over available treatments 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. For drugs granted Accelerated Approval, post-marketing confirmatory trials have been required to describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. These confirmatory trials must be completed with due diligence. Moreover, the FDA may withdraw approval of our product candidate or indication approved under the Accelerated Approval pathway if, for example:

 

  

the trial or trials required to verify the predicted clinical benefit of our product candidate fails to verify such benefit or does not demonstrate sufficient clinical benefit to justify the risks associated with the drug;

 

  

other evidence demonstrates that our product candidate is not shown to be safe or effective under the conditions of use;

 

  

we fail to conduct any required post approval trial of our product candidate with due diligence; or

 

  

we disseminate false or misleading promotional materials relating to the relevant product candidate.

In Europe, the EMA has implemented the so-called “PRIME” (PRIority MEdicines) status in order support the development and accelerate the approval of complex innovative medicinal products addressing an unmet medical need. The PRIME status enables early dialogue with the relevant EMA scientific committees and, possibly, some payers; and thus reinforces the EMA’s scientific and regulatory support. It also opens accelerated assessment of the marketing authorization application (150 days instead of 210 days). The PRIME status, which is decided by the EMA, is reserved to medicines that may benefit from accelerated assessment, i.e. medicines of major interest from a public health perspective, in particular from a therapeutic innovation perspective and that target unmet medical need.

Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the FDA and other government agencies on which our operations may rely are subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations due to insufficient funding of the SEC and other government agencies or due to a government shutdown that affects the SEC.

 

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Immatics OpCo and Immatics US, Inc. are subject to taxes and may have increased tax reporting and liabilities as a result of tax authority assessments.

Immatics OpCo and Immatics US, Inc. (“Immatics US”) have not been subject to detailed income tax audits in the past. Both companies’ tax returns since 2015 may therefore be subject to change based on subsequent tax audits. This could lead to potential court procedures and increased tax liabilities in the future.

We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements.

Prior to the Business Combination, we were a private company and had limited accounting and financial reporting personnel and other resources with which to address our internal controls and procedures. In connection with the audit of our consolidated financial statements for the year ended December 31, 2019, our management identified material weaknesses in our internal controls related to (i) the sufficiency of resources with an appropriate level of technical accounting and SEC reporting experience, (ii) clearly defined control processes, roles and segregation of duties within our finance and accounting functions and (iii) the design and operating effectiveness of information technology general controls for information systems that are significant to the preparation of our consolidated financial statements. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If our remedial measures are insufficient to address the material weaknesses, or if additional material weakness or significant deficiencies in our internal control are discovered or occur in the future, our financial statements may contain material misstatements.

Actual or anticipated changes to the laws and regulations governing the health care system may have a negative impact on cost and access to health insurance coverage and reimbursement of healthcare items and services.

The United States and several foreign jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell any of our future approved products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access to healthcare. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives, including the Patient Protection and Affordable Care Act (“ACA”), which became law in 2010. While it is difficult to assess the impact of the ACA in isolation, either in general or on our business specifically, it is widely thought that the ACA increases downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of, and the price we may charge for, any products we develop that receive regulatory approval. Further, the United States, European and foreign governments regularly consider reform measures that affect healthcare coverage and costs. Such reforms may include changes to the coverage and reimbursement of healthcare services and products. For example, there have been recent judicial and Congressional challenges to the ACA, which could have an impact on coverage and reimbursement for healthcare services covered by plans authorized by the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. In September 2017, members of the United States Congress unsuccessfully introduced legislation with the announced intention to repeal major provisions of the ACA. Executive or legislative branch attempts to repeal, reform or to repeal and replace the ACA will likely continue. In addition, various other healthcare reform proposals have also emerged at the federal and state level. In addition, recent changes to United States tax laws could negatively impact the ACA.

 

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We cannot predict what healthcare initiatives, if any, will be implemented in the U.S. at the federal or state level or in European or other jurisdictions, however, government and other regulatory oversight and future regulatory and government interference with the healthcare systems could adversely impact our business and results of operations.

We expect to experience pricing pressures in connection with the sale of any products that we develop, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative proposals.

Our failure to comply with international data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

European Union (“EU”) member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations on us. Moreover, the collection and use of personal health data in the EU, which was formerly governed by the provisions of the EU Data Protection Directive, was replaced with the EU General Data Protection Regulation (“GDPR”) in May 2018. 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 U.S., provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may, in the future, be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, 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.

Our failure to comply with state and/or national data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

In the European Union, regulations regarding data protection were revised in 2016 by Regulation (EU) 2016/679 to implement more strict regulations. There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns. In the U.S., some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act (“HIPAA”) and associated regulations. For example, California recently enacted legislation – the California Consumer Privacy Act (“CCPA”) – which went into effect January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Although the law includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of personal information depending on the context.

 

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

We do not carry insurance for all categories of risks that our business may encounter, and insurance coverage is becoming increasingly expensive. We do not know if we will be able to maintain existing insurance with adequate levels of coverage, and any liability insurance coverage we acquire in the future may not be sufficient to reimburse us for any expenses or losses we may suffer. If we obtain marketing approval for any product candidates that we or our collaborators may develop, we intend to acquire insurance coverage to include the sale of commercial products, but we may be unable to obtain such insurance on commercially reasonable terms or in adequate amounts. Required coverage limits for such insurances are difficult to predict and may not be sufficient. If potential losses exceed our insurance coverage, our financial condition would be adversely affected. In the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources. Clinical trials or regulatory approvals for any of our product candidates could be suspended, which could adversely affect our results of operations and business, including by preventing or limiting the development and commercialization of any product candidates that we or our collaborators may develop. Additionally, operating as a public company will make it more expensive for us to obtain director and officer liability insurance. As a result, it may be more difficult to attract and retain qualified individuals to serve on our supervisory board (the “Supervisory Board”), the board committees or our management board (the “Management Board”).

We are subject to new legislation, regulatory proposals, and healthcare payor initiatives that may increase our costs of compliance, and adversely affect our ability to market our products, obtain collaborators, and raise capital.

In the United States and other foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities, and affect our ability, or the ability of our collaborators, to profitably sell any products for which we obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or our collaborators, may receive for any approved products.

Since 2010, when the United States enacted the Affordable Care Act (“ACA”), there have been a number of legislative and regulatory changes to the health care system in U.S. and also certain foreign jurisdictions that could impact our ability to sell our products profitably. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect on April 1, 2013 and were to remain in effect until 2024. The Bipartisan Budget Act of 2015 extended the 2% sequestration to 2025. In January 2013, the American Taxpayer Relief Act of 2012 (“ATRA”) was approved which, among other things, reduced Medicare payments to several providers, with primary focus on the hospital outpatient setting and ancillary services, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. On January 20, 2017, the new administration signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices, and, for that reason, some final regulations have yet to take effect. In December 2017, Congress repealed the individual mandate for health insurance required by the ACA and could consider further legislation to repeal other elements of the ACA. At the end of 2017, CMS promulgated regulations that reduce the amount paid to hospitals for outpatient drugs purchased under the 340B program, and

 

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some states have enacted transparency laws requiring manufacturers to report information on drug prices and price increases. On December 14, 2018, the United States District Court for the Northern District of Texas struck down the ACA, deeming it unconstitutional given that Congress repealed the individual mandate in 2017. In December 2019, the U.S. Court of Appeals for the Fifth Circuit affirmed the district court’s decision that the individual mandate is unconstitutional, but remanded the case to the district court to reconsider the severability question. It is unclear how the ultimate decision in this case, which is now pending before the U.S. Supreme Court, and other efforts to repeal and replace the ACA will impact the ACA and our business.

Additional federal and state healthcare reform measures in the U.S. or foreign countries may be adopted in the future that may result in more rigorous coverage criteria, increased regulatory burdens and operating costs, decreased net revenue from our pharmaceutical products, decreased potential returns from our development efforts, and additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other foreign government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.

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

In addition, there have been a number of other policy, legislative and regulatory proposals aimed at changing the pharmaceutical industry. For instance, on May 11, 2018, the current administration presented its “Blueprint” to lower drug prices and reduce out of pocket costs of drugs, as well as additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, and incentivize manufacturers to lower the list price of their products. Although some proposals related to the administration’s Blueprint may require additional authorization to become effective, may ultimately be withdrawn, or may face challenges in the courts, the U.S. Congress and the administration have indicated that they will continue to seek new legislative and administrative measures to control drug costs, including by addressing the role of pharmacy benefit managers in the supply chain. 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.

We are unable to predict the future course of federal or state healthcare legislation in the United States or other major drug markets directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.

The use of Immatics Opco and Immatics US’s net operating loss carryforwards and research tax credits may be limited as a result of the Business Combination.

Both Immatics OpCo and Immatics US incurred significant losses in the past and therefore are entitled to use net operating loss carryforwards.

As of December 31, 2019, we had German federal net operating loss carryforwards of at least €155 million. These net operating loss carryforwards will not expire. However, the Business Combination resulted in an ownership change in accordance with § 8c (1) KStG (German corporation tax code). Therefore, these net

 

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operating loss carryforwards can be preserved only to the extent that our fair value exceeds the equity in the tax books plus the net operating loss carryforwards. Therefore, our net operating loss carryforwards could be reduced or eliminated as part of the transaction.

As of December 31, 2019, Immatics US had U.S. federal net operating loss carryforwards of at least $65 million. Immatics US’s net operating loss carryforwards arising in taxable years ending on or prior to December 31, 2017 will begin expiring in 2027 if Immatics US has not used them prior to that time. Net operating loss carryforwards arising in taxable years ending after December 31, 2017 are no longer subject to expiration under the U.S. Tax Code. Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), net operating losses arising in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Due to the cumulative losses of Immatics US through December 31, 2019, Immatics US does not anticipate that such provision of the CARES Act will be relevant to it. Additionally, Immatics US’s ability to use any net operating loss and credit carryforwards to offset taxable income or tax, respectively, in the future will be limited under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended (the “U.S. Tax Code”) respectively, if Immatics US has a cumulative change in ownership of more than 50% within a three-year period.

We have performed an analysis under Section 382 of the U.S. Tax Code as of the expected closing of the Business Combination. Per the analysis, the Business Combination may have triggered such an ownership change. As a result, the federal carryforwards associated with the net operating losses and research tax credits may be limited and more likely to expire unutilized. Based on our analysis, the annual limitation under Section 382 of the U.S. Tax Code is expected to be approximately $2.1 million. In addition to this limitation, Section 382 of the U.S. Tax Code provides that a corporation with a net unrealized built-in gain immediately before an ownership change may increase its limitation by the amount of recognized built-in gain recognized during a recognition period, which is generally the five-year period immediately following an ownership change. Based on our analysis, we believe that Immatics US has a net unrealized built-in gain at the time of the Business Combination; as a result, the limitation under Section 382 of the U.S. Tax Code may be increased during the recognition period.

In addition, since we will need to raise substantial additional funding to finance our operations, we may undergo further ownership changes in the future. Any such annual limitation may significantly reduce the utilization of the net operating loss carryforwards and research tax credits before they expire. Depending on our future tax position, limitation of our ability to use net operating loss carryforwards in which we are subject to income tax could have an adverse impact on our results of operations and financial condition.

Risks Related to Ownership of Our Ordinary Shares and the Offering

We are organized and existing under the laws of the Netherlands, and, as such, the rights of our shareholders and the civil liability of our directors and executive officers are governed in certain respects by the laws of the Netherlands.

We are organized and existing under the laws of the Netherlands, and, as such, the rights of our shareholders and the civil liability of our directors and executive officers are governed in certain respects by the laws of the Netherlands. The ability of our shareholders in certain countries other than the Netherlands to bring an action against us, our directors and executive officers may be limited under applicable law. In addition, substantially all of our assets are located outside the United States. As a result, it may not be possible for shareholders to effect service of process within the United States upon us or our directors and executive officers or to enforce judgments against us or them in U.S. courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. In addition, it is not clear whether a Dutch court would impose civil liability on us or any of our directors and executive officers in an original action based solely upon the federal securities laws of the United States brought in a court of competent jurisdiction in the Netherlands.

 

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As of the date of this prospectus, the United States and the Netherlands do not have a treaty providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. Accordingly, a judgment rendered by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized and enforced by the competent Dutch courts. However, if a person has obtained a final and conclusive judgment for the payment of money rendered by a court in the United States that is enforceable in the United States and files a claim with the competent Dutch court, the Dutch court will generally give binding effect to such foreign judgment insofar as it finds that (i) the jurisdiction of the U.S. court has been based on a ground of jurisdiction that is generally acceptable according to international standards, (ii) the judgment by the U.S. court was rendered in legal proceedings that comply with the Dutch standards of proper administration of justice including sufficient safeguards (behoorlijke rechtspleging) and (iii) the judgment by the U.S. court is not incompatible with a decision rendered between the same parties by a Dutch court, or with a previous decision rendered between the same parties by a foreign court in a dispute that concerns the same subject and is based on the same cause, provided that the previous decision qualifies for acknowledgment in the Netherlands and except to the extent that the foreign judgment contravenes Dutch public policy (openbare orde).

Based on the lack of a treaty as described above, U.S. investors may not be able to enforce against the company or our directors, representatives or certain experts named herein who are residents of the Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

Under our articles of association, and certain other contractual arrangements between us and our directors, we will indemnify and hold our directors harmless against all claims and suits brought against them, subject to limited exceptions. There is doubt, however, as to whether U.S. courts would enforce such indemnity provisions in an action brought against one of our directors in the United States under U.S. securities laws.

We do not anticipate paying dividends on our ordinary shares.

Our articles of association prescribe that any profits in any financial year will be distributed first to holders of financing preferred shares, if outstanding. Any remaining profits may be reserved by the Management Board subject to the approval of the Supervisory Board or, after July 1, 2021, the Board. Any profits remaining thereafter and our reserves may be distributed as dividends to the holders of our ordinary shares, subject to the appropriate record date. The general meeting will be authorized to declare distributions on the proposal of the Management Board, which proposal will require the prior approval of the Supervisory Board or, after July 1, 2021, the Board. We will have power to make distributions to shareholders only to the extent that our equity exceeds the aggregate amount of the issued share capital and the reserves which must be maintained pursuant to Dutch law or by our articles of association. We may not make any distribution of profits on shares held by the company as treasury shares and such treasury shares will not be taken into account when determining the profit entitlement of our shareholders. The Management Board or, after July 1, 2021, the Board, determines whether and how much of the profit shown in the adopted annual accounts it will reserve and the manner and date of any dividend. All calculations to determine the amounts available for dividends will be based on company-only annual accounts, which may be different from our consolidated financial statements, such as those included in this prospectus. In addition, the Management Board is permitted, subject to Supervisory Board approval and subject to certain requirements, to declare interim dividends without the approval of the shareholders. We may reclaim any distributions, whether interim or not interim, made in contravention of certain restrictions of Dutch law from shareholders that knew or should have known that such distribution was not permissible. In addition, on the basis of Dutch case law, if after a distribution we are not able to pay our due and collectable debts, then our shareholders or directors who at the time of the distribution knew or reasonably should have foreseen that result may be liable to our creditors. We have never declared or paid any cash dividends and have no plan to declare or pay any dividends in the foreseeable future on our ordinary shares. We currently intend to retain any earnings for future operations and expansion.

 

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Since we are a holding company, our ability to pay dividends will be dependent upon the financial condition, liquidity and results of operations of, and our receipt of dividends, loans or other funds from, our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to make funds available to us. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which our subsidiaries may pay dividends, make loans or otherwise provide funds to us.

Each of ARYA Sponsor and certain of Immatics OpCo’s former equityholders own a significant portion of our ordinary shares and will have representation on the Supervisory Board, and after July 1, 2021, the Board. The ARYA Sponsor and such former Immatics OpCo’s current equityholders may have interests that differ from those of other shareholders.

As of the date of this prospectus, approximately 9.7% of our ordinary shares are owned by the pre-Business Combination independent directors of ARYA (but not including a certain affiliate (the “Sponsor PIPE Entity”) of ARYA Sponsor), approximately 55.2% of our ordinary shares are owned by certain former Immatics OpCo equityholders and approximately 16.4% of our ordinary shares are owned by the investors in the PIPE Financing (including certain Immatics OpCo equityholders and the Sponsor PIPE Entity). In addition, two of our director nominees were designated by the ARYA Sponsor. As a result, the ARYA Sponsor and certain former Immatics OpCo equityholders may be able to significantly influence the outcome of matters submitted for director action, subject to obligation of the Management Board and Supervisory Board or, after July 1, 2021, the Board to act in the interest of all of our stakeholders, and for shareholder action, including the designation and appointment of the Management Board and Supervisory Board and, after July 1, 2021, the Board (and committees thereof) and approval of significant corporate transactions, including business combinations, consolidations and mergers. The influence of ARYA Sponsor and certain former Immatics OpCo equityholders over our management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of our company, which could cause the market price of our ordinary shares to decline or prevent our shareholders from realizing a premium over the market price for our ordinary shares. Additionally, ARYA Sponsor is controlled by Perceptive Advisors LLC and its affiliates (“Perceptive”), which is in the business of making investments in companies and which may from time to time acquire and hold interests in businesses that compete directly or indirectly with us or that supply us with goods and services. Perceptive may also pursue acquisition opportunities that may be complementary to (or competitive with) our business, and as a result those acquisition opportunities may not be available to us. Prospective investors in our ordinary shares should consider that the interests of ARYA Sponsor and certain former Immatics OpCo equityholders may differ from their interests in material respects.

Provisions of our articles of association or Dutch corporate law might deter acquisition bids for us that our shareholders might consider to be favorable and prevent or frustrate any attempt to replace or remove the Supervisory Board or Management Board at the time of such acquisition bid.

Certain provisions of our articles of association may make it more difficult for a third party to acquire control of the Supervisory Board, Management Board or, after July 1, 2021, the Board or effect a change in the composition of such boards. These provisions include:

 

  

a provision that our directors can only be removed (or a binding nomination by the Supervisory Board or, after July 1, 2021, the Board or shareholders representing, individually or jointly, 10% of our issued share capital to appoint directors can only be set aside) by the shareholders by a majority of at least two thirds of the votes cast during a general meeting, provided such votes represent more than half of the issued share capital (unless the removal was proposed by the Supervisory Board or, after July 1, 2021, the Board, in which case a majority of votes cast representing more than half of the issued share capital is required);

 

  

pursuant to our articles of association, the Management Board and, after July 1, 2021, the Board, is irrevocably authorized for a period of five years from the date of the Business Combination, to issue ordinary shares which could enable us to dilute the holding of an acquirer by issuing ordinary shares to other parties. Issuances of ordinary shares may make it more difficult for a shareholder or potential acquirer to obtain control over us;

 

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a requirement that certain matters, including an amendment of our articles of association, may only be brought to the shareholders for a vote upon a proposal by the Management Board, which proposal requires the prior approval of the Supervisory Board or, after July 1, 2021, upon a proposal by the Board; and

 

  

a provision implementing a staggered board, pursuant to which only one class of Supervisory Directors, or after July 1, 2021, our Directors, will be elected at each general meeting, with the other classes continuing for the remainder of their respective terms.

Such provisions could discourage a takeover attempt and impair the ability of shareholders to benefit from a change in control and realize any potential change of control premium. This may adversely affect the market price of our ordinary shares. See the section titled “Description of Securities”.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which is likely to negatively affect our business and the market price of our ordinary shares.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in our implementation could cause us to fail to meet our reporting obligations. In addition, any testing conducted by us, or any testing conducted by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which is likely to negatively affect our business and the market price of our ordinary shares.

We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). We could be an “emerging growth company” for up to five years. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

The market price and trading volume of our ordinary shares may be volatile and could decline significantly following the Business Combination.

Stock markets, including Nasdaq, on which our ordinary shares and public warrants are listed, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for our ordinary shares, the market price of our ordinary shares may be volatile and could decline significantly. In addition, the trading volume in our ordinary shares and public warrants may fluctuate and cause significant price variations to occur. Generally, securities of biotechnology companies tend to be volatile and experience significant price and volume fluctuations. If the market price of our ordinary shares declines significantly, you may be unable to resell your securities at or above the price you purchased them for. We cannot assure you that the market price of our ordinary shares will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:

 

  

the realization of any of the risk factors presented in this prospectus;

 

  

actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, results of operations, liquidity or financial condition;

 

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additions and departures of key personnel;

 

  

failure to comply with the requirements of Nasdaq;

 

  

failure to comply with the Sarbanes-Oxley Act or other laws or regulations;

 

  

future issuances, sales or resales, or anticipated issuances, sales or resales, of our ordinary shares;

 

  

publication of research reports about us;

 

  

the performance and market valuations of other similar companies;

 

  

broad disruptions in the financial markets, including sudden disruptions in the credit markets;

 

  

material and adverse impact of the COVID-19 pandemic on the markets and the broader global economy;

 

  

speculation in the press or investment community;

 

  

actual, potential or perceived control, accounting or reporting problems; and

 

  

changes in accounting principles, policies and guidelines.

In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.

If securities or industry analysts publish inaccurate or unfavorable research or cease publishing research about us, our share price and trading volume could decline significantly.

The market for our ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades its opinions about our ordinary shares, publishes inaccurate or unfavorable research about us, or ceases publishing about us regularly, demand for our ordinary shares could decrease, which might cause our share price and trading volume to decline significantly.

Future issuances of financing preferred shares or other equity securities may adversely affect us, including the market price of our ordinary shares, and may be dilutive to existing shareholders.

In the future, we may issue financing preferred shares or other equity ranking senior to our ordinary shares. Financing preferred shares have, and those other securities will generally have, priority upon liquidation. Such securities also may be governed by an instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our ordinary shares. Because our decision to issue equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, future capital raising efforts may reduce the market price of our ordinary shares and be dilutive to existing shareholders.

Our shareholders may not have any preemptive rights in respect of future issuances of our ordinary shares.

In the event of an increase in our share capital by way of an issue of our ordinary shares, holders of our ordinary shares are generally entitled under Dutch law to full preemptive rights, unless these rights are limited or excluded either by a resolution of the general meeting or by a resolution of the Management Board, subject to the prior approval of the Supervisory Board or, after July 1, 2021, the Board (if authorized by the general meeting for this purpose), or where shares are issued to our employees or a group company (i.e., certain affiliates, subsidiaries or related companies) or paid up by means of a non-cash contribution, or in case of an exercise of a previously acquired right to subscribe for shares. The same preemptive rights apply when rights to subscribe for shares are granted.

 

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Under our articles of association, the preemptive rights in respect of newly issued ordinary shares may be restricted or excluded by a resolution of the general meeting, which resolution requires a two-thirds majority of the votes cast if less than half of the issued share capital is present or represented at the meeting. The general meeting may authorize the Management Board, subject to the prior approval of the Supervisory Board or, after July 1, 2021, the Board to limit or exclude the preemptive rights in respect of newly issued ordinary shares. Such authorization for the Management Board, subject to the prior approval of the Supervisory Board or, after July 1, 2021, the Board can be granted and extended, in each case for a period not exceeding five years.

Pursuant to our resolution of the general meeting dated June 30, 2020, the Management Board is irrevocably authorized for a period of five years from the date of the Business Combination to limit or exclude preemptive rights on our ordinary shares up to 100% of the number of our ordinary shares in our authorized share capital (from time to time). On July 1, 2021, the powers of the Management Board will vest in the Board.

Accordingly, holders of our ordinary shares may not have any preemptive rights in connection with, and may be diluted by, an issue of new ordinary shares and it may be more difficult for a shareholder to obtain control over the general meeting. See the sections titled “Description of Securities — Share Capital”, “ — Issuance of Ordinary Shares” and “ — Preemptive Rights”. Certain of our ordinary shareholders outside the Netherlands, in particular, U.S. ordinary shareholders, may not be allowed to exercise preemptive rights to which they are entitled, if any, unless a registration statement under the Securities Act is declared effective with respect to ordinary shares issuable upon exercise of such rights or an exemption from the registration requirements is available.

Preemptive rights do not exist with respect to the issue of financing preferred shares and holder of financing preferred shares have no preemptive right to acquire newly issued ordinary shares. We are not obligated to and do not comply with all the best practice provisions of the DCGC. This could adversely affect your rights as a shareholder.

As we have our registered office in the Netherlands and our ordinary shares are listed on a third (non-EU) country market equivalent to a regulated market (Nasdaq), we are subject to the Dutch Corporate Governance Code, as of December 8, 2016 and as amended from time to time (the “DCGC”). The DCGC contains both principles and best practice provisions for the Management Board, the Supervisory Board or, after July 1, 2021, the Board, shareholders and the general meeting, financial reporting, auditors, disclosure compliance and enforcement standards.

The DCGC is based on a “comply or explain” principle. Accordingly, we are required to disclose in our management report publicly filed in the Netherlands, whether or not we are complying with the various provisions of the DCGC. If we do not comply with one or more of those provisions (e.g., because of a conflicting Nasdaq requirement or U.S. market practice), we are required to explain the reasons for such non-compliance.

We acknowledge the importance of good corporate governance. However, we do not comply with all the provisions of the DCGC, to a large extent because such provisions conflict with or are inconsistent with the corporate governance rules of Nasdaq and U.S. securities laws applicable to us, or because we believe such provisions do not reflect customary practices of global companies listed on Nasdaq. This could adversely affect your rights as a shareholder and you may not have the same level of protection as a shareholder in a Dutch company that fully complies with the DCGC.

We are an “emerging growth company”, and we cannot be certain if the reduced SEC reporting requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors, which could have a material and adverse effect on us, including on our growth prospects.

We are an “emerging growth company” as defined in the JOBS Act. We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year (a) following October 10, 2023, the fifth anniversary of ARYA’s initial public offering, (b) in which we have total annual gross revenue of at least

 

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$1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that are held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We intend to take advantage of exemptions from various reporting requirements that are applicable to most other public companies, whether or not they are classified as “emerging growth companies”, including, but not limited to, an exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. The JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. However, we have chosen to “opt out” of this extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for all public companies that are not emerging growth companies. our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. We cannot predict if investors will find our ordinary shares less attractive because we intend to rely on certain of these exemptions and benefits under the JOBS Act. If some investors find our ordinary shares less attractive as a result, there may be a less active, liquid and/or orderly trading market for our ordinary shares and the market price and trading volume of our ordinary shares may be more volatile and decline significantly.

As a foreign private issuer, we will be exempt from a number of rules under the U.S. securities laws and will be permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of our ordinary shares.

We are a foreign private issuer, as such term is defined in Rule 405 under the Securities Act. As a foreign private issuer, we will not be subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we will be exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. As long as we are eligible for the foreign private issuer exemption, we will not be required to obtain shareholder approval for certain dilutive events, such as the establishment or material amendment of certain equity-based compensation plans, we will not be required to provide detailed executive compensation disclosure in our periodic reports, and we will be exempt from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, our officers and directors will be exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities.

While we will submit quarterly interim consolidated financial data to the SEC under cover of the SEC’s Form 6-K, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies and will not be required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act.

Also, as a foreign private issuer, we will be permitted to follow home country practice in lieu of certain corporate governance rules of the Nasdaq, including those that require listed companies to have a majority of independent directors and independent director oversight of executive compensation, nomination of directors and corporate governance matters. As long as we rely on the foreign private issuer exemption, a majority of our board of directors will not be required to be independent directors and our compensation committee will not be required to be composed entirely of independent directors. Accordingly, holders of our ordinary shares may not have the same protections afforded to shareholders of listed companies that are subject to all of the applicable corporate governance requirements.

 

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Our tax residency might change if Germany ratifies the MLI and changes its provisional election on the corporate residence tie-breaker.

Our sole tax residency in Germany for purposes of the convention between Germany and the Netherlands for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (the “German-Dutch tax treaty”) is subject to the application of the provisions on tax residency as stipulated in the German-Dutch tax treaty as effective as of the date of this prospectus. However, among others, Germany and the Netherlands entered into a Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”). The MLI operates to amend bilateral tax treaties between participating states, provided there is a match between certain options made by the relevant states. The MLI provides, amongst others, for an amendment of relevant treaty rules regarding tax residency for purposes of relevant tax treaties. According to its elections, the Netherlands applies such deviating rules on tax residency, i.e., it did not opt out. With regard to Germany, provisional statements made at the time of signing the MLI indicate that it is intended to opt-out of the application of such provisions. However, given that the MLI has to date not been ratified in Germany and the options provided for in the MLI remain subject to discussion, it cannot be ruled out that Germany ultimately opts to amend the current rules regarding tax residency in line with the option exercised by the Netherlands. If Germany changes its provisional view on the election, the MLI rules on tax residency would become applicable to the German-Dutch tax treaty. In this case, the competent authorities of the Netherlands and Germany shall endeavor to determine by mutual agreement our sole tax residency. During the period in which a mutual agreement between both states is absent, we may not be entitled to any relief or exemption from tax provided by the German-Dutch tax treaty. During such period, there would also be a risk that both Germany and the Netherlands would levy dividend withholding tax on distributions by us, in addition to the risk of double taxation on our profits.

We may be or may become a PFIC, which could result in adverse U.S. federal income tax consequences to U.S. Holders.

If we or any of our subsidiaries is a passive foreign investment company (a “PFIC”) for any taxable year, or portion thereof, that is included in the holding period of a beneficial owner of our ordinary shares that is a U.S. Holder, such U.S. Holder (as defined in the section entitled “Material U.S. Federal Income Tax Considerations for U.S. Holders”), may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. It is uncertain whether we or any of our subsidiaries, including Immatics OpCo, will be treated as a PFIC for U.S. federal income tax purposes for the current or any subsequent tax year. If we determine that we and/or any of our subsidiaries is a PFIC for any taxable year, we intend to provide a U.S. Holder with such information necessary for the U.S. Holder to make and maintain a QEF Election (as defined in the section entitled “Material U.S. Federal Income Tax Considerations for U.S. Holders”) with respect to us and/or such subsidiaries, but there can be no assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.

See the section entitled “Material U.S. Federal Income Tax Considerations for U.S. Holders” for a more detailed discussion with respect to our PFIC status. Prospective U.S. Holders of our ordinary shares or public warrants are urged to consult their tax advisors regarding the possible application of the PFIC rules to them.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements regarding our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “might”, “objective”, “ongoing”, “plan”, “potential”, “predict”, “project”, “should”, “will” and “would”, or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements in this prospectus include, but are not limited to, statements regarding our operations, cash flows, financial position and dividend policy.

Forward-looking statements are subject to risks and uncertainties, including with regards to:

 

  

future operating or financial results;

 

  

future payments of dividends and the availability of cash for payment of dividends;

 

  

our expectations relating to dividend payments and forecasts of our ability to make such payments;

 

  

future acquisitions, business strategy and expected capital spending;

 

  

assumptions regarding interest rates and inflation;

 

  

business disruptions arising from the COVID-19 pandemic;

 

  

our financial condition and liquidity, including our ability to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities;

 

  

estimated future capital expenditures needed to preserve our capital base;

 

  

our ability to effect future acquisitions and to meet target returns;

 

  

the initiation, timing, progress, costs and results of our clinical trials, including our ACT and TCER Bispecific trials;

 

  

the timing of meetings with and feedback from regulatory authorities as well as any submission of filings for regulatory approval of our ACT and TCER Bispecific programs;

 

  

the potential advantages and differentiated profile of ACT and TCER Bispecific product candidates compared to existing therapies for the applicable indications;

 

  

our ability to successfully manufacture or have manufactured drug product for clinical trials and commercialization;

 

  

our ability to successfully commercialize drug products, if approved;

 

  

the rate and degree of market acceptance of our product candidates IMA201, IMA202, IMA203, IMA204, IMA301, IMA401 and IMA402, if approved;

 

  

our expectations regarding the size of the patient populations for and opportunity for and clinical utility of ACT and TCER Bispecific product candidates, if approved for commercial use;

 

  

our estimates regarding expenses, ongoing losses, future revenue, capital requirements and needs for or ability to obtain additional financing;

 

  

our ability to maintain intellectual property protection for our drug products;

 

  

our ability to identify, acquire or in-license and develop new product candidates;

 

  

our ability to identify, recruit and retain key personnel;

 

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developments and projections relating to our competitors or industry; and

 

  

other factors discussed in the section titled “Risk Factors”.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the section titled “Risk Factors” in this prospectus. Accordingly, you should not rely on these forward-looking statements, which speak only as of the date of this prospectus. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this prospectus or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports it will file from time to time with the SEC after the date of this prospectus.

In addition, statements reflecting our beliefs and opinions on certain subjects are based on information available to us as of the date of this prospectus. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely on these statements.

Although we believe the expectations reflected in the forward-looking statements were reasonable at the time made, we cannot guarantee future results, level of activity, performance or achievements. We do not assume responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary statements contained or referred to in this section in connection with the forward looking statements contained in this prospectus and any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf.

 

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USE OF PROCEEDS

All of the ordinary shares offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from such sales. We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “Plan of Distribution”.

 

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DIVIDEND POLICY

We have never declared or paid any cash dividends and have no plan to declare or pay any dividends on our ordinary shares in the foreseeable future. We currently intend to retain any earnings for future operations and expansion.

We will be able to make distributions to our shareholders only to the extent that our equity exceeds the aggregate amount of issued share capital and reserves that must be maintained pursuant to Dutch law or under our articles of association. We may not make any distribution of profits on shares held as treasury shares and such treasury shares will not be taken into account when determining the profit entitlement of our shareholders. Our articles of association prescribe that profits in any financial year will be distributed first to holders of our financing preferred shares, if any are outstanding. Any remaining profits may be reserved by our Management Board, subject to the approval of our Supervisory Board or, after July 1, 2021, our Board. Any profits remaining thereafter and reserves may be distributed as dividends to the holders of our ordinary shares, subject to the appropriate record date. The general meeting is authorized to declare distributions upon the proposal of our Management Board, which proposal requires the prior approval of our Supervisory Board or, after July 1, 2021, our Board. Our Management Board or, after July 1, 2021, our Board determines whether and how much of the profits shown in the adopted annual accounts will be reserved and the manner and date of any dividend. All calculations to determine the amounts available for dividends will be based on our company-only annual accounts, which may be different from our consolidated financial statements, such as those included in this prospectus. In addition, our Management Board is permitted, subject to Supervisory Board approval and certain requirements, to declare interim dividends without the approval of our shareholders. We may reclaim any distributions, whether interim or not interim, made in contravention of certain restrictions of Dutch law from shareholders that knew or should have known that such distribution was not permissible. In addition, on the basis of Dutch case law, if after a distribution we are not able to pay our due and collectable debts, then our shareholders or directors who at the time of the distribution knew or reasonably should have foreseen that result may be liable to our creditors.

Since we are a holding company, our ability to pay dividends will be dependent upon the financial condition, liquidity and results of operations of, and the receipt of dividends, loans or other funds from, our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to make funds available to us. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which our subsidiaries may pay dividends, make loans or otherwise provide funds to us.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2020 on:

 

  

a historical basis for Immatics OpCo; and

 

  

on a pro forma basis, after giving effect to the Business Combination and PIPE Financing.

The information in this table should be read in conjunction with the financial statements and notes thereto and other financial information included in this prospectus and any prospectus supplement and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Our historical results do not necessarily indicate our expected results for any future periods.

 

   As of March 31, 2020 
   Actual   Pro forma
for
Business
Combination

and PIPE Financing
 
   ( in millions) 

Cash and cash equivalents

  72.2   303.6 

Total indebtedness

   —      —   

Share capital

   1.2    0.6 

Share premium

   191.0    575.0 

Accumulated deficit

   (241.5   (427.2

Other reserves

   (1.5   (1.5

Non-controlling interest

   0.8    1.0 

Total equity

   (50.0   146.9 
  

 

 

   

 

 

 

Total capitalization

  (50.0  146.9 
  

 

 

   

 

 

 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

The following unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements of Immatics OpCo prepared in accordance with IFRS and the historical financial statements of ARYA, and gives effect to all of the transactions contemplated by the Business Combination and the PIPE Financing (together, the “Transaction”). ARYA historically prepared its financial statements in accordance with U.S. GAAP with the U.S. dollar as its reporting currency. The unaudited pro forma condensed combined financial information gives effect to adjustments required to convert the historical financial information of ARYA to IFRS and its reporting currency to Euros.

The following unaudited pro forma condensed combined statement of financial position as of March 31, 2020 gives effect to the Transaction as if had occurred on March 31, 2020. The following unaudited pro forma condensed combined statements of loss for the three months ended March 31, 2020 and the year ended December 31, 2019 give effect to the Transaction as if it had occurred on January 1, 2019.

This unaudited pro forma information has been presented for informational purposes only and is not necessarily indicative of what the actual financial position or results of operations of Immatics would have been had the Transaction been completed as of the dates indicated. In addition, the unaudited pro forma information does not purport to project the future financial position or operating results of Immatics. The unaudited pro forma adjustments are based on information currently available. The assumptions and estimates underlying the unaudited pro forma adjustments are described in the notes to the accompanying unaudited pro forma condensed combined financial information. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information. Management of Immatics OpCo and ARYA have made significant estimates and assumptions in the determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented. This information should be read together with Immatics OpCo’s and ARYA’s audited financial statements and related notes for the years ended December 31, 2019 and 2018, the unaudited financial statements and notes for the three months ended March 31, 2020 and 2019, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the other financial information included elsewhere in this prospectus.

Description of the Transaction

Pursuant to the Business Combination Agreement, upon consummation of the Transaction each participating shareholder exchanged his, her or its equity interest in Immatics OpCo for ordinary shares in accordance with an allocation schedule (a total of 33,093,838 ordinary shares were issued in connection with such exchange). Immediately after giving effect to the exchange, ARYA Merger Sub merged with and into ARYA (the “First Merger”). The separate existence of ARYA Merger Sub ceased and ARYA continued as the surviving entity of the First Merger. In connection with the First Merger, each ARYA Ordinary Share was exchanged for an ordinary share. Pursuant to the Business Combination Agreement, each ARYA public warrant, by its terms, converted into a public warrant, on the same contractual terms.

 

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In connection with the Transaction, Immatics and a co-founder of Immatics US affiliated with University of Texas MD Anderson Cancer (the “Immatics US Co-Founder”) agreed that the Immatics US Co-Founder would exchange all shares in the share capital of Immatics US held by it for 697,431 ordinary shares.

Concurrently with the execution of the Business Combination Agreement, Immatics OpCo and ARYA entered into Subscription Agreements with PIPE Investors pursuant to which, among other things, the PIPE Investors agreed to subscribe for and purchase, and Immatics agreed to issue and sell to the PIPE Investors, an aggregate of 10,415,000 ordinary shares for gross proceeds of approximately $104.2 million on the Closing Date.

Accounting for the Transaction

The Transaction is comprised of a series of transactions pursuant to the Business Combination Agreement. For accounting purposes, the Transaction was effectuated in three main steps:

 

 (1)

The exchange of shares held by Immatics OpCo participating shareholders for ordinary shares, which is accounted for as a recapitalization in accordance with IFRS.

 

 (2)

The merger of ARYA with ARYA Merger Sub, which is not within the scope of IFRS 3 (“Business Combinations”) since ARYA does not meet the definition of a business in accordance with IFRS 3, is accounted for within the scope of IFRS 2 (“Share-based payment”). Any difference between the fair value of the ordinary shares issued and the fair value of ARYA’s identifiable net assets represents a service to be expensed as incurred. The closing quoted market price of ARYA’s ordinary shares and public warrants on Nasdaq as of July 1, 2020 are the basis for determining the fair value of the share-based consideration paid to ARYA’s stockholders. These amounts represent the market prices at which any existing or new investor could trade during the period after the expiration of the redemption deadline for ARYA shareholders.

 

 (3)

The Subscription Agreements related to the PIPE Financing, which were executed concurrently with the Business Combination Agreement, resulted in the issuance of ordinary shares, leading to an increase in share capital and share premium.

 

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PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION

AS OF MARCH 31, 2020

(UNAUDITED)

 

           Pro Forma Adjustment 
(Euros in thousand) Immatics
GmbH
Historical
IFRS
EUR
  ARYA
Sciences
Acquisitions
Corp.
Historical
U.S. GAAP
USD
  ARYA
Sciences
Acquisitions
Corp.
Historical
U.S. GAAP
EUR1
  Pro Forma
Adjustments
EUR1
  Pro
Forma
Combined
EUR
 

Current assets

     

Cash and cash equivalents

  72,202   702   640   230,786(b)(c)   303,628 

Accounts receivable

  332   —     —     —     332 

Other current assets

  37,203   832   76   (511)(d)   36,768 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current assets

  109,737   785   716   230,275   340,728 

Marketable securities held in Trust Account

  —     148,699   135,724   (135,724)(b)   —   

Property, plant and equipment

  5,961   —     —     —     5,961 

Intangible assets

  1,006   —     —     —     1,006 

Right-of-use assets

  3,914   —     —     —     3,914 

Other non-current assets

  1,151   —     —     —     1,151 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total non-current assets

  12,032   148,699   135,724   (135,724  12,032 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  121,769   149,484   136,440   94,551   352,760 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Liabilities and shareholders’ equity

     

Current liabilities

     

Provisions

  715   —     —     —     715 

Accounts payable

  8,668   194   177   18,648(e)   27,493 

Deferred revenue

  65,280   —     —     —     65,280 

Lease liabilities

  1,450   —     —     —     1,450 

Other current liabilities

  1,150   4,1653   3,802   14,219(e)(f)   19,171 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current liabilities

  77,263   4,359   3,979   32,867   114,109 

Non-current liabilities

     

Deferred revenue

  89,369   —     —     —     89,369 

Lease liabilities

  2,396   —     —     —     2,396 

Other non-current liabilities

  2,772   —     —     (2,772)(f)   —   

Deferred underwriting commissions

  —     4,674   4,264   (4,264)(e)   —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total non-current liabilities

  94,537   4,674   4,264   (7,036  91,765 

Commitments

     

Class A ordinary shares, $0.0001 par value; 13,545,245 shares subject to possible redemption at redemption value

  —     135,452   123,633   (123,633)(b)   —   

shareholders’ deficit

     

Share capital

  1,164   4     —     (535)(a)(b)(c)(f)   629 

Share premium

  190,984   5,0645   4,622   379,349(a)(b)(c)(d)(e)(f)   574,955 

Accumulated deficit

  (241,500  (65)6   (58  (185,677)(b)(e)(f)   (427,235

Other reserves

  (1,462  —     —     —     (1,462
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total equity attributable to shareholders of the parent

  (50,814  4,999   4,564   193,136   146,887 

Non-controlling interest

  783   —     —     (783)(a)   —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total shareholders’ deficit/equity

  (50,031  4,999   4,564   192,353   146,887 

Total liabilities and shareholders’ deficit/equity

  121,769   149,484   136,440   94,551   352,760 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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(1) 

Refer to note 4 (foreign currency adjustments).

(2) 

Amount classified as prepaid expenses in ARYA’s historical financial statements.

(3) 

Amount classified as accrued expenses in ARYA’s historical financial statements.

(4) 

Amount includes ARYA’s Class A ordinary shares and Class B ordinary shares historically classified within equity in ARYA’s historical financial statements.

(5)

Amount classified as additional paid-in capital in ARYA’s historical financial statements.

(6) 

Amount classified as retained earnings in ARYA’s historical financial statements.

 

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PRO FORMA CONDENSED COMBINED STATEMENT OF LOSS

FOR THREE MONTHS ENDED MARCH 31, 2020

(UNAUDITED)

 

           Pro Forma Adjustment 
(Euros in thousands, except share and per share
data)
 Immatics
GmbH
Historical
IFRS EUR
  ARYA
Sciences
Acquisitions
Corp.
Historical
U.S. GAAP
USD
  ARYA
Sciences
Acquisitions
Corp.
Historical
U.S. GAAP
EUR2
  Pro Forma
Adjustments
EUR2
  Pro Forma
Combined
EUR
 

Revenue from collaboration agreements

  7,040   —     —     —     7,040 

Research and development expenses

  (12,246  —     —     (956)(f)(g)   (13,202

General and administrative expenses

  (6,188  (4,127  (3,743  1,962d)(f)(g)   (7,969

Other income

  113         —     113 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating result

  (11,281  (4,127  (3,743  1,006   (14,018

Financial income

  2,730   8571   777   —     3,507 

Financial expenses

  (29  —     —      (29
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financial result

  2,701   857   777   —     3,478 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before taxes

  (8,580  (3,270  (2,966  1,006   (10,540

Taxes on income

  —     —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  (8,580  (3,270  (2,966  1,006   (10,540

Attributable to:

     

Equityholders of the parent

  (8,306  (3,270  (2,966  732(a)   (10,540

Non-controlling interest

  (274  —     —     274(a)   —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  (8,580  (3,270  (2,966  1,006   (10,540
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average shares outstanding — basic and diluted

  1,163,625     61,744,992   62,908,617 

Net loss per share — basic and diluted

 (7.14    (0.17
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1) 

Amount classified as investment income on ARYA’s trust account (the “Trust Account”) in ARYA’s historical financial statements.

(2) 

Refer to note 4 (foreign currency adjustments).

 

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PRO FORMA CONDENSED COMBINED STATEMENT OF LOSS

FOR THE YEAR ENDED DECEMBER 31, 2019

(UNAUDITED)

 

           Pro Forma Adjustment 
(Euros in thousands, except share and per share
data)
 Immatics
GmbH
Historical
IFRS
EUR
  ARYA
Sciences
Acquisitions
Corp.
Historical
U.S. GAAP
USD
  ARYA
Sciences
Acquisitions
Corp.
Historical
U.S. GAAP
EUR2
  Pro Forma
Adjustments
EUR2
  Pro Forma
Combined
EUR
 

Revenue from collaboration agreements

  18,449   —     —     —     18,449 

Research and development expenses

  (40,091  —     —     (3,824)(f)(g)   (43,915

General and administrative expenses

  (11,756  (775  (692  (2,851)(d)(f)(g)   (15,299

Other income

  385   —     —     —     385 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating result

  (33,013  (775  (692  (6,675  (40,380

Financial income

  790   3,3531   2,995   —     3,785 

Financial expenses

  (264  —     —      (264
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Financial result

  526   3,353   2,995   —     3,521 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before taxes

  (32,487  2,578   2,303   (6,675  (36,859

Taxes on income

  —     —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  (32,487  2,578   2,303   (6,675  (36,859

Attributable to:

     

Equityholders of the parent

  (31,571  2,578   2,303   (7,591)(a)   (36,859

Non-controlling interest

  (916  —     —     916(a)   —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  (32,487  2,578   2,303   (6,675  (36,859
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average shares outstanding — basic and diluted

  1,163,625     61,744,992   62,908,617 

Net loss per share — basic and diluted

 (27.13    (0.59
 

 

 

     

 

 

 

 

(1) 

Amount classified as investment income on Trust Account in ARYA’s historical financial statements.

(2) 

Refer to note 4 (foreign currency adjustments).

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

1.

Basis of preparation

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Transaction and has been prepared for informational purposes only.

The historical consolidated financial statements of Immatics OpCo and the historical financial statements of ARYA have been adjusted in the pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the Transaction, (2) factually supportable and (3) with respect to the pro forma condensed combined statement of loss, expected to have a continuing impact on the combined results following the Transaction. The adjustments presented in the unaudited pro forma condensed combined financial information are based on currently available information and certain information that management of Immatics OpCo and ARYA believe are reasonable under the circumstances. The unaudited condensed pro forma adjustments may be revised as additional information becomes available.

Immatics OpCo and ARYA did not have any historical relationship prior to the Transaction. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

No holders of ARYA Class A shares exercised their redemption rights upon consummation of the Transaction.

 

2.

Accounting policy conformity changes

The historical financial information of ARYA was prepared in accordance with U.S. GAAP. No adjustments were required to convert ARYA’s historical financial information from U.S. GAAP to IFRS or to align ARYA’s accounting policies to those applied by Immatics OpCo.

As ARYA’s historical financial information is presented in accordance with the presentation of Immatics OpCo’s historical financial information, certain reclassifications of ARYA’s historical financial information are required, which are disclosed on the unaudited condensed combined statement of financial position and statement of loss.

 

3.

Foreign currency adjustments

The historical financial statements of ARYA are presented in U.S. dollars. The historical financial information was translated from U.S. dollars to Euros using the following historical exchange rates:

 

   Euros
per
U.S.
Dollar
 

Average exchange rate for three months ended March 31, 2020

   0.9069 

Period end exchange rate as of March 31, 2020

   0.9127 

Average exchange rate for year ended December 31, 2019

   0.8932 

 

4.

Adjustments to unaudited pro forma condensed combined financial information

The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:

Transaction

 

(a)

Reflects the adjustments to share capital and share premium after the contribution of Immatics OpCo’s shares outstanding to Immatics in exchange for 33,093,838 ordinary shares, and the exchange of all shares

 

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 in the share capital of Immatics US held by the Immatics US Co-Founder for 697,431 ordinary shares resulting in an increase to share capital and share premium of €338 thousand and €1.6 million, respectively. Immatics OpCo’s historical share capital of €1.2 million and the non-controlling interest of €783 are eliminated.

 

(b)

Reflects the contribution of all outstanding ARYA ordinary shares and ARYA public warrants to Immatics and the issuance of 17,968,750 ordinary shares and 7,187,500 public warrants in exchange. The Transaction is accounted for under IFRS 2 with an expense reflected for the difference between the fair value of ordinary shares and public warrants issued to ARYA shareholders and warrantholders and the fair value of ARYA’s net assets contributed. As the holders of redeemable ARYA Class A shares did not exercise their redemption rights, Immatics issued 17,968,750 ordinary shares and 7,187,500 public warrants and recognized share capital of €180 thousand and share premium of €123.4 million in exchange for all outstanding ARYA Class A shares, ARYA Class B shares and ARYA warrants. ARYA’s historical equity, including additional paid-in capital of €4.6 million, an accumulated deficit of €58 thousand, and ARYA Class A shares and ARYA Class B shares of €123.6 million are eliminated.

In accordance with IFRS 2, the difference between the fair value of ordinary shares issued and the fair value of ARYA’s identifiable net assets is reflected as an expense, resulting in a €155.8 million increase to accumulated deficit in accordance with the calculation described below. This IFRS 2 expense, which is non-recurring and therefore excluded from the unaudited pro forma condensed combined statement of loss, reflects increases in the prices for ARYA ordinary shares and ARYA public warrants during the time from the signing of the Business Combination Agreement on March 17, 2020 and the closing price on July 1, 2020. The book value of ARYA’s net assets are assumed to approximate fair value. ARYA’s net assets consist primarily of marketable securities, which are recorded at fair value, and current liabilities.

 

(Euros in thousands, except share and per share data)

Description

  Amount   Number of
shares/
warrants
 

(a) ARYA Ordinary Shares

   —      17,968,750 

(b) Closing price of ARYA Ordinary Shares on Nasdaq as of July 1, 2020

  13.83    —   

(c) Fair value of ordinary shares issued to ARYA shareholders (a * b)

  248,473    —   

(d) Outstanding ARYA Public Warrants

   —      7,187,500 

(e) Closing price of ARYA Public Warrants on Nasdaq as of July 1, 2020

  4.94    —   

(f) Fair value of outstanding ARYA Public Warrants (d * e)

  35,491    —   

Total fair value of ARYA Ordinary Shares and ARYA Public Warrants(c + f)

  283,964    —   

ARYA’s identifiable net assets

  128,197    —   

IFRS 2 Expense on the closing date

  155,767    —   

The entire amount of cash and cash equivalents held in the ARYA Trust Account of €135.7 million (as of March 31, 2020) becomes available to Immatics following the transaction, and is reclassified to cash and cash equivalents.

 

(c)

Reflects proceeds from the PIPE Financing, increasing cash and cash equivalents by €95.1 million ($104.2 million), with corresponding increases to share capital and share premium of €104 thousand and €95.0 million, respectively.

 

(d)

Reflects the elimination of transaction-related costs of €2.7 million and €152 thousand for the three months ended March 31, 2020 and the year ended December 31, 2019, respectively, which are reflected in Immatics OpCo’s historical consolidated statement of loss and the elimination of €511 thousand of costs directly attributable to raising new capital, which had been capitalized within other current assets as of March 31, 2020.

 

(e)

Reflects €18.6 million of additional incremental costs incurred in the Transaction after March 31, 2020, which are classified in accounts payable in the unaudited pro forma condensed combined statement of financial position. The amount of transaction costs deemed directly attributable to raising new capital is

 

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 determined based on the percentage of share capital held by ARYA shareholders and PIPE Investors immediately following the transaction. As a result, €5.7 million of the transaction costs were determined to be directly attributable to raising new capital in the Transaction, which is reflected as a decrease in share premium. The remaining €12.9 million, which is not directly related to raising new capital, is reflected as an increase to accumulated deficit. Deferred underwriting commissions of €4.3 million, which are reflected in ARYA’s historical statement of financial position and payable after the Transaction, are reclassified to other current liabilities.

 

(f)

Holders of vested Immatics OpCo stock appreciation rights (“SARs”) received for each vested Immatics OpCo SAR outstanding immediately prior to the Closing a right to receive a cash payment equal to the value, if any, of such vested Immatics OpCo SAR less the applicable exercise price of such vested Immatics OpCo SAR (“SAR Cash Proceeds”). Under the Business Combination Agreement, active employees and management members are required to re-invest a minimum of 25%-50% of the SAR Cash Proceeds, net of taxes, up to a maximum of 50%. The re-investment minimum is dependent on seniority, with management members required to re-invest a minimum of 50%. Recipients of SAR Cash Proceeds elected to re-invest approximately 48% of their SAR Cash Proceeds in exchange for ordinary shares. Therefore, the cash payment net of employee re-investment results in an increase to other current liabilities of €10.0 million, a decrease in other non-current liabilities related to the previously outstanding awards of €2.8 million, an increase to share capital of €7 thousand and share premium of €9.8 million, and an increase to accumulated deficit of €17.0 million. The increase to accumulated deficit represents the added expense from the accelerated vesting of the Immatics OpCo SARs.

For each ordinary share purchased by active employees and management members re-investing a portion of his or her SAR Cash Proceeds, Immatics granted two options to purchase one ordinary share under the 2020 Stock Option and Incentive Plan (the “2020 Equity Plan”), with an exercise price equal to $10.00 (or higher, as necessary to comply with Section 409A of the U.S. Tax Code). These options vest over a period of 12 months following the close of the Transaction. The award recipient must remain employed by Immatics or one of its affiliates through the vesting date to receive the option. As the options vest over 12 months and do not have a continuing impact on the combined results following the Transaction, no adjustment with respect to the options was reflected in the unaudited pro forma condensed combined statement of financial position or the unaudited pro forma condensed combined statement of loss. Based on the SAR re-investment, management expects Immatics to incur an additional €14.1 million in share-based compensation expense related to these options.

In addition, ARYA and Immatics OpCo granted performance-based options and service-based options out of the 2020 Equity Plan to Immatics OpCo’s executive officers and key personnel in connection with the Business Combination. The performance-based options vest based both on achievement of market capitalization milestones and satisfaction of a four-year time-based vesting schedule. As the market capitalization milestones represent market vesting conditions, the grant date fair value of these awards is reduced by the probability of not achieving each respective milestone. The service-based options will vest solely on a four-year time-based vesting schedule. The pro forma condensed combined statement of loss reflects additional research and development expenses and general and administrative expenses of €1.7 million and €2.3 million, respectively, in connection with these awards for the 12 months ended December 31, 2019. Additional research and development expenses and general and administrative expenses of €446 thousand and €592 thousand, respectively, are reflected in connection with these awards for the three months ended March 31, 2020.

 

(g)

Subject to the terms and conditions of the Business Combination Agreement and effective as of the Closing, solely with respect to Immatics OpCo SARs held by certain active employees and members of management, any Immatics OpCo SARs that would vest on or after January 1, 2021 each such Immatics OpCo SAR that was outstanding immediately prior to the Closing was cancelled in exchange for an option to purchase a certain number of ordinary shares under the 2020 Equity Plan. Shares under the 2020 Equity Plan have comparable terms as Immatics OpCo SAR, with revised exercise prices reflecting the reorganized capital structure of Immatics. The options granted under the 2020 Equity Plan are accounted for as a modification under IFRS 2, with the incremental fair value

 

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 expensed over the remaining vesting period. The incremental fair value is the difference between the fair value of the options to purchase ordinary shares under the 2020 Equity Plan and the net fair value of the exchanged unvested Immatics OpCo SAR (both measured at the date on which the replacement award is issued). The planned issuance of options to purchase ordinary shares under the 2020 Equity Plan results in an increase to research and development expenses of €512 thousand and €2.0 million and additional general and administrative expenses of €159 thousand and €638 thousand in the unaudited pro forma condensed combined statement of loss for the three months ended March 31, 2020 and the year ended December 31, 2019, respectively.

 

5.

Net loss per share

The pro forma basic and diluted net loss per share amounts presented in the unaudited pro forma condensed combined statement of loss are based upon the number of the ordinary shares outstanding as of March 31, 2020 and December 31, 2019, respectively, assuming the Transaction occurred on January 1, 2019. As the unaudited pro forma condensed combined statement of loss is in a loss position, anti-dilutive instruments are excluded in the calculation of diluted weighted average number of ordinary shares outstanding, including 7,187,500 public warrants, which are held by former holders of ARYA public warrants, and share-based awards issued under the 2020 Equity Plan.

As the Transaction and related proposed equity transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average ordinary shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Transaction have been outstanding for the entire period presented.

 

(Euros in thousands, except share and per share data)  Pro Forma
Adjustment
 

Pro forma weighted average number of ordinary shares outstanding

  

Immatics founder shares

   1 

Ordinary shares issued to Immatics OpCo participating shareholders

   33,093,838 

Ordinary shares issued to the Immatics US Co-Founder

   697,431 

Ordinary shares issued to ARYA Class A and Class B shareholders

   17,968,750 

Ordinary shares issued to PIPE Investors

   10,415,000 

Shares issued in relation to the Immatics OpCo Equity Plan

   733,597 
  

 

 

 

Pro forma weighted average number of ordinary shares outstanding — basic and diluted

   62,908,617 

Three months ended March 31, 2020

  

Pro forma net loss attributable to equityholders of the parent

  (10,540

Pro forma net loss per share — basic and diluted

  (0.17

Year ended December 31, 2019

  

Pro forma net loss attributable to equityholders of the parent

  (36,859

Pro forma net loss per share — basic and diluted

  (0.59

 

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BUSINESS

OVERVIEW

We are dedicated to the development of T cell receptor (“TCR”)-based immunotherapies for the treatment of cancer. We use our proprietary suite of technologies to identify intracellular drug targets, so called peptide-HLA or pHLA targets, as a basis for a broad range of potential immunotherapies designed to overcome the current limitations in immuno-oncology. Unlike CAR-T therapy and current antibody-based approaches, which can only target cell surface proteins, our technology enables the identification of otherwise inaccessible intercellular protein targets and thus significantly increases the diversity and novelty of the targets we can pursue. Such intracellular targets are generally recognized as one of the most important keys to unlock hard-to-treat cancer, particularly solid cancers. We believe that the elucidation of these targets gives us an advantage that we are leveraging to develop a pipeline of novel TCR-based products designed to deliver a robust and specific T cell response against cancer cells.

We are developing our targeted immunotherapy candidates with an emphasis on treating solid tumors through two distinct treatment modalities: Adoptive Cell Therapies (“ACT”) and antibody-like TCR Bispecifics (“TCER”). As of today, our wholly owned pipeline comprises eight therapeutic programs, of which four are in clinical trials and four are in preclinical stage. In addition to this proprietary pipeline, we are also developing some of our targets and TCRs through programs in alliances with global leaders, such as Amgen, Genmab, BMS and GlaxoSmithKline. In these collaborations, we seek to evaluate and enable the development of ten collaborative programs based on novel company-derived targets in a variety of immunotherapeutic approaches. From our research and development origins in Tübingen, Germany, to our cell therapy research and development (“R&D”) and manufacturing center in Houston, Texas, our global team is committed to developing and advancing our therapeutic pipeline and collaboration programs to address significant unmet medical needs in oncology.

T cells are critical actors in staging an effective immune response against diseased and abnormal cells, such as cancer cells. The human leukocyte antigen (“HLA”) system, also known as the major histocompatibility complex (“MHC”) in humans, is an important part of the immune system because it presents antigenic or foreign peptides on the surface of the cell to be recognized by the T cell receptor. Due to their biologic purpose to bind to peptides presented on HLA receptors (“pHLA targets”), we believe that TCRs represent a new therapeutic opportunity for leveraging the power of T cells. Our investigational immunotherapies are designed to use the potency and specificity of natural and engineered TCRs to attack and kill cancer cells and, in the case of solid tumors, invade the tumor, potentially overcoming significant hurdles for current immuno-oncology approaches.

Our target discovery platform, called XPRESIDENT, is a high throughput quantitative and ultrasensitive mass spectrometry (LC-MS/MS) based approach, which we have utilized to conduct a comparative and HLA-focused proteomic analysis combined with a transcriptomic analysis on thousands of cancer and healthy tissues. Using XPRESIDENT we have identified cancer targets that are presented on tumors but not, or to a far lower extent, on healthy tissues. We believe that XPRESIDENT allows us to confirm that these targets are naturally presented — in contrast to typical discovery methodologies relying on artificially cultured cell lines or in silico prediction algorithms. We delineate these mass spectrometry validated cancer targets into three classes: (1) peptides of well-known and characterized cancer target proteins; (2) unknown or poorly characterized proteins; and (3) crypto targets/neoantigens. Following analysis of over 400,000,000 MS/MS spectra and an initial long-list of 8,000 tumor-associated pHLA targets, we have focused on a prioritized short-list of over 200 tumor-associated and tumor-selected targets from these three categories and developed an extensive intellectual property portfolio to protect our discoveries.

Once a suitable target is identified, we leverage our XCEPTOR TCR discovery platform to develop, engineer and validate cognate TCRs for these targets. A rigorous process of assessing and optimizing the specificity and affinity of TCRs is critical for selecting the right TCR which, as part of an immunotherapeutic approach, is

 

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designed to focus an immune system attack on the tumor and confer a potent and well-tolerated therapeutic effect. Our XCEPTOR platform is differentiated from other TCR discovery platforms through leveraging the XPRESIDENT target database to generate highly specific TCRs, as a result of our capabilities to screen for off-target toxicity and cross-reactivity.

Figure 1. Proprietary pipeline and milestones.

 

LOGO

Our fully-owned pipeline consists of two distinct modalities: Adoptive Cell Therapies (ACT) and antibody-like TCR Bispecifics (TCER) directed against various targets relevant in a broad range of cancers. We expect several clinical and preclinical milestones in the near term and expects to further advance part of our preclinical programs towards clinical stage within the next two years.

Each therapeutic modality is designed with distinct attributes to produce the desired therapeutic effect for patients at different disease stages and with different types of tumors:

 

  

Adoptive Cell Therapy (ACT): Our clinical ACTengine program is a personalized approach for which the patient’s own T cells are genetically modified to express a novel proprietary TCR created by us and then reinfused, this approach is also known as TCR-T. The ACTallo program is advancing the ACT concept beyond individualized manufacturing and is being developed to generate “off-the-shelf” cellular therapy product candidates. The ACTolog program is a pilot approach for ultra-personalized, multi-target immunotherapy product candidates utilizing endogenous (non-genetically engineered) T cells with the goal of paving the way for a next step of enabling a fully engineered multi-TCR-T.

 

  

TCR Bispecifics (TCER): TCER are engineered ‘off-the-shelf’ biologics consisting of a portion of the TCR which directly recognizes cancer cells and a T cell recruiter domain which recruits and activates T cells. TCER are designed to attract any patient’s circulating T cells to bind and come into direct proximity with the cancer to destroy it.

 

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Figure 2. Lead product classes: Personalized engineered Adoptive Cell Therapy (ACTengine) and antibody-like TCR Bispecifics (TCER).

 

LOGO

We are advancing two distinct therapeutic modalities of Adoptive Cell Therapies and TCR Bispecifics, ACTengine and TCER. While the ACTengine approach is based on engineering a patient’s own T cells to specifically attack the patient’s tumor, our TCER molecules are off-the-shelf biologics designed to re-direct any T cell in a patient’s body against the tumor and for immediate treatment of the patient. ACTengine and TCER provide two distinct mechanisms of actions suitable for patients at different cancer stages.

We are pursuing a clinical development strategy that accelerates product candidates toward pivotal trials preceding submission of a Biologics License Application (“BLA”) with regulatory authorities. Each program enters clinical development initially in a “basket trial” to broadly investigate safety, tolerability and initial signs of efficacy in patients with various types of solid tumors confirmed to be expressing the specific cancer target tested in a tumor biopsy taken from the patient. Assuming favorable results from these trials, we plan to expand our Phase 1 clinical trials to enable fast entry into pivotal clinical trials and potentially achieve an accelerated approval pathway.

Initial biological data from the first patients treated in the ACTengine trials demonstrated very high frequencies of persisting target-specific T cell in the bloodstream as well as their infiltration in tumor lesions even at the lowest treatment dose. We expect a combined initial data read-out for the ACTengine trials by early 2021.

We have developed a proprietary manufacturing process, optimized to generate T cell products within a short manufacturing period of only 6 days, utilizing a proprietary cytokine cocktail. The process is designed to rapidly produce younger, better-persisting T cells, capable of “serial” killing of tumor cells in vitro. Processing time compares favorably to published reports by other companies operating in the CAR and TCR sectors. T cell products are manufactured by our personnel at the UTHealth Evelyn H. Griffin Stem Cell Therapeutics Research Laboratory in a 1,850 square foot state-of-the-art cGMP facility exclusively used by us in Houston, Texas.

Immatics OpCo was founded in 2000 in Tübingen, Germany by Harpreet Singh, Toni Weinschenk and others based on the revolutionary research of Professor Hans-Georg Rammensee at the University of Tübingen. In 2015, Immatics OpCo co-launched Immatics US as part of a strategic collaboration with the University of Texas MD Anderson Cancer Center and entered an agreement with UTHealth. These collaborations have allowed us to gain access to critical cell therapy expertise and cGMP manufacturing infrastructure. Since Immatics OpCo’s inception, we have raised more than $200.0 million through equity financing and have also added more than $250.0 million in nondilutive capital through our collaborations and public grants. We have applied this capital toward our strategy to identify, deliver and pioneer new treatments for cancer patients through identifying tumor-associated pHLA targets recognized by T cells. We believe that identifying true cancer targets that are presented on tumor tissue but not on healthy cells and the

 

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subsequent discovery, selection, and engineering of the right TCRs are central to our mission: delivering the power of T cells to cancer patients and advancing the next wave in cancer immunotherapy.

We have a highly experienced global leadership team that operates seamlessly between our locations in Germany and the United States, and currently employ more than 200 people. Our management consists of an interdisciplinary team that includes medical and scientific experts, as well as accomplished business leaders, and collectively has multiple decades of experience in the pharmaceutical and biotechnology industries. In addition, our management team includes the creators and developers of our core technologies, and benefits from their continued contributions.

Limitations of Current Cancer Immunotherapies

Cancer incidence continues to increase globally and despite advances in treatment options, cancer remains a major health problem and ranks second to cardiovascular disease as an overall cause of mortality. It is characterized by the uncontrolled growth of abnormal cells whose ability to evade the immune system’s surveillance is a key factor in their proliferation and persistence. In particular, patients with advanced, recurrent or refractory solid tumors have a generally poor prognosis and there remains for these patients a very high unmet medical need.

In recent years, the field of immunotherapy, a form of cancer treatment utilizing the patients’ own immune system to specifically seek and destroy cancer cells, has significantly changed the standard of care in many segments of oncology and emerged as a major pillar in the treatment of cancer. Terminally ill cancer patients have experienced tumor reductions, long term benefits, and even cure in some cases through immunotherapy. Although treatment with immunotherapy including checkpoint inhibitors, CAR-T cells and monoclonal antibodies has resulted in durable responses in some tumor types, a majority of cancers do not respond to current immunotherapeutic approaches. Explanations for the lack of effective therapies in many cancers are summarized below:

 

  

Limited to specific patient populations: Checkpoint inhibitors have proven to be highly effective against particular cancers while being ineffective against the majority of solid cancers. Checkpoint inhibitors are thought to be effective predominantly in tumors with high mutational burden, which account for less than 10% of all cancer types. However, the market and medical need for tumors without high mutational burden is significantly larger. We believe such tumors with low mutational burden will be best addressed with targeted therapies to non-mutated antigens covering various target classes.

 

  

Limited target space: The limited target space is a major constraint to CAR-T cell therapies and classical monoclonal antibody-based targeted therapies. Both of these approaches target surface proteins on cancer cells, which constitute only ~25% of the human proteome, leaving ~75% of intracellular proteins not accessible for these types of treatments.

 

  

Limited success in solid cancers: CAR-T cell therapies have demonstrated antitumor activity in hematological cancers, including B-cell acute lymphoblastic leukemia (“ALL”) and subtypes of non-Hodgkin’s lymphoma (“NHL”), such as diffuse large B cell lymphoma (“DLBCL”). However, clinical success in the majority of solid cancers, which represent a larger patient population and market, has not been achieved to date.

 

  

Inhibitory tumor microenvironment (“TME”): The tumor microenvironment is a dynamic network composed of immune cells, blood vessels, stromal cells, signaling molecules and the extracellular matrix imposing a significant barrier to effective therapeutic approaches. Immunosuppressive cells and immunomodulatory factors build an immunosuppressive environment and together with the rigid extracellular matrix are thought to inhibit drugs and T cells from accessing the tumor.

 

  

Tumor Heterogeneity: The tumor of each cancer patient evolves during the course of the disease. As a result, the tumor becomes more heterogenous with co-existing sub-populations of tumor cell clones. The associated intra-tumoral heterogeneity of target expression might contribute to tumor evasion and consequently to treatment failures and recurrence of the tumor.

 

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We believe that our approach might be able to overcome the current challenges of immunotherapy and develop truly novel opportunities for patients.

Our Strategy

Our mission is to become a leading oncology-focused biopharmaceutical company by developing differentiated TCR-based immunotherapies, particularly for solid tumors that are inadequately addressed with existing treatment modalities. Specifically, we seek to execute on the following strategy to maximize the value of our technology platforms and broad portfolio of product candidates:

Figure 3. Differentiated approach to deliver novel TCR-based immunotherapies to cancer patients.

 

LOGO

We combine the discovery of true targets (via XPRESIDENT) with the development of the right TCRs (via XCEPTOR) to generate Adoptive Cell Therapies (ACT) (e.g., ACTengine) and TCR Bispecifics (TCER). Our product candidates pass through a comprehensive preclinical characterization and validation process before entering the manufacturing phase and clinical trials.

 

  

Advance the proprietary pipeline of product candidates focusing on ACTengine and TCR Bispecifics through clinical development. Our ACTengine IMA200 Series includes three product candidates in Phase 1 clinical trials (IMA201, IMA202, IMA203) and one preclinical stage product candidate (IMA204). The Phase 1 trials are investigating safety, tolerability and initial signs of efficacy in patients suffering from solid cancers such as head and neck cancer, non-small cell lung cancer, liver cancer, uterine and ovarian carcinoma and several other tumor types. After FDA approval and start of patient recruitment at the University of Texas MD Anderson Cancer Center, we received regulatory approval to initiate the first ACTengine trial in Germany. To facilitate clinical development, four additional clinical centers have been opened in the United States and Europe and initiation of a further three sites is planned in 2020. Should the trials demonstrate safety and evidence of significant tumor control and tumor reduction, we may request FDA Fast Track designation and start pivotal trials with any of our ACTengine programs. We are also advancing two preclinical TCR Bispecifics candidates towards the IND stage of development and first-in-human clinical trials. IND filing for the lead program IMA401 is planned for year-end 2021 and preclinical proof of concept for the second program IMA402 for year-end 2020.

 

  

Develop cell therapies and biologics providing two distinct mechanisms of actions suitable for different cancer stages. We intend to leverage our technology and know-how to expand the potential therapeutic value for patients across a broad range of tumor types and stages. Both ACT and TCR Bispecifics programs are designed to overcome the limitation of CAR-T programs and improve the outcome for patients in solid cancers.

 

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Our proprietary class of engineered T cell therapy has the potential to provide cancer patients with a potent therapy that infiltrates the tumor. Our clinical ACT programs aim to improve patient benefit even in advanced stage disease, which is often accompanied with high tumor burden that is difficult to treat with other approaches.

 

  

Our novel class of TCR Bispecifics are designed to re-direct any T cell in a patient’s body against the tumor. TCER have the potential to be cost-effective biologic drug candidates, due to their off-the-shelf availability and simple treatment regimen. They are designed to treat advanced cancers with reduced (“debulked”) tumor burden as well as earlier stages of cancer.

 

  

Enhance potency, usability and commercial viability. Our latest proprietary ACTengine manufacturing processes are designed to generate cell product candidates within a short six-day manufacturing window and deliver high proliferative capacity T cells, with the capability to infiltrate the patient’s tumor and function in a challenging solid tumor microenvironment. We are actively investigating multiple next-generation enhancement strategies to render T cells even more potent to combat solid tumors. For advanced-stage clinical trials and commercial supply, manufacturing processes are planned to be further optimized to ensure a robust manufacturing capability incorporating functionally closed and automated manufacturing systems as well as the use of serum free, chemically defined media. In addition, we are advancing our first allogeneic, off-the-shelf product candidate IMA301 towards the IND stage of development and a first-in-human clinical trial. IMA301 utilizes TCR-transduced gd (gamma-delta) T cells derived from healthy donors as allogeneic TCR-T products. This off-the-shelf product candidate would not require cell harvesting from the immune-compromised patient, thus could be infused directly and is expected to have significantly decreased cost of goods compared to autologous cell products.

 

  

Enhance the competitive edge of our technology platforms. XPRESIDENT offers the potential exploitation of the whole tumor-associated antigen repertoire exhibiting an approximately 300% increased cancer target space and greater application potential compared to CAR-T and classical antibody approaches which can target surface antigens only. Beyond the identification of true targets from well-known tumor antigens (such as the MAGE antigen family used in IMA201 and IMA202), XPRESIDENT also identifies novel cancer targets (such as the tumor stroma target COL6A3 exon 6 used in IMA204 designed to disrupt the tumor microenvironment). In addition, we are utilizing XPRESIDENT to unlock new target spaces through novel target classes such as crypto-targets and shared neoantigens. Based on the unique interplay between our target and TCR discovery platforms XPRESIDENT and XCEPTOR, we have the capability to identify and engineer the right T cell receptors with the desired affinity and specificity. These technology platforms are the foundation for strengthening the product pipeline and our leading position in the field of TCR-based therapies. Over time, we have published our discoveries in multiple peer-reviewed, high-impact publications in Nature, Nature Medicine, Nature Biotechnology, Nature Communications and Lancet Oncology.

 

  

Expand our leading intellectual property portfolio. We intend to continue building on our extensive intellectual property portfolio in the field of cancer targets, TCRs and technologies. Our portfolio currently includes over 3,000 worldwide active patent applications and more than 1,550 secured patents, of which over 230 are granted in the United States. The protection of our intellectual property assets is a foundational element of our ability to not only strengthen our product pipeline, but also to successfully defend and expand our position as a leader in the field of TCR therapies.

 

  

Leverage the full potential of strategic collaborations. The differentiated nature of our discovery programs has been validated by recent collaborations including Amgen, Genmab, BMS and GlaxoSmithKline and which involve a total of ten company targets. We will seek to capitalize on the respective collaborator’s drug development and regulatory expertise and commercial capabilities to bring our collaboration product candidates to market.

 

  

Extend the impact of immunotherapy through a novel ultra-personalized multi-TCR warehouse approach. We will take the first step towards multi-TCR-T immunotherapy through combinatorial

 

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treatment of patients using anti-tumor and anti-stroma ACTengine products. This will enable attacking different compartments of the tumor and its microenvironment through different target classes, thereby aiming to avoid the tumor adjusting to and escaping from a single cancer target attack. With the portfolio of more than 200 prioritized cancer targets and the high-throughput capabilities in TCR discovery and characterization, we are well-positioned to build a broad library of TCR product candidates (TCR warehouse) aimed at delivering a pioneering, ultra-personalized cancer treatment. A treatment algorithm to select and deliver multiple TCR-based cell therapy products for any cancer patient will not only expand the treatable patient population, but is designed to ultimately reduce the likelihood for tumors to evade immunotherapy and prolong durability of clinical responses, possibly even resulting in cure.

 

  

Further developing the qualities and capabilities of our organization and realizing the potential of our exceptional people. We are defined by people passionately dedicated to delivering the power of T cells to cancer patients. We have a long-term management and employee base that is the backbone of our past and future achievements. We will continue to rely on this foundation and to support and develop our outstanding team to elevate the organization to the next level.

IMMATICS’ THERAPEUTIC PIPELINE

ACTENGINE

 

ACTengine at a glance

 

  

Expanded target space compared to CAR-T. ACTengine TCR-T targets tumor-associated peptides presented by HLA-molecules on the tumor cell surface. Most relevant solid cancer targets are of intracellular nature and thus only accessible by TCR-based approaches.

 

 

  

TCRs with desirable affinity and specificity. ACTengine TCRs identified via XCEPTOR TCR discovery and characterized via XPRESIDENT guided on- and off-target toxicity screening show desirable affinity and high specificity. Our competitive advantage to other TCR-T approaches is the combination of the suitable target (via XPRESIDENT) with the right TCR (via XCEPTOR).

 

 

  

Active at physiological levels of target expression. We believe that ACTengine TCR-T products are highly potent and capable of inducing the killing of tumor cells presenting physiological target copy numbers identified by quantitative mass spectrometry and TCR validation.

 

 

  

Optimized manufacturing. Our proprietary short manufacturing process including a significantly shorter manufacturing period (6 days for IMA203) and a proprietary cytokine cocktail used to promote T cell expansion in culture is designed to produce younger, less differentiated T cell phenotypes which are associated with better engraftment and in vivo persistence.

 

 

  

Patient recruitment. Patient recruitment is underway in three Phase 1 clinical trials. First combined initial data read-out is expected by early 2021 and further results are expected throughout 2021. The clinical trials are investigating safety, tolerability and initial signs of efficacy in patients and are designed to include potential expansion cohorts in the case of initial signs of clinical efficacy. This may enable a fast way forward towards pivotal clinical trials in specific indications. In case the data allow, we may seek fast track designation(s) as accelerated approval pathway(s) to bring the product candidate(s) to the market.

 

 

  

Early biological data from first patients treated. Initial biological data from the first patients treated in the ACTengine trials (N=4) suggest a high persistence of target-specific T cells after infusion, already at the first low-dose level, which constitutes approximately 5-10% of our anticipated target dose. These target-specific T cells can also be detected in post-treatment tumor biopsies.

 

 

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We are developing Adoptive Cell Therapies, which are designed to leverage the power of T cells to actively infiltrate tumor tissue and kill tumor cells in a specific and serial fashion.

Figure 4. Mechanism of action of our ACTengine product candidate: from infusion to tumor killing.

 

LOGO

Upon infusion of an ACTengine product, T cells “equipped” with the cancer target-specific TCR, are supposed to bind to the pHLA target on the tumor. Subsequent activation of the T cell induces release of cytotoxic granules which might ultimately lead to tumor killing.

There are several reasons why a patient’s own T cells are often not able to protect the body against cancer, such as unavailability of activated tumor antigen specific T cells or insufficient affinity of endogenous target-specific TCRs to properly activate the T cell and fight the tumor. We believe that these problems can be overcome by engineering of autologous T cells with a well characterized and potent TCR, an approach used in our ACTengine program.

ACTengine is based on genetically engineering a patient’s own T cells with a novel TCR designed to recognize the cancer target identified by our XPRESIDENT platform. If the target of interest is confirmed on a patient’s tumor by the IMADetect companion diagnostic device candidate, lentiviral transduction of the patient’s autologous T cells with a target-specific exogenous TCR aims to essentially “reprogram” the T cells to attack the tumor. The engineered T cells are then multiplied in vitro and reinfused back into the patient for the treatment of the tumor.

In our current ACTengine clinical trials, infusion of the engineered T cells is preceded by a preconditioning lymphodepleting chemotherapy to activate proliferation, facilitate T cell engrafting and persistence. Post-infusion of the T cell product, low-dose IL-2 is administered for 14 days to further enhance persistence of the transferred cells.

 

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Figure 5. Schematic representation of our ACTengine process.

 

LOGO

Process overview on how we generate a personalized ACTengine T cell product from leukapheresis to patient treatment. If the target of interest is present on the patient’s tumor as demonstrated by biomarker profiling, the patient undergoes leukapheresis followed by genetic engineering of the patient’s own (autologous) T cells with a proprietary TCR. T cells engineered with the TCR are supposed to recognize the biomarker tested target on the tumor and are expanded to larger numbers prior to re-infusion into the patient.

Development of ACTengine Product Candidates

Our preclinical activities for ACTengine programs aim to reduce the risk of on- and off-target toxicity by careful selection and validation of targets and powerful TCRs. All ACTengine targets demonstrate high prevalence in major solid cancer indications as well as in niche indications with high medical need and limited available treatment options. We selected the highly tumor-associated ACTengine targets based on XPRESIDENT’s comprehensive dataset on mass spectrometry-based peptide presentation, as well as on mRNA expression levels for the respective source genes at the exon level. T cell activation assays with target expressing tumor cell lines further confirm that the targets are endogenously processed, naturally presented peptides. Thus, we believe the targets are promising for T cell-based immunotherapies.

 

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Figure 6. Target characteristics of ACTengine targets.

 

 

LOGO

Our ACTengine targets are expressed in a broad range of tumor indications. Comparison of our ACTengine targets to clinically validated NY-ESO-1 demonstrates that IMA201, IMA202 and IMA203 targets show specificity profiles similar to NY-ESO-1 while having significantly higher peptide copy numbers.

 

1 

Natural presentation of this peptide has been validated by clinical data,

 

2 

Validated by XPRESIDENT mass spectrometry. Target peptide copy numbers per cell were determined by AbsQuant technology,

 

3 

Internal specificity categorization used by us. Specificity class 1: peptide not routinely found on any normal tissue; no relevant RNA expression detected on critical organs, Specificity class 2: peptide showing a large therapeutic window with rare detections on normal tissue and low RNA expression on critical organs.

The target-specific TCRs identified via our XCEPTOR technology are designed to recognize their targets with high specificity. XPRESIDENT-guided specificity testing confirmed that there have been no peptides identified in the natural HLA peptidome that cross-react with these TCRs. In addition, all TCRs are tested against a human primary cell panel of various healthy donors to reaffirm specificity and the absence of cross-reactivity. The panel covers critical organs (such as brain, heart, lung, liver, kidney) and multiple different cell types (such as endothelial cells, epithelial cells, smooth muscle cell) as well as organ-specific cell types (such as cardiomyocytes, hepatocytes, astrocytes, neurons, osteoblasts, keratinocytes). Finally, all TCRs used in current ACTengine programs were able to mediate the robust functional activation of T cells as evidenced by recognition of calibrated target cell lines presenting the target peptides at physiological levels. In contrast to IMA201 and IMA202, which use naturally occurring TCRs isolated from healthy donors, the TCR used in IMA203 is a pairing-optimized variant of a naturally occurring TCR which shows higher expression levels in T cells and increased affinity for its target.

Delivery of ACTengine Product Candidates to Patients

Patients eligible for clinical trials with ACTengine product candidates have a portion of their white blood cells collected using a well-established process called leukapheresis, a procedure in which a fraction of the white blood cells of a patient are extracted from their peripheral blood. These white blood cells are transferred to a manufacturing facility where peripheral blood mononuclear cells (“PBMCs”), which are a subset of white blood cells, are isolated from the leukapheresis product. PBMCs or a selected subset of T cells (e.g. CD8+ T cells) form the starting point of the ACTengine manufacturing process, which is currently being conducted at a central manufacturing site in the United States by us.

 

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T cells contained within PBMCs are activated and subsequently mixed with a lentiviral vector to transduce the T cells with the genes encoding the target-specific TCR. The transduced cells are expanded in the presence of a cytokine mixture, concentrated and frozen before undergoing quality control release testing. The resulting cell product can be stored frozen long-term until the patient is ready to receive the infusion. The manufacturing time is 7-10 days for IMA201/202 and 6 days for IMA203.

For the introduction of the engineered TCR into the cells, our manufacturing process utilizes a third generation, self-inactivating lentiviral vector that is designed to improve the safety and eliminate the risk of replication-competent viral particles, as well as produce stable integration of the TCR sequences in the modified cells. The lentiviral vector includes the transgene required for production of engineered TCRs along with other additional elements necessary for producing the lentiviral particles needed for the delivery of the TCR genes.

Enhancing Commercial Application of Autologous Cell Therapies

We are using a semi-closed, partially automated manufacturing process for IMA203 and is currently moving towards a commercially compatible manufacturing process for all ACTengine programs that is automated and utilizes closed manufacturing systems available on the market. Additional manufacturing improvements being developed include the use of selected T cell subsets, as well as manufacturing processes that use chemically defined media free from human or animal derived serum. Proof of concept studies for multiple manufacturing systems, including automated devices, have already been carried out to prepare for implementation.

We will continue manufacturing for Phase 1 clinical trials at the current cGMP manufacturing facility through clinical proof of concept for a given TCR-T cell product. For pivotal trials and commercial scale manufacturing, we are evaluating the use of commercial scale Contract Manufacturing Organizations (“CMOs”) in addition to evaluating building a dedicated commercial facility for launching our products.

The current time from leukapheresis collection until infusion ready for our T cell products varies between 20 and 24 days, depending on the manufacturing length and including 14-day full sterility testing according to United States Pharmacopeial Convention standards. However, we are already working with regulatory authorities in the United States and Europe to release the T cell products for infusion on interim (7-day) sterility results while continuing the testing for 14-days. By further reducing the sterility testing for infusion to five days, the commercial manufacturing duration is expected to be reduced to eleven days.

Figure 7. Schematic overview of our manufacturing process.

 

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Upon leukapheresis, our manufacturing duration to generate a personalized IMA203 ACTengine product is 6 days followed by 14-day sterility testing. For commercial ACTengine products, we plan to implement an accelerated 5-day sterility testing, reducing the overall manufacturing time to 11 days.

Ongoing ACTengine Clinical Trials

The three Phase 1 clinical trials IMA201-101, IMA202-101 and IMA203-101 are open for patient recruitment and are currently in the dose escalation phase. We plan to enroll 12-15 patients for each trial and will evaluate up

 

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to four dose levels of each ACTengine product (50x106 to 1,000x106 target-specific T cells/m²). Upon signs of clinical activity we may extend clinical trials in a certain or several cancer subtypes, and recruit additional patients of the respective indications to access anti-tumor activity of product candidates in more detail.

IMA201-101

The IMA201-101 trial (NCT03247309) is a Phase 1 dose-escalating trial evaluating safety, tolerability and initial signs of clinical efficacy of our IMA201 ACTengine product, which targets melanoma-associated antigen 4 or 8 (“MAGEA4/A8”) in patients with solid tumors. Among the range of solid cancer indications being studied, this trial is focused on, but not limited to, squamous non-small cell lung carcinoma (“squamous NSCLC”), head and neck squamous cell carcinoma (“HNSCC”), and subtypes of sarcoma due to the high frequency of MAGEA4/8 expression in these tumors.

Lung cancer is the second most common cancer in the United States and the leading cause of cancer-related deaths. It is estimated that there were 228,000 new cases and 143,000 deaths of lung cancer in 2019. NSCLC accounts for about 85% of all lung cancers, while squamous cell NSCLC accounts for approximately 35% (estimated 66,000 patients) of NSCLC. The 5-year survival rate for NSCLC is 23%, but varies materially by the stage of the disease. For localized NSCLC, the overall 5-year survival rate is about 60%, whereas patients with metastatic lung cancer have a 5-year survival rate of only 6%. Treatment options for NSCLC also depend on the stage of the disease. Compared to non-squamous NSCLC, recurrent or refractory squamous NSCLC has fewer treatment options and typically leads to unfavorable outcomes despite recent advances.

HNSCC comprises a heterogeneous group of cancers at different anatomic locations, which can be found in the oral cavity, the pharyngeal area, and the larynx. Approximately 65,000 Americans are diagnosed with HNSCC each year and around 15,000 die from this disease annually. The 5-year survival for laryngeal cancer, one of the most common types of HNSCC, has not significantly changed over the past 30 years. Despite several treatment options, overall long-term survival rates for recurrent/metastatic HNSCC remain low. Thus, recurrent or metastatic HNSCC is a severely underserved patient population with limited treatment options. Despite all the advances made recently, these cancer patients have a very poor prognosis with a short median survival of 4-6 months and no available and approved standard treatment. Thus, the target population for IMA201-101 consists of patients with an urgent unmet need for new treatment options.

The ACTengine IMA201-101 study is actively recruiting in its dose-escalation phase. To be eligible for IMA201-101, adult patients with pathologically confirmed advanced/metastatic cancer must be HLA-A*02:01 positive and MAGEA4/A8 needs to be present in a biopsy of the patient’s tumor. Upon successful manufacturing and release testing of the IMA201, the patient can be treated, given that all treatment eligibility criteria are fulfilled. IMA201 is administered when disease recurs/progresses, or becomes refractory, no indicated standard of care treatment is available, or if this treatment is no longer warranted. The primary study purpose is to establish the safety and tolerability of the treatment with IMA201 T cell products. Thus, the primary outcome is to determine the incidence of adverse events (“AE”) upon treatment including dose limiting toxicity (“DLT”) and determination of recommended Phase 2 dose. Secondary outcomes are the evaluation of T cell persistence of the TCR engineered T cells within the patient’s blood after T cell infusion, as well as the evaluation of anti-tumor activity (tumor response and duration of response). T cell persistence is considered as a major pre-requisite to obtain anti-tumor response.

IMA202-101

The IMA202-101 trial (NCT03441100) is a Phase 1 dose-escalating trial evaluating safety, tolerability and initial signs of clinical efficacy of our IMA202 ACTengine product, which targets melanoma-associated antigen 1 (“MAGEA1”) in patients with various solid tumors, including NSCLC and hepatocellular carcinoma (“HCC”).

HCC is the most common type of primary liver cancer. According to the World Health Organization liver cancer is one of the top five causes of cancer-related death worldwide and it is estimated that there were 42,000 new

 

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cases of liver cancer in the Unites States in 2019. Death rates from liver cancer have been steadily increasing over the last decades and the 5-year survival rate for liver cancer remains low at approximately 18%.

The standard care therapies for unresectable HCC patients are very limited and comprise various local therapies for early and intermediate patients and systemic therapies for advanced HCC patients. Thus, the target patient population for IMA202-101 is comprised of patients with very poor prognosis and high unmet medical need for new treatment options.

The ACTengine IMA202-101 study is actively recruiting in its dose-escalation phase. The study is targeting patients with recurrent or refractory solid tumors including, but not limited to unresectable advanced HCC. To be eligible for IMA202-101, adult patients with pathologically confirmed advanced/metastatic cancer including HCC not amenable to resection are considered for enrollment into the trial if they are tested to be HLA-A*02:01 positive and MAGEA1 was found to be present in a biopsy of the patient’s tumor. The patients have relapsed and/or have refractory solid cancers with no established treatment available. Upon successful manufacturing and release testing of the IMA202 product the patient can be treated, given that all treatment eligibility criteria are fulfilled.

The study purpose is to evaluate the safety and tolerability of the treatment with IMA202 T cell products. Thus, the primary outcome is to determine the incidence of AE upon treatment including DLT and determination of recommended Phase 2 dose. Secondary outcomes are the evaluation of T cell persistence of the TCR engineered T cells within the patient’s blood after T cell infusion, as well as the evaluation of anti-tumor activity (tumor response and duration of response). T cell persistence is considered as a major pre-requisite to obtain anti-tumor response.

IMA203-101

The IMA203-101 trial (NCT03686124) is a Phase 1 dose-escalating trial evaluating safety, tolerability and initial signs of clinical efficacy of our IMA203 ACTengine product, which targets preferentially expressed antigen in melanoma (“PRAME”) in adult patients with relapsed and/or refractory solid tumors. Among a broad range of solid cancer indications, uterine cancer (endometrial cancer and uterine carcinoma), ovarian cancer, melanoma, several subtypes of sarcoma and squamous NSCLC are of special interest because PRAME is expressed in these tumors at a very high frequency.

According to estimates for 2019, ovarian cancer accounted for 23,000 new cases per year in the United States. Approximately 14,000 patients died from this disease in 2019, being the fifth most common cause of cancer-related deaths in women. Beside ovarian cancer, uterine cancer is another common cancer in women with unfavorable prognosis and where advances in available treatments are urgently needed. Melanoma is the fifth most common cancer type in the United States and has an incidence of approximately 96,000 new cases and 7,000 estimated deaths per year. While localized melanoma has a very favorable prognosis with a 5-year survival rate of 99%, metastasized melanoma has a 5-year survival rate of only 25%. Despite recent advances in treatment approaches the prognosis for advanced melanoma remains poor. Thus, the target population for IMA203-101 is cancer patients with no or limited treatments available.

The ACTengine IMA203-101 study is actively recruiting in its dose-escalation phase. Before start of study treatment, patients must have recurrent and/or refractory solid tumors and must have received or not be eligible for all available indicated standard-of-care treatments known to confer clinical benefit (e.g., surgery, radiation therapy, chemotherapy, immunotherapy or targeted therapy). Thus, IMA203 is administered if the last available indicated standard-of-care treatment is no longer warranted. For a patient to be eligible for this study, there is no limitation on either the type or the number of prior anti-tumor treatments they may have received. These cancer patients have a very poor prognosis and an urgent unmet medical need for new treatment options. Moreover, patients are eligible for inclusion into the trial if they are tested to be HLA-A*02:01 positive and PRAME was found to be present in a biopsy of the patient’s tumor. Upon successful manufacturing and release testing of the IMA203 product, the patient can be treated, given that all treatment eligibility criteria are fulfilled.

 

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The study purpose is to evaluate the safety and tolerability of the treatment with IMA203 T cell products. Thus, the primary outcome is the determination of the incidence of AE upon treatment including DLT and determination of recommended Phase 2 dose. Secondary outcomes are the evaluation of T cell persistence of the TCR engineered T cells within the patient’s blood after T cell infusion, as well as the evaluation of anti-tumor activity (tumor response and duration of response). T cell persistence is considered as a major pre-requisite to obtain anti-tumor response. After establishing the initial safety profile, we plan to add atezolizumab to a cohort of patients to test the safety of the IMA203-atezolizumab combination.

Initial Results from Ongoing Clinical Trials

The recruitment status as of January 2020 is the following: 22 HLA-A*02:01-positive patients were found to express one of the three targets (for IMA201, IMA202 or IMA203) in their tumor biopsy. 13 of those patients have been enrolled into the manufacturing phase of the trials. Manufacturing was successful for all 10 patients for which manufacturing has already been completed. Four patients (IMA201-101: n=1; IMA202-101: n=2; IMA203-101: n=1) have been infused at the lowest dose (50 million specific T cells/m²) of the dose escalation scheme in their respective trial. So far, ACTengine treatment has been tolerated well. The most frequent adverse events observed to date included cytopenias associated with the lymphodepleting regimen and Grade 1-2 cytokine release syndrome.

Preliminary biological data indicate very high frequencies of target-specific T cells (up to 45% of CD8+ T cells) in the patient’s blood after T cell infusion even at the lowest dose level. Target-specific T cells persisted until the end of the observation period (up to 12 weeks, immunomonitoring is still ongoing).

Figure 8. Initial biological activity data in first ACTengine patients.

 

Cellular immunomonitoring in Blood

IMA203 Patient #1

 

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Molecular immunomonitoring in blood

 

LOGO

Initial data for biological activity in ACTengine patient (status January 2020). Left panel: Representative plot for cellular immunomonitoring of target-specific T cells in the blood of IMA203 patient #1 one week after infusion. Right panel: Molecular immunomonitoring in the blood of n=4 ACTengine patients. Target-specific T cells were determined in the patient’s blood for up to 12 weeks after infusion.

Additionally, target-specific T cells were detected in tumor biopsies that were taken after T cell infusion, indicating their infiltration into the tumor. Biological activity is the prerequisite for clinical efficacy, which will likely be assessed in the forthcoming months.

 

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Figure 9. Detection of target-specific T cells in the tumor.

Molecular immunomonitoring in Tumor

IMA202 Patient #2, IMA203 Patient #1

 

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Initial data for detection of target-specific T cells within post-treatment biopsies six weeks after infusion for n=2 ACTengine patients (status January 2020).

After completion of the dose-escalation phase, assuming favorable safety profiles of the IMA201, IMA202 and IMA203 product candidates and signs of clinical activity in a certain or several cancer subtypes, we may extend the described clinical trials and recruit patients of a respective indication in an extension cohort to assess potential anti-tumor activity in more detail, both as a single agent and in combination therapy with atezolizumab. We may target Fast Track designation(s) and Accelerated Approval(s) to bring the product candidate(s) to the market.

NEXT-GENERATION ACT

 

Next-Generation ACT at a glance

We are committed to developing our ACTengine programs, with the goal to deliver the potential benefits of our innovative science to cancer patients as soon as possible. At the same time, in order to achieve the best outcomes for cancer patients in the longer term, we strive to enhance the tolerability, potency and ease of use of our product candidates. To accomplish these goals, we have taken the following steps:

 

  

Addressing the tumor stroma and microenvironment. The complex tumor microenvironment is currently regarded as one of the biggest challenges to the success of immunotherapies in solid tumors. We believe that the combination of stroma targets with tumor targets, as well as our second-generation enhancements to generate more potent T cells, may address this unmet need.

 

 

  

Combating target heterogeneity and tumor evasion. Our next-generation multi-target approach is designed to combat target heterogeneity and tumor escape for deeper and longer clinical responses.

 

 

  

Enhancing commercial viability. Aside from improving commercially compatible manufacturing of autologous ACT, we aim to decrease the cost of goods and to reach patients more quickly with our off-the-shelf cell therapy, ACTallo.

 

 

  

Pioneering personalized multi-target precision cancer medicines. The ACTolog pilot trial served as the first proof of concept for the feasibility of a personalized multi-target approach. The ACTolog pilot trial indicated a favorable tolerability profile, persistence and biological activity of transfused T cells as well as clinical benefit by the long-term stabilization of tumor growth in some last-line patients. The ACTolog approach is limited by the properties of the patient’s own T cell repertoire (i.e. TCRs with limited affinities). We believe that this limitation can be overcome by a multi-TCR-based ACTengine approach, which utilizes highly potent and optimized TCRs that may enable significant clinical responses.

 

 

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Exploit the full target potential and offer treatment options for potentially any patient. We believe that our pool of more than 200 prioritized targets combined with the capability to develop the right TCRs offers a possibly unique foundation to develop treatments for almost any patient. We believe that our fast manufacturing process, combined with our broad target portfolio, may put us in a unique position to develop personalized medication efficiently and cost-effectively for any patient.

 

Targeting Tumor Stroma — ACTengine IMA204

Most current anti-tumor therapies directly target the malignant tumor cells. For Adoptive Cell Therapy, this approach has been successful as demonstrated by others in several indications. Challenges remain, however, for solid tumors, where access and activity of the T cells to the tumor is limited by a rigid tumor stroma and the immunosuppressive tumor microenvironment. Tumor stroma, which are cancer-associated fibroblasts, may promote tumor growth, inhibit drugs and T cells from entering the tumor and thus prohibit them from reaching and killing the tumor cells.

With the XPRESIDENT target discovery platform, we are not only able to identify tumor cell-associated targets, but also innovative targets that are predominantly expressed in tumor stroma. One such stroma-associated target is COL6A3 exon 6, which was selected for the IMA204 ACTengine program. The IMA204 ACTengine program is in preclinical development with a planned IND submission in 2021.

COL6A3 exon 6 is a novel cancer stroma target identified and validated by our XPRESIDENT technology platform. COL6A3 is an extracellular matrix component found in most connective tissues, however COL6A3 exon 6 is expressed predominantly by tumor stromal cells and not in normal tissues. COL6A3 exon 6 is highly prevalent in a broad range of tumor tissues including lung, pancreas, esophagus, breast, ovary, colon and stomach cancer.

We believe that targeting the tumor stroma via IMA204 ACTengine is a promising approach for many solid tumors. This could result in tumor cell death due to tumor cells’ dependency on the stroma, could allow endogenous tumor specific T cells to reach the tumor and exert their anti-tumor activity, or could trigger additional local inflammation in the tumor microenvironment. We are considering combining IMA204 with other ACTengine products directly targeting tumor cells, offering a potentially orthogonal and synergistic mechanism of action.

Off-the-Shelf Adoptive Cell Therapy — ACTallo

ACT based on genetically engineered, patient-derived T cells has demonstrated remarkable clinical successes. However, the high costs and logistics associated with use of autologous cells as starting material are a challenge to the widespread use of autologous ACT. In addition, autologous patient material is of heterogenous quality, and the efficacy of cell therapy products in patients may be impacted by the patient’s age, the quality of the patient’s T cell, the cancer itself or immunosuppressive pre-treatments. The development of simpler, off-the-shelf ACT approaches with large batches of therapeutic doses derived from pre-tested healthy donors may make the benefits of these therapies more easily accessible and affordable to cancer patients with challenging, unmet medical needs.

ACTallo is a process we developed for the manufacture of allogeneic, off-the-shelf, TCR-engineered cellular therapies derived from healthy donors’ gd T cells. We believe that gd T cells are ideally suited for allogenic ACT approaches: gd T cells naturally infiltrate tumors, which has been shown to be the most favorable prognostic factor for patient outcome. gd T cells possess intrinsic antitumor activity and recognize target cells in an HLA/peptide independent fashion, not causing Graft-versus-Host Disease. In clinical trials, the transfer of autologous gd T cells has been repeatedly shown to be well tolerated.

 

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The life span of ACTallo T cells in patients is expected to be limited by their allogeneic nature, and the transferred cells will ultimately be rejected by the host immune system. Therefore, any potential autoimmune reactions driven by the ACTallo product are expected to be limited in duration and severity. Thus, in order to sustain clinical activity, repeated ACTallo cell infusion may be required. The picture emerging from commercial CAR-T products indicates that while peak product concentration correlates with response rate, it is the long-term persistence that correlates with the duration of response. As a result, if an allogeneic product is not applied multiple times, premature rejection of the product may limit patients’ long-term prognosis. Therefore, we are investigating preclinically second-generation approaches that could be suited towards making ACTallo less immunogenic.

We have developed a process that allows ex vivo expansion of gd T cells isolated from a single healthy donor to manufacture multiple ACTallo doses, which we believe represents an ideal modality for an off-the-shelf approach. Using healthy donor T cells circumvents the need to use T cells from heavily treated or aging cancer patients, thus allogeneic cells are not encumbered by suppressive environments of the patients’ immune system. In addition, products are available immediately for patient treatment without any delays for cellular manufacturing upon enrollment. At the laboratory scale, we have observed that our proprietary manufacturing process could generate hundreds of doses from a single donor. We are currently translating these lessons into larger scale solutions. A schematic summary of the ACTallo T cell manufacturing process is shown below in Figure 10.

Figure 10. Schematic representation of our ACTallo process.

 

LOGO

Within the ACTallo process allogeneic gd T cells from healthy donors are genetically engineered to express TCRs specific for one of our cancer targets. Off-the-shelf ACTallo product candidates are then ready for treatment directly after patient enrollment.

For manufacturing of ACTallo products, gd T cells are isolated from healthy donor leukapheresis, activated and transduced with target-specific TCR and the CD8 co-receptor, and further expanded before cryopreservation as an off-the-shelf product. After infusion, these TCR-engineered gd T cells can recognize and eliminate cancer cells.

We are currently developing the manufacturing process for ACTallo products. Process development efforts are aimed at optimizing cell selection, enrichment, activation and expansion, as well as transduction of gd T cells. Our plans to use a proprietary lentiviral vector system capable of transducing gd T cells with a single vector incorporating the proprietary TCR and a CD8 co-receptor — which we believe significantly reduces costs and complexity. For our first ACTallo product, IMA301, non-cGMP production runs from selected healthy donors will be performed at clinical batch scale, before the transfer of the manufacturing process to a cGMP facility. Finally, cGMP technology transfer run(s) will be performed in preparation of clinical batch manufacturing for patient infusion in a first-in-human IMA301 clinical trial.

 

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The gd T cells transduced with the TCR developed for use in IMA301 showed high in vitro anti-tumor activity. In addition, IMA301 TCR+ gd T cells were able to effectively kill a tumor cell line in vitro that expressed the targeted antigen at copy numbers that are usually seen on target-positive solid tumors (Figure 11).

Figure 11. Specific in vitro tumor cell killing by ACTallo T cells.

 

LOGO

ACTallo T cells transduced with IMA301 TCR were observed to kill tumor cells endogenously expressing the IMA301 target at relevant copy numbers (U20S cell line, approximately 250 target copies per cell). The figure further demonstrates the intrinsic anti-tumor activity of gd T cells without TCR transduction.

We plan to enter first-in-human trials with the first ACTallo product IMA301 after completion of process development and IND-enabling studies, with a planned IND submission in 2022. Development of IMA301 in solid tumors as well as in hematological indications is an option.

Multi-target Cell Therapy Pilot Trial — ACTolog

The ACTolog approach was designed as the first known multi-target precision immunotherapy. The IMA101-101 Phase 1 clinical trial is currently being conducted as a pilot trial to demonstrate safety and feasibility of a multi-target ACT approach (NCT02876510).

ACTolog is based on the principle of endogenous T cell therapy pioneered by Cassian Yee. ACTolog T cells are not genetically modified: IMA101 T cell products are generated from peripheral blood cells and are the patient’s own T cells, which are applied after ex vivo expansion. This approach is based on the observation that tumor antigen-specific T cells are naturally occurring and can be identified in the peripheral blood of melanoma patients. Despite their natural ability to recognize tumor associated antigens that are presented by tumor cells, these T cells may not be activated and capable to act against cancer, as peptides presented without co-stimulatory signals are only poorly immunogenic. Moreover, the frequency of endogenous target-specific T cells is usually very low. Expanding and activating those naturally occurring T cells allows great flexibility in targeting tumors.

 

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Figure 12. Schematic representation of our ACTolog process.

 

LOGO

The ACTolog concept is based on selecting and expanding a patient’s own autologous T cells dependent on the detection of ACTolog targets in the patient’s tumor tissue. Thus, the manufacturing of a patient’s personalized multi-targeted ACTolog product is tailored to the individual target expression profile of each patient.

In ACTolog, this autologous T cell expansion approach is amended to use a warehouse including multiple novel cancer targets discovered by the target discovery platform XPRESIDENT. From this target pool (COL6A3 exon 6, PRAME, MAGEA1, MAGEA4, MAGEA4/8, NY-ESO-1, MXRA5), the suitable targets for each patient’s tumor are identified by analyzing their relative presence within a tumor biopsy. Up to four personalized IMA101 T cell products, each with a defined target specificity, are then manufactured for each patient by isolation, propagation and activation of the patient’s endogenous T cells in vitro. Billions of such activated and specific T cells are then re-infused into the cancer patient for the purpose of attacking the tumor. The patient-tailored IMA101 T cell product(s) are infused as single dose after a pre-conditioning lymphodepletion to facilitate engraftment of transferred T cells. Thereafter, patients receive low-dose IL-2 to further improve T cell engraftment and activation.

Initial results

The ongoing IMA101-101 study is a Phase 1 trial investigating the safety and tolerability of IMA101 alone (cohort 1) or in combination with the PD-L1 inhibitor atezolizumab (cohort 2) in HLA-A*02:01 positive patients with advanced solid cancers. As of December 2019, initial data from the ongoing trial has revealed no treatment related deaths. The most common adverse events observed so far were expected cytopenias associated with the lymphodepleting regimen and Grade 1-2 cytokine release syndrome. Many patients have received high ACTolog cell doses and multiple T cell products. These initial results indicate that ACTolog is well-tolerated with no changes to treatment regime required.

 

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Table 1. Initial tolerability profile for ACTolog product candidates.

 

Adverse Events (N = 12)

  ³ Grade 3
(N)
   SAE
(N)
   AESI
(N)
 

Anemia

   9    0    0 

Leukopenia

   7    0    0 

Lymphopenia

   6    0    0 

Neutropenia

   9    0    0 

Thrombocytopenia

   5    0    0 

Bacteremia

   2    2    1 

Cellulitis

   2    2    0 

Abdominal pain

   1    0    1 

Device-related infection

   1    0    0 

Sinus bradycardia

   1    0    1 

Hypotension/ Orthostatic hypotension

   1    1    1 

Appendicitis

   1    1    1 

Cytopenia

   1    1    1 

Cytokine release syndrome

   0    0    9 

Infusion-related reaction

   0    0    1 

Haematochezia

   0    0    1 

Fatigue

   0    0    1 

Overview of Adverse Events in ACTolog trial provides preliminary data for n=12 initial patients (Status as of December 2019). AE: adverse event; SAE, serious adverse event; AESI, adverse event of special interest. Only AEs from treated patients are listed. If a patient experienced > 1 event, the patient is counted only once for the most severe AE. If an SAE or AESI was ³ Grade 3, the same AE is counted in both columns.

Very high frequencies of target-specific T cells could be detected within the patients’ blood up to one year after infusion which is seen as an important pre-requisite for clinical activity.

Figure 13. Initial biological activity results in ACTolog patients.

 

T cell Persistence in Blood

 

 

T cell infiltration into Tumor

 

LOGO LOGO

Initial data for biological activity in ACTolog patients (status January 2020). Left panel: T cell persistence in the periphery of n=12 patients was determined up to one year after infusion, right panel: Detection of target-specific T cells within post-treatment biopsies.

As presented by the study’s principal investigator at public conferences, two interesting case studies were observed in the ACTolog IMA101-101 trial to date. One patient with nasopharyngeal cancer was treated with a

 

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T cell product against the novel tumor stromal target COL6A3 exon 6 and showed stable disease for one year without the requirement of subsequent anti-tumor treatment and with an indication of necrosis in tumor biopsies. Another patient with squamous cell carcinoma of the anus received T cell products directed to COL6A3 exon 6 and PRAME and showed a 26% decrease in tumor measurements (RECIST1.1, irRECIST) at week six. A significant drop of T cells at week eight and a presumably unfavorable shift in T cell phenotype towards terminal differentiation was associated with progression of the patient at week twelve.

Overall, preliminary results of this multi-target pilot study demonstrate that large T cell doses of multiple products can be applied simultaneously and are generally well tolerated. The IMA101-101 pilot trial demonstrated the feasibility of multi-target ACT and generated Phase 1 tolerability data for the investigated targets. Clinical topline data are expected to be available at the end of 2020.

Some of the targets tested in the ACTolog IMA101-101 trial either are, or may soon be, entering clinical development in our ACTengine trials. For the next wave of ACT, we envision utilizing the highly potent TCRs from ACTengine within such actively tailored, multi-target, precision immunotherapy approach.

Personalized Multi-target ACTengine and TCR Warehouse

Currently, the few publicly available targets in ACT trials are usually tackled separately by individual products and trials. As intra-tumor heterogeneity has been observed as a source for clonal re-growth of the tumor, tumor escape can occur if only one target is addressed. Targeting multiple antigens relevant for individual patients is therefore an important strategic objective for us that may enable us to see durable clinical responses by lowering the risk of relapse due to tumor antigen escape. We believe that an ACTengine TCR-T therapy with multiple TCRs against multiple targets may have the potential to realize durable and deep clinical responses.

The proprietary target discovery platform XPRESIDENT positions us to simultaneously address multiple targets. As a first step, we have already created a library, which we call our “warehouse”, of seven promising tumor antigens for use in the ACTolog pilot trial. In this study, endogenous, ex vivo amplified T cells (in contrast to ACTengine they are not genetically engineered but selected from the patient’s own T cell repertoire) are applied to solid cancer patients in a multi-target precision approach.

Phase 1 clinical trials with TCR-engineered ACTengine product candidates are either ongoing (IMA201-203) or planned (IMA204). While development of these product candidates is pursued with full commitment, we envision combining all four products into a “TCR warehouse” to allow treatment of individual patients with more than one TCR specificity. With an initial TCR warehouse including IMA201-204, patients could then potentially be treated with up to four different products depending on their individual target expression pattern.

Enabled by the XPRESIDENT target pool and the TCR identification platform XCEPTOR, we aim to develop further TCRs with supplementary target specificities and to include them into this TCR warehouse. We envision the combination of a warehouse-based TCR-T approach with next-generation technologies and other immuno-oncology drugs (such as checkpoint inhibitors) on a data-driven, patient-individual basis.

We have broad experience with the regulatory and clinical realization of such warehouse-based concepts as demonstrated with ACTolog in the United States, as well as a previous personalized vaccine trial (GAPVAC) in the European regulatory environment.

Offering a treatment option to potentially any cancer patient with a possibility of multiple targets per patient would require a substantially larger TCR warehouse. We envision expanding the warehouse, gradually, with additional TCRs targeting additional tumor and tumor stroma antigens available through XPRESIDENT. Moreover, we plan to include targets presented by HLA alleles other than HLA-A*02:01, such as HLA-A*01, HLA-A*03, HLA-A*24, HLA-B*07, HLA-B*08, HLA-B*44. This has the potential to broaden the patient population that might benefit from the TCR warehouse approach from approximately 40% of the population in

 

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North America and approximately 45% of Europe expressing HLA-A*02:01 to more than 90% of individuals expressing at least one suitable HLA allele, and to similar values for populations in other major markets.

Figure 14. Our multi-target TCR-T strategy.

 

LOGO

We combine the expertise from the ACTolog multi-target pilot study with the capability to develop novel engineered TCRs as used in the ACTengine approach. While developing ACTengine targets individually, we plan to combine IMA201-204 TCRs into an initial TCR warehouse, enabling patient treatment with multiple ACTengine products including anti-tumor and anti-stroma targets. We plan to extend that warehouse with the goal to treat ultimately any cancer patient and achieve durable responses.

TCR BISPECIFICS — TCER

 

TCER at a glance

 

•  TCR Bispecifics redirect any T cell. Our TCR Bispecifics, called TCER (T Cell Engaging Receptors), are off-the-shelf biologics that leverage the body’s immune system by redirecting and activating T cells towards cancer cells expressing specific tumor targets. The design of these novel biologics allows any T cell in the body to become activated and attack the tumor, regardless of the T cells’ intrinsic specificity.

 

•  Expanded target space compared to classical T cell engagers. TCER compounds target tumor-associated peptides presented by HLA-molecules on the tumor cell surface exploiting the whole proteome.

 

•  Active at low levels of target expression. TCER are designed to induce the killing of tumor cells even when presenting physiological low copy numbers of the target.

 

•  High affinity and preclinical activity. Very low concentration (low pM range) required for in vitro killing of tumor cells expressing physiological levels of target pHLA and significant tumor growth inhibition in vivo in a therapeutic model.

 

•  Extended half-life. The TCER-scaffold is designed to exhibit a long functional half-life in the patient’s bloodstream in order to achieve clinical activity without the requirement for daily and/or continuous intravenous application.

 

 

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•  Modularity. The TCER-scaffold is designed to offer modularity. This allows for the efficient exchange of tumor-targeting and T cell engaging binders.

 

•  Off-the-shelf therapeutics. TCER are biologics designed for cost-effective manufacturing and immediate application availability.

 

•  Manufacturing activities for IMA401 have started. The TCER-scaffold is designed to be produced in CHO-cells relying on well-established processes used in the production of antibody-based therapeutics. Manufacturing development for our lead TCER candidate IMA401 is ongoing and submission of an IND is planned for the end of 2021.

 

•  The planned first-in-human clinical trial with IMA401 is designed to assess safety and tolerability, establish a suitable dose and potentially observe initial signs of clinical activity.

 

 

Our TCER are designed to leverage the well-established and validated mode of action and off-the-shelf usage of bispecific T cell engagers (prototyped by Blinatumomab) and to combine this mechanism with the expanded target space available to T cell therapies against pHLA targets.

Once administered, TCER compounds are supposed to bind to the tumor cells presenting the target peptide in context of HLA and simultaneously recruit, activate and stimulate the patient’s own T cells to attack the tumor cells. This is expected to result in T cell expansion and subsequent tumor regression.

A TCER consists of three distinct elements: (i) an affinity and stability improved T cell receptor recognizing the target presented by HLA-molecules on tumor cells, (ii) a T cell stimulating and recruiting domain derived from an antibody, and (iii) an effector function silenced Fc-part based on human IgG conferring preferential stability, serum half-life and manufacturability. Our TCER molecules can be produced and purified utilizing established processes to manufacture antibodies.

Figure 15. Proposed mechanism of action of our TCER: from administration to tumor killing.

 

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Administration of the biologic compound, which is off-the-shelf available, to a biomarker positive cancer patient. TCER molecules are supposed to specifically bind to the pHLA targets on cancer cells, direct and activate any patient’s circulating T cell into proximity of the cancer cell with the goal of destroying the malignant cell.

Our TCER scaffold is the result of a campaign to engineer and evaluate various molecular scaffolds incorporating binding domains derived from affinity and stability enhanced TCRs and from T cell recruiting

 

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antibodies, respectively. The TCER architecture, in our in vitro testing, proved to be superior to other tested scaffolds with respect to preclinical activity, stability and physico-chemical properties, so called “developability”. TCER molecules can readily be expressed in CHO-cells with titers comparable to antibody-based biologics. The TCER protein can be purified using common chromatographic techniques and size-exclusion-chromatography, facilitating the cGMP-compliant manufacturing in established plants.

For all TCER programs, extensive in vitro and in vivo experiments are compiled. The activity of all TCER molecules is evaluated in various in vitro assays utilizing tumor cell lines presenting the target at physiological low levels. Figure 16 representatively illustrates such a tumor cell killing assay by a target-specific TCER.

Figure 16. Specific tumor cell killing by a TCER.

 

LOGO

PBMC-mediated cytotoxicity of a TCER against target positive tumor cells was assessed by live-cell analysis. Shown are representative images after 60 hours. Unstained (grey/black): PBMCs (lymphocytes, including T cells); Red: Living tumor cells, Green: Dead cells, Yellow: cell death in clusters of activated T cells and tumor cells.

In general, TCER molecules exhibiting high in vitro potency and the ability to target low abundant peptides are selected. In parallel, tolerability of TCER candidates is extensively tested in various in vitro assay systems. TCER molecules exhibiting low reactivity towards healthy tissue as well as high therapeutic windows are then selected for further development.

In vivo half-life of TCER molecules is assessed in mice by quantification of functional TCER molecules in blood. For a representative TCER molecule, a long terminal half-life of several days was determined, confirming the functionality of the Fc-part utilized in the TCER-scaffold.

The targets used in our current TCER programs are HLA-A*02:01-restricted, naturally presented peptide cancer targets identified by our comprehensive target discovery and validation process. The identified peptides demonstrate high target copy numbers and are highly tumor-associated targets with high target prevalence in several solid cancer types, which we believe makes them excellent targets for TCER programs.

 

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Table 2. Prevalence of IMA401 and IMA402 targets in selected cancer indications.

 

  

IMA401

  

IMA402

Tumor types with

significant target

prevalence

 

Sq NSCLC (50%)

HNSCC (35%)

Bladder carcinoma (30%)

Uterine carcinosarcoma (25%)

Esophageal carcinoma (25%)

Ovarian carcinoma (20%)

Melanoma (20%)

Sarcoma Subtypes

(up to 80%)

...

  

Uterine carcinoma (100%)

Melanoma (95%)

Ovarian carcinoma (80%)

Sq NSCLC (65%)

Uveal melanoma (50%)

Cholangiocarcinoma (35%)

Diffuse large B-cell lymphoma (30%)

Breast carcinoma (25%)

HNSCC (25%)

Sarcoma Subtypes

(up to 100%)

...

The table provides an overview of selected tumor indications with high target prevalence for our preclinical IMA401 and IMA402 TCER product candidates.

IMA401

Based on preclinical data, we believe that the IMA401 TCER represents a promising clinical product candidate. IND submission is targeted for the end of 2021, followed by a first-in-human clinical trial to assess safety and tolerability, escalate the dose and potentially observe initial signs of clinical activity.

IMA401 can readily be expressed in CHO-cells with titers exceeding 2 g/L. Once purified, IMA401 exhibits low aggregation and fragmentation even prior to formulation development and under heat stress suggesting favorable stability characteristics. The activity of the IMA401 TCER was evaluated in various in vitro assays utilizing tumor cell lines presenting the target at physiological low levels. Thereby the TCER-concentration needed in vitro to achieve half-maximal tumor cell killing was determined to be as low as 10 pM to 300 pM depending on the individual donor of effector cells.

In parallel, tolerability of the IMA401 TCER was extensively tested in various in vitro assay systems. To screen for reactivity towards healthy tissue and prevent toxicity, the therapeutic window for IMA401 TCER was determined in a co-culture assay with PBMC (effector cells) and a multitude of primary normal cell types derived from HLA-A*02-positive donors. The primary cell panel covers critical organs and different cell types thereof as well as organ-specific cell types. Reactivity against the different normal cell types and a tumor cell line for comparison was assessed for increasing concentrations of IMA401 by an LDH-release cytotoxicity assay. In the same experiment, cytotoxicity against a human tumor cell line (“Hs695T”) was recorded. While robust tumor cell killing was observed at low pM concentrations, reactivity towards primary tissue was observed only at high TCER concentrations in the nM range, if at all. Therapeutic windows are calculated based on lowest effective concentrations (“LOEL”) observed for normal cells and the tumor cell line and were at least 1000-fold for the IMA401 TCER on all tested normal tissue cells.

 

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Table 3. Therapeutic window of IMA401 TCER.

 

Normal Tissue Type

  Therapeutic Window (x-fold)

iPSC-derived Astrocytes

  >10,000

iPSC-derived GABA neurons

  >10,000

iPSC-derived cardiomyocytes

  >10,000

Osteoblasts

  10,000

Pulmonary Fibroblasts

  >10,000

Dermal Microvascular Endothelial Cells

  1,000

Mesenchymal Stem Cells from Bone Marrow

  1,000

Tracheal Smooth Muscle Cells

  >10,000

Epidermal keratinocytes

  >10,000

Renal Cortical Epithelial Cells

  >10,000

Adrenal Cortical Cells

  1,000

Cardiac Microvascular Endothelial Cells

  >10,000

Chondrocytes

  >10,000

Coronary Artery Endothelial Cells

  >10,000

Nasal Epithelial Cells

  >10,000

Pulmonary Artery Smooth Muscle Cells

  >10,000

Exemplary specificity assessment for IMA401 TCER, which demonstrated a broad therapeutic window (³ 1,000 – 10,000 fold) as defined by reactivity against tumor cells and normal tissue cells. iPSC: induced pluripotent stem cells.

In vivo experiments using human tumor cell lines to establish solid tumors in immune-deficient mice, demonstrated that the IMA401 TCER was, upon transfer of human PBMC, able to induce complete remissions. In these experiments the TCER was administered at very low doses, confirming the biological activity as well as high stability and long serum half-life of the TCER scaffold.

Figure 17. Potency of our lead TCER candidate IMA401 in vivo.

 

LOGO

NOG mice were injected subcutaneously with human Hs695T tumor cells expressing the target peptide. After 20 days of engraftment visible tumors have developed. At day 1 PBMCs derived from two healthy donors were intravenously injected. IMA401 TCER or vehicle was administered at low doses and tumor volume was assessed by caliper measurements.

 

 

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Generation of the IND-enabling data package for IMA401 is currently underway in parallel to the manufacturing phase. Data will include additional tests for preclinical evaluation of safety and tolerability, such as whole blood cytokine release assays and additional alloreactivity screenings. We are also planning to generate data from patient-derived xenograft (“PDX”) models and/or patient-derived spheroid models. A minimum anticipated biological effect level (“MABEL”) approach is planned to define the starting dose for the clinical trial.

The manufacturing development phase of IMA401 TCER is ongoing and includes cell line development, upstream and downstream process development, GMP production, fill and finish, release testing, storage and stability testing.

IMA402

Based on the selected target, IMA402 could address a broad patient population in a variety of solid and hematological malignancies. This may include ovarian cancer, uterine cancer, melanoma, several subtypes of sarcoma, subtypes of lung cancer, breast cancer, subtypes of B cell lymphoma and several other indications. Lead candidates for the IMA402 program are currently being generated. Early data indicate high-affinity binding and specific target recognition. IMA402 TCER lead candidate selection is targeted towards the end of 2020, after which we intend to start the manufacturing phase followed by IND submission and a first-in-human clinical trial.

TECHNOLOGY PLATFORMS

 

Our proprietary target and TCR technology platforms at a glance:

 

One of the largest target discovery databases. The XPRESIDENT primary tissue database is comprised of thousands of cancer and normal tissue samples covering most relevant organs. From these tissues a multitude of data is gathered (including genome, proteome, immunopeptidome, in depth transcriptome) and compiled in our database, building the foundation for its target discovery.

 

•  Identification of true target peptides for TCR-based immunotherapies. XPRESIDENT is built to identify the peptides actually presented on real tumors, and provides quantitative information on copy numbers, which allows differentiation between peptides originating from the same parent protein. Thus, we believe XPRESIDENT enables the identification of the most relevant tumor-associated pHLA targets.

 

•  Large pool of prioritized targets. We have prioritized more than 200 pHLA targets encompassing all known target classes.

 

•  Favorable target characteristics. Targets discovered and validated by XPRESIDENT are (i) naturally presented on real tumors; (ii) presented in sufficient copy numbers; (iii) highly prevalent in several cancer patient populations; and (iv) expressed in tumor tissue with no or quantitatively lower expression in normal tissue to avoid potential toxicities that might occur if healthy tissue were attacked by product candidates.

 

•  High-throughput TCR identification. Our proprietary XCEPTOR platform enables fast, efficient and highly sensitive discovery of natural TCRs with high affinity and high specificity.

 

•  Right TCRs for ACT and TCR Bispecifics. We have significant protein engineering expertise to design TCRs with increased preclinical activity for Adoptive Cell Therapy and TCR Bispecifics product candidates.

 

•  Optimized TCRs. Unique interplay between our target and TCR discovery platforms enables early de-selection of cross-reactive TCRs. We believe that XPRESIDENT-guided on- and off-target toxicity screening, enabled by the large normal tissue immunopeptidome database, minimizes safety risks in clinical development.

 

 

 

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TARGET DISCOVERY & CHARACTERIZATION PLATFORM XPRESIDENT

Discovering True Targets for Cancer Immunotherapy

XPRESIDENT is a high-throughput technology platform based on ultra-sensitive mass spectrometry (LC-MS/MS), coupled with a proprietary sample preparation workflow and a proprietary immunoinformatics platform. XPRESIDENT is centered on the identification of HLA-bound peptides (pHLA targets) presented on tumor cells and not, or to a far lower extent, on the cell surface of normal tissue. XPRESIDENT is capable of detecting pHLA targets down to attomolar amounts. Key features of XPRESIDENT include:

 

  

All XPRESIDENT peptides are sourced from native tumors (in 20 major cancer indications), including primary tissues and metastatic biopsies as well as tissues derived from healthy organs (40 most relevant organs all over the human body). The vast collection of over 2,000 tissue samples combined with XPRESIDENT’s high-throughput approach has led to the generation of one of the largest target databases in the industry.

 

  

Peptides are analyzed and identified through a combination of quantitative HLA peptidomics (mass spectrometry) complemented by quantitative transcriptomics (mRNA sequencing), enabling the analysis of the differential expression and presentation of these potential drug targets between tumor and normal tissue.

 

  

All HLA-bound targets discovered by XPRESIDENT on any allele are proven to be present on a patient’s cancer tissues, in contrast to those predicted by in silico techniques.

 

  

Our proprietary AbsQuant technology allows absolute quantification of target peptide copy numbers per cell, a crucial parameter to determine which peptide target of a given source antigen is the most promising, which is a key strength of XPRESIDENT.

Figure 18. Discovery of true cancer targets by our proprietary XPRESIDENT platform.

 

LOGO

XPRESIDENT’s large-scale database is based on the analysis of thousands of primary healthy and tumor tissue samples by quantitative HLA peptidomics (mass spectrometry) and quantitative transcriptomics (RNA sequencing) enabling target discovery, validation, specificity assessment, treatment personalization and artificial intelligence approaches for highly personalized immunotherapy.

XPRESIDENT has identified and characterized all cancer targets in clinical and preclinical development of proprietary and collaborative pipelines, all of which are currently targeting HLA-A*02, which is found on approximately 40-50% of individuals in North America, Europe, China and Japan and is one of the most common HLA types worldwide. Additionally, XPRESIDENT is used to discover cancer targets for other HLA

 

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types, and comprises a pipeline of more than 200 prioritized cancer targets across several HLA types, and with high prevalence across multiple cancer indications. These targets encompass three target classes:

Class 1: Well-known and characterized parent protein, for which we believe we can uniquely understand which peptide derived from the protein sequence is truly presented on the cancer cell. Examples include ACTengine programs IMA201, IMA202, IMA203.

Class 2: Unknown or poorly characterized parent protein (e.g., COL6A3). Examples include our ACTengine program IMA204 and the ACTolog pilot study.

Class 3: Crypto-targets including neoantigens. These are pHLA targets from novel target classes such as RNA-edited peptides, alternative or proteasomal splicing variants, short or alternative open reading frames, gene fusions, ribosomal frameshifting events and non-classical neoantigens. In addition, XPRESIDENT is also able to identify and validate classical neoantigens derived from mutational events.

Figure 19. Prioritization of more than 200 pHLA targets covering all known target classes.

 

LOGO

XPRESIDENT’s extensive pHLA database is based on more than 2,000 primary tissue samples from 40 healthy organs and 20 major cancer indications. Following analysis of over 400,000,000 MS/MS spectra and an initial long-list of 8,000 tumor-associated pHLA targets, we have prioritized over 200 mass spectrometry validated pHLA targets covering all target classes: 1) peptides of well-known and characterized cancer target proteins; 2) unknown or poorly characterized proteins and 3) crypto targets/neoantigens.

All our targets undergo an extensive target characterization and validation process before entering the product pipeline. RNA in situ hybridization analysis is used to demonstrate homogeneous target expression in the tumor (in case of a cancer target) or tumor stroma (in cases of a tumor stroma target), used in ACTengine IMA204 and the ACTolog pilot trial. Cell type-specific target expression for a stroma and tumor target is shown in Figure 20.

Tumor stroma cells are a key component of the tumor microenvironment, playing a crucial role in tumorigenesis, tumor progression, and metastasis as well as therapy resistance. We believe our innovative anti-cancer approach to target tumor stroma cells opens new avenues for developing powerful TCR-based immunotherapies. The combination of TCRs directed against tumor targets with TCRs directed against stroma targets could result in a breakthrough in immunotherapy.

 

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Figure 20. Pioneering novel targets such as stroma target COL6A3 exon 6.

 

LOGO

Demonstration of target-cell specific expression of a representative stroma target and tumor target in the same ovarian cancer tissue sample using RNA in situ hybridization. Both pictures show the same image section. Red dots indicate target mRNA expression, which is highly tumor cell specific in case of a tumor target and restricted predominantly to tumor stroma cells in case of a stroma target, COL6A3 exon 6 as example.

Pipeline Targets

The HLA-A*02:01 restricted targets for our ACTengine clinical-stage product candidates IMA201 (derived from MAGEA4/8), IMA202 (derived from MAGEA1) and IMA203 (derived from PRAME) show specificity profiles similar to a NY-ESO-1 derived peptide, which is a target that has been used in several clinical TCR-T trials showing promising results (e.g. NCT00670748, NCT01352286, NCT01343043). This means that our targets have been detected with high frequency on several cancer types, but have been detected to a much lower extent, or not at all, on normal tissue. However, the targets selected for our drug development programs have significantly higher peptide copy numbers than NY-ESO-1, making them potentially even more promising targets for immunotherapy.

Table 4. Comparison of our frontrunner targets to clinically validated NY-ESO-1.

 

  NY-ESO-l MAGEA4/A8 MAGEA1 PRAME COL6A3 exon 6 Cancer/
testis
antigen
 Cancer/
testis
antigen
 Cancer/
testis
antigen
  

 

 IMA201 IMA202 IMA203 IMA204 IMA301 IMA401 IMA402

Naturally presented

 Yes1 Yes2 Yes2 Yes2 Yes2 Yes2 Yes2 Yes2

Specificity Class3

 1 1 1 1 2 1 1 1

Copy number

 10-50 100-1,0002 50-9002 100-1,0002 100-7002 100-1,0002 100·1.0002 100-1,0002

The table compares specificity and copy number of our pipeline targets with clinically validated NY-ESO-1. Our ACTengine clinical stage product candidates IMA20, IMA202, and IMA203 show specificity profiles similar to a NY-ESO-1 derived peptide while having significantly higher copy numbers than NY-ESO-1. 1Natural

 

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presentation of this peptide has been validated by clinical data, 2Validated by XPRESIDENT mass spectrometry. Target peptide copy numbers per cell were determined by AbsQuant technology, 3Internal specificity categorization used by us. Specificity class 1: peptide not routinely found on any normal tissue; no relevant RNA expression detected on critical organs, Specificity class 2: peptide showing a large therapeutic window with rare detections on normal tissue and low RNA expression on critical organs.

Figure 21. Our mass spectrometry validated ACTengine targets.

 

 

LOGO

Peptide presentation profile1 for our ACTengine clinical frontrunner targets MAGEA4/8 (IMA201), MAGEA1 (IMA202), PRAME (IMA203) (as submitted with the IND application) and the preclinical program COL6A3

 

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(IMA204, status March 25, 2020) based on XPRESIDENT mass spectrometry (LC-MS/MS) data. AML: acute myeloid leukemia; CCC: cholangiocellular carcinoma; CLL: chronic lymphocytic leukemia; GEJC: gastro-esophageal junction cancer; HCC: hepatocellular carcinoma; HNSCC: head and neck squamous cell carcinoma; NHL: non-Hodgkin lymphoma; NSCLCadeno: non-small cell lung cancer adenocarcinoma; NSCLCother: NSCLC samples that could not unambiguously be assigned to NSCLCadeno or NSCLCsquam; NSCLCsquam: squamous cell non-small cell lung cancer; SCLC: small cell lung cancer; UBC: urinary bladder carcinoma; UEC: uterine and endometrial cancer. 1Please note that such profiles are indicative of tumor selectivity but are not sufficient to establish safety. To establish safety of a novel pHLA target, additional data is gathered from further in vitro experiments and clinical trials.

Our Proprietary Immunoinformatics Platform for Target Discovery and Validation

In order to leverage the wealth of XPRESIDENT data, we have developed a comprehensive, proprietary immunoinformatics platform that integrates three interacting engines for all bioinformatics needs – computing, database and analytics — to pioneer next-generation immunotherapies (Figure 22). The Computing engine is optimized for standardized and automated data processing of mass spectrometry and next-generation sequencing data. We overcome the inherent challenges of immunopeptidomics by tailored pipeline and algorithm development, and ensure software validation by thorough benchmarks and testing.

The XPRESIDENT Database engine combines a data warehouse back-end with a web-based user interface front-end. The data warehouse integrates all XPRESIDENT associated data, whether small or big data. The user interface provides unified and central access for knowledge discovery, providing interactive visualization, crosslinks between information and data provenance down to the raw data level.

The data warehouse also serves as base for the proprietary Analytics engine, which is a collection of predictive models based on statistical modelling and machine learning. We achieve effective artificial intelligence (“AI”) machine learning by the power of XPRESIDENT’s data in comprehensiveness, breadth, depth and standardization, as well as from the incorporation of domain knowledge in immunopeptidomics. With the models currently used, we are capable of automating quality control and target prioritization.

Figure 22. Our immunoinformatics platform combines all required key features to serve target discovery and validation.

 

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Our proprietary immunoinformatics platform combines three engines — computing, database and analytics to serve every bioinformatics need in an optimized and integrated fashion. The platform is powered by XPRESIDENT data from biobanking, sample preparation, mass spectrometry and peptide synthesis to enable target discovery, validation and toxicity assessment.

Extensive Database for Pioneering Novel Target Classes

XPRESIDENT is one of the largest pHLA target databases in the industry, comprising more than 400 million MS/MS fragment spectra, millions of peptide sequences and quantitative information on tissue presentation. This database also enables the discovery of crypto targets not derived from the canonical human proteome (e.g. RNA-edited peptides, alternative or proteasomal splicing variants, short or alternative open reading frames, gene fusions, ribosomal frameshifting events and non-classical neoantigens — described as class 3 targets in the previous chapter). This novel type of target is only visible directly at the pHLA level and not on mRNA level, based on exclusive detection on tumor but not, or to a far lower amount, on normal tissues. We believe that the wealth of data contained in XPRESIDENT database provides an ideal basis for the detection of crypto targets and also facilitates deeper characterization, such as for quantitative information and other characteristics, revealing the full potential of all types of pHLA targets for immunotherapy.

Artificial Intelligence Guided Epitope Prediction for Personalized Immunotherapies

We prefer direct elution from native tumor and normal tissues and sequencing of pHLA targets by mass spectrometry over in silico prediction of such pHLA targets which is common in the industry. Such current algorithms frequently predict targets that are often false positives and do not truly exist on patients’ cancer cells. Thus, based on our assessment, current in silico approaches — unless combined with extended target validation confirming the natural presentation of the investigated targets — are insufficient to move into clinical development.

However, we believe that XPRESIDENT may be the best basis to develop a suitable in silico prediction algorithm with a minimal false-positive rate. “Big data” is necessary for development of such reliable predictive models by machine learning (e.g., deep learning). We have created one of the largest (if not the largest) HLA peptidome dataset, which allows us to develop artificial intelligence algorithms designed for evidence based, personalized immunotherapies and precision medicine. Several other immunopeptidomics datasets have also triggered attempts to predict HLA targets. However, due to the complexity of the HLA repertoire, confounding factors and variation between patients and organs, only large databases enable accurate predictions. Our database is based on native tissues, where other approaches rely on artificial cell lines. With our extensive and continuously growing tissue bank of thousands of real cancer and normal tissues and the resulting XPRESIDENT pHLA target database, covering more than 130 HLA allotypes, we have a competitive advantage compared to other artificial intelligence approaches (Figure 23). Moreover, we have acquired and will continue to acquire additional complementary data on mRNA expression, genomics and proteomics from the same tissue specimens. XPRESIDENT’s dataset, in combination with our Analytics engine, allows generation of statistical and AI models that elucidate the antigen processing machinery. Current statistical models underlying IMADetect already enable personalized target selection. These current capabilities combined with the future models using XPRESIDENT data ideally position us to develop and continuously improve statistical and AI-based models and advance pHLA target prediction. We believe this provides the basis for full antigenic profiling and target selection of an individual tumor of an individual patient for ultra-personalized immunotherapies.

 

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Figure 23. Our competitive advantage based on the wealth of our immunopeptidome database.

 

 

LOGO

With our extensive dataset of more than 2,000 real primary tissues covering more than 130 HLA allotypes, we have a competitive advantage compared to other artificial intelligence approaches that are primarily based on artificial cell lines. Our extensive immunopeptidome database provides a competitive advantage for artificial intelligence and the development of improved AI algorithms for highly personalized immunotherapies.

Translation to Clinical Use — Companion Diagnostic IMADetect

Our XPRESIDENT know-how can also be translated to clinical application for decision-making and personalized target selection for cancer patients. XPRESIDENT-based analysis of correlation between peptide presentation and expression of the peptide-encoding exon(s) allows for the definition of mRNA-based thresholds that are designed to be predictive of presence of the target peptide on the tumor. Based on this expertise, we are developing the companion diagnostic IMADetect to define target peptide positive patient populations and their inclusion into our clinical trials. IMADetect is a reverse transcription quantitative PCR (“RT-qPCR”) based biomarker assay that enables treatment decisions based on presence of the drug target in the tumor, implementing precision medicine for cancer immunotherapies. The assay is currently performed for the clinical trials in our in-house CLIA-certified and CAP-accredited laboratory at our R&D facilities in Houston, Texas, and will be further developed as companion diagnostics for our drug products.

Interaction between XPRESIDENT and XCEPTOR Technology Platforms for the Development of TCRs

Apart from identifying cancer targets, XPRESIDENT also significantly contributes to our TCR discovery and engineering platform XCEPTOR. The extensive information available on the HLA peptidome in normal tissues is specifically useful for guiding on-and off-target toxicity screenings by determining which peptides potentially cross-recognized by a TCR are actually presented on normal tissues which is of relevance and importance to safety. The information of relevant off-target peptides can also be utilized to guide TCR engineering and affinity maturation for TCR Bispecifics. Absolute target copy numbers determined on tumor cell lines or tissue samples from animal models in relation to copy numbers on primary tumor tissues are an essential piece of information for designing relevant models for TCR efficacy testing.

DISCOVERY, ENGINEERING & VALIDATION OF RIGHT TCRS — XCEPTOR

TCRs naturally recognize human HLA-bound peptides (“pHLA targets”) derived from foreign and endogenous proteins, regardless of their extracellular or intracellular localization. We have established XCEPTOR, a next-

 

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generation technology platform designed to discover, engineer and validate TCRs. The process comprises the discovery and selection of highly specific parental, membrane-bound TCRs with optional engineering (e.g. chain pairing enhancement, engineering towards CD8 independency) to serve ACT modalities, and further engineering via affinity-maturation for TCR Bispecifics.

 

  

Many unique TCRs are identified for each target in a high throughput approach and for several targets in parallel.

 

  

Multiple TCR sources are used for each target, such as blood cells from many different HLA-matched and HLA-mismatched donors or patients.

 

  

TCRs are re-expressed in human donor cells, extensively screened in vitro (e.g. testing of killing of tumor cell lines vs normal cells to establish a therapeutic window) and qualified as candidates for Adoptive Cell Therapies or TCR Bispecifics.

 

  

Information exchange with the XPRESIDENT platform throughout TCR identification and candidate screening ensures selection of specific and potent TCRs, e.g. by providing information on TCR-motif and target similar peptide expression on healthy tissue, or calibrated tumor cell lines with physiological target levels as screening tool.

 

  

Qualified TCRs are subject to further engineering, including affinity maturation, engineering towards CD8 independency or chain pairing enhancement, if needed.

Figure 24. Key principles of our proprietary XCEPTOR platform for development of the right TCR.

 

 

LOGO

Our proprietary XCEPTOR technology platform is designed to allow the fast and efficient discovery of a multitude of TCRs with high affinity and high specificity, which optionally can be engineered and enhanced. TCR identification and engineering is guided by XPRESIDENT to serve development of product candidates for Adoptive Cell Therapy (ACTengine, ACTallo) and TCR Bispecifics (TCER).

We use HLA-matched and mismatched human donors as starting material for TCR discovery, both from healthy donors and patients. A large number of unique, fully human TCR sequences per target are identified at single cell level, characterized in a transient human re-expression system and selected based on functional avidity measurements, specificity screening with target similar peptides expressed on normal tissue (XPRESIDENT database) and TCR binding motif determination by guided positional scanning.

 

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Suitable candidates for Adoptive Cell Therapies are selected based on in vitro specificity and efficacy screenings, including human tumor cell lines expressing the respective target at physiological levels (AbsQuant), target-negative cell lines and primary healthy cells.

Optionally, those fully human membrane-bound TCRs can be optimized by engineering, either in silico or using yeast display. For the majority of targets, lead TCRs with low to single digit micromolar affinity are identified from the natural human repertoire, and we may choose to moderately enhance the TCR affinity for Adoptive Cell Therapies. Additionally, engineering to address alpha/beta chain pairing and CD8 independency is pursued as an additional approach. For preclinical validation, TCR candidates for ACT are subsequently expressed as lentiviral constructs and further tested for potency and tolerability, again making use of calibrated target cell lines (AbsQuant) to validate that the chosen TCR can recognize physiological target levels.

For bispecific immunotherapies, TCRs are converted into stable high affinity scTvs (single-chain TCR variable fragments) using yeast display, serving as building blocks for the generation of bispecific T cell engaging receptor molecules (TCER). Affinity maturation includes counterselection with target similar peptides (potential “off-targets”), resulting in TCR binding domains with strongly augmented binding towards the target peptide-HLA while retaining high specificity. Together with a T cell recruiting domain, scTVs are incorporated in our proprietary TCER format that comprises extended half-life and antibody-like stability and manufacturability characteristics (see “ —TCR Bispecifics — TCER”).

The entire TCR selection process is accompanied by input from the XPRESIDENT database, guiding on-and off-target toxicity screenings as well as potency evaluation, including by providing absolute target-copy numbers on primary human tumor tissue in relation to pHLA copy numbers found on human tumor cell lines or healthy tissue. Testing TCR-mediated killing of tumor cell lines with defined target pHLA copies versus normal cells allows for the determination of therapeutic windows.

Figure 25. Preclinical anti-tumor activity of our TCRs.

 

 

U20S tumor line — 240 target copies  A375 tumor line — 50 target copies
LOGO  LOGO

Exemplary data for XPRESIDENT-guided determination of potency for a naturally occurring (WT TCR) and an engineered, enhanced TCR (Enhanced TCR). Physiological target copy numbers for the respective target range from 100-1,000 copies per cell. TCRs mediate reduction in tumor growth and tumor cell killing of A375 (50 copies/ cell) and U2OS tumor cells (240 copies/ cell). The engineered and enhanced TCR is active in vitro down to sub-physiological copy numbers.

In summary, our XCEPTOR platform enables fast and efficient discovery, engineering and validation of a large number of high-affinity and highly specific natural TCRs that can be used for Adoptive Cell Therapies, such as ACTengine, ACTallo and TCR Bispecifics.

 

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MANUFACTURING AND SUPPLY

The ACT drug products are manufactured by our own employees who are cGMP-trained within The Evelyn H. Griffin Stem Cell Therapeutics Research Laboratory at UTHealth (“UTH”) McGovern Medical School (the “Griffin Facility”) in Houston, Texas through a multi-year collaboration between us and UTHealth. The Griffin Facility is part of the Cellular Therapy Core (“CTC”) at UTHealth and is an 1,850 square foot state-of-the-art multiple ISO 7 class 10,000 Human Cell Processing cGMP Facility. UTHealth procures the necessary supplies and reagents for cGMP manufacturing ACT products based on our requests. These supplies and reagents are purchased from qualified vendors specialized in supplying cGMP grade reagents for the cell and gene therapy industry and approved by UTHealth management.

The UTHealth facility is FDA registered to produce cells and tissues for clinical applications in compliance with cGMP and has received accreditation by the Foundation for Accreditation of Cellular Therapy (“FACT”) in January 2016 which was renewed in 2019.

We have exclusive access to three cGMP suites and support areas for the manufacturing of various ACT products. Facility operation/maintenance, supply procurement/release and co-release of final drug product is performed by UTHealth, while our trained personnel carry out the manufacturing and in-process controls. In addition, we have contractual agreements in place with two suppliers of lentiviral vectors which is the most critical raw material for the manufacturing of genetically modified T cells products.

For pivotal trials, we plan to sign agreements with one or multiple CMOs for cellular manufacturing with dedicated access to multiple cGMP suites and trained personnel. We are in the process of obtaining proposals from multiple CMOs for manufacturing of ACT products beyond Phase 1 or once clinical proof of concept has been established. Similarly, we are in the process of pursuing commercial supply agreements with raw material vendors ahead of pivotal trials and commercial manufacturing, especially for the lentiviral vector supply.

Our TCR Bispecifics are expressed in mammalian cells. We have established a laboratory scale production process to generate R&D material suitable for compound characterization and early preclinical assessments. In the course of preclinical development, the process is transferred to and further developed by CMOs. Our CMOs are experienced in cGMP manufacturing of biologics and regulatory compliance for these processes. The IND enabling studies (e.g., in vitro toxicology studies) are performed with material which we receive from CMOs.

The manufacturing phase at CMOs includes cell line development, establishment of master- and working cell banks, upstream and downstream process development, formulation development, development of suitable analytical methods for testing and release, cGMP manufacturing for clinical supplies, fill and finish, drug substance and drug product release testing, storage and stability testing.

An in-house chemistry, manufacturing and control (“CMC”) team guides and manages the processes at our CMOs through the different stages. Before and during the cooperation with a contract manufacturer we conduct audits to control compliance with the mutually agreed process descriptions and to cGMP regulations. Our manufacturers themselves are controlled by their in-house quality assurance functions and inspected by regulatory agencies, including European national agencies and the FDA. During the development of TCER candidates, our contract manufacturers may need to modify or scale the manufacturing process to suitable size. Potentially, the drug formulation or other parameters may be changed. Such modifications may require a renewed qualification of the manufacturing process with the relevant authorities. In addition to the currently contracted CMOs, we expect to engage with additional third-party manufacturers to support potential pivotal trials and potential commercial supplies.

MARKETING AND SALES

We currently do not have our own marketing, sales or distribution capabilities. In order to commercialize any future product candidate, if approved for commercial sale, it is our current plan to develop a sales and marketing

 

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infrastructure. We may opportunistically seek strategic collaborations to maximize the commercial opportunities for our future product candidates inside and outside the United States.

COMPETITION

Immunotherapy and the companies and academic groups using TCR-based approaches against cancer are rapidly evolving. While we believe that our technology platforms, therapeutic modalities and scientific knowledge provide us with a competitive advantage, we also face significant competition.

Other pharmaceutical and biotechnology companies are active in the field of TCR therapies, with the goal to target solid tumors following the success of CAR-T therapies in hematology. Companies developing other immunotherapies such as CAR-T, bispecific antibodies or immune checkpoint inhibitors, may show that their products applied alone or in combination may demonstrate significant improvement in efficacy and compete with our approach and candidates.

Any product candidates that we successfully develop and commercialize will compete with currently approved therapies and new therapies that may become available in the future. Our competitors fall primarily into the following groups, depending on their treatment approach:

 

  

Academic institutions as well as industry competitors (including Adaptimmune, Gritstone, Immunocore, Adaptive Biotechnologies, pureMHC, BioNTech, and Genentech) are also seeking to identify HLA targets.

 

  

Adaptimmune, Immunocore, T-Knife, Adaptive Biotechnologies, 3T Biosciences, Medigene, Regeneron, Gilead, Bluebird Bio, Agentus and possibly others are also working on TCR-based approaches.

 

  

Takara Bio Inc., Kite Gilead, Tmunity, Cell Medica, BMS, GSK, Adaptimmune, Bluebird Bio, Medigene and Bellicum, in addition to various academic institutions and possibly industry competitors, are investigating novel autologous TCR-T therapeutics.

 

  

Several companies, including Takeda Bio Inc., Adaptimmune, Bluebird Bio and Medigene, are developing TCR-T programs to the same proteins, although possibly not the same peptide targets, as utilized in our ACTengine pipeline.

 

  

Allogene, Celyad, CRISPR Therapeutics, Fate Therapeutics, Intellia Therapeutics, Precision Biosciences, Sangamo Therapeutics, Cellectis, TC Biopharm and Adicet Bio, and possible others, are developing allogeneic cell therapies.

 

  

Companies such as Immunocore, Amgen, Genmab and MorphoSys are developing TCR Bispecific compounds or TCR mimetic antibodies.

 

  

Marker Therapeutics, Achilles and Neximmune, and possibly others, are developing multi-target immunotherapies to pHLA targets.

The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our products. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than us, which might result in competitors establishing a strong market position before we are able to enter the market.

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

 

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INTELLECTUAL PROPERTY

We have a robust intellectual property portfolio which includes a large number of patents in many commercially significant jurisdictions worldwide. Our patent portfolio is a strategically important asset. As of January 27, 2020, the portfolio contains over 3,000 active worldwide patent applications and more than 100 active patent families. Our patent application portfolio is diverse and covers a large number of cancer antigen targets, T cell receptors, antibodies, bi-specific molecules, and antigen discovery platforms.

 

 a.

As of January 27, 2020, we had secured over 1,550 world-wide patents, including 239 U.S. patents. Of the 239 granted U.S. patents, a total of 198 U.S. patents have been issued since 2017. We plan to continue to expand our U.S. patent portfolio by filing new patent applications as well as filing continuation and divisional applications of pending U.S. applications.

 

 b.

We recognize the need for a global intellectual property strategy in order to protect future products and assets around the world. As a result, we file patent applications with an aim of protecting our technology throughout many commercially relevant jurisdictions, such as Europe, the United States, Canada, Brazil, China, Japan, South Korea, Argentina, Russia, Australia, New Zealand, Singapore, Vietnam, Thailand, Indonesia, Mexico, Taiwan and the Gulf states. For applications deemed to be of highest commercial importance to us, filing may take place in more than 50 countries.

 

 c.

Patent coverage for our product candidates, encompassing proprietary cancer antigens, TCRs, TCER and antibodies, includes the following:

 

  

One issued patent in the U.S. and 34 pending applications in Argentina, Australia, Brazil, Canada, Chile, China, Columbia, Costa Rica, Algeria, Eurasia, Egypt, Europe, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Morocco, Mexico, Malaysia, New Zealand, Peru, Philippines, Singapore, Thailand, Taiwan, the Ukraine, the U.S., Vietnam and South Africa relate to IMA201 (MAGEA4/8). These patents and applications are expected to expire on March 16, 2037.

 

  

No issued patent in and 34 pending applications in Argentina, Australia, Brazil, Canada, Chile, China, Columbia, Costa Rica, Germany, Algeria, Eurasia, Egypt, Europe, Gulf Cooperation Council, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Morocco, Mexico, Malaysia, New Zealand, Peru, Philippines, Singapore, Thailand, Taiwan, the Ukraine, the U.S., Vietnam and South Africa relate to IMA202 (MAGEA1). These patents and applications are expected to expire on December 7, 2037.

 

  

One issued patent in the U.S. and 33 pending applications in Argentina, Australia, Brazil, Canada, Chile, China, Columbia, Costa Rica, Germany, Algeria, Eurasia, Egypt, Europe, Gulf Cooperation Council, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Morocco, Mexico, Malaysia, New Zealand, Peru, Philippines, Singapore, Thailand, Taiwan, the Ukraine, the U.S., Vietnam and South Africa relate to IMA203 (PRAME). These patents and applications are expected to expire on March 28, 2038.

 

  

Two issued patents in the U.S. and 35 pending applications in Argentina, Australia, Brazil, Canada, Chile, China, Columbia, Costa Rica, Germany, Algeria, Eurasia, Egypt, Europe, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Morocco, Mexico, Malaysia, New Zealand, Peru, Philippines, Singapore, Thailand, Taiwan, the Ukraine, the U.S., Vietnam and South Africa relate to IMA204 (COL6A3 exon 6). These patents and applications are expected to expire July 4, 2037.

 

  

One issued patent in the U.S. and 36 pending applications in Argentina, Australia, Brazil, Canada, Chile, China, Columbia, Costa Rica, Germany, Algeria, Eurasia, Egypt, Europe, Gulf Cooperation Council, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Morocco, Mexico, Malaysia, New Zealand, Peru, Philippines, Singapore, Thailand, Taiwan, the Ukraine, the U.S., Vietnam, South Africa and PCT IMA301 (Cancer testis antigen). These patents and applications are expected to expire between March 16, 2037 and March 17, 2040.

 

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One issued patent in the U.S. and 36 pending applications in Argentina, Australia, Brazil, Canada, Chile, China, Columbia, Costa Rica, Algeria, Eurasia, Egypt, Europe, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Morocco, Mexico, Malaysia, New Zealand, Peru, Philippines, Singapore, Thailand, Taiwan, the Ukraine, the U.S., Vietnam and South Africa relate to IMA401 (Cancer testis antigen). These patents and applications are expected to expire between March 16, 2037 and September 25, 2040.

 

  

We are currently devising an application covering the clinical candidates for IMA402.

 

 d.

In addition to patent coverage for our proprietary cancer antigens, TCRs, TCER and antibodies, we seek protection for aspects of our ACT protocols via patent filings. To this end, our subsidiary, Immatics US, has filed eleven patent families. These patent applications are predominantly focused on securing claims to ACT methods, cell populations, and other immunotherapy methodologies, and are expected to expire between November 26, 2038 and March 11, 2041.

 

 e.

We also place an emphasis on protecting our expanding brand recognition by filing and registering Trademark applications throughout the world. We are the owner of 23 different Trademarks most of which are registered or have been allowed, in multiple countries and classes. Prominent Trademarks are, for example, XPRESIDENT, TCER, ACTallo, ACTengine, ACTolog and Immatics.

COLLABORATIONS AND OTHER AGREEMENTS

 

 

LOGO

We have forged strategic collaborations with biotech and pharmaceutical companies as well as academic research institutions. Key collaborations include:

MD Anderson Cancer Center

In August 2015, we and MD Anderson Cancer Center (“MD Anderson”) announced the launch of Immatics US to develop multiple T cell and TCR-based adoptive cellular therapies. Immatics US secured over $60 million in total funding – more than $40.0 million from the parent company Immatics OpCo and a $19.7 million grant from the Cancer Prevention and Research Institute of Texas (“CPRIT”) and entered into several agreements.

Under the Collaboration and License Agreement, MD Anderson and Immatics US will conduct work pursuant to agreed research plans to develop (i) ACTolog IMA101 and (ii) ACTengine IMA201, 202, 203 and 204 products

 

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in certain cancer indications. Immatics US will fund all activities by MD Anderson under the research plans. Immatics US owns all intellectual property resulting from or directly related to the work conducted under the research plans.

Further, pursuant to several license agreements MD Anderson granted Immatics US access and rights to certain of its IL21, CD25 and K562 technologies.

GlaxoSmithKline

In December 2019, we entered into a strategic collaboration agreement with GlaxoSmithKline (“GSK”) to develop novel adoptive cell therapies targeting multiple cancer indications with a focus on solid tumors. Under the agreement, we and GSK are collaborating on the identification, research and development of next-generation TCR Therapeutics and will initially develop autologous T cell therapies with GSK having an option to add allogeneic cell therapies using our ACTallo approach. We will utilize proprietary TCRs identified by our XCEPTOR and directed against two proprietary targets, discovered and validated by our XPRESIDENT with the primary responsibility for the development and validation of the TCR Therapeutics up to designation of a clinical candidate. GSK will then assume sole responsibility for further worldwide development, manufacturing and commercialization of the TCR Therapeutics with the possibility for us to co-develop one or more TCR Therapeutics including the conduct of the first-in-human clinical trial upon GSK’s request. GSK also obtained an option to select additional target programs to include in the collaboration. For each additional program, we are entitled to predetermined option, milestone and royalty payments.

Under the terms of the agreement, we received an upfront payment of €45 million for two initial programs and are eligible to receive additional development, regulatory and sales milestones up to $575 million, respectively, as well as additional royalties on net sales for each licensed product.

Bristol-Myers Squibb

We and Celgene Corporation, a Bristol-Myers Squibb Company (“BMS”), entered into a strategic collaboration and license agreement in August 2019 to develop novel adoptive cell therapies targeting multiple cancers. Under the agreement, we may develop TCR-T programs against solid tumor targets discovered with our XPRESIDENT technology. We will utilize proprietary TCRs identified by our XCEPTOR TCR discovery and engineering platform. We will be responsible for the development and validation of these programs through the lead candidate stage, at which time BMS may exercise its opt-in right to exclusively license one or more programs, thereby assuming sole responsibility for further worldwide development, manufacturing and commercialization of the TCR-T cell therapies. We retain certain early stage co-development and co-funding rights for selected TCR-T cell therapies arising from the collaboration. BMS has the option to exclusively license up to two additional targets to expand the collaboration at predetermined economics.

Under the terms of the agreement, we received an upfront payment of $75 million for three programs and are eligible to receive additional regulatory and sales milestones in aggregate amounts of up to $190 million, and $300 million, respectively, as well as tiered royalties based on net sales for each licensed product at percentages ranging from high single digits to teens, subject to customary reductions.

Genmab

In July 2018, we and Genmab entered into a research collaboration and license agreement to develop next-generation, T cell engaging bispecific immunotherapies targeting multiple cancer indications. Under the agreement, we are conducting joint research, funded by Genmab, and combining XPRESIDENT, XCEPTOR and TCER technology platforms with Genmab’s proprietary antibody technologies to develop multiple bispecific immunotherapies in oncology. Both we and Genmab are exclusively discovering and developing immunotherapies directed against three proprietary targets, discovered and developed by our XPRESIDENT

 

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platform. Genmab is responsible for development, manufacturing and worldwide commercialization. We retain an option to contribute certain promotion efforts at predetermined levels in selected countries in the EU. Genmab has the option to exclusively license up to two additional targets to expand the collaboration at predetermined economics.

Under the terms of the agreement, we received an upfront fee of $54 million and is eligible to receive additional development, regulatory and commercial milestone payments, totaling $550 million, for each licensed product resulting from the collaboration In addition, we are eligible to receive tiered royalties on net sales for each licensed product at up to double-digit percentages.

Amgen

Since December 2016, Amgen and us have been developing next-generation, T cell engaging bispecific immunotherapies targeting multiple cancers under the research collaboration and exclusive license agreement. The collaboration combines our XPRESIDENT and XCEPTOR technology platforms with Amgen’s validated BiTE( Bispecific T cell Engager) technology. Amgen is responsible for the clinical development, manufacturing and commercialization worldwide.

Under the terms of the agreement, we received a non-refundable, non-creditable upfront fee of $30 million and are eligible to receive additional development, regulatory and commercial milestone payments in aggregate amounts of up to $525 million, respectively, as well as tiered royalties on net sales for each licensed product at percentages ranging from high-single digits to low teens subject to customary reductions.

MorphoSys

In August 2015, we announced a strategic alliance with MorphoSys, a German company in the field of immuno-oncology. The alliance was formed to develop novel antibody-based therapies against a variety of cancer antigens that are recognized by T cells. The alliance agreement gives MorphoSys access to several of our proprietary tumor-associated peptides and, in return, we receive the right to develop MorphoSys’s Ylanthia antibodies against several tumor-associated peptides. The companies will pay each other milestone payments and royalties on commercialized products based on the companies’ development progress.

Roche

In November 2013, we entered into a research and clinical development collaboration with Roche focused on identification of novel and relevant XPRESIDENT targets for cancer vaccine candidates and other immunotherapies in oncology, primarily in gastric, prostate and non-small cell lung cancer indications.

In December 2017, Roche exercised its option under the existing discovery, development and commercialization agreement with us to exclusively license from us a proprietary immunotherapy target for further development and commercialization in oncology. In December 2019, Roche discontinued development of the immunotherapy product directed against the target it has exclusively licensed from us in 2017 and delivered notice to us in February 2020 that it was terminating the collaboration, effective as of September 30, 2020.

Other Agreements

We entered into a number of collaborations that are important for our ability to manufacture, supply and offer our adoptive cell therapies and TCR Bispecifics.

UTHealth

We entered into a multi-year collaboration agreement to secure exclusive access to three UTHealth cGMP suites to manufacture various ACT products within the Griffin Research Laboratory. Under the agreement, general

 

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facility operations, maintenance, supply and reagents for cGMP manufacture, and co-release of product is provided by UTHealth. Under the agreement, we perform all manufacturing and in-process controls. The UTHealth facility is FDA registered to produce cells and tissues for clinical applications in compliance with cGMP and has received accreditation by the FACT in January 2016, which was renewed in 2019.

We use several third-party contract manufacturers acting in accordance with FDA’s good laboratory practice (“GLP”) or cGMP, as applicable, practices for the manufacture of viral vectors and cell bank development. We generally apply second-supplier strategies to mitigate supply risks and to secure access to manufacturing innovation and competitive supply costs.

For pivotal trial supply of ACT products, we plan on entering into one or more relationships with large CMOs with dedicated access to multiple cGMP suites and trained personnel, as well as into commercial supply agreements with raw material vendors.

For manufacturing and supply of TCR Bispecifics, we have contracted third party manufacturers and may enter into additional CMO relationships in the future.

REGULATIONS

Government authorities in the United States, at the federal, state, and local level, and in other countries and jurisdictions, including the EU, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, as well as import and export of biological products. Some jurisdictions also regulate the pricing of medicinal products. The processes for obtaining marketing approvals in the United States and in foreign countries and jurisdictions, along with compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.

Licensure and Regulation of Biologics in the United States

In the United States, biological products, including gene therapy products, are regulated under the Public Health Service Act (“PHSA”) and the Federal Food, Drug, and Cosmetic Act (“FDCA”), and their implementing regulations, as well as other federal, state and local statutes and regulations.

The failure of an applicant to comply with the applicable regulatory requirements at any time during the product development process, including during testing, the approval process or post-approval process, may result in delays to the conduct of a study, regulatory review and approval, and/or administrative or judicial sanctions. Failure to comply with regulatory requirements may result in the FDA’s refusal to allow an applicant to proceed with clinical trials, refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, and civil or criminal investigations and penalties brought by the FDA or Department of Justice (“DOJ”), or other government entities, including state agencies.

An applicant seeking to market and distribute a new biologic in the United States generally must satisfactorily complete each of the following steps before the product candidate will be licensed by the FDA:

 

  

preclinical testing including laboratory tests, animal studies, and formulation studies, which must be performed in accordance with the FDA’s GLP regulations, as applicable;

 

  

submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin;

 

  

approval by an institutional review board (“IRB”) representing each clinical site before each clinical trial may be initiated;

 

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performance of adequate and well-controlled human clinical trials to establish the safety, and efficacy of the product candidate for each proposed indication, in accordance with current good clinical practices (“GCP”);

 

  

preparation and submission to the FDA of a Biologics License Application (“BLA”) for a biological product;

 

  

FDA acceptance and substantive review of the BLA;

 

  

review of the product candidate by an FDA advisory committee, where appropriate or if applicable;

 

  

satisfactory completion of an FDA inspection of the manufacturing facility or facilities, including those of third parties, at which the product candidate or components thereof are manufactured to assess compliance with cGMP requirements and to assure that the facilities, methods, and controls are adequate to preserve the product’s identity, strength, quality, and purity;

 

  

satisfactory completion of any FDA audits of clinical trial sites to assure compliance with GCP and the integrity of clinical data in support of the BLA; and

 

  

securing FDA approval of the BLA to allow marketing of the new biological product.

Preclinical Studies and Investigational New Drug Application

Before an applicant begins testing a product candidate with potential therapeutic value in humans, the product candidate enters preclinical testing. Preclinical studies include studies to evaluate, among other things, the toxicity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements, as applicable, including GLP regulations. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and long-term toxicity studies, may continue after the IND is submitted. Additional nonclinical tests are conducted and include laboratory evaluations of product chemistry, formulation, and stability.

The IND and IRB Processes

An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational product to humans. Such authorization must be secured prior to interstate shipment and administration of any product candidate that is not the subject of an approved BLA. In support of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, must be submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time during this 30-day period the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin.

Following commencement of a clinical trial, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed.

 

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A sponsor may choose, but is not required, to conduct a foreign clinical trial under an IND. When a foreign clinical trial is conducted under an IND, all FDA IND requirements must be met unless waived. When a foreign clinical trial is not conducted under an IND, the sponsor must ensure that the study complies with certain regulatory requirements of the FDA in order to use the study as support for an IND or application for marketing approval or licensing. In particular, such studies must be conducted in accordance with GCP, including review and approval by an independent ethics committee (“IEC”) and informed consent from subjects. The FDA must be able to validate the data through an onsite inspection, if deemed necessary by the FDA.

An IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.

Some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee (“DSMB”). This group provides authorization as to whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study.

In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials involving recombinant or synthetic nucleic acid molecules had historically been subject to review by the Recombinant DNA Advisory Committee (“RAC”) of the National Institutes of Health (“NIH”), Office of Biotechnology Activities (“OBA”), pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules (“NIH Guidelines”). On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversight framework for gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect to human clinical trials of gene therapy products, and requesting public comment on its proposed modifications. During the public comment period, which closed October 16, 2018, the NIH announced that it will no longer accept new human gene transfer protocols for review as a part of the protocol registration process or convene the RAC to review individual clinical protocols. In April 2019, NIH announced the updated guidelines, which reflect these proposed changes, and clarified that these trials will remain subject to the FDA’s oversight and other clinical trial regulations, and oversight at the local level will continue as set forth in the NIH Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.

Information about clinical trials must be submitted within specific timeframes to the NIH for public dissemination on its ClinicalTrials.gov website.

Clinical Trials in Support of a BLA

Clinical trials involve the administration of the investigational product candidate to human subjects under the supervision of a qualified investigator in accordance with GCP requirements which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written clinical trial protocols detailing, among other things,

 

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the objectives of the study, inclusion and exclusion criteria, the parameters to be used in monitoring safety, and the effectiveness and safety criteria to be evaluated.

Human clinical trials are typically conducted in three sequential phases, but the phases may overlap or be combined. Additional studies may also be required after licensing.

 

  

Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse effects, dose tolerance, absorption, metabolism, distribution, excretion, and pharmacodynamics in healthy humans or in patients. During Phase 1 clinical trials, information about the investigational biological product’s pharmacokinetics and pharmacological effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2 clinical trials.

 

  

Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks, evaluate the efficacy of the product candidate for specific targeted indications, and determine dose tolerance and optimal dosage.

 

  

Phase 3 clinical trials are undertaken within an expanded patient population to further evaluate dosage, provide substantial evidence of clinical efficacy, and further test for safety. A well-controlled, statistically robust Phase 3 trial may be designed to deliver the data that regulatory authorities will use to decide whether or not to license, and, if licensed, how to appropriately label a biologic.

While the FDA requires in most cases two adequate and well-controlled pivotal clinical trials to demonstrate the efficacy of a product candidate, a single trial with strong confirmatory evidence may be sufficient in instances where the trial is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible. In rare cancer indications with very limited treatment options a large and/or controlled trial are often not feasible and thus data from smaller and even uncontrolled trials may be sufficient for regulatory approval.

In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additional clinical trials to further assess the product candidate’s safety and effectiveness after approval. Such post-approval trials are typically referred to as Phase 4 clinical trials. These studies are used to gain additional experience from the treatment of a larger number of patients in the intended treatment group and to further document a clinical benefit in the case of biologics licensed under Accelerated Approval regulations. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.

Clinical trials including the use of an investigational device sometimes require submission of an application for an Investigational Device Exemption (“IDE”), to the FDA. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the investigational protocol is scientifically sound. The IDE application must be approved in advance by the FDA, unless the product is deemed a non-significant risk device and eligible for more abbreviated IDE requirements. Clinical trials for a significant risk device may begin once the IDE application is approved by the FDA as well as the appropriate IRBs at the clinical trial sites, and the informed consent of the patients participating in the clinical trial is obtained.

 

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Review and Approval of a BLA

In order to obtain approval to market a biological product in the United States, a biologics license application must be submitted to the FDA that provides sufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The BLA includes all relevant data available from pertinent preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things.

Under federal law, the submission of most BLAs is subject to an application user fee, which for federal fiscal year 2020 is $2,942,965 for an application requiring clinical data. The sponsor of an approved BLA is also subject to an annual program fee, which for fiscal year 2020 is $325,424. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and a waiver for certain small businesses.

Following submission of a BLA, the FDA conducts a preliminary review of the application generally within 60 calendar days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s receipt of the submission whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept the application for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also 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. The FDA has agreed to specified performance goals in the review process of the BLAs. Under that agreement, 90% of original BLA submissions are meant to be reviewed within ten months of the 60-day filing date, and 90% of original BLAs that have been designated for “priority review” are meant to be reviewed within six months of the 60-day filing date. The review process may be extended once per review cycle by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.

Before approving an application, the FDA will typically audit the preclinical study and clinical trial sites that generated the data in support of the BLA. Additionally, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections may cover all facilities associated with a BLA submission, including component manufacturing, finished product manufacturing and control testing laboratories. The FDA will not approve an application 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.

As a condition of approval, the FDA may require an applicant to develop a Risk Evaluation Mitigation Strategy (REMS). REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events and whether the product is a new molecular entity.

The FDA will refer an application for a novel product to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides 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.

Fast Track, Breakthrough Therapy, Priority Review and Regenerative Advanced Therapy Designations

The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are

 

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referred to as Fast Track designation, Breakthrough Therapy designation, Priority Review designation and Regenerative Advanced Therapy designation.

Specifically, the FDA may designate a product for Fast Track designation if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a Fast Track application does not begin until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to Breakthrough Therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.

Third, the FDA may designate a product for Priority Review if it is a product that treats a serious condition and, if licensed, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.

The FDA can accelerate review and approval of products designated as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product has the potential to address unmet medical needs for such disease or condition. The benefits of a regenerative advanced therapy designation include early interactions with FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for Priority Review and Accelerated Approval based on surrogate or intermediate endpoints.

Accelerated Approval Pathway

The FDA may grant Accelerated Approval to a product for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant Accelerated Approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality (“IMM”) and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Products granted Accelerated Approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

 

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For the purposes of Accelerated Approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with Accelerated Approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support Accelerated Approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.

The Accelerated Approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, Accelerated Approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstrate a clinical or survival benefit. Thus, the benefit of Accelerated Approval derives from the potential to receive approval based on surrogate endpoints sooner than possible for trials with clinical or survival endpoints, rather than deriving from any explicit shortening of the FDA approval timeline, as is the case with Priority Review.

The Accelerated Approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the product’s clinical benefit. As a result, a product candidate licensed on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to initiate expedited proceedings to withdraw approval of the product. All promotional materials for product candidates licensed under accelerated regulations are subject to prior review by the FDA.

The FDA’s Decision on a BLA

On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for licensing.

If the FDA licenses a new product, it may limit the licensed indications for use of the product. The agency may also require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, to help ensure that the benefits of the product outweigh the potential risks. REMS can include medication guides, communication plans for health care professionals, and elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After licensing, many types of changes to the licensed product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

 

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Post-Licensing Regulation

If regulatory licensing for marketing of a product or new indication for an existing product is obtained, the sponsor will be required to comply with all regular post-licensing regulatory requirements as well as any post-licensing requirements that the FDA may have imposed as part of the licensing process. The sponsor will be required to report, among other things, certain adverse reactions and manufacturing problems to the FDA, provide updated safety and potency or efficacy information and comply with requirements concerning advertising and promotional labeling requirements. Manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMP regulations, which impose certain procedural and documentation requirements upon manufacturers. Changes to the manufacturing processes are strictly regulated and often require prior FDA approval before being implemented. Accordingly, the sponsor and its third-party manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance with cGMP regulations and other regulatory requirements.

As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. After a BLA is approved for a biological product, the product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release, the manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in addition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products.

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

 

  

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls;

 

  

fines, warning letters, or holds on post-licensing clinical trials;

 

  

refusal of the FDA to approve pending applications or supplements to licensed applications, or suspension or revocation of product licenses;

 

  

product seizure or detention, or refusal to permit the import or export of products; or

 

  

injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. This regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet and social media. After licensing, a drug product generally may not be promoted for uses that are not licensed by the FDA, as reflected in the product’s prescribing information. In the United States, health care professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’ communications, prohibiting the promotion of off-label uses. It may be permissible, under very specific, narrow

 

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conditions, for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such as distributing scientific or medical journal information.

If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services (“HHS”), as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act (“PDMA”) and its implementing regulations, as well as the Drug Supply Chain Security Act (“DSCA”), which regulate the distribution and tracing of prescription drug samples at the federal level, and set minimum standards for the regulation of distributors by the states. The PDMA, its implementing regulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.

Pediatric Studies and Exclusivity

Under the Pediatric Research Equity Act, a BLA or supplement thereto for a biological product with a new active ingredient, indication, dosage form, dosing regimen or route of administration must contain data that are adequate 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. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.

For products intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of an applicant, meet to discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, FDA will meet early in the development process to discuss pediatric study plans with sponsors and FDA must meet with sponsors by no later than the end-of-Phase 1 meeting for serious or life-threatening diseases and by no later than ninety (90) days after FDA’s receipt of the study plan.

The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after licensing of the product for use in adults, or full or partial waivers from the pediatric data requirements. Generally, the pediatric data requirements do not apply to products with orphan designation.

The FDA Reauthorization Act of 2017 established new requirements to govern certain molecularly targeted cancer indications. Any company that submits a BLA three years after the date of enactment of that statute must submit pediatric assessments with the BLA if the biologic is intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatric cancer. The investigation must be designed to yield clinically meaningful pediatric study data regarding the dosing, safety and preliminary potency to inform pediatric labeling for the product. Deferrals and waivers as described above are also available.

Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing

 

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regulatory exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot license another application.

Orphan Drug Designations and Exclusivity

Under the Orphan Drug Act, the FDA may designate a biological product as an “orphan drug” if it is intended to treat a rare disease or condition, generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a product available in the United States for treatment of disease or condition will be recovered from sales of the product. A company must seek orphan drug designation before submitting a BLA for the candidate product. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan drug designation does not shorten the PDUFA goal dates for the regulatory review and licensing process, although it does convey certain advantages such as tax benefits and exemption from the PDUFA application fee.

If a product with orphan designation receives the first FDA approval for the disease or condition for which it has such designation or for a select indication or use within the rare disease or condition for which it was designated, the product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not license another sponsor’s marketing application for the same drug for the same condition for seven years, except in certain limited circumstances. Orphan exclusivity does not block the licensing of a different product for the same rare disease or condition, nor does it block the licensing of the same product for different conditions. If a biologic designated as an orphan drug ultimately receives marketing licensing for an indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.

Orphan drug exclusivity will not bar licensing of another product under certain circumstances, including if a subsequent product with the same biologic for the same condition is shown to be clinically superior to the licensed product on the basis of greater effectiveness, safety in a substantial portion of the target populations, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand.

Biosimilars and Exclusivity

The 2010 Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, included a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”). The BPCIA established a regulatory scheme authorizing the FDA to license biosimilars and interchangeable biosimilars. The FDA has licensed several biosimilar products for use in the United States. The FDA has issued several guidance documents outlining an approach to review and licensing of biosimilars.

Under the BPCIA, a manufacturer may submit an application for licensure of a biological product that is “biosimilar to” or “interchangeable with” a previously licensed biological product or “reference product.” In order for the FDA to license a biosimilar product, it must find, among other things, that the product is “highly similar” to the reference product notwithstanding minor differences in clinically inactive components and that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety, purity, and potency. For the FDA to license a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and, for products administered multiple times, that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished potency relative to exclusive use of the reference biologic.

 

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Under the BPCIA, an application for a biosimilar or interchangeable biological product may not be submitted to the FDA until four years following the date of licensing of the reference product. The FDA may not license a biosimilar or interchangeable biological product until 12 years from the date on which the reference product was licensed. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA licenses a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars licensed as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

Patent Term Restoration and Extension

A patent claiming a new biological product may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during product development and FDA regulatory review. The restoration period granted on a patent covering a product is typically one-half the time between the effective date of an IND and the submission date of a marketing application (such as a BLA), plus the time between the submission date of a marketing application and the ultimate licensing date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s licensing date. Only one patent applicable to a licensed product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question and within 60 days after approval of the relevant marketing application. A patent that covers multiple products for which licensing is sought can only be extended in connection with one of the licenses. The USPTO reviews and licenses the application for any patent term extension or restoration in consultation with the FDA.

Regulation of Companion Diagnostics

The success of certain of our product candidates may depend, in part, on the development and commercialization of a companion diagnostic. Companion diagnostics identify patients who are most likely to benefit from a particular therapeutic product; identify patients likely to be at increased risk for serious side effects as a result of treatment with a particular therapeutic product; or monitor response to treatment with a particular therapeutic product for the purpose of adjusting treatment to achieve improved safety or effectiveness. Companion diagnostics are regulated as medical devices by the FDA. In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Unless an exemption or FDA exercise of enforcement discretion applies, diagnostic tests generally require marketing clearance or approval from the FDA prior to commercialization. The two primary types of FDA marketing authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and approval of a premarket approval (“PMA”).

To obtain 510(k) clearance for a medical device, or for certain modifications to devices that have received 510(k) clearance, a manufacturer must submit a premarket notification demonstrating that the proposed device is substantially equivalent to a previously cleared 510(k) device or to a preamendment device that was in commercial distribution before May 28, 1976, or a predicate device, for which the FDA has not yet called for the submission of a PMA. In making a determination that the device is substantially equivalent to a predicate device, the FDA compares the proposed device to the predicate device or predicate devices and assesses whether the subject device is comparable to the predicate device or predicate devices with respect to intended use, technology, design and other features which could affect safety and effectiveness. If the FDA determines that the subject device is substantially equivalent to the predicate device or predicate devices, the subject device may be cleared for marketing.

PMA applications must be supported by valid scientific evidence, which typically requires extensive data, including technical, preclinical, clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the

 

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safety and effectiveness of the device. For diagnostic tests, a PMA application typically includes data regarding analytical and clinical validation studies. As part of its review of the PMA, the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the Quality System Regulation (“QSR”), which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures. If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure the final approval of the PMA. If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny the approval of the PMA or issue a not approvable letter. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable. Once granted, PMA approval may be withdrawn by the FDA if compliance with post-approval requirements, conditions of approval or other regulatory standards is not maintained or problems are identified following initial marketing.

On July 31, 2014, the FDA issued a final guidance document addressing the development and approval process for “In Vitro Companion Diagnostic Devices.” According to the guidance document, for novel therapeutic products that depend on the use of a diagnostic test and where the diagnostic device could be essential for the safe and effective use of the corresponding therapeutic product, the premarket application for the companion diagnostic device should be developed and approved or cleared contemporaneously with the therapeutic, although the FDA recognizes that there may be cases when contemporaneous development may not be possible. However, in cases where a drug cannot be used safely or effectively without the companion diagnostic, the FDA’s guidance indicates it will generally not approve the drug without the approval or clearance of the diagnostic device. The FDA also issued a draft guidance in July 2016 setting forth the principles for co-development of an in vitro companion diagnostic device with a therapeutic product. The draft guidance describes principles to guide the development and contemporaneous marketing authorization for the therapeutic product and its corresponding in vitro companion diagnostic.

Once cleared or approved, the companion diagnostic device must adhere to post-marketing requirements including the requirements of FDA’s quality system regulation, adverse event reporting, recalls and corrections along with product marketing requirements and limitations. Like drug and biologic makers, companion diagnostic makers are subject to unannounced FDA inspections at any time during which the FDA will conduct an audit of the product(s) and the company’s facilities for compliance with its authorities.

Healthcare Law and Regulation

Health care providers and third-party payors play a primary role in the recommendation and prescription of biological products that are granted marketing licensing. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, patient privacy laws and regulations and other health care laws and regulations that may constrain business and/or financial arrangements. Restrictions under applicable federal and state health care laws and regulations, include the following:

 

  

the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or

 

  

indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal health care program such as Medicare and Medicaid;

 

  

the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government;

 

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the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program or making false statements relating to health care matters;

 

  

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

 

  

the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services;

 

  

the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the 2010 Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act (the ACA), which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services (“CMS”) within HHS, information related to payments and other transfers of value made by that entity to physicians (as defined by the statute) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and

 

  

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to health care items or services that are reimbursed by non-government third-party payors, including private insurers.

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Pharmaceutical Insurance Coverage and Health Care Reform

In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated health care costs. Significant uncertainty exists as to the coverage and reimbursement status of products licensed by the FDA and other government authorities. Thus, even if a product candidate is licensed, sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage and establish adequate reimbursement levels for, the product. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is licensed. Third-party payors are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on a licensed list, also known as a formulary, which might not include all of the licensed products for a particular indication.

In order to secure coverage and reimbursement for any product that might be licensed for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable marketing licenses. Nonetheless, product candidates may not be considered medically necessary or cost effective. A decision by a third-party payor not to cover a product could reduce physician utilization once the product is

 

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licensed and have a material adverse effect on sales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be licensed. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.

The containment of health care costs also has become a priority of federal, state and foreign governments and the prices of products have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any licensed products. 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 a company or its collaborators receive marketing licenses, less favorable coverage policies and reimbursement rates may be implemented in the future.

In March 2010, Congress passed the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional policy reforms. The ACA, for example, contains provisions that subject products to potential competition by lower-cost products and may reduce the profitability of products through increased rebates for drugs reimbursed by Medicaid programs; address a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increase the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations; establish annual fees and taxes on manufacturers of certain branded prescription drugs; and create a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (increased pursuant to the Bipartisan Budget Act of 2018 (“BBA”), effective as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Since its enactment, there have been judicial, administrative, executive and Congressional legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, various portions of the ACA are currently undergoing constitutional challenges in the United States Supreme Court, the current Administration has issued various Executive Orders eliminating cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices, and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. It is unclear whether the ACA will be overturned, repealed, replaced, or further amended, and we cannot predict what affect further changes to the ACA would have on our business.

Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and will stay in effect through 2029 unless additional Congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory licensing or the frequency with which any such product candidate is prescribed or used. Further, there have been several recent U.S. congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

 

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These healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price for any licensed product and/or the level of reimbursement physicians receive for administering any licensed product. Reductions in reimbursement levels may negatively impact the prices or the frequency with which products are prescribed or administered. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

Further, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the current Administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our product candidates, once licensed, or put pressure on our product pricing.

In addition, on May 11, 2018, the current U.S. presidential administration (the “Administration”) issued a plan to lower drug prices. Under this blueprint for action, the Administration indicated that HHS will: take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update Medicare’s drug-pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance; and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our product candidates, once licensed, or put pressure on our product pricing.

Review and Approval of Medicinal Products in the EU

In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA licensing for a product, an applicant will need to obtain the necessary approvals by the comparable non-U.S. regulatory authorities before it can commence clinical trials or marketing

 

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of the product in those countries or jurisdictions. Specifically, the process governing approval of medicinal products in the EU generally follows the same lines as in the United States. It entails satisfactory completion of preclinical studies and adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication. It also requires the submission to the relevant competent authorities of a marketing authorization application (“MAA”), and granting of a marketing authorization by these authorities before the product can be marketed and sold in the EU.

Clinical Trial Approval in the EU

The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP and the related national implementing provisions of the individual EU Member States govern the system for the approval of clinical trials in the EU. Under this system, an applicant must obtain prior approval from the competent national authority of the EU Member States in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a favorable opinion. The clinical trial application must be accompanied by, among other documents, an investigational medicinal product dossier (the Common Technical Document) with supporting information prescribed by Directive 2001/20/EC, Directive 2005/28/EC, where relevant the implementing national provisions of the individual EU Member States and further detailed in applicable guidance documents.

In April 2014, the EU adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the current Clinical Trials Directive 2001/20/EC. It is expected that the new Clinical Trials Regulation (EU) No 536/2014 will apply following confirmation of full functionality of the Clinical Trials Information System (“CTIS”), the centralized EU portal and database for clinical trials foreseen by the regulation, through an independent audit. The regulation becomes applicable six months after the European Commission publishes notice of this confirmation. It will overhaul the current system of approvals for clinical studies in the EU. Specifically, the new regulation, which will be directly applicable in all member states, aims at simplifying and streamlining the approval of clinical studies in the EU. For instance, the new Clinical Trials Regulation provides for a streamlined application procedure via a single point and strictly defined deadlines for the assessment of clinical study applications.

PRIME Designation in the EU

In March 2016, the European Medicines Agency (“EMA”), launched an initiative to facilitate development of product candidates in indications, often rare, for which few or no therapies currently exist. The PRIority Medicines (“PRIME”) scheme is intended to encourage drug development in areas of unmet medical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized procedure. Products from small- and medium-sized enterprises may qualify for earlier entry into the PRIME scheme than products from larger companies. Many benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and accelerated marketing authorization application assessment once a dossier has been submitted. Importantly, a dedicated Agency contact and rapporteur from the Committee for Human Medicinal Products (“CHMP”) or Committee for Advanced Therapies are appointed early in PRIME scheme facilitating increased understanding of the product at EMA’s Committee level. A kick-off meeting initiates these relationships and includes a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies.

Marketing Authorization in the EU

To obtain a marketing authorization for a product under EU regulatory systems, an applicant must submit an MAA, either under a centralized procedure administered by the EMA or one of the procedures administered by competent authorities in EU Member States (decentralized procedure, national procedure, or mutual recognition procedure). A marketing authorization may be granted only to an applicant established in the EU. Regulation

 

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(EC) No. 1901/2006 provides that prior to obtaining a marketing authorization in the EU, applicants must demonstrate compliance with all measures included in an EMA-approved Pediatric Investigation Plan (“PIP”) covering all subsets of the pediatric population, unless the EMA has granted a product-specific waiver, class waiver, or a deferral for one or more of the measures included in the PIP.

The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid across the European Economic Area. Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, ATMPs and products with a new active substance indicated for the treatment of certain diseases, including products for the treatment of cancer. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. The centralized procedure may at the request of the applicant also be used in certain other cases. We anticipate that the centralized procedure will be mandatory for the product candidates we are developing.

Under the centralized procedure, the CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated evaluation may be granted by the CHMP in exceptional cases and under PRIME designation, when a medicinal product is of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts such a request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that it is no longer appropriate to conduct an accelerated assessment. At the end of this period, the CHMP provides a scientific opinion on whether or not a marketing authorization should be granted in relation to a medicinal product. Within 15 calendar days of receipt of a final opinion from the CHMP, the European Commission must prepare a draft decision concerning an application for marketing authorization. This draft decision must take the opinion and any relevant provisions of EU law into account. Before arriving at a final decision on an application for centralized authorization of a medicinal product the European Commission must consult the Standing Committee on Medicinal Products for Human Use. The Standing Committee is composed of representatives of the EU Member States and chaired by a non-voting European Commission representative. The European Parliament also has a related “droit de regard.” The European Parliament’s role is to ensure that the European Commission has not exceeded its powers in deciding to grant or refuse to grant a marketing authorization.

The European Commission may grant a so-called “marketing authorization under exceptional circumstances.” Such authorization is intended for products for which the applicant can demonstrate that it is unable to provide comprehensive data on the efficacy and safety under normal conditions of use, because the indications for which the product in question is intended are encountered so rarely that the applicant cannot reasonably be expected to provide comprehensive evidence, or in the present state of scientific knowledge, comprehensive information cannot be provided, or it would be contrary to generally accepted principles of medical ethics to collect such information. Consequently, marketing authorization under exceptional circumstances may be granted subject to certain specific obligations, which may include the following:

 

  

the applicant must complete an identified program of studies within a time period specified by the competent authority, the results of which form the basis of a reassessment of the benefit/risk profile;

 

  

the medicinal product in question may be supplied on medical prescription only and may in certain cases be administered only under strict medical supervision, possibly in a hospital and in the case of a radiopharmaceutical, by an authorized person; and

 

  

the package leaflet and any medical information must draw the attention of the medical practitioner to the fact that the particulars available concerning the medicinal product in question are as yet inadequate in certain specified respects.

 

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A marketing authorization under exceptional circumstances is subject to annual review to reassess the risk-benefit balance in an annual reassessment procedure. Continuation of the authorization is linked to the annual reassessment and a negative assessment could potentially result in the marketing authorization being suspended or revoked. The renewal of a marketing authorization of a medicinal product under exceptional circumstances, however, follows the same rules as a “normal” marketing authorization. Thus, a marketing authorization under exceptional circumstances is granted for an initial five years, after which the authorization will become valid indefinitely, unless the EMA decides that safety grounds merit one additional five-year renewal.

The European Commission may also grant a so-called “conditional marketing authorization” prior to obtaining the comprehensive clinical data required for an application for a full marketing authorization. Such conditional marketing authorizations may be granted for product candidates (including medicines designated as orphan medicinal products), if (i) the risk-benefit balance of the product candidate is positive, (ii) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial data, (iii) the product fulfills an unmet medical need and (iv) the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required. A conditional marketing authorization may contain specific obligations to be fulfilled by the marketing authorization holder, including obligations with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data. Conditional marketing authorizations are valid for one year, and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or modified conditions and/or specific obligations. The timelines for the centralized procedure described above also apply with respect to the review by the CHMP of applications for a conditional marketing authorization.

The EU medicines rules expressly permit the EU Member States to adopt national legislation prohibiting or restricting the sale, supply or use of any medicinal product containing, consisting of or derived from a specific type of human or animal cell, such as embryonic stem cells. While the product candidates we have in development do not make use of embryonic stem cells, it is possible that the national laws in certain EU Member States may prohibit or restrict us from commercializing our product candidates, even if they have been granted an EU marketing authorization.

Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU Member State in which the product is to be marketed. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States who, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the European Commission, whose decision is binding on all EU Member States.

The mutual recognition procedure similarly is based on the acceptance by the competent authorities of the EU Member States of the marketing authorization of a medicinal product by the competent authorities of other EU Member States. The holder of a national marketing authorization may submit an application to the competent authority of an EU Member State requesting that this authority recognize the marketing authorization delivered by the competent authority of another EU Member State.

Regulatory Data Protection in the EU

In the EU, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to Directive 2001/83/EC. Regulation (EC) No. 726/2004 repeats the entitlement for medicinal products

 

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authorized in accordance with the centralized authorization procedure. Data exclusivity prevents applicants for authorization of generics of these innovative products from referencing the innovator’s data to assess a generic (abridged) application for a period of eight years. During the additional two-year period of market exclusivity, a generic marketing authorization application can be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be placed on the EU market until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company may market another version of the product if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, non-clinical tests and clinical trials.

Periods of Authorization and Renewals

A marketing authorization has an initial validity for five years in principle. The marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU Member State. To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety, and efficacy, including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid.

The European Commission or the competent authorities of the EU Member States may decide, on justified grounds relating to pharmacovigilance, to proceed with one further five-year period of marketing authorization. Once subsequently definitively renewed, the marketing authorization shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the medicinal product on the EU market (in case of centralized procedure) or on the market of the authorizing EU Member State within three years after authorization ceases to be valid (the so-called sunset clause).

Orphan Drug Designation and Exclusivity

Regulation (EC) No. 141/2000, as implemented by Regulation (EC) No. 847/2000 provides that a drug can be designated as an orphan drug by the European Commission if its sponsor can establish: that the product is intended for the diagnosis, prevention or treatment of (1) a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or (2) a life-threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it is unlikely that the marketing of the drug in the EU would generate sufficient return to justify the necessary investment. For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the drug will be of significant benefit to those affected by that condition.

Once authorized, orphan medicinal products are entitled to 10 years of market exclusivity in all EU Member States and in addition a range of other benefits during the development and regulatory review process including scientific assistance for study protocols, authorization through the centralized marketing authorization procedure covering all member countries and a reduction or elimination of registration and marketing authorization fees. However, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the 10-year period with the consent of the marketing authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if this product is safer, more effective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity.

 

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Regulatory Requirements after a Marketing Authorization has been Obtained

In case an authorization for a medicinal product in the EU is obtained, the holder of the marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products. These include:

 

  

compliance with the European Union’s stringent pharmacovigilance or safety reporting rules must be ensured. These rules can impose post-authorization studies and additional monitoring obligations;

 

  

the manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory, must also be conducted in strict compliance with the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice. These requirements include compliance with EU cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of the EU with the intention to import the active pharmaceutical ingredients into the EU; and

 

  

the marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the EU notably under Directive 2001/83EC, as amended, and EU Member State laws. Direct-to-consumer advertising of prescription medicines is prohibited across the EU.

Brexit and the Regulatory Framework in the United Kingdom

On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the EU (commonly referred to as “Brexit”). Thereafter, on March 29, 2017, the country formally notified the EU of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The United Kingdom formally left the EU on January 31, 2020. A transition period began on February 1, 2020, during which EU pharmaceutical law remains applicable to the United Kingdom. This transition period is due to end on December 31, 2020. Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from EU directives and regulations, Brexit could materially impact the future regulatory regime which applies to products and the approval of product candidates in the United Kingdom. It remains to be seen how, if at all, Brexit will impact regulatory requirements for product candidates and products in the United Kingdom.

Pricing Decisions for Approved Products in the EU

In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a Member States to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Member States may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other Member States allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the EU have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage health care expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the EU. The downward pressure on health care costs in general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various Member States, and parallel trade, or arbitrage, between low-priced and high-priced Member States, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries.

 

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FACILITIES

As of January 27, 2020, Immatics OpCo has three locations in Germany. The corporate headquarters are located at Paul-Ehrlich-Straße 15 in 72076 Tübingen. It comprises approximately 1,600 square meters of office space as well as research and laboratory space. It houses Operations, Immunology, TCR Discovery and Validation, TCR Engineering & Bispecifics, Immunomonitoring, Discovery, Companion Diagnostics and CMC.

Our operations facility is approximately 700 square meters and is located at Aischbachstraße 1 in 72070 Tübingen. It houses Operations, HR, IT, Finance, Translational Development, Regulatory Affairs and Clinical Development.

Our third facility is approximately 380 square meters and is located in Machtlfinger Straße 11 in 81379 Munich. It houses Intellectual Property, IT, Communications and Business Development.

Immatics US has two locations, the corporate headquarters, which is a direct lease, and the research and laboratory facility, which is subleased from University of Texas MD Anderson Cancer Center. The corporate headquarters is a 6,690 square foot facility located at 2201 West Holcombe, Houston, TX 77030, and houses Operations, Human Resources, Finance, Clinical Operations, Regulatory, Bioinformatics and Program Management.

The research and laboratory facility is is a 15,694 square foot facility located in the Life Science Plaza building at 2130 West Holcombe, Suite 1100, Houston, Texas 77030. The research and laboratory facility is comprised primarily of laboratory space, with limited office seating that houses CMC, Immunology, Biomarkers, Quality Assurance and Quality Control. Our sublease on the space will expire in August 2023.

T cell products are manufactured by our at the UTHealth Evelyn H. Griffin Stem Cell Therapeutics Research Laboratory in a 1,850 square foot state-of-the-art cGMP facility exclusively used by us in Houston, Texas.

We believe that our office, research and laboratory facilities in Germany and the United States are sufficient to meet our current needs. However, in anticipation of future demand, we are negotiating for a new lease for a larger office facility and also pursuing options for a laboratory facility at both locations.

EMPLOYEES

As of July 31, 2020, Immatics US employed 71 full-time employees of which 22 hold doctorate degrees and 2 have the credentials of M.D. Of these employees, 46 are employed in positions relating to research and development (including CMC, Target-based Biomarkers, Immunology and Quality Assurance and Control, and Bioinformatics), 14 are employed in positions relating to Clinical Operations/Development, Regulatory and Program Management, 8 are employed in administrative functions (including Finance, IT, Operations and Human Resources), and 3 were employed in senior management positions.

As of July 31, 2020, Immatics OpCo has a headcount of 156 employees and 134 full-time equivalent employees. 59 of these employees hold a doctorate degree. 109 are full-time employed. Of these 156 employees, 107 are employed in positions relating to research and development positions (including Immunology, Discovery, Companion Diagnostics, CMC, Translational Development), 6 are employed in Clinical Development, 2 are employed in Regulatory Affairs, 2 are employed in Business Development, 4 are employed in Intellectual Property and 30 are employed in Administrative Functions (including Finance, IT, Operations, Quality Management, human resources, Communications and Facility) and 5 in senior management positions.

We have never had a work stoppage and is not covered under any collective bargaining agreements nor are any of our employees represented by a labor union. We believe we have good employee relations.

LEGAL PROCEEDINGS

As of July 2020, there are no ongoing material legal proceedings.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with Immatics OpCo’s consolidated financial statements and the related notes thereto and the unaudited pro forma condensed combined financial information included elsewhere in this prospectus. The following discussion is based on the financial information of Immatics OpCo prepared in accordance with IFRS, which may differ in material respects from generally accepted accounting principles in other jurisdictions, including U.S. GAAP. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the section titled “Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Business Impact of the COVID-19 Pandemic

Management is monitoring the global outbreak and spread of the novel strain of coronavirus (“COVID-19”) and has taken steps to identify and mitigate the adverse effects and risks to our company as a result of the pandemic. As a result, we have modified our business practices, including implementing work from home arrangements for employees able to perform their duties remotely, restricting nonessential travel, and practicing safe social distancing in our laboratory operations. Management expects to continue to take actions as may be required or recommended by government authorities or in the best interests of our employees and business partners. To date, the pandemic has resulted in a slowdown in activities related to our laboratory operations and at some of our suppliers. The ongoing spread of COVID-19 may also negatively impact our clinical trials in the future, including potential delays and restrictions on our ability to recruit and retain patients, principal investigators and healthcare employees. COVID-19 could also affect the operations of CROs, which may result in delays or disruptions in the supply of product candidates.

Due to COVID-19, we have also experienced delays in research activities performed under our collaboration agreements. Consequently, we recognized less revenue under these agreements during the first quarter of 2020 than previously planned. Management believes declines in revenue associated with the delay in research activities is largely temporary, as the revenue is primarily associated with non-refundable upfront payments recognized on a cost-to-cost basis. COVID-19 may continue to impact the timing and amount of revenue recognized under these agreements in the future.

The COVID-19 pandemic remains a rapidly evolving situation and management does not yet know the full extent of our potential impact on our business operations. We will continue to closely monitor the effects of the pandemic. For additional information on risks posed by the COVID-19 pandemic, refer to the section titled “Risk Factors” included elsewhere in this prospectus.

Overview

We are a biotechnology company that is primarily engaged in the research and development of T cell redirecting immunotherapies for the treatment of cancer. We use our proprietary suite of technologies to identify intracellular drug targets, so called pHLA targets, as a basis for a broad range of potential immunotherapies designed to overcome the current limitations in immuno-oncology. Unlike CAR-T therapy and current antibody-based approaches, which can only target cell surface proteins, our technology enables the identification of otherwise inaccessible intercellular protein targets and thus significantly increases the diversity and novelty of the targets it can pursue. Such intracellular targets are generally recognized as one of the most important keys to unlock hard-to-treat cancer, particularly solid cancers. We believe that the elucidation of these targets gives us an advantage that we are leveraging to develop a pipeline of novel TCR-based products designed to deliver a robust and specific T cell response against cancer cells.

 

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Since 2000, when Immatics OpCo was incorporated, we have focused on raising capital and performing research and development activities to advance our research, development and technology. We are a development phase company and have not yet marketed any products commercially. Our success depends on the successful development and regulatory approval of our products and our ability to finance operations.

We have assembled a team of approximately 200 employees and have established relationships with four pharmaceutical collaborators, including Amgen Inc. (“Amgen”), Genmab A/S, (“Genmab”), Celgene Switzerland LLC (“BMS”) and GlaxoSmithKline plc (“GSK”).

Immatics OpCo has raised approximately €378.5 million through private placements of securities and from our collaborators. These funds are used to fund operations and investing activities across research for technology creation, drug discovery and clinical development programs, infrastructure (including digital infrastructure), creation of portfolio of intellectual property, and administrative support.

Immatics OpCo has incurred significant operating losses since its incorporation. Net losses were €8.6 million and €5.9 million for the three months ended March 31, 2020 and 2019, respectively, and €32.5 million and €32.4 million for the years ended December 31, 2019 and 2018, respectively. As of March 31, 2020, Immatics OpCo’ accumulated deficit was €241.5 million. We expect to continue to incur significant expenses and operating losses for the near future.

We do not expect to generate revenue from our product candidates unless and until we successfully complete clinical development and obtain regulatory approval for such product candidates. If we seek to obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses.

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

Because of the numerous risks and uncertainties associated with pharmaceutical development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. If we fail to become profitable or is unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

For more details concerning our business and key areas of focus for research, see the section titled “Business”.

Components of Operating Results

Revenue from Collaboration Agreements

To date, we have not generated any revenue from the sale of pharmaceutical products. Our revenue has been solely derived from our collaboration agreements with Amgen, Genmab, BMS and GSK.

Our revenue from collaboration agreements consists of upfront payments as well as reimbursement of research and development expenses. Upfront payments are initially recorded on our statement of financial position as deferred revenue and are subsequently recognized as revenue on a cost-to-cost measurement basis in accordance with our accounting policy as described further in “Significant accounting judgements, estimates and assumptions”.

 

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As part of the collaboration arrangements, we grant exclusive licensing rights for the development and commercialization of future product candidates developed for specified targets defined in the respective collaboration agreement, in addition to research activities, including screening of highly specific molecules for reactivity with the specified targets and off-targets using our proprietary technology and know-how, participation on a joint steering committee, and preparation of data packages. In each of our collaboration agreements, these promises represent one combined performance obligation, because the research activities are mutually dependent and the collaborator is unable to derive significant benefits from its access to these targets without our research activities, which are highly specialized and cannot be performed by other organizations.

The collaboration agreements resulted in €186.6 million of up-front cash payments, intended to fund the research and development activities under each contract. As part of the agreements, we contribute our XPRESIDENT technology, as well as other technology and commit to participate in joint research activities. In addition, we agree to license certain target rights and the possible product candidates developed under the collaboration. The agreements provide for future payments if development, regulatory or sales milestones are achieved. In addition, we are entitled to future royalties.

Under each of our collaboration agreements, we are entitled to receive payments for certain development and commercial milestone events, in addition to royalty payments upon successful commercialization of a product. The uncertainty of achieving these certain milestones significantly impacts our ability to generate revenue.

Our ability to generate revenue from sales of pharmaceutical products and to become profitable depends on our ability to successfully commercialize our product candidates. For the foreseeable future, we do not expect revenue from product sales. To the extent that existing or potential future collaborations generate revenue, our revenue may vary due to many uncertainties in the development of our product candidates and other factors.

Research and Development Expenses

Research and development expenses consist primarily of personnel-related costs (including share-based compensation) for the various research and development departments, IP expenses, facility-related costs and amortization as well as direct expenses for programs such as direct cost for clinical trials.

Our core business is focused on the following initiatives with the goal of enabling us to achieve the next advance in immunotherapy:

 

  

Advance the proprietary pipeline of product candidates focusing on ACTengine® and TCR Bispecifics;

 

  

Develop Adoptive Cell Therapies and off-the-shelf biologics with distinct mode of actions;

 

  

Advance off-the-shelf cell therapies into the clinic;

 

  

Enhance commercial viability of autologous cell therapies;

 

  

Disrupt the tumor microenvironment through combination therapies, next-generation technologies and novel target classes;

 

  

Expand leadership in ultra-personalized multi-target immunotherapy;

 

  

Maintain and enhance the competitive edge of our target and TCR technology platforms;

 

  

Leverage existing collaboration agreements with Amgen, Genmab, BMS and GSK; and

 

  

Expand our intellectual property portfolio.

Research expenses are defined as costs incurred for current or planned investigations undertaken with the prospect of gaining new scientific or technical knowledge and understanding. All research and development costs are expensed as incurred due to scientific uncertainty.

 

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We expect our research and development expenses to increase substantially in the future as we advance existing and future proprietary product candidates into and through clinical studies and pursue regulatory approval. The process of conducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming. We are increasing our headcount to support our continued research activities and development of our product candidates. Clinical studies generally become larger and more costly to conduct as they advance into later stages and, in the future, we will be required to make estimates for expense accruals related to clinical study expenses. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any product candidates that we develop from our programs. Our research and development programs are at an early stage. We must demonstrate our products’ safety and efficacy in humans through extensive clinical testing. We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of our products, including but not limited to the following:

 

  

after reviewing trial results, we or our collaborators may abandon projects that might previously have believed to be promising;

 

  

we, our collaborators or regulators, may suspend or terminate clinical trials if the participating subjects or patients are being exposed to unacceptable health risks;

 

  

the effects our potential products have may not be the desired effects or may include undesirable side effects or other characteristics that preclude regulatory approval or limit their commercial use if approved;

 

  

manufacturers may not meet the necessary standards for the production of the product candidates or may not be able to supply the product candidates in a sufficient quantity;

 

  

regulatory authorities may find that our clinical trial design or conduct does not meet the applicable approval requirements; and

 

  

safety and efficacy results in various human clinical trials reported in scientific and medical literature may not be indicative of results we obtain in our clinical trials.

Clinical testing is very expensive, can take many years, and the outcome is uncertain. It could take several years before we learn the results from any clinical trial using ACT or TCR Bispecifics. The data collected from our clinical trials may not be sufficient to support approval by the FDA, EMA, or regulatory authorities in other countries of our ACT- or TCR Bispecifics-based product candidates for the treatment of solid tumors. The clinical trials for our products under development may not be completed on schedule and the FDA, EMA or regulatory authorities in other countries may not ultimately approve any of our product candidates for commercial sale. If we fail to adequately demonstrate the safety and effectiveness of any product candidate under development, we may not receive regulatory approval for those product candidates, which would prevent us from generating revenues or achieving profitability.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs (including share-based compensation) for finance, legal, human resources, business development and other administrative and operational functions, professional fees, accounting and legal services, information technology and facility-related costs. These costs relate to the operation of the business, unrelated to the research and development function or any individual program.

Due to our substantial increase in planned research and development expenses, as explained above, we also expect that our general and administrative expenses will increase proportionally. We expect to incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs, as well as investor and public relations expenses associated with being a public company. We anticipate that the additional costs for these services will substantially increase our general and administrative expenses. Additionally, if and when a

 

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regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expenses as a result of our preparation for commercial operations.

Other Income

We receive income through government grants for specific research and development projects. We recognize grant income as we perform research and development activities specified by the grant agreements.

Other components of other income have historically been immaterial.

Financial Result

Financial result consists of both financial income and financial expense. Financial income results primarily from interest income on cash and foreign exchange gains. Our financial expense consists of interest expense related to lease liabilities and foreign exchange losses.

Results of Operations

The following table summarizes our consolidated statements of operations for each period presented:

 

   Three Months Ended
March 31,
  Year Ended
December 31,
 
   2020  2019  2019  2018 
(Euros in thousands, except share and per share data)             

Revenue from collaboration agreements

  7,040  3,626  18,449  3,770 

Research and development expenses

   (12,246  (7,990  (40,091  (33,971

General and administrative expenses

   (6,188  (2,275  (11,756  (7,666

Other income

   113   3   385   3,458 
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating result

   (11,281  (6,636  (33,013  (34,409
  

 

 

  

 

 

  

 

 

  

 

 

 

Financial income

   2,730   825   790   2,215 

Financial expenses

   (29  (70  (264  (161
  

 

 

  

 

 

  

 

 

  

 

 

 

Financial result

   2,701   755   526   2,054 
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before taxes

   (8,580  (5,881  (32,487  (32,355
  

 

 

  

 

 

  

 

 

  

 

 

 

Taxes on income

   —     —     —     —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

  (8,580 (5,881 (32,487 (32,355
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss per share — basic and diluted

  (7.14 (4.89 (27.13 (27.02

Weighted average shares outstanding — basic and diluted

   1,163,625   1,163,625   1,163,625   1,163,625 

Revenue from Collaboration Agreements

Revenue from collaboration agreements increased by €3.4 million, from €3.6 million for the three months ended March 31, 2019 to €7.0 million for the three months ended March 31, 2020. Approximately €2.9 million of the increase resulted from the collaboration agreements with GSK and BMS, which we entered into during December 2019 and August 2019, respectively. Due to the COVID-19 pandemic, we experienced delays in research activities performed under the Amgen and Genmab collaboration agreements. As we recognize revenue under these contracts on a cost-to-cost model based on research activities, we recognized less revenue under the Amgen and Genmab agreements during the first quarter of 2020 than previously planned. Consequently, revenue recognized under the Genmab agreement decreased by €440 thousand. While revenue earned under the Amgen

 

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agreement was less than initially planned, revenue recognized during the three months ended March 31, 2020 exceed the prior year comparative period by €979 thousand. We believe that any declines in revenue associated with delayed research activities are largely temporary, because the revenue is primarily associated with non-refundable upfront payments.

Revenue from collaboration agreements increased by €14.6 million, from €3.8 million for the year ended December 31, 2018 to €18.4 million for the year ended December 31, 2019. This increase primarily resulted from the new collaboration agreement with BMS and a ramp-up in research activities performed under the Genmab and Amgen agreements. Our collaboration with GSK did not result in any revenue in 2019 as no work was performed under the collaboration agreement in 2019.

We did not achieve any milestones or receive any royalty payments in connection with our collaboration agreements during the presented periods.

The following table summarizes our collaboration revenue for the periods indicated:

 

  Three Months
Ended
March 31,
  Year Ended
December 31,
 
      2020          2019          2019          2018     
(Euros in thousands)            

Revenue from collaboration agreements:

    

Amgen

  2,150   1,171   6,197   1,501 

Genmab

  2,015   2,455   11,191   2,269 

BMS

  2,422   —     1,061   —   

GSK

  453   —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

 

Total revenue from collaboration agreements

  7,040   3,626   18,449   3,770 
 

 

 

  

 

 

  

 

 

  

 

 

 

Research and Development Expenses

The following table summarizes our research and development expenses:

 

  Three Months Ended
March 31,
  Year Ended
December 31,
 
      2020          2019          2019          2018     
(Euros in thousands)            

Direct research and development expenses by program:

    

ACTengine

  1,520  600  4,234  2,616 

Next Generation ACT

  515   777   3,447   2,363 

TCR Bispecifics

  833   239   1,585   964 

Technology Platforms

  103   262   1,184   1,843 

Collaboration agreements

  302   200   931   185 
 

 

 

  

 

 

  

 

 

  

 

 

 

Sub-total direct expenses

 3,273  2,078  11,381  7,971 
 

 

 

  

 

 

  

 

 

  

 

 

 

Internal research and development expenses:

    

Personnel related (including stock-based compensation)

 4,811  3,319  15,226  12,643 

Facility related

  535   215   1,175   2,179 

IP Expenses

  2,235   1,037   7,093   7,049 

Depreciation

  856   795   2,945   1,766 

Other internal costs

  536   546   2,271   2,363 
 

 

 

  

 

 

  

 

 

  

 

 

 

Sub-total internal expenses

 8,973  5,912  28,710  26,000 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total research and development expenses

 12,246  7,990  40,091  33,971 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

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For the three months ended March 31, 2020, our research and development expenses were €12.2 million compared to €8.0 million for the three months ended March 31, 2019.

For the three months ended March 31, 2020, direct research and development expenses associated with our programs increased due to increased preclinical and clinical work performed under the programs compared to three months ended March 31, 2019. The increase in ACTengine expenses is mainly due to the start of clinical trials in the United States, which began in February 2019. The decrease in Next Generation ACT expenses in the three months ended March 31, 2020 is due to a planned slow-down in the ACTolog clinical trial, as no additional patients are being enrolled into this trial. The increase in TCR Bispecifics expenses is related to the start of GMP manufacturing of a cell line in 2019.

Direct research expenses related to collaboration agreements increased due to an overall increase in research activities performed under our four collaboration agreements.

Personnel related research and development expenses for the three months ended March 31, 2020 and 2019 were €4.8 million and €3.3 million, respectively. These increases were primarily a result of our increased research and development headcount and increased share-based compensation expenses. The increase in IP expenses for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 is due to timing of legal cost related to filing and defending of the Group’s patents.

For the year ended December 31, 2019, our research and development expenses were €40.1 million compared to €34.0 million for the year ended December 31, 2018.

For the year ended December 31, 2019, our direct research and development expenses associated with our programs increased due to increased preclinical and clinical work performed under the programs compared to the year ended December 31, 2018. The increase in ACTengine expenses is mainly due to the start of clinical trials in the United States. The increase in Next Generation ACT expenses is mainly due to additional expenses related to the ACTolog clinical trial. The decrease in expenses in Technology Platforms is mainly due to a time shift of expenses. It is expected that expenses for Technology Platforms will go up again in the future.

Direct research expenses related to collaboration agreements increased due to further increase in the work performed under the collaboration agreements with Amgen and Genmab as well as the additional collaboration with BMS.

Personnel related research and development expenses for the years ended December 31, 2019 and 2018 were €15.2 million and €12.6 million, respectively. This increase of €2.6 million was primarily a result of our increased research and development headcount and increased share-based compensation expenses. Facility related research and development expenses decreased, whereas depreciation expenses increased due to the first-time application of IFRS 16.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2020 and 2019 were €6.2 million and €2.3 million, respectively.

The €3.9 million increase in general and administrative expenses for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to an increase in personnel related expenses of €0.7 million and an increase in professional and consulting fees of €2.7 million. Personnel related expenses increased mainly due to the growth in headcount in our finance function as well as the communications functions. The increase in professional and consulting fees resulted from an increase in accounting, audit and legal fees as well as costs associated with ongoing business activities and our preparations to operate as a public company.

 

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General and administrative expenses for the years ended December 31, 2019 and 2018 were €11.8 million and €7.7 million, respectively.

The increase in general and administrative expenses in the year ended 2019 compared to the year ended December 31, 2018 was primarily due to an increase in personnel related expenses of €1.8 million and an increase in professional and consulting fees of €1.7 million. Personnel related expenses increased mainly due to the growth in headcount in our finance function as well as IP and communications function. The increase in professional and consulting fees resulted from an increase in accounting, audit and legal fees, as well as costs associated with ongoing business activities and our preparations to operate as a public company.

Other Income

Other income during the three months ended March 31, 2020 and 2019 was €113 thousand and €3 thousand, respectively. This increase of €110 thousand resulted primarily from a €82 thousand increase in grant income in the three months ended March 31, 2020 compared to three months ended March 31, 2019.

Other income during the years ended December 31, 2019 and 2018 was €385 thousand and €3.5 million, respectively. The decrease of €3.1 million in 2019 resulted primarily from lower grant income, which decreased from €2.9 million in 2018 to €26 thousand in 2019. The decrease in grant income resulted from the closing of the CPRIT grant of Immatics US in 2018. There are no unfulfilled conditions or contingencies related to these grants.

Financial Result

Financial result consists of both financial income and financial expense.

Financial income increased to €2.7 million for the three months ended March 31, 2020 compared to €825 thousand for the three months ended March 31, 2019. This increase of €1.9 million resulted primarily from an increase in foreign exchange gains of €1.7 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Interest income increased by €175 thousand to €319 thousand for the three months ended March 31, 2020, compared to €144 thousand for the three months ended March 31, 2019. This increase is due to higher cash balances as well as short-term deposits, resulting from the upfront payments received as part of the collaboration agreements.

During the three months ended March 31, 2020, financial expenses amounted to €29 thousand, compared to €70 thousand during the three months ended March 31, 2019. Our interest expenses for both periods are substantially related to lease liabilities. Financial expenses for the three months ended March 31, 2020 consisted primarily of €28 thousand in interest expense from lease liabilities, with the remainder resulting from foreign exchange losses. Financial expenses for the three months ended March 31, 2019 consisted primarily of €51 thousand in interest from lease liabilities with the remainder resulting from foreign exchange losses.

Financial income decreased to €790 thousand for the 12 months ended December 31, 2019, compared to €2.2 million during the 12 months ended December 31, 2018. During 2019, financial income consisted almost entirely of interest income from short-term deposits. During 2018, financial income consisted of foreign exchange gains of €1.7 million and interest income of €507 thousand. Changes in foreign currency gains resulted from changes in the exchange rates between the U.S. Dollar and Euro. Interest income increased due to higher cash balances as well as short-term deposits, resulting from the upfront payments received as part of the collaboration agreements.

During 2019, financial expenses amounted to €264 thousand, compared to €161 thousand during 2018. Financial expenses in 2019 consisted primarily of €170 thousand in interest expense from lease liabilities, with the remainder resulting from foreign exchange losses. Financial expenses in 2018 consisted primarily of €145 thousand in foreign exchange losses. The increase in interest expense from lease liabilities resulted from the adoption of IFRS 16 in 2019.

 

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Liquidity and Capital Resources

Sources of Liquidity

We have historically funded our operations primarily from private placements of our ordinary shares and proceeds from collaborators.

As of March 31, 2020 and as of December 31, 2019, we had cash and cash equivalents of €72.2 million and €103.4 million, respectively. Cash and cash equivalents are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation, and consist primarily of cash in banks and short-term deposits with an original maturity of between three and nine months.

The following table summarizes the primary sources and uses of cash for each period presented:

 

   Three Months Ended
March 31,
   Year Ended
December 31,
 
   2020   2019   2019   2018 
(Euros in thousands)                

Net cash (used in) provided by:

        

Operating activities

  (28,286  (248  68,045   7,583 

Investing activities

   (2,387   (333   (2,137   (413

Financing activities

   (611   (446   (1,862   23,648 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash flow

  (31,284  (1,027  64,046   30,818 
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Activities

We primarily derive cash from our collaboration agreements. Our cash flows from operating activities are significantly influenced by our use of cash for operating expenses and working capital to support the business, in addition to the placement of cash and cash equivalents into short-term deposits, which do not meet the classification criteria of cash and cash equivalents in accordance with IAS 7 (“Statement of Cash Flows”).

We experienced net cash outflows from operating activities during both the three months ended March 31, 2020 and 2019, resulting primarily from the net loss of the periods and working capital changes.

During the first quarter 2020, net cash used in operating activities of €28.3 million primarily resulted from an increase in working capital of €21.2 million combined with a net loss of €8.6 million during the quarter, partially offset by non-cash charges of €1.5 million. The increase in working capital mainly resulted from an increase in short-term deposits of €16.8 million, which have an original maturity of four to six months and do not meet the requirements of cash and cash equivalents under IAS 7, and a decrease in accounts payable and other current liabilities of €4.8 million, primarily related to the recognition of deferred revenue from upfront payments.

During the three months ended March 31, 2019, net cash used in operating activities of €0.2 million resulted from a net loss of €5.9 million during the quarter, offset by a decrease in working capital of €4.5 million and non-cash charges of €1.2 million. The decrease in working capital mainly resulted from a decrease in other assets of €9.0 million, resulting from the disbursement of cash held in short-term deposits that previously did not meet the definition of cash and cash equivalents according to IAS 7, partially offset by a decrease in accounts payable and other current liabilities of €4.4 million primarily related to the recognition of deferred revenue from upfront payments.

For the years ended December 31, 2019 and 2018, we experienced positive cash flows from operating activities primarily from upfront payments of collaboration agreements.

Net loss amounted to €32.5 million and €32.4 million for the years ended December 31, 2019 and 2018, respectively, and drove the operating cashflow in 2019 and 2018.

 

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During 2019, net cash flow from operating activities of €68.0 million primarily resulted from a €94.6 million change in working capital and non-cash charges of €5.9 million, partially offset by €32.5 million net loss for the year. This increase in working capital mainly resulted from an increase in accounts payable and other current liabilities of €98.9 million primarily related to deferred revenue from upfront payments received from our collaborators BMS and GSK, partially offset by an increase in other assets of €4.4 million that primarily resulted from a €3.0 million increase in short-term deposits.

During 2018, net cash flow from operating activities of €7.6 million consisted primarily of a change in working capital amounting to €36.6 million and non-cash charges of €3.3 million, partially offset by €32.4 million of net loss for the year. This increase in working capital mainly resulted from an increase in accounts payable and other current liabilities of €43.7 million primarily related to deferred revenue from upfront payments received from our collaborator Genmab, partially offset by an increase in other assets of €7.5 million that primarily resulted from a €6.9 million decrease in grant receivables and a €13.1 million increase in short-term deposits.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2020 was €2.4 million, mainly due to payments related to new laboratory space and office equipment.

Net cash used in investing activities for the three months ended March 31, 2019 was €333 thousand, which is primarily attributable to the acquisition of new property, plant and equipment.

Net cash used in investing activities for the year ended December 31, 2019 was €2.1 million, of which €91 thousand was attributable to the purchase of intangible assets, and €2.1 million to the purchase of property, plant and equipment, partially offset by proceeds from the sale of property, plant and equipment amounting to €97 thousand.

Net cash used in investing activities for the year ended December 31, 2018 was €413 thousand, of which €78 thousand was attributable to the purchase of intangible assets, and €429 thousand was attributable to the purchase of property, plant and equipment, partially offset by proceeds from the sale of property, plant and equipment amounting to €94 thousand.

The increase in investing activities reflects the increase in our research and development activities.

Financing Activities

During the three months ended March 31, 2020 and 2019 net cash used in financing activities was of €611 thousand and €446 thousand, resulting entirely from the payment of the principal portion of lease liabilities.

During the year ended December 31, 2019 net cash used in financing activities consisted of €1.9 million from the payment of the principal portion of lease liabilities. During the year ended December 31, 2018, cash inflow from financing activities of €23.6 million was generated from the share premium proceeds received relating to the issuance of shares in 2017.

Operation and Funding Requirements

Historically, we have incurred significant losses due to our substantial research and development expenses. We had an accumulated deficit of €241.5 million as of March 31, 2020 and of €233.2 million as of December 31, 2019. We expect to continue to incur significant losses in the foreseeable future and expect our expenses to increase in connection with our ongoing activities, particularly as we continue research and development and

 

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clinical activities for our product candidates. In addition, we expect to incur additional costs associated with operating as a public company. Our expenses will also increase if, and as, we:

 

  

continue or expand our research or development programs in preclinical development;

 

  

continue or expand the scope of our clinical trials for our product candidates;

 

  

initiate additional preclinical studies or clinical or other trials for our product candidates, including under our collaboration agreements;

 

  

continue to invest in our immunotherapy platforms to conduct research to identify novel technologies;

 

  

change or add to internal manufacturing capacity or capability;

 

  

change or add additional suppliers;

 

  

add additional infrastructure to our quality control, quality assurance, legal, compliance and other groups to support our operations as we progress product candidates toward commercialization;

 

  

attract and retain skilled personnel;

 

  

create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts, including expansion of sites in Germany and in the United States;

 

  

seek marketing approvals and reimbursement for our product candidates;

 

  

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

 

  

seek to identify and validate additional product candidates;

 

  

acquire or in-licenses other product candidates and technologies;

 

  

make milestone or other payments under any in-license agreements;

 

  

maintain, protect, defend, enforce and expand our intellectual property portfolio; and

 

  

experience any delays, interruptions or encounter issues with any of the above.

We are subject to all of the risks related to the development and commercialization of pharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Our forecast of sufficient financial runway to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and could utilize our available capital resources sooner than we currently expect. We believe that our cash and cash equivalents, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through at least the next 12 months. We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our product candidates. Our future funding requirements will depend on many factors, including, but not limited to:

 

  

progress, timing, scope and costs of our clinical trials, including the ability to timely initiate clinical sites, enroll subjects and manufacture Adoptive Cell Therapy (“ACT”), and bispecific T cell engaging receptor, or TCR Bispecific, product candidates for our ongoing, planned and potential future clinical trials;

 

  

time and cost to conduct investigational new drug application (“IND”) or clinical trial application (“CTA”) enabling studies for our preclinical programs;

 

  

time and costs required to perform research and development to identify and characterize new product candidates from our research programs;

 

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time and cost necessary to obtain regulatory authorizations and approvals that may be required by regulatory authorities to execute clinical trials or commercialize our product;

 

  

our ability to successfully commercialize our product candidates, if approved;

 

  

our ability to have clinical and commercial products successfully manufactured consistent with U.S. Food and Drug Administration (“FDA”), European Medicines Agency (“EMA”), and other authorities’ regulations;

 

  

amount of sales and other revenues from product candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party coverage and reimbursement for patients;

 

  

sales and marketing costs associated with commercializing our products, if approved, including the cost and timing of building our marketing and sales capabilities;

 

  

cost of building, staffing and validating our manufacturing processes, which may include capital expenditure;

 

  

terms and timing of our current and any potential future collaborations, licensing or other arrangements that we have established or may establish;

 

  

cash requirements of any future acquisitions or the development of other product candidates;

 

  

costs of operating as a public company;

 

  

time and cost necessary to respond to technological, regulatory, political and market developments;

 

  

costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

 

  

costs associated with any potential acquisitions, strategic collaborations, licensing agreements or other arrangements that we may establish; and

 

  

inability of clinical sites to enroll patients as health care capacities are required to cope with natural disasters, epidemics or other health system emergencies, such as the COVID-19 pandemic.

A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until we can generate sufficient product and royalty revenue to finance our cash requirements, which we may never do, we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements as well as grant funding. We will use the proceeds from the PIPE Financing, together with the proceeds received from our trust account, to fund our future research and development activities. These estimates are based on assumptions that may prove to be wrong.

If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely affect our shareholders’ rights. Further, to the extent that we raise additional capital through the sale of ordinary shares or securities convertible or exchangeable into ordinary shares, our shareholders’ ownership interest will be diluted. If we raise additional capital through debt financing, we would be subject to fixed payment obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making

 

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capital expenditures or declaring dividends. If we are unable to obtain additional funding on favorable terms when needed, we may have to delay, reduce the scope of or terminate one or more of our research and development programs or clinical trials.

Off-Balance Sheet Arrangements

During the periods presented, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2019 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

 

   Payments due by period 
(Euros in thousands)  Less than 1
year
   1 - 3
years
   3 - 5
years
   More than
5 years
   Total 

Lease liabilities(1)

   1,482    1,823    47    —      3,352 

Other lease obligations(2)

   172    324    300    300    1,096 

In-license agreements(3)

   455    200    —      —      655 

Contract research organization agreements(4)

   1,131    1,466    —      —      2,597 

Total contractual obligations

  3,240    3,813    347    300   7,700 

 

(1)

Represents our future minimum commitments under non-cancellable lease liabilities reflected on the balance sheet in our audited consolidated financial statements included elsewhere in this prospectus. In addition, in 2020, we signed further lease agreements leading to additional payments of approximately €3.2 million.

(2)

Represents our future minimum commitments under non-cancellable leasing arrangements, which are not capitalized under IFRS 16. These arrangements include short-term as well as low value leases, which are not reflected on our balance sheet.

(3)

Represents obligations of non-cancellable terms of license agreements.

(4)

Represents obligations from contract research organization agreements.

We have lease agreements for land and buildings in our locations Tübingen, Munich and Houston, Texas, which will expire between 2020 and 2026. In addition, we have various leases for equipment and cars, which will expire in 2022. The amounts in the table above represent our fixed contractual lease obligations and do not include the optional extensions.

In addition to the above obligations, we enter into a variety of agreements and financial commitments in the normal course of business. The terms generally provide us with the option to cancel, reschedule and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. However, it is not possible to predict the maximum potential amount of future payments under these agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements for the years ended December 31, 2019 and 2018, respectively, have been prepared in accordance with IFRS. The preparation of the consolidated financial statements in accordance with IFRS requires the use of estimates and assumptions that affect the value of assets and liabilities — as well as contingent assets and liabilities — as reported on the balance sheet date, and revenues and expenses arising during the fiscal year. The main areas in which assumptions, estimates and the exercising of a degree of discretion are appropriate relate to revenue recognition, research and development expenses, share-based

 

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compensation and income taxes. We based our assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond our control. Hence, our estimates may vary from the actual values.

We believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements.

Revenue Recognition for Collaboration Agreements

We recognize revenue through collaboration and license agreements and reimbursement for research and development costs.

Under our collaboration and license agreements, we may receive up-front licensing payments, milestone payments and reimbursement of research and development expenses. Such collaboration agreements also include licenses of certain of our intellectual property to the respective collaborators. As these agreements comprise several promises, it must be assessed whether these promises are capable of being distinct within the context of the contract. For each of our four collaboration agreements, we determined that the promises included in each agreement represented single combined performance obligation with a single measure of progress. The performance obligation is accounted for as a performance obligation satisfied over time on a cost-to-cost basis, as our customer simultaneously receives and consumes the benefits from our performance. Up-front licensing payments and reimbursement for development expenses are initially deferred on our statement of financial position and subsequently recognized as revenue over time as costs are incurred.

Milestone payments are generally included in the transaction price at the amount stipulated in the respective agreement and recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. To date, no milestone has been included in the transaction price and recognized into revenue.

For further information regarding our revenue recognition policy, please refer to Note 4.9 Revenue from collaboration agreements of the Notes to the Consolidated Financial Statements as of December 31, 2019 of our consolidated financial statements included elsewhere in this prospectus.

Research and Development Expenses

Research and development expenses are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries and bonuses, stock-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation, manufacturing expenses and external costs of vendors engaged to conduct preclinical development activities and clinical trials as well as the cost of licensing technology.

All patent-related costs incurred in connection with filing and prosecuting patent applications are classified as research and development expenses and expensed as incurred due to the uncertainty about the recovery of the expenditure.

Share-Based Compensation

For the equity plan of Immatics OpCo, management applied a Black Scholes pricing model to estimate the fair value of Immatics Stock Appreciation Rights (“SARs”).

We determined the value of the SARs with the assistance of a third party valuation specialist using certain assumptions, such as share price volatility, the determination of an appropriate risk-free interest rate, expected

 

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dividends and the probability of reaching certain exercisability criteria. Expected volatility of the equity plan of Immatics OpCo was determined by calculating the historic volatility in share prices of peer companies within the biotechnology industry and the expected life in the model has been adjusted, based on our management’s best estimate, for the effects of non-transferability and exercise restrictions.

The exercisability is dependent on our estimated combined probability of exit events. We discounted the fair values of the SARs based on these assumed probabilities of the awards becoming exercisable. The present value of the probability-weighted fair value under all scenarios represents the value of the SARs.

Income Taxes

Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Currently, all tax loss carryforwards are fully reserved due to management judgement regarding the future profitability of the company.

Recently Issued and Adopted Accounting Pronouncement

For information on the standards applied for the first time as of January 1, 2020 and 2019, please refer to our consolidated financial statements as of December 31, 2019 provided elsewhere in this prospectus.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to various risks in relation to financial instruments, including liquidity risk and currency risk. Our risk management is coordinated by our Executive Committee. We do not engage in the trading of financial assets for speculative purposes. The most significant financial risks to which we are exposed include the risks discussed below.

Our principal financial instruments comprise cash, cash equivalents and fixed-term deposits. The main purpose of these financial instruments is to invest the proceeds of capital contributions and upfront payments from collaboration agreements. We have various other financial instruments such as other receivables and trade accounts payable, which arise directly from our operations.

In accordance with our internal guidelines, we do not trade in derivatives. The main risks arising from our financial instruments are interest rate risk, liquidity risk and currency exchange risk. The Management Board reviews and agrees to policies for managing these risks as summarized below. We also monitor the market price risk arising from all financial instruments.

Interest rate risk

Our exposure to changes in interest rates relates to investments in deposits and to changes in the interest for overnight deposits. Changes in the general level of interest rates may lead to an increase or decrease in the fair value of these investments.

Regarding the liabilities shown in the statement of financial position, we are currently not subject to interest rate risks.

 

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Credit risk

Financial instruments that potentially subject us to concentrations of credit and liquidity risk consist primarily of cash, cash equivalents, deposits and accounts receivable. Our cash, cash equivalents and deposits are denominated in Euros and U.S. Dollars. Cash, cash equivalents and deposits securities are maintained with two high-quality financial institutions in Germany and one in the United States.

We continually monitor our positions with, and the credit quality of, the financial institutions and corporations that are counterparts to our financial instruments and we are not currently anticipating non-performance. The maximum default risk corresponds to the carrying amount of the financial assets shown in the statement of financial position. We monitor the risk of a liquidity shortage. The main factors considered here are the maturities of financial assets, as well as expected cash flows from equity measures.

Currency risk

Currency risk shows the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. In particular, it poses a threat if the value of the currency in which liabilities are priced appreciates relative to the currency of the assets. Our business transactions are generally conducted in Euros and U.S. Dollars. In the finance committee meetings, we analyze the currency risks. We aim to match U.S. Dollar cash inflows with U.S. Dollar cash outflows where possible.

Our cash and cash equivalents were €72.2 million and €103.4 million as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020 approximately 92% of our cash and cash equivalents were held in Germany, of which approximately 27% were denominated in Euros and 73% were denominated in U.S. Dollars. The remainder of our cash and cash equivalents are held in the United States and denominated in U.S. Dollars. Additionally, we have short-term deposits classified as other current assets denominated in U.S Dollars in the amount of €32.9 million as of March 31, 2020.

Liquidity risk

We continuously monitor our risk to a shortage of funds. Our objective is to maintain a balance between continuity of funding and flexibility through the use of capital increases. We concluded that our liquidity risk is moderate.

Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. In connection with the audit of our consolidated financial statements for the year ended December 31, 2019, we identified material weaknesses in our internal controls related to (i) the sufficiency of resources with an appropriate level of technical accounting and SEC reporting experience, (ii) clearly defined control processes, roles and segregation of duties within our finance and accounting functions, and (iii) the design and operating effectiveness of IT general controls for information systems that are significant to the preparation of our consolidated financial statements. We are developing a remediation plan designed to address these material weaknesses and other existing deficiencies. In addition, we have, and are in the process of, recruiting, hiring, and retaining additional financial reporting personnel to develop and implement appropriate internal controls and reporting procedures.

 

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MANAGEMENT

Board Structure

We are a Dutch public limited liability company (naamloze vennootschap) with a two-tier board structure that consists of a management board (bestuur) (the “Management Board”) and a supervisory board (raad van commissarissen) (the “Supervisory Board”). The Management Board and the Supervisory Board are separate boards and no individual may simultaneously be a member of both boards. We also have an executive committee (the “Executive Committee”) consisting of a sole managing director and executive officers appointed by the Management Board.

Under Dutch law, the Management Board is responsible for our management, strategy, policy and operations. The Supervisory Board is responsible for supervising the conduct of and providing advice to our Management Board and for supervising the business generally. Furthermore, each member of the Management Board and Supervisory Board has a duty to act in the corporate interest of the company and the business connected with it. Under Dutch law, the corporate interest extends to the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers. The duty to act in the corporate interest of the company also applies in the event of a proposed sale or break-up of the company, whereby the circumstances generally dictate how such duty is to be applied.

On July 1, 2021, and pursuant to our articles of association, our two-tier board structure will automatically convert into a one-tier board structure. There will be one board of directors that will consist of executive directors and non-executive directors. In the one-tier board structure, the Executive Committee will consist of all executive directors and all executive officers. As used herein, the term “Board” refers to the Management Board and the Supervisory Board collectively through July 1, 2021, and to the one-tier board of directors after such date.

Management Board

Harpreet Singh, Ph.D., our Chief Executive Officer, serves as the sole managing director. The Management Board consists of such number of managing directors as the Supervisory Board may determine.

Subject to our articles of association, the Management Board is charged with the management of the company. In fulfilling their duties, managing directors serve the interest of the company and the business connected therewith. Resolutions of our Management Board that result in an important change in the identity or character of the company or the business connected with it (for example, transfer of the entire business to a third party) require approval of the general meeting. Additionally, resolutions of our Management Board that relate to significant corporate action (for example, listing on Nasdaq, capital expenditures or debt incurrence of over $500,000 and related party transactions) require prior approval by the Supervisory Board. A resolution taken by our Management Board in violation of our articles of association will be void or voidable. The Management Board has the power to represent the company.

Pursuant to our articles of association, managing directors are elected by the general meeting upon a binding nomination. The Supervisory Board is authorized to nominate a director candidate for appointment at the general meeting. Shareholders who individually or jointly represent at least one-tenth of the issued share capital have the same right to nominate a director candidate for appointment at the general meeting. The general meeting may at any time suspend and dismiss a managing director. The general meeting may only adopt a resolution to suspend or dismiss a managing director by a majority of at least two thirds of the votes cast, representing more than half of the issued share capital, unless the resolution is adopted on the basis of a proposal of the Supervisory Board; in that case, the resolution may be adopted by an absolute majority of the votes cast, representing more than half of the issued share capital.

 

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The Management Board is required to provide the Supervisory Board with the information it needs to carry out its duties. In addition, at least once a year, the Management Board must inform the Supervisory Board in writing of the strategic policy, the general and financial risks and the management and control system of the company.

Our articles of association provide that if one or more managing directors have a direct or indirect personal interest that conflicts with the interest of the company and the business connected with it, they will not be authorized to participate in the discussion and the decision-making process. In the event that all managing directors have, or the only managing director has, a direct or indirect personal interest that conflicts with the interest of the company and the business connected with it, the resolution will be adopted by the Supervisory Board.

Supervisory Board

The Supervisory Board consists of seven supervisory directors, although only six supervisory directors have been appointed at this time. The Supervisory Board may consist of such number of supervisory directors as the Supervisory Board may determine, but not less than three. The Supervisory Board is divided into three classes, with each class as nearly equal in number as possible.

The role of the Supervisory Board is the supervision of the policies of the Management Board and of the general course of affairs of the company and the business connected with it. In doing so, the Supervisory Board also focuses on the effectiveness of our internal risk management and control systems and the integrity and quality of our financial reporting. In fulfilling their duties, the supervisory directors must serve the interests of the company and the business connected with it. This supervision includes the power to intervene whenever necessary and to take corrective actions as may be required in the interest of the company, subject to Dutch law and our articles of association. Our articles of association provide the Supervisory Board with the authority to approve or reject Management Board resolutions that relate to significant corporate action (for example, listing on Nasdaq, capital expenditures or debt incurrence of over $500,000 and related party transactions).

Pursuant to our articles of association, the supervisory directors are appointed by the general meeting upon a binding nomination. The Supervisory Board is authorized to nominate a director candidate for appointment at the general meeting. Shareholders who individually or jointly represent at least one-tenth of the issued share capital have the same right to nominate a director candidate for appointment at the general meeting. The general meeting may at all times overrule the binding nature of each nomination by a resolution adopted by a majority of at least two thirds of the votes cast, representing more than half of the issued share capital.

The general meeting may at any time suspend and dismiss a supervisory director. The general meeting may only adopt a resolution to suspend or dismiss a supervisory director by a majority of at least two thirds of the votes cast, representing more than half of the issued share capital, unless the resolution is adopted on the basis of a proposal of the Supervisory Board; in that case, the resolution may be adopted by an absolute majority of the votes cast representing more than half of the issued share capital.

Board of Directors

On July 1, 2021, and pursuant to our articles of association, our two-tier board structure will automatically convert into a one-tier board structure. There will be one Board that will consist of executive directors and non-executive directors.

Subject to our articles of association, the Board will be charged with the management of the company. In fulfilling their duties, our directors will serve the interest of the company and the business connected with it. The executive directors and the Executive Committee are charged with the day-to-day management of the company. Supervision of the fulfilment of duties by the executive directors and of the general course of the company’s affairs and the business connected with it will primarily be carried out by the non-executive directors. The executive directors must in due time provide the non-executive directors with the information they need to carry out their duties.

 

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The Board consists of one or more executive directors and three or more non-executive directors. The majority of the Board, however, consists of non-executive directors. The number of executive directors and non-executive directors is determined by the Board. The Board will be divided into three classes with each class as nearly equal in number as possible.

After July 1, 2021, our directors will be elected by the general meeting upon a binding nomination. The Board will be authorized to nominate a director candidate for appointment at the general meeting. Shareholders who individually or jointly represent at least one-tenth of the issued share capital will have the same right to nominate a director candidate for appointment at the general meeting. The general meeting may at all times overrule the binding nature of each nomination by a resolution adopted by a majority of at least two thirds of the votes cast, representing more than half of the issued share capital.

The general meeting may at any time suspend and dismiss a non-executive director or executive director. The general meeting may only adopt a resolution to suspend or dismiss a non-executive director or executive director by a majority of at least two thirds of the votes cast, representing more than half of the issued share capital, unless the resolution is adopted on the basis of a proposal of the Board; in that case, the resolution may be adopted by an absolute majority of the votes cast, representing more than half of the issued share capital.

Executive Committee

In addition to the Management Board and the Supervisory Board, or the Board after July 1, 2021, we have an Executive Committee. Pursuant to our articles of association, the Executive Committee consists of all managing directors and executive officers. Executive officers who are not managing directors are appointed by the Management Board. The Management Board may at any time suspend or dismiss an executive officer who is not a managing director. A resolution of the Management Board to appoint, suspend or dismiss an executive officer requires the prior approval of the Supervisory Board.

The Executive Committee is charged with the matters concerning the day-to-day management of the company determined by the Management Board. Two executive officers acting jointly have the power to represent the company. The Management Board may, whether or not by rule, determine the duties with which each executive officer will be particularly charged, such resolution requires the prior approval of the Supervisory Board.

 

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Directors and Executive Officers

The Management Board consists of one managing director, the Executive Committee consists of seven executive officers, and the Supervisory Board consists of seven supervisory directors, although only six supervisory directors have been appointed at this time. The following table lists the names, ages as of July 31, 2020 and positions of the individuals who are serving as managing director, executive officers and supervisory directors.

 

Name

  Age   

Position

Executive Committee

    

Harpreet Singh, Ph.D.

   46   Chief Executive Officer

Thomas Ulmer

   42   Chief Financial Officer

Cedrik Britten, M.D.

   45   Chief Medical Officer

Carsten Reinhardt, M.D., Ph.D.

   53   Chief Development Officer

Toni Weinschenk, Ph.D.

   47   Chief Innovation Officer

Rainer Kramer, Ph.D.

   56   Chief Business Officer

Steffen Walter, Ph.D.

   44   Chief Technology Officer

Management Board

    

Harpreet Singh, Ph.D.

   46   Managing Director

Supervisory Board

    

Peter Chambré

   64   Chairman of the Supervisory Board

Michael G. Atieh

   66   Supervisory Director

Paul R. Carter

   60   Supervisory Director

Christof Hettich, L.L.D.

   60   Supervisory Director

Heather L. Mason

   59   Supervisory Director

Adam Stone

   41   Supervisory Director

Executive Officers

Harpreet Singh, Ph.D. Dr. Singh co-founded Immatics OpCo in 2000, and since its foundation, Dr. Singh has served in a number of roles, including as managing director and Chief Scientific Officer. In addition, in 2014, Dr. Singh became President & CEO of Immatics U.S., overseeing all operations in Houston, Texas and a strategic collaboration with MD Anderson Cancer Center to develop next-generation adoptive cell therapies. In 2019, Dr. Singh became CEO of Immatics OpCo. Dr. Singh has played a leadership role in raising more than $200 million of venture capital funding over several financing rounds as well $30 million of public grants. Dr. Singh is the inventor of numerous granted patents and patent applications and co-author of numerous scientific papers published by peer-reviewed journals including Nature, Nature Medicine, Nature Biotechnology, Journal of Experimental Medicine, Brain, Lancet Oncology and more. A scholar of Prof. Hans-Georg Rammensee, Dr. Singh completed his academic studies by gaining a Ph.D. in immunology at the University of Tübingen, Germany. 

We believe Dr. Singh’s qualifications to serve on our Management Board include his corporate leadership experience, perspective and experience as one of Immatics OpCo’s founders and as a long-term executive of Immatics in the United States and Germany, and his scientific background.

Thomas Ulmer. Mr. Ulmer joined Immatics OpCo as its Chief Financial Officer in April 2018 from the Merck Group (“Merck”), where he was Chief Financial Officer of the Allergopharma Business Unit. Mr. Ulmer began his professional career with Merck in 2004 where he held several roles, including Head of Business Planning & Analysis and previously Head of Planning, Forecasting & Resource Allocation. Mr. Ulmer has also been Chief Financial Officer for Australia and New Zealand and Financial Controller for Merck’s global generics business which was sold to Mylan Laboratories Inc. Mr. Ulmer also played a leading role of the integration of the business and built up an OTC business unit in Australia for which he received the company’s innovation award.

 

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Mr. Ulmer is a Certified Practicing Accountant of Australia and holds an MBA from Justus-Liebig-University of Giessen.

We believe Mr. Ulmer’s qualifications to serve on the Executive Committee include his financial background and corporate leadership experience.

Cedrik M. Britten, M.D. Dr. Britten joined Immatics OpCo as its Chief Medical Officer in June 2020, assuming leadership for the management and global clinical development of our adoptive cell therapy and TCR Bispecifics pipeline from first testing in humans to registration trials, including managing regulatory affairs. Prior to that, Dr. Britten served as the Vice President and Head of the Oncology Cell Therapy Research Unit at GlaxoSmithKline plc (NYSE: GSK) from February 2015 to May 2020. While at GlaxoSmithKline, Dr. Britten was responsible for building the Oncology Cell Therapy Unit and driving the strategy and establishing the end-to-end capabilities required to research and develop innovative cell therapies in oncology. His main focus was on the early cell therapy portfolio covering target validation, the preclinical space and clinical trials up to proof of concept in patients. He also led several technical due diligences and deal preparations for new partnerships with various life science companies in the cell therapy space. He coordinated the opt-in and transfer of the late-stage NY-ESO TCR-T cell asset with multiple active clinical protocols into GSK, and oversaw four early cell therapy programs. Prior to his role at GlaxoSmithKline, Dr. Britten was Vice President of Research and Development at BioNTech RNA Pharmaceuticals GmbH. While at BioNTech, Dr. Britten was a key player establishing its clinical research group and led the clinical trial applications for BioNTech’s initial clinical assets until January 2015. Dr. Britten holds an M.D. from the University Medical Center of the Johannes-Gutenberg University.

We believe Dr. Britten’s qualifications to serve on the Executive Committee include his long-term experience in drug development, his specific experience in immune-oncology including cell therapy, his medical background, his leadership experience, and his track record of developing corporate partnerships.

Carsten Reinhardt, M.D., Ph.D. Dr. Reinhardt joined Immatics OpCo as its managing director and Chief Medical Officer in October 2009 from Micromet, Inc., where he was Chief Medical Officer and a member of the management board. In June 2020, Dr. Reinhardt began serving as Immatics OpCo’s Chief Development Officer leading its Product Development Strategy. Furthermore, he leads our TCR Bispecifics platform and pipeline as well as the Immunology and Translational Development functions. Previously, as International Medical Leader at Hoffmann-La Roche (“Roche”), Dr. Reinhardt had global responsibility for the development of Herceptin. Prior to his tenure at Roche, Dr. Reinhardt was Head of Clinical Development at Fresenius Biotech GmbH. Prior to joining the pharma and biotech industry, Dr. Reinhardt held various academic medical positions and worked at the University of Tübingen and Max Planck Institute, Munich to complete his curriculum in Neurology. Dr. Reinhardt has co-authored more than 40 publications in peer-reviewed journals including Nature, Science, Nature Medicine, Lancet, Journal of Clinical Oncology, Cancer Research, and Journal of Experimental Medicine. Dr. Reinhardt is a Visiting Professor for Pharmaceutical Medicine at the University of Basel. Dr. Reinhardt received a Medical Degree in 1994 from the University of Munich, Germany and, in addition, completed a Ph.D. thesis in cellular immunology at the Institute of Immunology in Munich, Germany.

We believe Dr. Reinhardt’s qualifications to serve on the Executive Committee include his corporate leadership experience, his long-term experience in the areas of early- and late-stage drug development, and his medical and scientific background, as well as his track record of developing corporate partnerships and serving as an executive at public companies.

Toni Weinschenk, Ph.D. Dr. Weinschenk co-founded Immatics OpCo in 2000. From 2002 to 2014, Dr. Weinschenk served as Immatics’ Head of Discovery. In 2015, Dr. Weinschenk became Immatics Opco’s Vice President Discovery, later transitioning to Chief Technology Officer for Immatics U.S. in 2015. In 2017, Dr. Weinschenk assumed the role of Immatics OpCo’s Chief Technology Officer. As of June 2020, Dr. Weinschenk serves as our Chief Innovation Officer. Dr. Weinschenk is the inventor of our proprietary

 

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XPRESIDENT technology platform and leads the discovery and validation of novel and innovative I/O targets. Furthermore, he is responsible for advancing our vision for ultrapersonalized multi-target immunotherapies and the X-AI data computing platform. pHLA targets discovered by his XPRESIDENT platform have been utilized for all of our drug candidates and for the collaboration with leading players in the field including Amgen, Genmab, BMS and GSK. Dr. Weinschenk is an inventor who holds many patents and has co-authored numerous publications in the cancer immunology field in peer-reviewed journals including Nature, Nature Medicine, Nature Immunology, Immunological Reviews and Cell Report. Dr. Weinschenk holds a Doctor of Science degree and a diploma in biochemistry from the University of Tübingen, Germany.

We believe Dr. Weinschenk’s qualifications to serve on the Executive Committee include his corporate leadership experience, his globally leading expertise in the field of pHLA target discovery, his perspective and experience as one of Immatics OpCo’s founders and his scientific background.

Rainer Kramer, Ph.D. Dr. Kramer joined Immatics OpCo as its Chief Business Officer in April 2012 from Signature Diagnostics AG, where he was a member of the Management Board and Chief Business Officer. Dr. Kramer still serves as Chief Business Officer, and he is responsible for our corporate business development activities, intellectual property and strategic alliance management. Dr. Kramer also currently serves as a director on the board of Immatics U.S. Dr. Kramer has worked in research and business development functions with increasing responsibilities at Amgen Inc., MorphoSys AG, Jerini AG, Shire PLC and Signature Diagnostics AG. During his career, Dr. Kramer negotiated and contributed to the completion of more than 50 partnering, M&A and financing transactions with an aggregate value of more than $6 billion. Dr. Kramer holds a diploma in molecular biology from the University of Regensburg and a Ph.D. in neurobiology from the Max-Planck-Institute, Martinsried, Germany.

We believe Dr. Kramer’s qualifications to serve on the Executive Committee include his corporate leadership experience and educational background, as well as his broad business experience and track record within the life sciences industry.

Dr. Steffen Walter. After serving as a scientific consultant in 2004, Dr. Walter joined Immatics OpCo `in 2005 where he initially served as Director and Head of Immunology from January 2005 until December 2013, then as Vice President Immunology from January 2014 until April 2015, and then served as Chief Scientific Officer of Immatics U.S. As of June 2020, Dr. Walter serves as our Chief Technology Officer. Dr. Walter also established operations of Immatics US in Houston, Texas and contributed significantly to raising the necessary funding including a $20 million Cancer Prevention and Research grant by the State of Texas. Dr. Walter leads our Cell Therapy platform and pipeline including manufacturing and process development. Furthermore, he leads our Quality Management. For over 15 years, Dr. Walter has been active in the field of cancer immunotherapy and a leader in human T cell biology. In addition to supporting the development of the XPRESIDENT technology platform, under his initial leadership, we developed our powerful XCEPTOR platforms to support the generation of safe and effective TCR-based therapeutic modalities. Dr. Walter is an inventor on numerous patents and patent applications and has co-authored more than 30 publications in prestigious peer-reviewed journals including Nature Medicine, Cell Reports, Lancet Oncology, Brain and Blood. Dr. Walter gained his diploma in biochemistry and a Ph.D. in immunology from the University of Tübingen, Germany.

We believe Dr. Walter’s qualifications to serve on the Executive Committee include his corporate leadership experience, his long-term experience in the field of T cell biology, his perspective and experience as one of the founders of Immatics US and his scientific background.

There are no family relationships among any of our executive officers.

Managing Director

Harpreet Singh, Ph.D., our Chief Executive Officer, serves as the sole managing director.

 

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Supervisory Directors

Peter Chambré. Mr. Chambré joined Immatics OpCo as Chairman of the Board in October 2012, and still maintains the position of Chairman. Mr. Chambré also acted as Executive Chairman between August 2015 and June 2019. Mr. Chambré was the Chief Executive Officer of Cambridge Antibody Technology Group plc (“CAT”) from 2002 until its acquisition by AstraZeneca plc in 2006. Before joining CAT, Mr. Chambré was Chief Operating Officer of Celera Genomics Group and, previously, CEO of Bespak plc (later Consort Medical plc), a drug delivery company. From 2008 to 2010, Mr. Chambré was Chairman of ApaTech Ltd., a specialist in orthobiologic bone graft technologies, which was acquired by Baxter International Inc. in March 2010. From 2008 to 2013, Mr. Chambré was Chairman of Xellia Pharmaceuticals AS, a company focused on the development, manufacturing and global commercialization of anti-infective therapies and between 2011 and 2019 he was Chairman of OneMed AB a leading distributor of medical products in Northern Europe. From 2006 to 2012, Mr. Chambré served as Non-executive Director of BTG plc and between 2006 and 2016, he served as a Non-Executive Director of Spectris plc. Mr. Chambré also currently holds chairman and non-executive board positions with other companies, including UDG Healthcare plc, Cancer Research UK (trustee), and 7TM Holding ApS. Mr. Chambré holds a Bachelor of Science in food science from the University of Reading.

We believe Mr. Chambré’s qualifications to serve on the Supervisory Board include his extensive business and leadership experience within the life sciences industry.

Michael G. Atieh. Mr. Atieh was Executive Vice President, Chief Financial and Business Officer at Ophthotech Inc. (Nasdaq: OPHT) from September 2014 until his retirement in March 2016. Previously, he was Executive Chairman of Eyetech Inc., a private biotech company from 2009 until the company was acquired in 2012. Prior to Eyetech, he was with OSI Pharmaceuticals (Nasdaq: OSIP) where he served as Executive Vice President and Chief Financial Officer from 2005 until 2009. Mr. Atieh spent the majority of his career with Merck and Co., Inc. (NYSE: MRK) where he held various executive level positions over a 19 year period, including Vice President- U.S. Human Health, Senior Vice President- Merck Medco Managed Care, Vice President- Public Affairs, Vice President- Government Relations, and Treasurer. Mr. Atieh began his career at Arthur Young (now Ernst & Young), where he became an Audit Manager. Mr. Atieh currently serves on the Board of Directors of Chubb Limited (NYSE: CB), where he is a member of the Risk & Finance Committee, and previously chaired the Audit Committee from 2012 to 2018. His previous Board experience was with Theravance Biopharma (Nasdaq: TBPH) from 2014 to 2015, where he was a member of the Audit Committee, OSI Pharmaceuticals, where he served as a member of the Board and Chairman of the Audit Committee from 2003 to 2005 and Clintrak Clinical Labeling Services LLC, a private company where he served on the Board from 2004 to 2006. Mr. Atieh earned a B.A. from Upsala College.

We believe Mr. Atieh’s qualifications to serve on the Supervisory Board include his business leadership experience, financial background and track record within the life sciences industry.

Paul R. Carter, FCMA. Mr. Carter’s background includes 10 years of experience at Gilead Sciences, Inc., in their Foster City, CA and London, UK offices, where he was employed as Executive Vice President, Commercial Operations from 2014 to 2016 and Senior Vice President and Head, International Commercial Operations from 2006-2014. Prior to that role, Mr. Carter spent 10 years at GlaxoSmithKline plc, where he served as Regional Vice President, China & Hong Kong from 2002 to 2005, Vice Presiden