DRS/A
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Index to Financial Statements

As confidentially submitted to the U.S. Securities and Exchange Commission on January 11, 2021.

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

BOLT BIOTHERAPEUTICS, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware   2834   47-2804636

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

900 Chesapeake Drive

Redwood City, California 94063

(650) 665-9295

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

Randall C. Schatzman, Ph.D.

Chief Executive Officer

Bolt Biotherapeutics, Inc.

900 Chesapeake Drive

Redwood City, California 94063

(650) 665-9295

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

Copies to:

 

Sonya F. Erickson

John T. McKenna

Cooley LLP

1700 Seventh Avenue

Seattle, Washington 98101

(206) 452-8753

 

Alan F. Denenberg

Stephen Salmon

Davis Polk & Wardwell LLP

1600 El Camino Real

Menlo Park, California 94025

(650) 752-2000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared 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 statement number of the earlier effective registration statement for the same offering.  ☐

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

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

    

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities being Registered
 

Proposed Maximum
Aggregate

Offering Price(1)(2)

 

Amount of

Registration Fee

Common stock, par value $0.00001 per share

  $               $            

 

 

(1)

Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the aggregate offering price of additional shares that the underwriters have the option to purchase, if any.

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 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PROSPECTUS (Subject To Completion)

Issued                , 2021

            Shares

 

LOGO

COMMON STOCK

 

 

Bolt Biotherapeutics, Inc. is offering                shares of its common stock. This is our initial public offering and no public market currently exists for our shares of common stock. We anticipate that the initial public offering price will be between $                and $                per share.

We have applied to list our common stock on the Nasdaq Global Market under the symbol “BOLT.”

 

 

We are an “emerging growth company” as defined under the federal securities laws. Investing in our common stock involves risks. See “Risk Factors” beginning on page 11.

 

 

PRICE $             A SHARE

 

 

 

      

Per Share

      

Total

 

Initial public offering price

       $                      $              

Underwriting discounts and commissions(1)

       $                      $              

Proceeds, before expenses, to us

       $                      $              

 

(1)

See “Underwriters” for a description of the compensation payable to the underwriters.

We have granted the underwriters an option to purchase up to an additional                shares of common stock at the initial public offering price less underwriting discounts and commissions to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on                , 2021.

 

 

 

MORGAN STANLEY    SVB LEERINK    STIFEL    GUGGENHEIM SECURITIES

                , 2021


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TABLE OF CONTENTS

 

     Page  

Prospectus Summary

     1  

The Offering

     7  

Summary Financial Data

     9  

Risk Factors

     11  

Special Note Regarding Forward-Looking Statements

     62  

Industry and Market Data

     64  

Use of Proceeds

     65  

Dividend Policy

     66  

Capitalization

     67  

Dilution

     69  

Selected Financial Data

     72  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     74  

Business

     90  
     Page  

Management

     139  

Executive Compensation

     148  

Certain Relationships and Related Party Transactions

     162  

Principal Stockholders

     165  

Description of Capital Stock

     168  

Shares Eligible For Future Sale

     174  

Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of our Common Stock

     177  

Underwriters

     181  

Legal Matters

     187  

Experts

     187  

Where You Can Find More Information

     187  

Index to Financial Statements

     F-1  
 

 

 

Through and including                , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

We and the underwriters have not authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or in any applicable free writing prospectus is accurate only as of the date of this prospectus or any such free writing prospectus, as applicable, regardless of its time of delivery or of any sale of our common stock. Our business, financial condition, results of operations and future growth prospects may have changed since that date.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

 

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to “Bolt Biotherapeutics,” “we,” “us,” “our” and “our company” refer to Bolt Biotherapeutics, Inc.

Overview

We are a clinical-stage immuno-oncology company developing tumor-targeted therapies that leverage the power of the innate and adaptive immune systems. Our proprietary Boltbody Immune-Stimulating Antibody Conjugate, or ISAC, approach uses immunostimulants to engage and activate myeloid cells, including macrophages and dendritic cells, that directly kill tumor cells via phagocytosis and expose tumor neoantigens to the adaptive immune system. This leads to recruitment of cytotoxic T cells and additional tumor-killing myeloid cells thereby converting immunologically “cold” tumors to “hot” tumors. We believe that this process leads to the development of systemic immunological memory with epitope spreading to neoantigens that is critical to achieving a long-term anti-tumor response. Our lead product candidate BDC-1001 is a human epidermal growth factor receptor 2, or HER2, Boltbody ISAC comprised of a HER2-targeting biosimilar, of trastuzumab conjugated to one of our proprietary TLR7/8 agonists, for the treatment of patients with HER2-expressing solid tumors, including those with HER2-low tumors. We have demonstrated robust single agent anti-tumor activity in multiple preclinical models, including elimination of large tumors (~500 mm3), as well as tumors that are refractory to trastuzumab or ado-trastuzumab emtansine. In our preclinical safety studies, BDC-1001 was well tolerated and no adverse safety signals were observed. We believe these findings are encouraging for the therapeutic potential of BDC-1001. We initiated a Phase 1/2 trial of BDC-1001 in the first quarter of 2020 for the treatment of patients with HER2-expressing solid tumors. We are currently in the dose escalation portion of the trial and expect to move into Phase 2 dose expansions in key solid tumor indications with unmet medical need in 2021. We anticipate that our Phase 1/2 data will provide us with clinical proof of concept for our HER2 Boltbody ISAC approach. We are also advancing additional Boltbody ISAC product candidates targeting carcinoembryonic antigen, or CEA, and PD-L1, both of which are currently in preclinical development. We anticipate advancing our CEA Boltbody ISAC into the clinic in 2022.

Our Boltbody ISAC approach is pioneering a new category of immunotherapies that combines the precision of antibody targeting with the strength of the innate and adaptive immune systems by activating and recruiting myeloid cells, thereby re-programming the tumor microenvironment to invoke an adaptive immune response. Our Boltbody ISACs are delivered systemically but act locally through a highly targeted approach that triggers a localized anti-tumor immune cascade through the following “Three-Factor Authentication” process designed to optimize safety and avoid systemic immune stimulation.

 

  1.  

Tumor antigen recognition: Our selective and specific tumor-targeting Boltbody ISACs recognize and bind specifically to the target antigen-expressing tumors.

 

  2.  

FcR-dependent phagocytosis: Engagement of optimized Fc domains triggers myeloid-mediated phagocytosis of the Boltbody ISAC-bound tumor cell. This process directly kills antigen-expressing tumor cells and delivers tumor neoantigens to myeloid cells.

 

  3.  

TLR-mediated activation: Our proprietary TLR agonist conjugates activate myeloid cells and enable the presentation of tumor-associated neoantigens to cytotoxic T cells, thereby initiating the body’s adaptive anti-tumor immune response and converting immunologically “cold” tumors to “hot” tumors. Furthermore, these activated myeloid cells also encourage additional myeloid cell-mediated phagocytosis to amplify the innate and adaptive immune responses.



 

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During this “Three-Factor Authentication,” tumor-associated myeloid cells engulf the Boltbody ISAC-bound tumor cells, become armed with tumor neoantigens, and migrate to the lymph nodes where they mediate the activation and rapid expansion of tumor-reactive T cells to eliminate tumor cells, including those without the initial target antigen. We believe that this represents the development of systemic immunological memory with epitope spreading to neoantigens that will result in long-term anti-tumor responses. With the Boltbody ISAC mechanism of action, the patient’s immune system determines the relevant neoantigen-specific T cells to mobilize for tumor destruction and subsequent immunosurveillance, providing a compelling example of how an off-the-shelf targeted immunotherapeutic such as BDC-1001 can deliver a personalized therapeutic outcome.

Unlike immuno-oncology approaches that solely seek to relieve immune suppression, Boltbody ISACs act by engaging the immune system at multiple points in the cancer immunity cycle. Boltbody ISACs activate tumor-associated myeloid cells, leading to tumor phagocytosis and the presentation of tumor neoantigens to T cells that enable a productive anti-cancer response. The following key features provide us with the opportunity to develop robust applications across various solid tumors designed to deliver effective and safe therapeutics that provide durable responses.

 

   

Ability to address difficult-to-treat solid tumors including those refractory to current treatments: We have observed in vivo anti-tumor activity in large, well-established tumors as well as in tumors refractory to current therapies;

 

   

Engaging the body’s innate and adaptive immune responses: Targeted activation of myeloid APCs for antigen presentation encourages the patient’s own adaptive immune system to reveal relevant tumor neoantigens;

 

   

Generation of immunological memory with epitope spreading to provide long-term anti-tumor responses and protect against recurrence: Our preclinical experiments indicate that Boltbody ISACs generate immunological memory and epitope spreading to tumor antigens that are distinct from the Boltbody ISAC target. This process may prevent tumor recurrence and kill related tumors that do not express the original Boltbody ISAC target antigen;

 

   

Ability to target tumor antigens with less dense cell surface expression: We have observed in preclinical studies that Boltbody ISACs demonstrated promising anti-tumor activity even at low levels of target antigen expression;

 

   

Capability to modulate myeloid cell activity via TLR potency and selectivity and Fc engineering: Our medicinal chemistry and monoclonal antibody, or mAb, engineering expertise allow us to modulate potency, selectivity and specificity of our TLR agonists as well as enhance the stability, PK/PD profile and safety of our Boltbody ISACs;

 

   

Well tolerated in preclinical studies by avoiding unintended systemic immune stimulation: Our “Three-Factor Authentication” system provides additional layers of safety for an initially localized immune effect that may avoid unintended systemic immune activation. In our preclinical safety studies, BDC-1001 was well tolerated and no adverse safety signals were observed. We believe this will potentially enable us to treat patients earlier in the course of their disease. This can be used as monotherapy or as part of a combination therapy strategy; and

 

   

Potential to benefit patients who have a defective adaptive immune response: Some patients’ tumors may have defects at presenting neoantigens that makes them resistant to T cell-mediated killing. Boltbody ISACs overcome this barrier by activating myeloid cells and enhancing their phagocytic capacity resulting in anti-tumor activity.

Our lead product candidate, BDC-1001, is currently in clinical development for the treatment of patients with HER2-expressing solid tumors, including those with HER2-low tumors. We have designed BDC-1001 as a



 

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Boltbody ISAC comprised of a HER2-targeting biosimilar trastuzumab conjugated to one of our proprietary TLR7/8 agonists to maximize the potential anti-tumor response. Through our preclinical studies in mice, we have demonstrated that systemic administration of HER2 Boltbody ISACs exhibited localized immune activation that resulted in single agent activity that eliminated large or refractory tumors, and generated immunological memory against cancers with epitope spreading. Furthermore, preclinical data showed anti-tumor activity against established tumors resistant to trastuzumab and ado-trastuzumab emtansine, and immunological memory providing protection against tumor cells that no longer express the HER2 antigen. Our observed preclinical anti-tumor response coupled with a lack of adverse safety signals in our non-human primate toxicology studies leads us to believe that BDC-1001 offers the potential for long-term and meaningful response for patients with HER2-expressing cancers, including HER2-low tumors. We initiated a Phase 1/2 trial of BDC-1001 in the first quarter of 2020 for the treatment of patients with HER2-expressing solid tumors. We are currently in the dose escalation portion of the trial and expect to advance into Phase 2 dose expansions in 2021 in four clinically important and commercially compelling indications. We anticipate that our Phase 1/2 data will provide us with clinical proof of concept for our HER2 Boltbody ISAC approach.

Our second program focuses on CEA, a well-known tumor antigen that is overexpressed in various solid tumors with significant unmet medical need including, but not limited to, colorectal cancer, non-small cell lung cancer, pancreatic cancer and breast cancer. CEA is upregulated on the cell surface of these cancers and displays minimal receptor-mediated internalization into the cancer cell. CEA allows us to target these cancers, some of which are immunologically “cold.” In our preclinical studies, we have observed promising in vivo and in vitro activity with notable anti-tumor activity in xenograft models. We anticipate advancing our CEA Boltbody ISAC into the clinic in 2022.

Our third program, a PD-L1 Boltbody ISAC, focuses on the treatment of patients with tumors that are nonresponsive or become refractory to immune checkpoint blockade. This encompasses more than 15 different tumor types impacting the lives of millions of patients yearly. Our PD-L1 program is a trifunctional therapeutic with the following mechanism: 1) Antibody-dependent cellular phagocytosis of the tumor, 2) Myeloid activation and engagement of an adaptive T cell response, and 3) PD-L1/PD-1 checkpoint inhibition. In our preclinical studies, we have observed enhanced anti-tumor activity compared to checkpoint inhibition alone, and induced immunological memory in syngeneic mice models with our PD-L1 Boltbody ISAC.



 

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Our Pipeline

We are leveraging our myeloid biology expertise to build a robust pipeline of immune-stimulating, myeloid-engaging therapeutics. Our current pipeline is represented in the figure below. In addition to the programs below, we are also exploring various well-known targets that have been traditionally difficult to drug and where our myeloid expertise and the Boltbody ISAC approach may unlock the potential of these promising antigens as viable cancer targets. We hold exclusive worldwide rights to all of the listed programs.

 

LOGO

In this graphic, HER2 = human epidermal growth factor receptor 2; CEA = carcinoembryonic antigen; PD-L1 = programmed cell death-ligand 1; TAM1 = tumor-associated macrophage 1 antigen; NSCLC = non-small cell lung cancer; CRC = colorectal cancer; and SCLC = small cell lung cancer. A registrational trial is a Phase 2 or a Phase 3 clinical trial that is intended to obtain sufficient data and results to support the filing of an application for regulatory approval, including accelerated approval.

Our Corporate History and Team

Our company was founded in 2015 to capture the pioneering work of our founder Dr. Edgar G. Engleman, who is Professor of Pathology and Medicine at Stanford University School of Medicine and Co-Director of the Immunology and Immunotherapy Program of the Stanford Cancer Institute. Dr. Engleman’s expertise in translating cancer immunotherapeutics from bench to bedside includes the discovery of a dendritic cell-based technology that was the basis for the first active immunotherapy approved by the Food and Drug Administration, or the FDA. It was also at the Engleman Laboratory that the promising new immunotherapy activating dendritic cells in tumors in situ, without requiring their removal and activation in vitro, was discovered in collaboration with Dr. Yaron Carmi and led to the founding of Bolt Biotherapeutics. Continued research in the Engleman Laboratory led Dr. Michael Alonso, a scientific co-founder, and Dr. Shelley Ackerman to invent the technology that formed the basis of our promising Boltbody ISAC platform.

We have assembled a highly qualified management team with broad experience in myeloid biology, drug discovery and development to execute our mission. Our scientific founders and our management team collectively have extensive experience in immunology, oncology drug development and patient care. We are industry veterans with prior experience at companies such as Alder, Astellas, Gilead, Jazz, Roche / Genentech, Sunesis and others. Together, our team has a proven track record in the discovery, development and commercialization of numerous approved therapeutics such as Alecensa, Cytovene, Evenity, Gazyva, Herceptin, Kadcyla, Polivy, Perjeta, Rituxan, Tecentriq, Valcyte, Venclexta and Vyepti while at other companies. Since our inception through September 30, 2020, we have raised an aggregate of $122 million of gross proceeds and our investors include Novo Holdings, Vivo Capital, Pivotal bioVenture Partners, Sofinnova Investments, Nan Fung Life Sciences, RA Capital Management, Surveyor Capital (a Citadel Company), Rock Springs Capital, Pfizer Ventures and Samsara BioCapital.



 

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Strategy

Our goal is to become a leading immuno-oncology company, leveraging our myeloid biology expertise and proprietary Boltbody ISAC approach to discover, develop and commercialize transformative treatments to address key unmet medical needs in cancer. The key components of our strategy are to:

 

   

Leverage our Boltbody ISAC approach and myeloid expertise to develop our pipeline of immune-activating therapies.

 

   

Rapidly advance the development of our lead Boltbody ISAC product candidate, BDC-1001, for the treatment of patients with HER2-expressing cancers.

 

   

Expeditiously advance our pipeline focused on additional promising targets including CEA and PD-L1.

 

   

Continue to invest in our myeloid expertise and Boltbody ISAC approach to explore the full potential of our targeted immunotherapies for the treatment of cancer.

 

   

Selectively enter into collaborations to expand and enhance our proprietary Boltbody ISAC approach and myeloid expertise to increase the impact of our future product candidates.

Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties, including those described in “Risk Factors” and elsewhere in this prospectus. You should carefully consider these risks before making an investment. These risks include, among others, the following:

 

   

We have a limited operating history and have incurred significant losses since inception and we anticipate that we may continue to incur losses for the foreseeable future and may never achieve or maintain profitability. We have not yet generated any product revenue and had an accumulated deficit of $77.4 million as of September 30, 2020.

 

   

We will need substantial funding to pursue our business objectives. If we are unable to raise capital when needed or on terms favorable to us, we could be forced to delay, reduce or terminate our product development, other operations or commercialization efforts.

 

   

We depend primarily on the success of our lead product candidate, BDC-1001, which is in clinical development and which has not completed a pivotal trial. If we do not obtain regulatory approval for and successfully commercialize our lead product candidate in one or more indications or we experience significant delays in doing so, or if we are unable to advance our other product candidates through preclinical and clinical development, obtain regulatory approval for and successfully commercialize our other product candidates in one or more indications, or we experience significant delays in doing so, we may never generate any revenue or become profitable.

 

   

Our approach to the discovery and development of product candidates based on our Boltbody ISAC approach is unproven, and we do not know whether we will be able to develop any products of commercial value, or if competing technological approaches will limit the commercial value of our product candidates or render our platform obsolete.

 

   

We have never commercialized a product candidate and we may lack the necessary expertise, personnel and resources to successfully commercialize any of our products that receive regulatory approval on our own or together with collaborators.

 

   

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

 

   

We do not have our own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of BDC-1001 and our other current and future product candidates.



 

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Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may charge for such product candidates.

 

   

If we are unable to obtain, maintain and protect sufficient patent and other intellectual property rights for our product candidates and technology, we may not be able to compete effectively in our market.

 

   

Our business, operations and clinical development plans and timelines and supply chain could be adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our contract manufacturing organizations, or CMOs, clinical research organizations, or CROs, shippers and others.

If we are unable to adequately address these and other risks we face, our business may be harmed.

Implications of Being an Emerging Growth Company

In addition, we are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and therefore we intend to take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, 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 any golden parachute payments not previously approved. We may take advantage of these exemptions for up to five years or until we are no longer an “emerging growth company,” whichever is earlier. In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies. We have not elected to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

Corporate Information

We were incorporated under the laws of the state of Delaware in January 2015 under the name Bolt Therapeutics, Inc. and changed our name to Bolt Biotherapeutics, Inc. in July 2015. Our principal executive offices are located at 900 Chesapeake Drive, Redwood City, California 94063. Our telephone number is (650) 665-9295. Our website is www.boltbio.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on or accessible through our website to be part of this prospectus.

“Bolt Biotherapeutics,” the Bolt Biotherapeutics logo and our other registered or common law trade names, trademarks or service marks appearing in this prospectus are our property. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective owners.



 

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THE OFFERING

 

Common stock offered by us

  

            shares

Option to purchase additional shares of common stock from us

  


            shares

Common stock to be outstanding after this offering

  

            shares (or             shares if the underwriters exercise their option to purchase additional shares in full)

Use of proceeds

  

We estimate that the net proceeds from the sale of             shares of common stock in this offering will be approximately $             million (or approximately $             million if the underwriters exercise their option to purchase additional shares in full), based upon an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

  

We intend to use the net proceeds from this offering to conduct our clinical trials, to fund continued research and development of BDC-1001, to fund other research and development activities, and for working capital and other general corporate purposes. See the section titled “Use of Proceeds” for additional information.

Risk factors

  

See “Risk Factors” and the other information included in this prospectus for a discussion of risks you should carefully consider before investing in our common stock.

Proposed Nasdaq trading symbol

  

“BOLT”

The number of shares of common stock that will be outstanding after this offering is based on 121,297,062 shares of common stock (including shares of preferred stock on an as-converted basis) outstanding as of September 30, 2020, and excludes:

 

   

26,353,303 shares of common stock issuable upon the exercise of outstanding stock options as of September 30, 2020, with a weighted-average exercise price of $0.45 per share, plus 1,200,000 shares of common stock issuable upon the exercise of stock options granted subsequent to September 30, 2020, with a weighted-average exercise price of $0.63 per share;

 

   

1,524,683 additional shares of common stock reserved for future issuance under our 2015 Equity Incentive Plan as of September 30, 2020, all of which shares will cease to be available for issuance under our 2015 Equity Incentive Plan at the time our 2021 Equity Incentive Plan becomes effective in connection with this offering;

 

   

             shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan, which will become effective upon the execution of the underwriting agreement for this offering, as well as (i) any automatic increases in the number of shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan and (ii) upon the forfeiture, termination, expiration or reacquisition of any shares of common stock underlying outstanding stock awards granted under our 2015 Equity Incentive Plan, an equal number of shares of common stock, such number of shares not to exceed              ; and

 



 

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             shares of common stock reserved for future issuance under our 2021 Employee Stock Purchase Plan, which will become effective upon the execution of the underwriting agreement for this offering, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan.

In addition, unless we specifically state otherwise, all information in this prospectus assumes:

 

   

that our amended and restated certificate of incorporation, which we will file in connection with the closing of this offering, and our amended and restated bylaws adopted in connection with this offering are effective;

 

   

the conversion of all 106,626,123 shares of preferred stock outstanding as of September 30, 2020, into an equal number of shares of common stock upon the closing of this offering;

 

   

the issuance of            shares of common stock upon the automatic net exercise of warrants, with an exercise price of $0.01 per share, immediately prior to the closing of this offering, assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus;

 

   

no exercise of outstanding options; and

 

   

no exercise of the underwriters’ option to purchase additional shares of common stock.



 

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SUMMARY FINANCIAL DATA

The following tables summarize our statements of operations and balance sheet data. The summary statements of operations data for the years ended December 31, 2018 and 2019 have been derived from our audited financial statements included elsewhere in this prospectus. The statements of operations data for the nine months ended September 30, 2019 and 2020, and the balance sheet data as of September 30, 2020, are derived from our unaudited interim financial statements included elsewhere in this prospectus. We have prepared the unaudited interim financial statements on the same basis as the audited financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair statement of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected for any other period in the future and our interim results for the nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the full year ending December 31, 2020, or any other period.

You should read the financial data set forth below in conjunction with our financial statements and the accompanying notes, the information in “Selected Financial Data” and the information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus. The summary financial data included in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and related notes included elsewhere in this prospectus.

 

     Year Ended December 31,     Nine Months Ended September 30,  
     2018     2019               2019                         2020            
     (In thousands, except share and per share amounts)  

Statements of Operations Data:

        

Collaboration revenue

   $     $ 215     $ 150     $ 231  

Operating expenses:

        

Research and development

     9,420       26,002       18,567       25,493  

General and administrative

     2,209       5,182       3,045       6,998  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     11,629       31,184       21,612       32,491  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (11,629     (30,969     (21,462     (32,260

Other income (expense), net:

        

Interest income

     193       524       379       187  

Change in fair value of convertible preferred stock purchase right liability

     (153     (42     (42     2,380  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     40       482       337       2,567  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (11,589   $ (30,487   $ (21,125   $ (29,693
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted

   $ (1.00   $ (2.18   $ (1.53   $ (2.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding, basic and diluted

     11,555,760       13,954,354       13,805,753       14,653,438  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted(1)

     $         $    
    

 

 

     

 

 

 

Pro forma weighted-average shares outstanding, basic and diluted(1)

        
    

 

 

     

 

 

 

 

(1)

See the statements of operations and comprehensive loss and Note 11 to our audited financial statements and unaudited interim financial statements included elsewhere in this prospectus for further details on the calculation of net loss per share and the pro forma net loss per share and pro forma weighted-average shares outstanding.



 

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     As of September 30, 2020  
     Actual     Pro
Forma(1)
     Pro Forma
As Adjusted(2)(3)
 
     (In thousands)  

Balance Sheet Data:

       

Cash, cash equivalents and short-term investments

   $ 37,748     $                    $                

Total assets

     61,736       

Convertible preferred stock purchase right liability

     11,099       

Working capital(4)

     29,776       

Total liabilities

     31,026       

Convertible preferred stock

     105,296       

Accumulated deficit

     (77,364     

Total stockholders’ (deficit) equity

     (74,586     

 

(1)

The pro forma balance sheet data gives effect to (i) the conversion of 106,626,123 shares of convertible preferred stock outstanding as of September 30, 2020, into an equal number of shares of common stock immediately upon the closing of this offering, (ii) the issuance of                shares of common stock upon the automatic net exercise of outstanding warrants, with an exercise price of $0.01 per share, immediately prior to the closing of this offering, assuming an initial public offering price of $        per share, which is the midpoint of the price range set forth on the cover page of this prospectus, (iii) the reclassification of our convertible preferred stock purchase right liability to additional paid-in capital immediately prior to the closing of this offering and (iv) the filing and effectiveness of our amended and restated certificate of incorporation that will be in effect upon the closing of this offering.

(2)

The pro forma as adjusted balance sheet data further reflects our receipt of net proceeds from the sale of shares of common stock in this offering at the assumed initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

Each $1.00 increase or decrease in the assumed initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, respectively, the amount of cash, cash equivalents and short-term investments, total assets, working capital and total stockholders’ equity by $        million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares we are offering would increase or decrease the amount of cash, cash equivalents and short-term investments, total assets, working capital and total stockholders’ equity by $        million, assuming the assumed initial public offering price per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. The pro forma as adjusted information is illustrative only, and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

(4)

We define working capital as current assets less current liabilities. See our financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.



 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our financial statements and related notes included elsewhere in this prospectus, before making an investment decision. If any of the following risks actually occur, it could harm our business, financial condition, results of operations and prospects. Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, net revenue and future prospects. In such event, the trading price of our common stock could decline and you might lose all or part of your investment.

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history and have incurred significant losses since inception and we anticipate that we may continue to incur losses for the foreseeable future and may never achieve or maintain profitability.

Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are an immuno-oncology company with a limited operating history upon which you can evaluate our business and prospects. With the exception of our lead product candidate, BDC-1001, all of our development programs are in preclinical development or in the drug discovery stage. We commenced operations in 2015, and to date, we have focused primarily on organizing and staffing our company, business planning, raising capital, developing our proprietary Boltbody ISAC approach, identifying product candidates, establishing our intellectual property portfolio and conducting research, preclinical studies and clinical trials. Our approach to the discovery and development of product candidates based on our Boltbody ISAC approach is unproven, and we do not know whether we will be able to develop any product candidates that succeed in clinical development or products of commercial value. As an organization, we have not yet completed any clinical trials, obtained regulatory approvals, manufactured a commercial-scale product (or arranged for a third party to do so on our behalf), or conducted sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.

Since inception in 2015, we have not generated any product revenue and have incurred significant operating losses. Our net losses were $11.6 million, $30.5 million and $29.7 million in 2018, 2019 and the nine months ended September 30, 2020, respectively. As of September 30, 2020, we had an accumulated deficit of $77.4 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Since inception, we have devoted substantially all of our efforts to research and preclinical and clinical development of our product candidates, as well as to building our management team and infrastructure. It could be at least several years, if ever, before we have a commercialized drug. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if, and as, we:

 

   

continue to advance our research and preclinical and clinical development of our product candidates;

 

   

expand and initiate further clinical trials for our product candidates;

 

   

seek to identify additional product candidates;

 

   

seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

 

   

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

 

   

maintain, expand, protect and enforce our intellectual property portfolio and obtain licenses to third-party intellectual property;

 

   

attract, hire and retain additional administrative, clinical, regulatory and scientific personnel;

 

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enter into third party relationships for clinical trials, manufacturing and supply; and

 

   

incur additional legal, accounting and other expenses in operating our business, including the additional costs associated with operating as a public company.

In addition, because of the numerous risks and uncertainties associated with pharmaceutical products and development, we are unable to accurately predict the timing or amount of increased expenses and when, or if, we will be able to achieve profitability. Our expenses could increase and profitability could be further delayed if we decide to or are required by the FDA or other regulatory authorities such as the European Medicines Agency, or EMA, or the U.K. Medicines & Healthcare Products Regulatory Agency, or MHRA, to perform studies or trials in addition to those currently expected, or if there are any delays in the development or completion of any planned or future preclinical studies or clinical trials of our current and future product candidates. Even if we complete the development and regulatory processes described above, we anticipate incurring significant costs associated with launching and commercializing our current and future product candidates.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company also could cause you to lose all or part of your investment.

We will need substantial funding to pursue our business objectives. If we are unable to raise capital when needed or on terms favorable to us, we could be forced to delay, reduce or terminate our product development, other operations or commercialization efforts.

Identifying and developing potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and begin selling any approved products. We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our ongoing and planned preclinical studies, initiate additional clinical trials for our product candidates and seek regulatory approval for our current product candidates and any future product candidates we may develop. Our expenses could increase beyond our current expectations if the FDA requires us to perform clinical trials and other studies in addition to those that we currently anticipate. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or terminate our research and development programs or future commercialization efforts.

As of September 30, 2020, we had cash, cash equivalents and short-term investments of $37.7 million. Our recurring losses from operations and negative cash flows raise substantial doubt about our ability to continue as a going concern. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern. Similarly, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of, and for the year ended, December 31, 2019, describing the existence of substantial doubt about our ability to continue as a going concern. We believe that the successful completion of this offering will eliminate this doubt and enable us to continue as a going concern; however, if we are unable to raise sufficient capital in this offering, we may need to obtain alternative financing or significantly modify our operational plans for us to continue as a going concern. Based upon our current operating plan and assumptions, we believe that our existing cash, cash equivalents and short-term investments, including the net proceeds from this initial public offering, will be sufficient to fund our operations for at least the next                months from the date of this prospectus. This estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. Changes may occur beyond

 

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our control that would cause us to consume our available capital before that time, including changes in and progress of our development activities and changes in regulation. Our future capital requirements will depend on many factors, including:

 

   

the scope, rate of progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

 

   

the number and development requirements of product candidates that we may pursue, and other indications for our current product candidates that we may pursue;

 

   

the costs, timing and outcome of regulatory review of our product candidates;

 

   

the scope and costs of manufacturing development and commercial manufacturing activities;

 

   

the cost associated with commercializing any approved product candidates;

 

   

the cost and timing of developing our ability to establish sales and marketing capabilities, if any;

 

   

the costs of preparing, filing and prosecuting patent applications, maintaining, enforcing and protecting our intellectual property rights, defending intellectual property-related claims and obtaining licenses to third-party intellectual property;

 

   

the timing and amount of milestone and royalty payments we are required to make under our license agreements;

 

   

our ability to establish and maintain collaborations on favorable terms, if at all; and

 

   

the extent to which we acquire or in-license other product candidates and technologies and associated intellectual property.

We will require additional capital to complete our planned clinical development programs for our current product candidates to obtain regulatory approval. Any additional capital raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future product candidates, if approved.

In addition, we cannot guarantee that future financing will be available on a timely basis, in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities by us, whether equity or debt, or the market perception that such issuances are likely to occur, could cause the market price of our common stock to decline. If we are unable to obtain funding on a timely basis on acceptable terms, we may be required to delay, reduce or terminate one or more of our research and development programs or the commercialization of any product candidates that may be approved. This could harm our business and could potentially cause us to cease operations.

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

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. 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 of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise

 

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additional funds through equity or debt financings when needed, we may be required to delay, reduce or terminate our product development or future commercialization efforts or grant rights to third parties to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We might not be able to utilize a significant portion of our net operating loss carryforwards.

As of December 31, 2019, we had federal and state net operating loss, or NOL, carryforwards of $46.2 million and $46.3 million, respectively. The federal NOLs include $4.4 million that may be used to offset up to 100% of future taxable income and will begin to expire in 2035, unless previously utilized, and $41.8 million that are not subject to expiration. The net operating loss carryforwards subject to expiration could expire unused and be unavailable to offset future income tax liabilities. Under the Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, federal net operating losses incurred in taxable years beginning after December 31, 2017 and in future taxable years may be carried forward indefinitely, but the deductibility of such federal net operating losses in taxable years beginning after December 31, 2020 is limited. There is variation in how states will respond to the Tax Act and CARES Act. In addition, for state income tax purposes, there may be periods during which the use of NOLs is suspended or otherwise limited, such as recent California legislation limiting the usability of NOLs for tax years beginning in 2020 and before 2023.

Separately, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. The completion of this offering, together with private placements and other transactions that have occurred since our inception, may trigger such an ownership change pursuant to Section 382. We have not completed a Section 382 analysis, and therefore, there can be no assurances that the NOLs are not already limited.

We may experience ownership changes as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

Risks Related to the Development of Our Product Candidates

We depend primarily on the success of our lead product candidate, BDC-1001, which is in clinical development and which has not completed a pivotal trial. If we do not obtain regulatory approval for and successfully commercialize our lead product candidate in one or more indications or we experience significant delays in doing so, or if we are unable to advance our other product candidates through preclinical and clinical development, obtain regulatory approval for and successfully commercialize our other product candidates in one or more indications, or we experience significant delays in doing so, we may never generate any revenue or become profitable.

We do not have any products that have received regulatory approval and may never be able to develop marketable product candidates. We are very early in our development efforts. BDC-1001, our lead product candidate, is still in the early stages of clinical development, and is our only product candidate to have advanced beyond preclinical studies. We have invested substantially all of our efforts in developing our Boltbody ISAC approach, identifying potential product candidates and conducting preclinical studies. We expect that a substantial portion of our efforts and expenses over the next several years will be devoted to the development of BDC-1001 in our ongoing and planned clinical trials in HER2-expressing solid tumors, including subsets of HER2-low tumors. As a result, our business currently depends heavily on the successful development, regulatory approval and, if approved, commercialization of BDC-1001 in one or more of these indications. We

 

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cannot be certain that BDC-1001 will receive regulatory approval or will be successfully commercialized even if it receives regulatory approval. The research, testing, manufacturing, safety, efficacy, labeling, approval, sale, marketing and distribution of BDC-1001 is, and will remain, subject to comprehensive regulation by the FDA and similar foreign regulatory authorities. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through preclinical studies and clinical trials that the product candidate is safe and effective for use in each target indication. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. Failure to obtain regulatory approval for our product candidates will prevent us from commercializing and marketing our product candidates. The success of BDC-1001 and any other product candidates, including our CEA Boltbody ISAC for the treatment of CEA-expressing solid tumors, will depend on several additional factors, including:

 

   

completing clinical trials that demonstrate their safety and efficacy;

 

   

successful initiation of clinical trials;

 

   

successful patient enrollment in, and completion, of clinical trials;

 

   

the ability to successfully develop, in-license or otherwise acquire additional targeting agents for our Boltbody ISACs;

 

   

receiving marketing approvals from applicable regulatory authorities;

 

   

obtaining, maintaining, protecting and enforcing patent, trade secret and other intellectual property rights and regulatory exclusivity for our product candidates;

 

   

completing any post-marketing studies required by applicable regulatory authorities;

 

   

making and maintaining arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial supplies of our product candidates;

 

   

establishing sales, marketing and distribution capabilities and successfully launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;

 

   

the prevalence and severity of adverse events experienced with our product candidates;

 

   

acceptance of our product candidates by patients, the medical community and third-party payors;

 

   

a continued acceptable safety profile following approval;

 

   

obtaining and maintaining healthcare coverage and adequate reimbursement for our product candidates;

 

   

competing effectively with other cancer therapies, including with respect to the sales and marketing of our product candidates, if approved; and

 

   

obtaining licenses to any third party intellectual property we deem necessary or desirable.

Many of these factors are beyond our control, including the time needed to adequately complete clinical testing, the regulatory submission process, potential threats to our intellectual property rights and changes in the competitive landscape. It is possible that none of our product candidates will ever obtain regulatory approval, even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully complete clinical trials, obtain regulatory approval or, if approved, commercialize our product candidates, which would materially harm our business, financial condition, results of operations and prospects.

In addition, the clinical trial requirements of the FDA, the EMA, the MHRA and other regulatory agencies and the criteria these regulators may use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates.

 

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Our approach to the discovery and development of product candidates based on our Boltbody ISAC approach is unproven, and we do not know whether we will be able to develop any products of commercial value, or if competing technological approaches will limit the commercial value of our product candidates or render our platform obsolete.

The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our proprietary Boltbody ISAC approach, which leverages a novel and unproven approach. While we have had favorable preclinical study results based on our technology, we have not yet succeeded and may not succeed in demonstrating safety and efficacy for any product candidates in clinical trials or in obtaining marketing approval thereafter. Our lead product candidate, BDC-1001, is in clinical development and we have not yet completed any clinical trials for any product candidate. Our research methodology and novel approach to immunotherapy may be unsuccessful in identifying additional product candidates, and any product candidates based on our technology may be shown to have harmful side effects or may have other characteristics that may necessitate additional clinical testing, or make the product candidates unmarketable or unlikely to receive marketing approval. Further, because all of our product candidates and development programs are based on our technology approach, adverse developments with respect to one of our programs may have a significant adverse impact on the actual or perceived likelihood of success and value of our other programs.

In addition, the biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies. Our future success will depend in part on our ability to maintain a competitive position with our Boltbody ISAC approach. If we fail to stay at the forefront of technological change in utilizing our Boltbody ISAC approach to create and develop product candidates, we may be unable to compete effectively. Our competitors may render our Boltbody ISAC approach obsolete, or limit the commercial value of our product candidates, by advances in existing technological approaches (for example, using different antibody drug conjugate, or ADC, technologies than we use) or the development of new or different approaches, potentially eliminating the advantages in our drug discovery process that we believe we derive from our research approach and proprietary technologies. By contrast, adverse developments with respect to other companies that attempt to use a similar approach to our approach may adversely impact the actual or perceived value of our Boltbody ISAC approach and potential of our product candidates.

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

Our product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development.

We have concentrated our product research and development efforts on our novel therapeutic approach, and our future success depends on the successful development of our lead product candidate, BDC-1001, and other product candidates. There can be no assurance that any development problems we experience in the future related to our novel therapy will not cause significant delays or unanticipated costs, or that such development problems can be efficiently solved. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical trials or commercializing our product candidates on a timely or profitable basis, if at all.

We are currently developing, and in the future may develop, product candidates in combination with other therapies and that may expose us to additional risks.

We are developing BDC-1001 as a combination therapy in addition to a single agent therapy. Also, we may develop future product candidates for use in combination with one or more currently approved cancer therapies. Even if any product candidate we develop was to receive marketing approval or be commercialized for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA or similar

 

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foreign regulatory authorities could revoke approval of the therapy used in combination with our product candidate or that safety, efficacy, manufacturing or supply issues could arise with these existing therapies. Combination therapies are commonly used for the treatment of cancer, and we would be subject to similar risks if we develop any of our product candidates for use in combination with other drugs or for indications other than cancer. This could result in our own products being removed from the market or being less successful commercially.

We may also evaluate BDC-1001 or any other future product candidates in combination with one or more other cancer therapies that have not yet been approved for marketing by the FDA or similar foreign regulatory authorities. We will not be able to market and sell BDC-1001 or any product candidate we develop in combination with any such unapproved cancer therapies that do not ultimately obtain marketing approval.

If the FDA or similar foreign regulatory authorities do not approve these other drugs or revoke their approval of, or if safety, efficacy, manufacturing or supply issues arise with, the drugs we choose to evaluate in combination with BDC-1001 or any product candidate we develop, we may be unable to obtain approval of or market BDC-1001 or any product candidate we develop.

We may seek accelerated approval for some or all of our product candidates from the FDA, however, the FDA may disagree and may require completion of additional clinical trials before considering a Biologics License Application, or BLA, for review.

We may seek accelerated approval for BDC-1001 for the treatment of patients with HER2-expressing solid tumors. Under the FDA’s accelerated approval program, the FDA may approve a drug or biologic for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon 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 and biologics granted accelerated approval, confirmatory trials are required to confirm safety and clinical benefit and convert the application to full approval. These confirmatory trials must be completed with due diligence. Moreover, the FDA may withdraw approval of an application approved under the accelerated approval pathway if, for example:

 

   

the trial or trials required to verify the predicted clinical benefit of our product candidates fail to verify such benefit or do not demonstrate sufficient clinical benefit, including as to the duration of their effectiveness, to justify the risks associated with the product;

 

   

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

 

   

we fail to conduct any required post-approval trial with due diligence; or

 

   

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

Clinical trials are very expensive, time-consuming and difficult to design and implement, and involve uncertain outcomes. Furthermore, results of earlier preclinical studies and clinical trials may not be predictive of results of future preclinical studies or clinical trials.

The risk of failure for our product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe and effective in humans for use in each target indication. Clinical testing is expensive and can take many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during the clinical trial process.

In addition, the results of preclinical studies and earlier clinical trials may not be predictive of the results of later-stage preclinical studies or clinical trials. The results generated to date in preclinical studies or clinical trials

 

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for our product candidates do not ensure that later preclinical studies or clinical trials will demonstrate similar results. We have limited clinical data for any of our product candidates. Product candidates in later stages of clinical trials, although we have none at this stage as of yet, may fail to show the desired safety and efficacy traits despite having progressed through preclinical and earlier stage clinical trials. For example, the favorable results of our ongoing trial of BDC-1001 in patients with HER2-expressing solid tumors may not be predictive of similar results in subsequent trials. In later-stage clinical trials, we will likely be subject to more rigorous statistical analyses than in completed earlier stage clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in later-stage clinical trials due to adverse safety profiles or lack of efficacy, notwithstanding promising results in earlier trials, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

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 clinical trial procedures set forth in protocols, differences in the size and type of the patient populations, adherence to the dosing regimen and other clinical trial protocols, and the rate of dropout among clinical trial participants. If we fail to produce positive results in our planned preclinical studies or clinical trials of any of our product candidates, the development timeline and regulatory approval and commercialization prospects for our product candidates, and, correspondingly, our business and financial prospects, would be materially and adversely affected.

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidate for its intended indications. Clinical trials are expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

 

   

delays in reaching a consensus with regulatory authorities on trial design;

 

   

delays in reaching agreement or failing to agree on acceptable terms with prospective CROs and clinical trial sites;

 

   

delays in opening sites and recruiting suitable patients to participate in our clinical trials;

 

   

delays in enrollment due to travel or quarantine policies, or other factors, related to COVID-19, other pandemics or other events outside our control;

 

   

imposition of a clinical hold by regulatory authorities as a result of a serious adverse event, concerns with a class of product candidates or after an inspection of our clinical trial operations or trial sites;

 

   

delays in having patients complete participation in a trial or return for post-treatment follow-up;

 

   

occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or

 

   

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

For instance, the ongoing COVID-19 pandemic and the measures taken by the governmental authorities could disrupt the supply chain and the manufacture or shipment of drug substances and finished drug products for our product candidates for use in our research and clinical trials, delay, limit or prevent our employees and CROs from continuing research and development activities, impede the ability of patients to enroll or continue in

 

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clinical trials, or impede testing, monitoring, data collection and analysis or other related activities, any of which could delay our clinical trials and increase our development costs, and have a material adverse effect on our business, financial condition and results of operations.

Any inability to timely and successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to achieve regulatory and commercialization milestones. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional testing to bridge our modified product candidate to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our competitors to bring comparable drugs to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business, financial condition, results of operations and prospects.

Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our product candidates, we may:

 

   

be delayed in obtaining marketing approval, if at all;

 

   

obtain approval for indications or patient populations that are not as broad as intended or desired;

 

   

obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

 

   

be subject to additional post-marketing testing requirements;

 

   

be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

 

   

have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy, or REMS;

 

   

be subject to the addition of labeling statements, such as warnings or contraindications;

 

   

be sued; or

 

   

experience damage to our reputation.

Our drug development costs will also increase if we experience delays in testing or obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, need to be restructured or be completed on schedule, if at all.

Further, we, the FDA or an institutional review board may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s current Good Clinical Practice, or GCP, regulations, that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our Investigational New Drug Applications, or INDs, or the conduct of these trials. Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials. If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates could be negatively impacted, and our ability to generate revenues from our product candidates may be delayed or eliminated entirely.

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

Because we have limited financial and managerial resources, we focus on research programs that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product

 

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candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial therapies or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, our ability to market the drug could be compromised.

Clinical trials of our product candidates are conducted in carefully defined subsets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If one or more of our product candidates receives regulatory approval, and we, or others, later discover that they are less effective than previously believed, or cause undesirable side effects, a number of potentially significant negative consequences could result, including:

 

   

withdrawal or limitation by regulatory authorities of approvals of such product;

 

   

seizure of the product by regulatory authorities;

 

   

recall of the product;

 

   

restrictions on the marketing of the product or the manufacturing process for any component thereof;

 

   

requirement by regulatory authorities of additional warnings on the label, such as a “black box” warning or contraindication;

 

   

requirement that we implement a REMS or create a medication guide outlining the risks of such side effects for distribution to patients;

 

   

commitment to expensive additional safety studies prior to approval or post-marketing studies required by regulatory authorities of such product;

 

   

the product may become less competitive;

 

   

initiation of regulatory investigations and government enforcement actions;

 

   

initiation of legal action against us to hold us liable for harm caused to patients; and

 

   

harm to our reputation and resulting harm to physician or patient acceptance of our products.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, financial condition, results of operations and prospects.

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

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

 

   

the patient eligibility criteria defined in the protocol;

 

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the size and health of the patient population required for analysis of the trial’s primary endpoints;

 

   

the proximity of patients to study sites;

 

   

the design of the trial;

 

   

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

 

   

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

 

   

our ability to obtain and maintain patient consents; and

 

   

the risk that patients enrolled in clinical trials will drop out of the trials before completion.

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 trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial site. 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 rather than enroll patients in any future clinical trial.

Delays in patient enrollment 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.

We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage, and our product liability insurance may not cover all damages from such claims.

We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. We currently have no products that have been approved for commercial sale. However, the current and future use of product candidates by us in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients who use the product, healthcare providers, pharmaceutical companies or others selling such products. In addition, we have agreed to indemnify the licensors of the intellectual property related to our product candidates against certain intellectual property infringement, misappropriation and other claims. Any claims against us, or with respect to which we are obligated to provide indemnification, regardless of their merit, could be difficult and costly to defend or settle, and could compromise the market acceptance of our product candidates or any prospects for commercialization of our product candidates, if approved. For more information regarding the risks associated with intellectual property-related litigation, see “Risk Factors—Risks Related to Our Intellectual Property.”

Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates.

Although we maintain product liability insurance coverage, such insurance may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage each time we commence a clinical

 

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trial and if we successfully commercialize any product candidate. As the expense of insurance coverage is increasing, we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

Risks Related to Commercialization of Our Product Candidates

We have never commercialized a product candidate and we may lack the necessary expertise, personnel and resources to successfully commercialize any of our products that receive regulatory approval on our own or together with collaborators.

We have never commercialized a product candidate. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring the rights to our product candidates and undertaking preclinical studies and clinical trials of our product candidates. We currently have no sales force, marketing, manufacturing or distribution capabilities. To achieve commercial success of our product candidates, if any are approved, we will have to develop our own sales, marketing and manufacturing capabilities or outsource these activities to a third party.

Factors that may affect our ability to commercialize our product candidates on our own include recruiting and retaining adequate numbers of effective sales and marketing personnel, persuading adequate numbers of physicians to prescribe our product candidates and other unforeseen costs associated with creating an independent sales and marketing organization. Developing a sales and marketing organization requires significant investment, is time-consuming and could delay the launch of our product candidates. We may not be able to build an effective sales and marketing organization in the United States, the European Union or other key global markets. If we are unable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our product candidates, we may have difficulties generating revenue from them.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical, specialty pharmaceutical and biotechnology companies among others. We compete in the segments of the pharmaceutical, biotechnology and other related markets that develop immunotherapies for the treatment of cancer. There are other companies working to develop immunotherapies for the treatment of cancer including divisions of large pharmaceutical and biotechnology companies of various sizes. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

We are developing our initial product candidates for the treatment of cancer and currently none of these therapies are approved. There are already a variety of available drug therapies marketed for cancer and some of the currently approved drug therapies are branded and subject to patent protection, and others are available on a generic basis. Many of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. We expect that if our product candidates are approved, they will be priced at a significant premium over competitive generic products. This may make it difficult for us to achieve our business strategy of using our product candidates in combination with existing therapies or replacing existing therapies with our product candidates.

 

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Competition may further increase as a result of advances in the commercial applicability of technologies for drug discovery and development and greater availability of capital for investment in cancer therapies. We are aware that Novartis and Silverback are developing HER2-targeting ISACs, and other companies may develop ISACs and toll-like receptor, or TLR, agonists that may have utility for the treatment of HER2-expressing cancers and other indications we are targeting. With respect to BDC-1001, there are numerous companies developing and marketing therapies focused on HER2-expressing cancers that utilize a range of other technologies and scientific approaches including ADCs, vaccines, bispecific antibodies and receptor tyrosine kinases inhibitors. Several of these companies have approved therapies, including Seattle Genetics, Daiichi Sankyo, Roche, Novartis and AstraZeneca, and many others have therapies in clinical development, including Zymeworks, MacroGenics, Merus and Ambrx. Our current product and future product candidates will also compete more generally with companies developing alternative innate and adaptive immune system approaches for the treatment of cancer.

Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop. In addition, most of these companies have substantially greater sales, marketing and other experience and reserves than we do.

Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates less competitive. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing, receiving FDA approval for or commercializing drugs before we do, which would have an adverse impact on our business and results of operations.

The availability of our competitors’ products could limit the demand and the price we are able to charge for any product candidate we commercialize, if any. The inability to compete with existing or subsequently introduced drugs would harm our business, financial condition, results of operations and prospects.

Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

If BDC-1001 and our other current and future product candidates receive marketing approval, whether as a single agent or in combination with other therapies, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. For example, current approved immunotherapies, and other cancer treatments like chemotherapy and radiation therapy, are well established in the medical community, and doctors may continue to rely on these therapies. If any of our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may never become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

 

   

efficacy and potential advantages compared to alternative treatments;

 

   

the ability to offer our products, if approved, for sale at competitive prices;

 

   

convenience and ease of administration compared to alternative treatments;

 

   

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

 

   

the strength of marketing and distribution support;

 

   

sufficient third-party coverage or reimbursement, including of combination therapies;

 

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the willingness of patients to pay all, or a portion of, out-of-pocket costs associated with our products in the absence of sufficient third-party coverage and adequate reimbursement;

 

   

adoption of a companion diagnostic or complementary diagnostic; and

 

   

the prevalence and severity of any side effects.

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

The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford products such as our product candidates, if approved. Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize our product candidates and attract additional collaboration partners to invest in the development of our product candidates. Coverage under certain government programs, such as Medicare, Medicaid, the 340B drug pricing program and TRICARE, may not be available for certain of our product candidates. Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidates and other therapies as substitutable and only offer to reimburse patients for the less expensive product. Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing drugs may limit the amount we will be able to charge for our product candidates. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on products that we may develop.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse health care providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

Obtaining and maintaining reimbursement status is time-consuming and costly. No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and

 

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adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. The continuing efforts of the government, insurance companies, managed care organizations and other payors of health care services to contain or reduce costs of health care may adversely affect:

 

   

the demand for any products for which we may obtain regulatory approval;

 

   

our ability to set a price that we believe is fair for our products;

 

   

our ability to obtain coverage and reimbursement approval for a product;

 

   

our ability to generate revenues and achieve or maintain profitability; and

 

   

the level of taxes that we are required to pay.

Even if we receive marketing approval for any of our product candidates, we may not achieve market acceptance, which would limit the revenue that we can generate from sales of any of our approved product candidates.

Even if the FDA approves the marketing of any product candidates that we develop, physicians, patients, third-party payors or the medical community may not accept or use them. Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. Market acceptance of BDC-1001 and our other product candidates, if any are approved, will depend on a number of factors, including, among others:

 

   

the ability of BDC-1001 and our other product candidates to treat cancer, as compared with other available drugs, treatments or therapies;

 

   

the prevalence and severity of any adverse side effects associated with BDC-1001 and our other product candidates;

 

   

limitations or warnings contained in the labeling approved for BDC-1001 or our other product candidates by the FDA;

 

   

availability of alternative treatments;

 

   

the size of the target patient population, and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

 

   

the strength of marketing and distribution support and timing of market introduction of competitive products;

 

   

publicity for our product candidates and competing products and treatments;

 

   

pricing and cost effectiveness;

 

   

the effectiveness of our sales and marketing strategies;

 

   

our ability to increase awareness of our product candidates through marketing efforts;

 

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our ability to obtain sufficient third-party coverage and adequate reimbursement; and

 

   

the likelihood that the FDA may impose additional requirements that limit the promotion, advertising, distribution or sales of our product candidates.

The market acceptance of our product candidates also will depend in part on the market acceptance of other immunotherapies for the treatment of cancer. While a number of other cancer immunotherapies have received regulatory approval and are being commercialized, our approach to harnessing ISACs is novel. Adverse events in clinical trials for our product candidates or in clinical trials of others developing similar products and the resulting publicity, as well as any other adverse events in the field of immuno-oncology that may occur in the future, could result in a decrease in demand for BDC-1001 or any other product candidate that we may develop. If public perception is influenced by claims that the use of cancer immunotherapies is unsafe, whether related to our therapies or those of our competitors, our products may not be accepted by the general public or the medical community. Future adverse events in immuno-oncology or the biopharmaceutical industry generally could also result in greater governmental regulation and stricter labeling requirements.

If any one of our product candidates is approved but does not achieve an adequate level of acceptance by patients, physicians and third-party payors, we may not generate sufficient revenue to become or remain profitable and our business may be harmed.

Even if we obtain regulatory approval for our product candidates, they will remain subject to ongoing regulatory oversight.

Even if we obtain regulatory approval for any of our product candidates, they will be subject to extensive and ongoing regulatory requirements for manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, sampling and record-keeping. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practices, or cGMP, regulations and GCPs, for any clinical trials that we conduct post-approval, all of which may result in significant expense and limit our ability to commercialize such products. In addition, any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS as a condition of approval of our product candidates, which could include 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’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 and we may not achieve or sustain profitability. Moreover, if there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or our manufacture of a product, or if we or one of our distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take various actions. These include:

 

   

issuing warning or untitled letters;

 

   

seeking an injunction or imposing civil or criminal penalties or monetary fines;

 

   

suspension or imposition of restrictions on operations, including product manufacturing;

 

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seizure or detention of products, refusal to permit the import or export of products or request that we initiate a product recall;

 

   

suspension or withdrawal of our marketing authorizations;

 

   

suspension of any ongoing clinical trials;

 

   

refusal to approve pending applications or supplements to applications submitted by us; or

 

   

requiring us to conduct additional clinical trials, change our product labeling or submit additional applications for marketing authorization.

If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could harm our business, financial condition, results of operations and prospects.

If any of our product candidates are approved for marketing and commercialization and we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we will be unable to successfully commercialize our product candidates if and when they are approved.

We have no sales, marketing or distribution capabilities or experience. To achieve commercial success for any approved product for which we retain sales and marketing responsibilities, we must either develop a sales and marketing organization, which would be expensive and time consuming, or outsource these functions to other third parties. In the future, we may choose to build a focused sales and marketing infrastructure to sell, or participate in sales activities with our collaborators for, some of our product candidates if and when they are approved.

There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

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

 

   

our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

 

   

the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future product candidates;

 

   

the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

 

   

unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues to us are likely to be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. In entering into third-party marketing or distribution arrangements, any revenue we receive will depend upon the efforts of the third parties and we cannot assure you that such third parties will establish adequate sales and distribution capabilities or devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

 

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Risks Related to Our Dependence on Third Parties

We do not have our own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of BDC-1001 and our other current and future product candidates.

We have limited experience in drug formulation and manufacturing and do not own or operate, and we do not expect to own or operate, facilities for drug manufacturing, storage, distribution or testing. We have entered into supply agreements with Piramal Healthcare UK Ltd, or Piramal, to manufacture drug substance and drug product and EirGenix, Inc., pursuant to which we agreed to purchase monoclonal antibodies, including a biosimilar of trastuzumab, for our Boltbody ISAC. Our current third-party CMOs may be unable or unwilling to supply us with sufficient clinical and commercial grade quantities of our clinical materials due to production shortages or other supply interruptions resulting from the ongoing COVID-19 pandemic or otherwise, because they are purchased by one of our competitors or another company that decides not to continue supplying us with these materials, or for other reasons. If one or more of these events occur and we are unable to timely establish an alternate supply from one or more third-party CMOs, we could experience delays in our development efforts as we locate and qualify new manufacturers. Under such circumstances, we may be required to receive drug substance for use on a purchase order basis, and as such, there can be no assurance that we actually receive sufficient quantities. See also the risk factor titled “—Our business, operations and clinical development plans and timelines and supply chain could be adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our CMOs, CROs, shippers and others.”

Further, our reliance on third-party manufacturers exposes us to risks beyond our control, including the risk of:

 

   

inability to meet our product specifications and quality requirements consistently;

 

   

delay or inability to procure or expand sufficient manufacturing capacity;

 

   

manufacturing and quality issues, including related to scale-up of manufacturing;

 

   

costs and validation of new equipment and facilities required for additional scale-up;

 

   

failure of the manufacturer to comply with cGMP and similar foreign standards;

 

   

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

 

   

termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;

 

   

reliance on a limited number of sources, and in some cases, single sources for components, such that if we are unable to secure a sufficient supply of these drug components, we will be unable to manufacture and sell BDC-1001 or other product candidates in a timely fashion, in sufficient quantities or under acceptable terms;

 

   

lack of qualified backup suppliers for those components that are currently purchased from a sole or single source supplier;

 

   

operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier or the issuance of a FDA Form 483 notice or warning letter;

 

   

carrier disruptions or increased costs that are beyond our control; and

 

   

failure to deliver our products under specified storage conditions and in a timely manner.

Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production. In addition, our third-party manufacturers and suppliers are subject to FDA inspection from time to time. Failure by our third-party manufacturers and suppliers to pass such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to our product candidate may result in regulatory actions such as the issuance of FDA Form 483 notices of observations, warning letters or injunctions or the loss of operating licenses. In addition, our third-party manufacturers and suppliers are subject to numerous

 

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environmental, health and safety laws and regulations, including those governing the handling, use, storage, treatment and disposal of waste products, and failure to comply with such laws and regulations could result in significant costs associated with civil or criminal fines and penalties for such third parties. Based on the severity of the regulatory action, our clinical or commercial supply of drug and packaging and other services could be interrupted or limited, which could harm our business.

In addition, our CMOs are or may be engaged with other companies to supply and manufacture materials or products for such companies, which also exposes our suppliers and manufacturers to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may also affect the regulatory clearance of a contract supplier’s or manufacturer’s facility. If the FDA or a comparable foreign regulatory agency does not approve these facilities for the supply or manufacture of our product candidates, or if it withdraws its approval in the future, we may need to find alternative supply or manufacturing facilities, which would negatively impact our ability to develop, obtain regulatory approval of or market our product candidates, if approved.

As we prepare for later-stage clinical trials and potential commercialization, we will need to take steps to increase the scale of production of our product candidates, which may include transferring production to new third-party suppliers or manufacturers. In order to conduct larger or late-stage scale clinical trials for our product candidates and supply sufficient commercial quantities of the resulting drug product and its components, if that product candidate is approved for sale, our CMOs and suppliers will need to produce our product candidates in larger quantities, more cost effectively and, in certain cases, at higher yields than they currently achieve. These third-party contractors may not be able to successfully increase the manufacturing capacity for any such product candidates in a timely or cost-effective manner or at all. Significant scale up of manufacturing may require additional processes, technologies and validation studies, which are costly, may not be successful and which the FDA and foreign regulatory authorities must review and approve. In addition, quality issues may arise during those scale-up activities because of the inherent properties of a product candidate itself or of a product candidate in combination with other components added during the manufacturing and packaging process, or during shipping and storage of the active pharmaceutical ingredients or the finished product. If our third-party CMOs are unable to successfully scale up the manufacture of any of our product candidates in sufficient quality and quantity and at commercially reasonable prices, and we are unable to find one or more replacement suppliers or manufacturers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality, and we are unable to successfully transfer the processes on a timely basis, the development of that product candidate and regulatory approval or commercial launch for any resulting products may be delayed, or there may be a shortage in supply, either of which could significantly harm our business, financial condition, results of operations and prospects.

Any of these events could lead to clinical trial delays, failure to obtain regulatory approval or impact our ability to successfully commercialize any potential future product candidates.

We rely on third parties to conduct our preclinical studies and clinical trials and if these third parties perform in an unsatisfactory manner, our business could be substantially harmed.

We intend to conduct our future clinical trials using our own clinical resources while also leveraging expertise and assistance from CROs as appropriate. We do not currently have the ability to independently conduct large-scale clinical trials, such as a Phase 3 clinical trial, without outside assistance.

We have relied upon and plan to continue to rely upon medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct or assist us in conducting GCP-compliant clinical trials on our product candidates properly and on time, and may not currently have all of the necessary contractual relationships in place to do so. Once we have established contractual relationships with such third-party CROs, we will have only limited control over their actual performance of these activities.

 

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We and our CROs and other vendors are required to comply with current good manufacturing practice, or cGMP, good clinical practice, or GCP, and good laboratory practice, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Union and any comparable foreign regulatory authorities for all of our product candidates in preclinical and clinical development. Regulatory authorities enforce these regulations through periodic inspections of trial sponsors, principal investigators, clinical trial sites and other contractors. Although we rely on CROs to conduct any current or planned GLP-compliant preclinical studies and GCP-compliant clinical trials and have limited influence over their actual performance, we remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities. If we or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our preclinical studies and clinical trials may be deemed unreliable and the FDA, EMA, MHRA or any comparable foreign regulatory agency may require us to perform additional preclinical studies and clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory agency, such regulatory agency will determine that all of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with products produced under cGMP requirements. Our failure to comply with these requirements may require us to repeat clinical trials, which would delay the regulatory approval process.

While we will have agreements governing their activities, our CROs will not be our employees, and we will not be able to control whether or not they devote sufficient time and resources to our future preclinical and clinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our business. We face the risk of potential unauthorized disclosure, infringement, misappropriation or other violation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors, and other third parties, to access and exploit our proprietary technology. CROs also may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property-related proceedings that could jeopardize or invalidate our proprietary information and intellectual property. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reason, our clinical trials may be extended, delayed or terminated, the clinical data generated in our clinical trials may be deemed unreliable, and we may not be able to obtain regulatory approval for, or successfully commercialize any product candidate that we develop. As a result, our financial results and the commercial prospects for any product candidate that we develop would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

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

If we are not able to maintain our current collaborations and establish further collaborations, we may have to alter some of our future development and commercialization plans.

Our product development programs and the potential commercialization of our product candidates will require substantial additional capital to fund expenses. We entered into a joint development and license agreement, or the Toray Development Agreement with Toray Industries, Inc., or Toray, to collaborate with Toray to develop and commercialize a cancer therapy medicine product containing Toray’s proprietary antibody or a related antibody, and our proprietary Boltbody ISAC approach. We may enter into other collaboration agreements with pharmaceutical and biotechnology companies for the future development and potential

 

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commercialization of our product candidates. We will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of any product candidates we may seek to develop with them. We cannot predict the success of any collaboration that we have entered into or will enter into.

We face significant competition in seeking appropriate collaborators, and a number of more established companies may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, financial resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA, EMA, MHRA or similar foreign regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. We may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate further collaborations on a timely basis, on acceptable terms, or at all. Even if we are able to obtain a license to intellectual property of interest, we may not be able to secure exclusive rights, in which case others could use the same rights and compete with us. Our existing collaboration partners may not prioritize our product candidates or otherwise not effectively pursue the development of our product candidates which may delay, reduce or terminate the development of such product candidate, reduce or delay its development program or delay its potential commercialization. Further if we are unable to successfully obtain rights to required third-party intellectual property rights or maintain and protect the existing intellectual property rights we have, we may have to delay, reduce or terminate the development of such product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities or increase our expenditures and undertake development or commercialization activities at our own expense. Doing so will likely harm our ability to execute our business plans. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

Risks Related to Regulatory Compliance

Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may charge for such product candidates.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product for which we obtain marketing approval.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was enacted, which includes

 

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measures that have significantly changed the way health care is financed by both governmental and private insurers. Some of the provisions of the Affordable Care Act have yet to be implemented, and there have been judicial and congressional challenges to certain aspects of the Affordable Care Act. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. In addition, while Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the Affordable Care Act such as removing penalties, starting January 1, 2019, for not complying with the Affordable Care Act’s individual mandate to carry health insurance. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the Affordable Care Act-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. It is unclear how this decision, future decisions, subsequent appeals and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and our business. We continue to evaluate the effect that the Affordable Care Act and its possible repeal and replacement has on our business.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, then-President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year through 2029 unless Congress takes additional action. Recently, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. congressional inquiries and legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. Further, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human Services has solicited feedback on some of these measures and has implemented others under its existing authority. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control costs pharmaceutical and biological products.

We expect that the healthcare reform measures that have been adopted and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government 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.

 

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Our business operations and current and future relationships with investigators, health care professionals, consultants, third-party payors and customers will be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Although we do not currently have any products on the market, our operations may be, directly or indirectly through our prescribers, customers and third-party payors, subject to various U.S. federal and state healthcare laws and regulations, including, without limitation, the U.S. federal Anti-Kickback Statute, the U.S. federal civil and criminal false claims laws and the Physician Payments Sunshine Act and regulations. Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. These laws may impact, among other things, our current business operations, including our clinical research activities, and proposed sales, marketing and education programs and constrain the business of financial arrangements and relationships with healthcare providers, physicians and other parties through which we may market, sell and distribute our products for which we obtain marketing approval. In addition, we may be subject to patient data privacy and security regulation by both the U.S. federal government and the states in which we conduct our business. Finally, we may be subject to additional healthcare, statutory and regulatory requirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. The laws that may affect our ability to operate include:

 

   

the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or paying any remuneration (including any kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. 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;

 

   

the U.S. federal false claims, including the False Claims Act, which can be enforced through whistleblower actions, and civil monetary penalties laws, which, among other things, impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

 

   

the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or 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, healthcare benefits, items or services; similar to the U.S. 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 of 2009, or HITECH, and its implementing regulations, and as amended again by the Modifications to the HIPAA Privacy, Security, Enforcement and Breach Notification Rules Under HITECH and the Genetic Information Nondiscrimination Act; Other Modifications to the HIPAA Rules, commonly referred to as the Final HIPAA Omnibus Rule, published in January 2013, which imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by

 

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covered entities subject to the Final HIPAA Omnibus Rule, i.e. health plans, healthcare clearinghouses and certain healthcare providers, as well as their business associates that perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information;

 

   

the U.S. Federal Food, Drug and Cosmetic Act, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

 

   

the U.S. federal legislation commonly referred to as Physician Payments Sunshine Act, enacted as part of the Affordable Care Act, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

 

   

analogous state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws requiring the registration of pharmaceutical sales representatives; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and

 

   

European and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and payments to healthcare providers.

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

 

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Failure to comply with current or future federal, state and foreign laws and regulations and industry standards relating to privacy and data protection laws could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.

We and our collaborators and third-party providers may be subject to federal, state and foreign data privacy and security laws and regulations. In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators and third-party providers.

In many jurisdictions, enforcement actions and consequences for noncompliance are rising. In the United States, these include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards that may legally or contractually apply to us. If we fail to follow these security standards, even if no customer information is compromised, we may incur significant fines or experience a significant increase in costs. Many state legislatures have adopted legislation that regulates how businesses operate online, including measures relating to privacy, data security and data breaches. Laws in all 50 states require businesses to provide notice to customers whose personally identifiable information has been disclosed as a result of a data breach. The laws are not consistent, and compliance in the event of a widespread data breach is costly. States are also constantly amending existing laws, requiring attention to frequently changing regulatory requirements. Furthermore, California recently enacted the California Consumer Privacy Act, or the CCPA, which became effective on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Additionally, a new privacy law, the California Privacy Rights Act, or the CPRA, was approved by California voters in the election of November 3, 2020. The CPRA, which will take effect in most material respects on January 1, 2023, modifies the CCPA significantly, including by expanding consumers’ rights with respect to certain sensitive personal information and creating a new state agency to oversee implementation and enforcement efforts, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. At this time, we do not collect personal data on residents of California but should we begin to do so, the CCPA and CPRA will impose new and burdensome privacy compliance obligations on our business and will raise new risks for potential fines and class actions.

Foreign data protection laws, including EU General Data Protection Regulation, or the GDPR, may also apply to health-related and other personal information obtained outside of the United States. The GDPR, which came into effect on May 25, 2018, introduced new data protection requirements in the European Union, as well as potential fines for noncompliant companies of up to the greater of €20 million or 4% of annual global revenue. The regulation imposes numerous new requirements for the collection, use and disclosure of personal information, including more stringent requirements relating to consent and the information that must be shared with data subjects about how their personal information is used, the obligation to notify regulators and affected individuals of personal data breaches, extensive new internal privacy governance obligations and obligations to honor expanded rights of individuals in relation to their personal information (e.g., the right to access, correct and delete their data). Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain. For example, in 2016, the EU and United States agreed to a transfer framework for data transferred from the EU to the United States, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the European Union.

 

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Further, the vote in the United Kingdom in favor of exiting the EU, referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom. Specifically, while the Data Protection Act of 2018, that “implements” and complements the GDPR achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, aspects of data protection in the United Kingdom, such as the transfer of data from the EEA to the United Kingdom, remain uncertain. In particular, with the expiry of the transition period on December 31, 2020, companies must comply with both the GDPR and the GDPR as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, including, for example, around how data can lawfully be transferred between each jurisdiction, which exposes us to further compliance risk. At this time, we do not believe we are subject to the GDPR or the Data Protection Act of 2018, but should this change, the GDPR and/or the Data Protection Act of 2018 will increase our responsibility and potential liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with these data protection rules.

Compliance with U.S. and foreign data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure by us or our collaborators and third-party providers to comply with U.S. and foreign data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects about whom we or our potential collaborators obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend, could result in adverse publicity and could have a material adverse effect on our business, financial condition, results of operations and prospects.

Risks Related to Our Intellectual Property

If we are unable to obtain, maintain and protect sufficient patent and other intellectual property rights for our product candidates and technology, or if the scope of patent and other intellectual property rights obtained is not sufficiently broad, we may not be able to compete effectively in our market.

Our success depends in significant part on our ability and the ability of our licensors and collaborators to obtain, maintain, enforce and defend patents and other intellectual property rights with respect to our product candidates and technology and to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of others. We have licensed two patent estates from The Board of Trustees of the Leland Stanford Junior University, or Stanford. For more information, see “Business—License and Collaboration Agreements.” In addition, we have filed patent applications that are solely owned by us or co-owned by us with Stanford and for which Stanford has granted us an exclusive license to its rights. As of September 30, 2020, we only have one issued patent. Our only issued patent is a U.S. patent that is co-owned with, and exclusively licensed to us by, Stanford. Many of our patent applications that we own, co-own with Stanford, or have licensed from Stanford are U.S. provisional patent applications. U.S. provisional patent applications are not eligible to become issued patents until, among other things, we file a non-provisional patent application within 12 months of filing of one or more of our related provisional patent applications. With regard to such U.S. provisional patent applications, if we or our licensors do not timely file any non-provisional patent applications, we may lose our priority date with respect to our provisional patent applications and any patent protection on the inventions disclosed in our provisional patent applications. While we intend to timely file non-provisional patent applications relating to our provisional patent applications, we cannot predict whether any such patent applications will result in the issuance of patents that provide us with any competitive advantage.

 

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The patent prosecution process is expensive and time-consuming. We and our current or future licensors, licensees or collaborators may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors will fail to identify patentable aspects of our research and development output in time to obtain patent protection or fail to file patent applications covering inventions made in the course of development and commercialization activities before a competitor or another third party files a patent application covering, or publishes information disclosing, a similar, independently-developed invention. Such competitor’s or other third party’s patent application may pose obstacles to our ability to obtain patent protection or limit the scope of the patent protection we may obtain. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, collaborators, CROs, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or were the first to file for patent protection of such inventions.

The patent position of biotechnology and pharmaceutical companies generally is uncertain, involves complex legal and factual questions and is the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors’ patent rights are uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued that protect our technology or product candidates, in whole or in part, or which effectively exclude others from commercializing competitive technologies and product candidates. The patent examination process may require us or our licensors to narrow the scope of the claims of our pending and future patent applications, and therefore, even if such patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us or otherwise provide us with any competitive advantage. Our and our licensors’ patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover such technology. Any patents that we hold or in-license may be challenged, narrowed, circumvented or invalidated by third parties. Consequently, we do not know whether any of our product candidates will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Any of the foregoing could harm our competitive position, business, financial condition, results of operations and prospects.

The patent protection we obtain for our product candidates and technology may be challenged or not sufficient enough to provide us with any competitive advantage.

Even if our owned or licensed patent applications issue as patents, the issuance of any such patents is not conclusive as to their inventorship, scope, validity or enforceability, and such patents may be challenged, invalidated, narrowed or held to be unenforceable, including in the courts or patent offices in the United States and abroad, or circumvented. We may be subject to a third-party preissuance submission of prior art to the United States Patent and Trademark Office, or USPTO, or equivalent foreign bodies, or become involved in opposition, derivation, revocation, re-examination, post-grant and inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we, or one of our licensors, may have to participate in interference or derivation proceedings declared by the USPTO to determine priority or ownership of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability. Such proceedings and

 

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any other patent challenges may result in loss of patent rights, loss of exclusivity, loss of priority or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and product candidates. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. Moreover, there could be public announcements of the results of hearings, motions or other developments related to any of the foregoing proceedings. If securities analysts or investors perceive those results to be negative, it could cause the price of shares of our common stock to decline. Any of the foregoing could harm our business, financial condition, results of operations and prospects.

Moreover, some of our owned or in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. If we are unable to obtain an exclusive license to any such co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, who could market competing products and technology. In addition, we may need the cooperation of any such co-owners in order to enforce such patents against third parties, and such cooperation may not be provided to us.

In addition, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties. For example, our licenses to certain intellectual property owned by Stanford are subject to certain rights Stanford retained for itself and for other non-profit research institutions. In addition, the technology claimed by the patents that we licensed from Stanford was developed using U.S. government funding. As a result, the U.S. government has certain rights to such patent rights and technology, including march-in rights and a non-exclusive license authorizing the government to use the invention for noncommercial purposes. These rights may permit the government to disclose our confidential information to third parties or allow third parties to use our licensed technology. The government can also exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the government-funded technology, or to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any of the foregoing could harm our competitive position, business, financial condition, results of operations and prospects.

We are heavily dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing our product candidates, if approved. If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or technology from third parties or, in certain cases, we fail to meet certain development deadlines, we could lose license rights that are important to our business.

We are heavily reliant upon licenses to certain patent rights and other intellectual property from third parties that are important or necessary to the development of our product candidates, including BDC-1001. For example, in May 2015 and June 2018 we entered into license agreements with Stanford under which we are granted rights to intellectual property that are necessary to the development and commercialization of BDC-1001 or are otherwise important to our business. We may also need to obtain additional licenses to advance the development and commercialization of our current product candidates and other product candidates we may develop. It is possible that we may be unable to obtain any additional licenses at a reasonable cost or on reasonable terms, or at all, or such licenses may be non-exclusive. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business, financial condition, results of operations, and prospects significantly.

Our existing license agreements with Stanford and Toray impose, and we expect that future license agreements will impose, upon us various development, regulatory and/or commercial diligence obligations,

 

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obligations to make milestone or royalty payments or to share revenues and other obligations. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy-related event, the licensor may have the right to terminate the license, and if they exercise that right we would not be able to develop, market or otherwise commercialize our technology and product candidates covered by the license, which in the case of our 2015 license agreement with Stanford includes BDC-1001. Our business could suffer, for example, if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensed patents or other rights are found to be invalid or unenforceable or if we are unable to enter into necessary licenses on acceptable terms.

Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues, and certain provisions in intellectual property license agreements may be susceptible to multiple interpretations. Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including:

 

   

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

 

   

whether and the extent to which our technology and processes infringe, misappropriate or otherwise violate intellectual property of the licensor that is not subject to the license agreement;

 

   

our right to sublicense patent and other rights to third parties;

 

   

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;

 

   

the inventorship or ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners;

 

   

the priority of invention of patented technology;

 

   

our right to transfer or assign the license; and

 

   

the effects of termination.

The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could harm our business, financial condition, results of operations and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

We may enter into additional licenses to third-party intellectual property that are necessary or useful to our business. Under some license agreements, such as under the Toray Development Agreement, we may not control the preparation, filing, prosecution or maintenance of the licensed intellectual property, or may not have the first right to enforce the intellectual property. In those cases, we may not be able to adequately influence patent prosecution or enforcement, or prevent inadvertent lapses of coverage due to failure to pay maintenance fees and we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our business and that does not compromise the patent rights. If we fail to comply with any of our obligations under a current or future license agreement, the licensor may allege that we have breached our license agreement, and may accordingly seek to terminate our license. Termination of any of our current or future licenses could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize a product candidate or product, if approved, as well as harm our competitive business position and our business prospects. Under some license agreements, termination may also result in the transfer or granting of rights under certain of our intellectual property and information related to the product candidate being developed under the license, such as regulatory information. If these licenses are terminated, or if the underlying patents fail

 

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to provide the intended exclusivity, third parties, including our competitors, would have the freedom to seek regulatory approval of, and to market, products identical to ours. In addition, we may seek to obtain additional licenses from our licensors and, in connection with obtaining such licenses, we may agree to amend our existing licenses in a manner that may be more favorable to the licensors, including by agreeing to terms that could enable third parties, including our competitors, to receive licenses to a portion of the intellectual property that is subject to our existing licenses. Any of these events could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.

In addition, if our licensors fail to abide by the terms of the license, if the licensors fail to prevent infringement, misappropriation or violation of the licensed intellectual property by third parties, if the licensed intellectual property or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms, our business, competitive position, financial condition, results of operations and prospects could be materially harmed.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we rely on third parties to develop and manufacture our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite these contractual agreements with third parties, sharing trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may harm our business.

In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful, and issued patents covering our technology and product candidates could be found invalid or unenforceable if challenged.

Competitors and other third parties may infringe, misappropriate or otherwise violate our issued patents or other intellectual property or the patents or other intellectual property of our licensors. In addition, our patents or the patents of our licensors may become involved in inventorship or priority disputes. Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. To counter infringement or other unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents or that our patents are invalid or unenforceable. In a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology. An adverse result in any litigation proceeding could put one or more of our owned or licensed patents at risk of being invalidated, held unenforceable or interpreted narrowly. We may find it impractical or undesirable to enforce our intellectual property against some third parties.

 

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In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or insufficient written description. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO or an equivalent foreign body, even outside the context of litigation. Potential proceedings include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover our technology or any product candidates that we may develop. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on the applicable product candidates or technology covered by the patent rendered invalid or unenforceable. Such a loss of patent protection would materially harm our business, financial condition, results of operations and prospects.

Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the ownership or priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Such licenses may not be available on commercially reasonable terms, or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of one or more of the product candidates we may develop. In addition, if we or our licensors are unsuccessful in any inventorship disputes to which we or they are subject, we may lose valuable intellectual property rights, such as exclusive ownership of, or the exclusive right to use, our owned or in-licensed patents. The loss of exclusivity or the narrowing of our owned and licensed patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. Any of the foregoing could result in a material adverse effect on our business, financial condition, results of operations or prospects. Even if we are successful in any of the foregoing disputes, it could result in substantial costs and be a distraction to management and other employees. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or proceeding.

Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Most of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of complex patent litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing, misappropriating or otherwise violating our intellectual property. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims could result in substantial costs and diversion of management resources, which could harm our business. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs or in-license needed technology or other product candidates. There could also be public announcements of the results of the hearing, motions or other interim proceedings or developments. If securities analysts or investors perceive those results to be negative, it could cause the price of shares of our common stock to decline. Any of the foregoing events could harm our business, financial condition, results of operations and prospects.

 

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

Filing, prosecuting, maintaining, defending and enforcing patents and other intellectual property rights on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection or other intellectual property rights to develop their own products and may export otherwise infringing, misappropriating or violating products to territories where we have patent or other intellectual property protection, but enforcement rights are not as strong as those in the United States. These products may compete with our 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 some countries do not favor the enforcement of patents and other intellectual property rights, which could make it difficult for us to stop the infringement, misappropriation or other violation of our intellectual property rights generally. Proceedings to enforce our intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.

Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license, which could adversely affect our business, financial condition, results of operations and prospects.

We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which might adversely affect our ability to develop and market our product candidates.

We cannot guarantee that any of our or our licensors’ patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending patent application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction. For example, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates could have been filed by third parties without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our product candidates. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to

 

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market our product candidates. We may incorrectly determine that our product candidates are not covered by a third-party patent or may incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our product candidates. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our product candidates.

If we fail to identify and correctly interpret relevant patents or if we are unable to obtain licenses to relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, which may be significant, we may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We might, if possible, also be forced to redesign product candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business and could adversely affect our business, financial condition, results of operations and prospects.

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

It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. If we are unable to license such technology, or if we are forced to license such technology, on unfavorable terms, our business could be materially harmed. If we are unable to obtain a necessary license, we may be unable to develop or commercialize the affected product candidates, which could materially harm our business, and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

If we fail to comply with our obligations under our license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may face other penalties under such agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, cause us to lose our rights under these agreements, including our rights to important intellectual property or technology, or impede, delay or prohibit the further development or commercialization of one or more product candidates that rely on such agreements. For more information on risks related to our licensing of intellectual property, see “Risk Factors—Risks Related to Our Intellectual Property—We are heavily dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing our product candidates, if approved. If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or technology from third parties or, in certain cases, we fail to meet certain development deadlines, we could lose license rights that are important to our business.”

 

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Patent terms may be inadequate to protect our competitive position on our 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 its 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 are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours.

Depending upon the timing, duration and conditions of any FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and one or more of our foreign patents may be eligible for patent term extension under similar legislation, for example, in the European Union. In the United States, the Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, there are no assurances that the FDA or any comparable foreign regulatory authority or national patent office will grant such extensions, in whole or in part. For example, we may not receive an extension if we fail to exercise due diligence during the testing phase or regulatory review process, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. Only one patent per approved product can be extended, the extension cannot extend the total patent term beyond 14 years from approval, and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for the applicable product candidate will be shortened, and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case, and our competitive position, business, financial condition, results of operations and prospects could be materially harmed.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

Obtaining and enforcing patents in the pharmaceutical industry is inherently uncertain, due in part to ongoing changes in the patent laws. Depending on decisions by Congress, the federal courts, and the USPTO and equivalent institutions in other jurisdictions, the laws and regulations governing patents, and interpretation thereof, could change in unpredictable ways that could weaken our and our licensors’ or collaborators’ ability to obtain new patents or to enforce existing or future patents. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Therefore, there is increased uncertainty with regard to our and our licensors’ or collaborators’ ability to obtain patents in the future, as well as uncertainty with respect to the value of patents once obtained.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ or collaborators’ patent applications and the enforcement or defense of our or our licensors’ or collaborators’ issued patents. Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while

 

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outside the United States, the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted in September 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications are prosecuted and may also affect patent litigation. These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO-administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, particularly the first inventor-to-file provisions. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents, all of which could harm our business, financial condition, results of operations and prospects.

Obtaining and maintaining 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 if we fail to comply with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on any issued patents and applications are required to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent. In certain circumstances, we rely on our licensors to pay these fees. The USPTO and various foreign patent agencies also require compliance with a number of procedural, documentary, fee payment and other similar requirements during the patent application and prosecution process. Noncompliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official communications within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. 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 non-compliance can result in irrevocable abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we or our licensors or collaborators fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market with similar or identical products or technology, which would harm our business, financial condition, results of operations and prospects.

Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could negatively impact the success of our business.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We may become party to, or be threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and technology, including re-examination, interference, post-grant review, inter partes review or derivation proceedings before the USPTO or an equivalent foreign body. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. For example, we are aware of certain third-party patents, including those of our competitors, that may be construed to cover the use of our Boltbody ISACs for the treatment of cancer and of pending patent applications that, if issued with their current claim scope, may be construed to cover our Boltbody ISAC approach and product candidates more generally. In the event that any of these patents were asserted against us, we believe that we would have defenses against any such action, including

 

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that such patents are not valid or that we would be able to replace such technology with alternative, non-infringing technology. However, if any such patents were to be asserted against us and our defenses to such assertion were unsuccessful and such alternative technology was not available or technologically or commercially practical, unless we obtain a license to such patents, we could be liable for damages, which could be significant and include treble damages and attorneys’ fees if we are found to willfully infringe such patents, and we could be precluded from commercializing any product candidates that were ultimately held to infringe such patents. Any potential future legal proceedings relating to these patents could cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. If we are unsuccessful in our challenges to these patents and become subject to litigation or are unable to obtain a license on commercially reasonable terms with respect to these patents, it could harm our business, financial condition, results of operations and prospects.

Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of infringement, validity, enforceability or priority. A court of competent jurisdiction could hold that third-party patents asserted against us are valid, enforceable and infringed, which could materially and adversely affect our ability to commercialize any product candidates we may develop and any other product candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found to infringe, misappropriate or otherwise violate a third party’s intellectual property rights, and we are unsuccessful in demonstrating that such rights are invalid or unenforceable, we could be required to obtain a license from such a third party in order to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease commercializing the infringing technology or product candidates. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties and other fees, redesign our infringing drug or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. Any of the foregoing events would harm our business, financial condition, results of operations and prospects.

We may be subject to claims by third parties asserting that we or our employees have infringed upon, misappropriated or otherwise violated their intellectual property rights, or claiming ownership of what we regard as our own intellectual property.

Many of our employees were previously employed at other biotechnology or pharmaceutical companies. Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s former employer. Litigation may be necessary to defend against these claims.

In addition, we or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents or other intellectual property as an inventor or co-inventor. While it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact conceives, develops or reduces to

 

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practice intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.

If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs, delay development of our product candidates and be a distraction to management. Any of the foregoing events would harm our business, financial condition, results of operations and prospects.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties or enter into development collaborations that would help us commercialize our product candidates, if approved. Any of the foregoing events would harm our business, financial condition, results of operations and prospects.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

We rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology and other proprietary information and to maintain our competitive position. With respect to our Boltbody ISAC approach and development programs, we consider trade secrets and know-how to be one of our important sources of intellectual property, including our extensive knowledge of certain drug delivery techniques and antibody conjugation. Trade secrets and know-how can be difficult to protect. We seek to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, collaborators, CROs, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. We cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed.

 

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We may not be able to protect and enforce our trademarks and trade names, or build name recognition in our markets of interest thereby harming our competitive position.

We intend to rely on both registered and common law rights for our trademarks. We have not yet registered certain of our trademarks in all of our potential markets, including our “Boltbody” and “Bolt Biotherapeutics” trademarks. We are currently applying to register these trademarks with the USPTO and may in the future seek to register additional trademarks in the United States and other countries. Our current and future trademark applications may not be allowed for registration in a timely fashion or at all, and our registered trademarks may not be maintained or enforced. In addition, the registered or unregistered trademarks or trade names that we own may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of other marks. We may not be able to protect our rights in these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. In addition, third parties have filed, and may in the future file, for registration of trademarks similar or identical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion. If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such rights, we may not be able to use these trademarks to develop brand recognition of our technologies, products or services. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.

During the trademark registration process, we may receive Office Actions from the USPTO or from comparable agencies in foreign jurisdictions objecting to the registration of our trademark. Although we would be given an opportunity to respond to those objections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may in the future be filed against our trademark applications or registrations, and our trademark applications or registrations may not survive such proceedings. In addition, third parties may file first for our trademarks in certain countries. If they succeed in registering such trademarks, and if we are not successful in challenging such third party rights, we may not be able to use these trademarks to market our products in those countries. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Intellectual property rights do not necessarily address all potential threats.

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

 

   

others may be able to make products that are similar to any product candidates we may develop or utilize similar technology but that are not covered by the claims of the patents that we own or license now or in the future;

 

   

we, or our current or future licensors, might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or license now or in the future;

 

   

we, or our current or future licensors, might not have been the first to file patent applications covering certain of our or their inventions;

 

   

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;

 

   

it is possible that our pending owned or licensed patent applications or those that we may own or license in the future will not lead to issued patents;

 

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issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors;

 

   

our competitors might conduct research and development activities in the United States under FDA-related safe harbor patent infringement exemptions and/or in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

 

   

we may not develop additional proprietary technologies that are patentable;

 

   

the patents of others may harm our business; and

 

   

we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could harm our business, financial condition, results of operations and prospects.

Risks Related to Our Business Operations, Employee Matters and Managing Growth

Our business, operations and clinical development plans and timelines and supply chain could be adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our CMOs, CROs, shippers and others.

Our business could be adversely affected by health epidemics wherever we have clinical trial sites or other business operations. In addition, health epidemics could cause significant disruption in the operations of CMOs, CROs and other third parties upon whom we rely. For example, the COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting employees, patients, communities and business operations, as well as the U.S. economy and financial markets. Many geographic regions have imposed, or in the future may impose, “shelter-in-place” orders, quarantines or similar orders or restrictions to control the spread of COVID-19. Our headquarters are located in the San Francisco Bay Area and our CMOs are located in the United States and in the United Kingdom. At present, we have implemented work-from-home policies for all employees. The effects of the executive order and our work-from-home policies may negatively impact productivity, disrupt our business and delay our clinical programs and timelines, 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, operating results and financial condition.

We are dependent on a worldwide supply chain for products to be used in our clinical trials and, if approved by the regulatory authorities, for commercialization. Quarantines, shelter-in-place and similar government orders, or the expectation that such orders, shutdowns or other restrictions could occur, whether related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials or supplies, which could disrupt our supply chain or our ability to enroll patients in or perform testing for our clinical trials. For example, any manufacturing supply interruption of BDC-1001, which is currently manufactured at facilities in the United Kingdom and the United States, or any future product candidates, could adversely affect our ability to conduct ongoing and future clinical trials of BDC-1001 and any future product candidates. In addition, closures of transportation carriers and modal hubs could materially impact our clinical development and any future commercialization timelines.

If our relationships with our suppliers or other vendors are terminated or scaled back as a result of the COVID-19 pandemic or other health epidemics, we may not be able to enter into arrangements with alternative suppliers or vendors or do so on commercially reasonable terms or in a timely manner. Switching or adding additional suppliers or vendors involves substantial cost and requires management time and focus. In addition,

 

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there is a natural transition period when a new supplier or vendor commences work. As a result, delays generally occur, which could adversely impact our ability to meet our desired clinical development and any future commercialization timelines. Although we carefully manage our relationships with our suppliers and vendors, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects. See “Risk Factors—Risks Related to Our Dependence on Third Parties.”

In addition, our clinical trials have been, and in the future may be, affected by the COVID-19 pandemic. For example, some early site activations, and related patient enrollments, were delayed by approximately two months. We have increased the number of planned study sites in an effort to mitigate any potential future impact. In the future, clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic or concerns among patients about participating in clinical trials during a pandemic and public health measures imposed by the respective national governments of countries in which the clinical sites are located. Some patients may have difficulty following certain aspects of clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our inability to successfully recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 or experience additional restrictions by their institutions, city or state governments could adversely impact our clinical trial operations. We continue to evaluate the impact of the COVID-19 pandemic on our clinical development timelines. We will provide an update on our clinical development timelines once we have more information about how the COVID-19 pandemic progressed.

The spread of COVID-19 has also led to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty. The trading prices for the common stock of other biopharmaceutical companies have, at times, been highly volatile as a result of COVID-19. To the extent the COVID-19 pandemic adversely affects our business, financial results and value of our common stock, it may also affect our ability to access capital, which could in the future negatively affect our liquidity.

The global pandemic of COVID-19 continues to evolve rapidly. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.

Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.

We are highly dependent on the management, research and development, clinical, financial and business development expertise of our executive officers, as well as the other members of our scientific and clinical teams. Although we have employment offer letters with each of our executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or employees.

Recruiting and retaining qualified scientific and clinical personnel and, if we are successful in obtaining marketing approval for our product candidates, sales and marketing personnel, is critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval for and commercialize our product candidates. Competition to hire qualified personnel in our industry is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous

 

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pharmaceutical and biotechnology companies for similar personnel. Furthermore, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their research output. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited, and could harm our business, financial condition, results of operations and prospects.

We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

As of September 30, 2020, we had 63 employees. As our clinical development progresses, we expect to experience growth in the number of our employees and the scope of our operations, particularly in the areas of research, clinical operations, regulatory affairs, general and administrative and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk that our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs and vendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or unauthorized activities that violates (1) the laws and regulations of the FDA, the EMA, the MHRA and other similar regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities, (2) manufacturing standards, (3) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and abroad and (4) laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve the improper use of individually identifiable information, including information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product candidates, which could result in regulatory sanctions and serious harm to our reputation.

We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in

 

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defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, including damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm and the delay, reduction, termination or restructuring of our operations.

Our international operations may expose us to business, regulatory, political, operational, financial, pricing and reimbursement risks associated with doing business outside of the United States.

Our business is subject to risks associated with conducting business internationally. Some of our suppliers, industry partners and clinical study centers are located outside of the United States. Furthermore, our business strategy incorporates potential international expansion as we seek to obtain regulatory approval for, and commercialize, our product candidates in patient populations outside the United States. If approved, we may hire sales representatives and conduct physician and patient association outreach activities outside of the United States. Doing business internationally involves a number of risks, including but not limited to:

 

   

multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

 

   

failure by us to obtain and maintain regulatory approvals for the use of our products in various countries;

 

   

rejection or qualification of foreign clinical trial data by the competent authorities of other countries;

 

   

delays or interruptions in the supply of clinical trial materials resulting from any events affecting raw material supply or manufacturing capabilities abroad, including those that may result from the ongoing COVID-19 pandemic;

 

   

additional potentially relevant third-party patent and other intellectual property rights;

 

   

complexities and difficulties in obtaining, maintaining, protecting and enforcing our intellectual property;

 

   

difficulties in staffing and managing foreign operations;

 

   

complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems;

 

   

limits in our ability to penetrate international markets;

 

   

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our product candidates and exposure to foreign currency exchange rate fluctuations;

 

   

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, including COVID-19 and related shelter-in-place orders, travel, social distancing and quarantine policies, boycotts, curtailment of trade and other business restrictions;

 

   

certain expenses including, among others, expenses for travel, translation and insurance; and

 

   

regulatory and compliance risks that relate to anti-corruption compliance and record-keeping that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its accounting provisions or its anti-bribery provisions or provisions of anti-corruption or anti-bribery laws in other countries.

Any of these factors could harm our future international expansion and operations and, consequently, our results of operations.

 

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Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or experience security breaches or other unauthorized or improper access.

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to privacy and information security incidents, such as data breaches, damage from computer viruses and unauthorized access, malware, natural disasters, fire, terrorism, war and telecommunication, electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusions, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. While we have not experienced any such material system failure or security breach to our knowledge to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed, ongoing or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business.

Unauthorized disclosure of sensitive or confidential data, including personally identifiable information, whether through a breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, or unauthorized access to or through our information systems and networks, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation. Unauthorized disclosure of personally identifiable information could also expose us to sanctions for violations of data privacy laws and regulations around the world. To the extent that any disruption or security breach resulted 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 our product candidates could be delayed.

As we become more dependent on information technologies to conduct our operations, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, may increase in frequency and sophistication. These threats pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of our data and these risks apply both to us, and to third parties on whose systems we rely for the conduct of our business. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we and our partners may be unable to anticipate these techniques or to implement adequate preventative measures. Further, we do not have any control over the operations of the facilities or technology of our cloud and service providers, including any third party vendors that collect, process and store personal data on our behalf. Our systems, servers and platforms and those of our service providers may be vulnerable to computer viruses or physical or electronic break-ins that our or their security measures may not detect. Individuals able to circumvent such security measures may misappropriate our confidential or proprietary information, disrupt our operations, damage our computers or otherwise impair our reputation and business. We may need to expend significant resources and make significant capital investment to protect against security breaches or to mitigate the impact of any such breaches. There can be no assurance that we or our third party providers will be successful in preventing cyber-attacks or successfully mitigating their effects. 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 and commercialization of our future product candidates could be delayed.

 

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Risks Related to This Offering and Our Common Stock

We have identified a material weakness in our internal control over financial reporting. If we fail to remediate the material weakness, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Prior to the completion of this offering, we have been a private company with limited accounting personnel to adequately execute our accounting processes and limited supervisory resources with which to address our internal control over financial reporting. In connection with the audit of our financial statements as of and for the years ended December 31, 2018 and 2019, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

We did not design and have not maintained an effective control environment as required under the rules and regulations of the U.S. Securities and Exchange Commission, or the SEC. Specifically, we lack a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately while maintaining appropriate segregation of duties. Without such professionals, we did not design and currently do not maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations and journal entries.

The above material weakness did not result in a misstatement, however, it could result in a misstatement of our account balances or disclosures that would result in a material misstatement of our annual or interim financial statements that would not be prevented or detected.

To address the material weakness, we have begun adding personnel, such as a Chief Financial Officer, and have implemented new financial processes. We intend to continue to take steps to remediate the material weakness through the hiring of additional experienced accounting and financial reporting personnel, formalizing documentation of policies and procedures and further evolving the accounting processes, including implementing appropriate segregation of duties.

We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses. If the steps we take do not correct the material weakness in a timely manner, we will be unable to conclude that we maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.

If we fail to remediate our existing material weakness or identify new material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the Nasdaq Global Market, the SEC or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and financial condition or divert financial and management resources from our regular business activities.

 

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An active trading market for our common stock may not develop and you may not be able to resell your shares of our common stock at or above the initial offering price, if at all.

Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which an active market for our common stock will develop or be sustained after this offering, or how the development of such a market might affect the market price for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters and may not be indicative of the price at which our common stock will trade after the closing of this offering. Although we have applied to list our common stock on the Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop or is not sustained, it may be difficult for you to sell shares you purchased in this offering at an attractive price or at all.

The trading price of the shares of our common stock may be volatile, and purchasers of our common stock could incur substantial losses.

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

 

   

adverse regulatory decisions;

 

   

any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

 

   

the impact of the COVID-19 pandemic;

 

   

the commencement, enrollment or results of any future clinical trials we may conduct, or changes in the development status of our product candidates;

 

   

adverse results from, delays in or termination of clinical trials;

 

   

unanticipated serious safety concerns related to the use of our product candidates;

 

   

lower than expected market acceptance of our product candidates following approval for commercialization;

 

   

changes in financial estimates by us or by any securities analysts who might cover our stock;

 

   

conditions or trends in our industry;

 

   

changes in the market valuations of similar companies;

 

   

stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the pharmaceutical industry;

 

   

publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

 

   

announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures;

 

   

announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

 

   

investors’ general perception of our company and our business;

 

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recruitment or departure of key personnel;

 

   

overall performance of the equity markets;

 

   

trading volume of our common stock;

 

   

disputes or other developments relating to intellectual property rights, including patents, litigation matters and our ability to obtain, maintain, defend, protect and enforce patent and other intellectual property rights for our technologies;

 

   

significant lawsuits, including patent or stockholder litigation;

 

   

proposed changes to healthcare laws in the United States or foreign jurisdictions, or speculation regarding such changes;

 

   

general political and economic conditions; and

 

   

other events or factors, many of which are beyond our control.

In addition, in the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods of volatility in the market prices of these companies’ stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources from our business.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that equity research analysts publish about us and our business. We do not currently have and may never obtain research coverage by equity research analysts. Equity research analysts may elect not to provide research coverage of our common stock after this offering, and such lack of research coverage may adversely affect the market price of our common stock. In the event we do have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.

If you purchase shares of our common stock in this offering, you will suffer immediate dilution of your investment.

The assumed initial public offering price of our common stock is substantially higher than the pro forma as adjusted net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma as adjusted net tangible book value per share after this offering. Based on an assumed initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $        per share, representing the difference between our pro forma as adjusted net tangible book value per share after this offering and the assumed initial public offering price. In addition, to the extent outstanding stock options are exercised, there will be further dilution to investors in this offering. In addition, if the underwriters exercise their over-allotment option or if we issued additional equity securities, you will experience additional dilution. See “Dilution” for a more detailed description of the dilution to investors in the offering.

 

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A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time, subject to the restrictions and limitations described below. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly.

Upon the closing of this offering, we will have                outstanding shares of common stock, after giving effect to the conversion of 106,626,123 outstanding shares of convertible preferred stock as of September 30, 2020 into an equal number of shares of common stock and the issuance of shares of common stock upon the automatic net exercise of warrants, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options. Of these shares, the shares sold in this offering will be freely tradable and the remaining shares of common stock will be available for sale in the public market beginning after the end of the 180th day after the date of this prospectus following the expiration of lock-up agreements between our stockholders and certain of the underwriters for this offering, subject, in the case of our affiliates, to the conditions of Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. Morgan Stanley & Co. LLC and SVB Leerink LLC on behalf of the underwriters may release these stockholders from their lock-up agreements at any time and without notice, which would allow for earlier sales of shares in the public market subject to the conditions of Rule 144 under the Securities Act.

In addition, promptly following the closing of this offering, we intend to file one or more registration statements on Form S-8 registering the issuance of approximately                million shares of common stock subject to options or other equity awards issued or reserved for future issuance under our equity incentive plans. Shares registered under these registration statements on Form S-8 will be available for sale in the public market subject to vesting arrangements and exercise of options, the lock-up agreements described above and, in the case of our affiliates, the restrictions of Rule 144.

Additionally, after this offering, the holders of an aggregate of                shares of our common stock, or their transferees, will have rights, subject to some conditions, to require us to file one or more registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. If we were to register the resale of these shares, they could be freely sold in the public market without limitation. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

 

   

provide for a classified board of directors whose members serve staggered terms;

 

   

authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights and preferences determined by our board of directors that may be senior to our common stock;

 

   

require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

 

   

specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors or our chief executive officer;

 

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establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

 

   

prohibit cumulative voting in the election of directors;

 

   

provide that our directors may be removed for cause only upon the vote of the holders of at least 66 2/3% of our outstanding shares of common stock;

 

   

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

 

   

require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Based upon our common stock outstanding as of September 30, 2020 and including the shares to be sold in this offering, upon the closing of this offering, our executive officers, directors and current beneficial owners of 5% or more of our common stock will, in the aggregate, beneficially own approximately     % of our outstanding common stock. These stockholders, acting together, will be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with the interests of other stockholders.

Some of these persons or entities may have interests different than yours. For example, because many of these stockholders purchased their shares at prices substantially below the price at which shares are being sold in this offering and have held their shares for a longer period, they may be more interested in selling our company to an acquirer than other investors, or they may want us to pursue strategies that deviate from the interests of other stockholders.

We will incur costs and demands upon our management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business.

As a public company listed in the United States, we will incur significant additional legal, accounting and other expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and the Nasdaq Global Market may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from regular business activities to compliance activities. If, notwithstanding our efforts, we fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

 

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Failure to comply with these rules might also make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.

We are an “emerging growth company” and a “smaller reporting company,” and as a result of the reduced reporting requirements applicable to “emerging growth companies” and “smaller reporting companies,” our common stock may be less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an “emerging growth company,” we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an “emerging growth company,” we are required to report only two years of financial results and selected financial data compared to three and five years, respectively, for comparable data reported by other public companies. We may take advantage of these exemptions until we are no longer an “emerging growth company.” We could be an “emerging growth company” for up to five years, although circumstances could cause us to lose that status earlier, including if the aggregate market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 (the end of our second quarter) before that time, in which case we would no longer be an “emerging growth company” as of the following December 31 (our year-end). Even after we no longer qualify as an “emerging growth company,” we may still qualify as a “smaller reporting company,” which would allow us to continue to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

After the closing of this offering, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the Nasdaq Global Market. Section 302 of the Sarbanes-Oxley Act requires, among other things, that we report on the effectiveness of our disclosure controls and procedures in our quarterly and annual reports and, beginning with our annual report for the year ending 2022, Section 404 of the Sarbanes-Oxley Act requires that we perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Form 10-K filing for that year. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts. Prior to this offering, we have never been required to test our internal control within a specified period, and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an emerging growth company or a smaller reporting company.

As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in those internal controls. We identified a material weakness in our internal control over financial reporting as of and for the years ended December 31, 2018 and 2019, related to a lack of an effective

 

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control environment as required under SEC rules and regulations. During 2020, we added personnel, including a Chief Financial Officer, as well as implemented new financial processes. Our remediation efforts are ongoing. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC or other regulatory authorities. In addition, our common stock may not be able to remain listed on the Nasdaq Global Market or any other securities exchange.

We will have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. We intend to use the net proceeds from this offering to conduct our clinical trials, to fund continued research and development of BDC-1001 in several applications, to fund other research and development activities, and for working capital and other general corporate purposes. The failure by our management to apply these funds effectively could result in financial losses that could have an adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment.

You should not rely on an investment in our common stock to provide dividend income. We have not declared or paid cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any existing or future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Investors seeking cash dividends should not purchase our common stock.

Our amended and restated certificate of incorporation that will be in effect upon the closing of this offering will provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

 

   

any derivative action or proceeding brought on our behalf;

 

   

any action asserting a breach of fiduciary duty;

 

   

any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; and

 

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any action asserting a claim against us that is governed by the internal-affairs doctrine.

To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations, financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, factors and assumptions described in “Risk Factors” and elsewhere in this prospectus, regarding, among other things:

 

   

the success, cost and timing of our product development activities and clinical trials;

 

   

our expectations about the timing of achieving regulatory approval and the cost of our development programs;

 

   

our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;

 

   

the impact of the COVID-19 pandemic on our operations;

 

   

the commercialization of our product candidates, if approved;

 

   

our plans to research, develop and commercialize our product candidates;

 

   

our ability to obtain, maintain, expand, protect and enforce our intellectual property rights;

 

   

our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of third parties;

 

   

our ability to attract collaborators with development, regulatory and commercialization expertise;

 

   

future agreements with third parties in connection with the commercialization of our product candidates;

 

   

the size and growth potential of the markets for our product candidates, and our ability to serve those markets;

 

   

the rate and degree of market acceptance of our product candidates;

 

   

regulatory developments in the United States and foreign countries;

 

   

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

 

   

the success of competing therapies that are or may become available;

 

   

our ability to attract and retain key scientific or management personnel;

 

   

the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

   

our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act and as a smaller reporting company under the federal securities laws;

 

   

our use of the proceeds from this offering; and

 

   

our ability to maintain proper and effective internal controls.

 

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These risks are not exhaustive. Other sections of this prospectus may include additional factors that could harm our business and financial performance. New risk factors may emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our 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 investors are cautioned not to unduly rely on these statements.

You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

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INDUSTRY AND MARKET DATA

This prospectus contains estimates, projections and other information concerning our industry and our business, including estimated market size, projected growth rates and the incidence of certain medical conditions. Unless otherwise expressly stated, we obtained this industry, business, market, medical and other information from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this information is derived. In that regard, when we refer to one or more sources of this type of information in any paragraph, you should assume that other information of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

This industry, business, market, medical and other information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. Although we are responsible for all of the disclosure contained in this prospectus and we believe the market position, market opportunity, market size and medical information included in this prospectus is reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of             shares of common stock in this offering will be approximately $         million at an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds to us will be approximately $         million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase or decrease in the assumed initial public offering price of $         per share would increase or decrease, respectively, our net proceeds by $         million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares we are offering would increase or decrease, respectively, the net proceeds from this offering, after deducting underwriting discounts and commissions by $         million, assuming the assumed initial public offering price stays the same.

We currently expect to use our net proceeds from this offering as follows:

 

   

approximately $        million to fund the clinical development of BDC-1001 for the treatment of four distinct groups of patients with HER2-expressing cancers through completion of our existing Phase 1/2 clinical trial;

 

   

approximately $         million to fund completion of IND-enabling studies, chemistry, manufacturing and control, or CMC, activities and the clinical development of our CEA Boltbody ISAC program; and

 

   

the remaining proceeds for PD-L1 Boltbody ISAC program, research and development activities, as well as working capital and general corporate purposes.

However, due to the uncertainties inherent in the product development process, it is difficult to estimate with certainty the exact amounts of the net proceeds from this offering that may be used for the above purposes. Our management will have broad discretion over the use of the net proceeds from this offering. The amounts and timing of our expenditures will depend upon numerous factors including the results of our research and development efforts, the timing and success of preclinical studies and any ongoing clinical trials or clinical trials we may commence in the future, the timing of regulatory submissions and the amount of cash obtained through future collaborations, if any. Following this offering, we will require additional funding in order to complete clinical development and commercialize our lead product candidate, BDC-1001, and complete the clinical development of any additional product candidates.

We believe opportunities may exist from time to time to expand our current business through acquisitions or in-licenses of complementary companies, medicines or technologies. While we have no current agreements, commitments or understandings for any specific acquisitions or in-licenses at this time, we may use a portion of the net proceeds for these purposes.

Pending the use of the proceeds from this offering as described above, we intend to invest the net proceeds in interest-bearing investment-grade securities or government securities.

 

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DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination regarding the declaration and payment of dividends will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

 

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CAPITALIZATION

The following table sets forth our cash, cash equivalents and short-term investments and our capitalization as of September 30, 2020, on:

 

   

an actual basis;

 

   

a pro forma basis to give effect to (1) the conversion of 106,626,123 shares of convertible preferred stock outstanding as of September 30, 2020, into an equal number of shares of common stock upon the closing of this offering; (2) the issuance of            shares of common stock upon the automatic net exercise of outstanding warrants, with an exercise price of $0.01 per share, immediately prior to the closing of this offering, assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus; (3) the reclassification of our convertible preferred stock purchase right liability to additional paid-in capital immediately prior to the closing of this offering; and (4) the filing and effectiveness of our amended and restated certificate of incorporation; and

 

   

a pro forma as adjusted basis to give further effect to the issuance and sale of            shares of common stock in this offering at the assumed initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this information in conjunction with our financial statements and the related notes included elsewhere in this prospectus, the information set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information contained elsewhere in this prospectus.

 

     As of September 30, 2020  
     Actual     Pro
Forma
     Pro Forma
As Adjusted(1)
 
     (In thousands, except share and per
share data)
 

Cash, cash equivalents and short-term investments

   $ 37,748     $                    $                
  

 

 

   

 

 

    

 

 

 

Convertible preferred stock purchase right liability

   $ 11,099       

Convertible preferred stock, $0.00001 par value—145,903,585 shares authorized, 106,626,123 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

     105,296     $        $    

Stockholders’ equity (deficit):

       

Preferred stock, $0.00001 par value—no shares authorized, issued or outstanding, actual;                              shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted

           

Common stock, $0.00001 par value—198,000,000 shares authorized, 14,670,939 shares issued and outstanding, actual;              shares authorized,                              shares issued and outstanding, pro forma;             shares authorized,              shares issued and outstanding, pro forma as adjusted

           

Additional paid-in capital

     2,776       

Accumulated other comprehensive income

     2       

Accumulated deficit

     (77,364     
  

 

 

   

 

 

    

 

 

 

Total stockholders’ equity (deficit)

     (74,586     
  

 

 

   

 

 

    

 

 

 

Total capitalization

   $ 41,809     $        $    
  

 

 

   

 

 

    

 

 

 

 

(1)

Each $1.00 increase (decrease) in the assumed initial public offering price of $        per share of common stock, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of cash, cash equivalents and short-term investments, additional paid-in capital, total

 

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stockholders’ equity and total capitalization by $        million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, an increase (decrease) of 1,000,000 shares of common stock offered by us would increase (decrease) each of cash, cash equivalents and short-term investments, additional paid-in capital, total stockholders’ equity and total capitalization by $        million, assuming the assumed initial public offering price of $        per share of common stock, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, after deducting underwriting discounts and commissions. The pro forma as adjusted information is illustrative only, and will depend on the actual initial public offering price, number of shares offered and other terms of this offering determined at pricing.

The outstanding share information in the table above is based on 121,297,062 shares of common stock (including shares of preferred stock on an as-converted basis) outstanding as of September 30, 2020, and excludes:

 

   

26,353,303 shares of common stock issuable upon the exercise of outstanding stock options as of September 30, 2020, with a weighted-average exercise price of $0.45 per share, plus 1,200,000 shares of common stock issuable upon the exercise of stock options granted subsequent to September 30, 2020, with a weighted-average exercise price of $0.63 per share;

 

   

1,524,683 additional shares of common stock reserved for future issuance under our 2015 Equity Incentive Plan as of September 30, 2020, all of which shares will cease to be available for issuance under our 2015 Equity Incentive Plan at the time our 2021 Equity Incentive Plan becomes effective in connection with this offering;

 

   

            shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan, which will become effective upon the execution of the underwriting agreement for this offering, as well as (i) any automatic increases in the number of shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan and (ii) upon the forfeiture, termination, expiration or reacquisition of any shares of common stock underlying outstanding stock awards granted under our 2015 Equity Incentive Plan, an equal number of shares of common stock, such number of shares not to exceed             ; and

 

   

            shares of common stock reserved for future issuance under our 2021 Employee Stock Purchase Plan, which will become effective upon the execution of the underwriting agreement for this offering, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan.

 

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of common stock immediately after this offering.

As of September 30, 2020, our pro forma net tangible book value was $        million, or $        per share of common stock. Pro forma net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of shares of common stock outstanding as of September 30, 2020, after giving effect to (i) the conversion of all 106,626,123 outstanding shares of convertible preferred stock into an equal number of shares of common stock upon the closing of this offering, and (ii) the issuance of             shares of common stock upon the automatic net exercise of outstanding warrants, with an exercise price of $0.01 per share, immediately prior to the closing of this offering, assuming an initial public offering price of $        per share, which is the midpoint of the price range set forth on the cover page of this prospectus.

After giving further effect to the receipt of the net proceeds from our sale of              shares of common stock in this offering at an assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2020, was $         million, or $         per share of common stock. This represents an immediate increase in pro forma net tangible book value of $         per share to our existing stockholders and immediate dilution of $         per share to investors purchasing common stock in this offering.

The following table illustrates this dilution on a per share basis to investors in this offering:

 

Assumed initial public offering price per share

      $                

Pro forma net tangible book value per share as of September 30, 2020

   $                   

Increase in pro forma net tangible book value per share attributed to investors purchasing shares in this offering

     
  

 

 

    

Pro forma as adjusted net tangible book value per share after this offering

     
     

 

 

 

Dilution in pro forma net tangible book value per share to investors in this offering

      $    
     

 

 

 

Each $1.00 increase (decrease) in the assumed initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by $        and dilution to investors in this offering by $        , assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions. An increase of 1,000,000 shares in the number of shares of common stock offered by us would increase the pro forma as adjusted net tangible book value by $        per share and the dilution to investors in this offering would decrease by $        per share, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions. A decrease of 1,000,000 shares in the number of shares of common stock offered by us would decrease the pro forma as adjusted net tangible book value by $        per share and the dilution to investors in this offering would increase by $        per share, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions.

If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value after the offering would be $        per share, the increase in pro forma net tangible book value per share to existing stockholders would be $        per share and the dilution per share to investors in this offering would be $        per share, in each case assuming an initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus.

 

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The dilution information above is for illustration purposes only. Our pro forma as adjusted net tangible book value following the closing of this offering will depend on the actual initial public offering price and other terms of this offering determined at pricing.

The following table summarizes, as of September 30, 2020:

 

   

the total number of shares of common stock purchased from us by our existing stockholders and by investors purchasing shares in this offering;

 

   

the total consideration paid to us by our existing stockholders and by investors purchasing shares in this offering, assuming an initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering; and

 

   

the average price per share paid by existing stockholders for shares issued prior to this offering and by investors purchasing shares in this offering.

 

     Shares Purchased     Total Consideration     Average
Price
Per Share
 
     Number      Percent     Amount      Percent  

Existing stockholders

                         $                      $                

New investors

            
  

 

 

    

 

 

   

 

 

    

 

 

   

Total

        100   $          100  
  

 

 

    

 

 

   

 

 

    

 

 

   

Each $1.00 increase or decrease in the assumed initial public offering price of $        per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, respectively, the total consideration paid by investors in this offering by $        million and increase or decrease, respectively, the total consideration paid by investors in this offering by      %, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting underwriting discounts and commissions.

Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares. If the underwriters exercise their option to purchase an additional    shares in full, our existing stockholders would own      % and investors in this offering would own      % of the total number of shares of common stock outstanding upon the closing of this offering.

The outstanding share information in the table above is based on 121,297,062 shares of common stock (including shares of preferred stock on an as-converted basis), outstanding as of September 30, 2020, and excludes:

 

   

26,353,303 shares of common stock issuable upon the exercise of outstanding stock options as of September 30, 2020, with a weighted-average exercise price of $0.45 per share, plus 1,200,000 shares of common stock issuable upon the exercise of stock options granted subsequent to September 30, 2020, with a weighted-average exercise price of $0.63 per share;

 

   

1,524,683 additional shares of common stock reserved for future issuance under our 2015 Equity Incentive Plan as of September 30, 2020, all of which shares will cease to be available for issuance under our 2015 Equity Incentive Plan at the time our 2021 Equity Incentive Plan becomes effective in connection with this offering;

 

   

             shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan, which will become effective upon the execution of the underwriting agreement for this offering, as well as (i) any automatic increases in the number of shares of common stock reserved for future issuance under our 2021 Equity Incentive Plan and (ii) upon the forfeiture, termination, expiration or reacquisition of any shares of common stock underlying outstanding stock awards granted under our 2015 Equity Incentive Plan, an equal number of shares of common stock, such number of shares not to exceed             ; and

 

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             shares of common stock reserved for future issuance under our 2021 Employee Stock Purchase Plan, which will become effective upon the execution of the underwriting agreement for this offering, as well as any automatic increases in the number of shares of common stock reserved for future issuance under this plan.

To the extent any outstanding options are exercised, there will be further dilution to investors purchasing in this offering.

 

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SELECTED FINANCIAL DATA

The statements of operations data for the years ended December 31, 2018 and 2019 and balance sheet data as of December 31, 2018 and 2019 have been derived from our audited financial statements included elsewhere in this prospectus. The statements of operations data for the nine months ended September 30, 2019 and 2020, and the balance sheet data as of September 30, 2020, are derived from our unaudited interim financial statements included elsewhere in this prospectus. We have prepared the unaudited interim financial statements on the same basis as the audited financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair statement of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected for any other period in the future and our interim results for the nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the full year ending December 31, 2020, or any other period.

You should read the selected financial data set forth below in conjunction with our financial statements and the accompanying notes and the information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus. The selected financial data included in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and related notes included elsewhere in this prospectus.

 

     Year Ended December 31,     Nine Months Ended
September 30,
 
     2018     2019     2019     2020  
    

(In thousands, except share and per share amounts)

 

Statements of Operations Data:

        

Collaboration revenue

   $     $ 215     $ 150     $ 231  

Operating expenses:

        

Research and development

     9,420       26,002       18,567       25,493  

General and administrative

     2,209       5,182       3,045       6,998  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     11,629       31,184       21,612       32,491  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (11,629     (30,969     (21,462     (32,260

Other income (expense), net:

        

Interest income

     193       524       379       187  

Change in fair value of convertible preferred stock purchase right liability

     (153     (42     (42     2,380  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     40       482       337       2,567  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (11,589   $ (30,487   $ (21,125   $ (29,693
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted

   $ (1.00   $ (2.18   $ (1.53   $ (2.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding, basic and diluted

     11,555,760       13,954,354       13,805,753       14,653,438  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted(1)

     $         $    
    

 

 

     

 

 

 

Pro forma weighted-average shares outstanding, basic and diluted(1)

        
    

 

 

     

 

 

 

 

(1)

See the statements of operations and comprehensive loss and Note 11 to our audited financial statements and unaudited interim financial statements included elsewhere in this prospectus for further details on the calculation of net loss per share and the pro forma net loss per share and pro forma weighted-average shares outstanding.

 

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     As of December 31,     September 30,
2020
 
     2018     2019  
    

(In thousands)

 

Balance Sheet Data:

      

Cash, cash equivalents and short-term investments

   $ 13,634     $ 34,826     $ 37,748  

Total assets

     15,975       48,447       61,736  

Working capital(1)

     11,345       27,244       29,776  

Total liabilities

     3,551       16,788       31,026  

Convertible preferred stock

     28,367       77,505       105,296  

Accumulated deficit

     (17,184     (47,671     (77,364

Total stockholders’ deficit

     (15,943     (45,846     (74,586

 

(1)

We define working capital as current assets less current liabilities. See our financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

 

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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 our financial statements and related notes included elsewhere in this prospectus. Some of the information contained in this discussion and analysis are set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, and includes forward looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section of this prospectus titled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage immuno-oncology company developing tumor-targeted therapies that leverage the power of the innate and adaptive immune systems. Our proprietary Boltbody ISAC approach uses immunostimulants to engage and activate myeloid cells, including macrophages and dendritic cells, that directly kill tumor cells via phagocytosis and expose tumor neoantigens to the adaptive immune system. This leads to recruitment of cytotoxic T cells and additional tumor-killing myeloid cells thereby converting immunologically “cold” tumors to “hot” tumors. We believe that this process leads to the development of systemic immunological memory with epitope spreading to neoantigens that is critical to achieving a long-term anti-tumor response. Our lead product candidate BDC-1001 is a HER2 Boltbody ISAC comprised of a HER2-targeting biosimilar of trastuzumab conjugated to one of our proprietary TLR7/8 agonists, for the treatment of patients with HER2-expressing solid tumors, including those with HER2-low tumors. We have demonstrated robust single agent anti-tumor activity in multiple preclinical models, including elimination of large tumors (~500 mm3), as well as tumors that are refractory to trastuzumab or ado-trastuzumab emtansine. In our preclinical safety studies, BDC-1001 was well tolerated and no adverse safety signals were observed. We believe these findings are encouraging for the therapeutic potential of BDC-1001. We initiated a Phase 1/2 trial of BDC-1001 in the first quarter of 2020 for the treatment of patients with HER2-expressing solid tumors. We are currently in the dose escalation portion of the trial and expect to move into Phase 2 dose expansions in key solid tumor indications with unmet medical need in 2021. We anticipate that our Phase 1/2 data will provide us with clinical proof of concept for our HER2 Boltbody ISAC approach. We are also advancing additional Boltbody ISAC product candidates targeting CEA and PD-L1, both of which are currently in preclinical development. We anticipate advancing our CEA Boltbody ISAC into the clinic in 2022.

Since our inception in January 2015, we have focused primarily on organizing and staffing our company, business planning, licensing and developing intellectual property, raising capital, developing our product candidates and conducting preclinical studies and early clinical trials. We have not recorded any revenue from product sales. Our only revenue has been derived from our collaboration with Toray. In March 2019, we entered into the Toray Development Agreement, to jointly develop and commercialize a Boltbody ISAC utilizing Toray’s proprietary antibody. To date, we have funded our operations primarily through private placements of our convertible preferred stock for gross proceeds of $121.7 million, including Toray’s purchase of 5,022,601 shares of Series T convertible preferred stock for gross proceeds of $10.0 million.

We have incurred operating losses since our inception. Our net losses were $11.6 million, $30.5 million and $29.7 million in 2018, 2019 and the nine months ended September 30, 2020, respectively. As of September 30, 2020, we had an accumulated deficit of $77.4 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, and we further expect our expenses will increase substantially as we:

 

   

conduct our ongoing and planned clinical trials;

 

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continue our research and development programs;

 

   

expand our clinical, regulatory, quality and manufacturing capabilities;

 

   

seek regulatory approvals for our product candidates; and

 

   

operate as a public company.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in particular on the timing of our planned clinical trials and preclinical studies, and our expenditures on other research and development activities.

Components of Results of Operations

Revenue

To date our only revenue has been collaboration revenue derived from our collaboration with Toray. We are collaborating with Toray to develop a Boltbody ISAC that incorporates a proprietary Toray antibody against a novel tumor antigen target. We are jointly responsible for early stage development and for providing technical and regulatory support, and Toray will pay for all of the program expenses through the end of Phase 1 development. In conjunction with the collaboration, Toray purchased 5,022,601 shares of our Series T convertible preferred stock for $10.0 million. We evaluated the collaboration together with Toray’s purchase of Series T convertible preferred stock, and allocated $1.5 million from the stock purchase proceeds to deferred revenue, which we recognize, together with payments received from Toray for reimbursement based on agreed-upon full-time equivalent rates and out of pocket costs, as collaboration revenue over time as we fulfill our performance obligation to Toray.

We expect that any collaboration revenue we generate from our current collaboration, and from any future collaboration partners, will fluctuate in the future as a result of the timing and results of development activities and the timing and amount of payments, including upfront and milestone payments, and other factors.

We have not generated any revenue from product sales, and we do not expect to generate any revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our product candidates.

Operating Expenses

Research and Development

Research and development expenses have related primarily to early research and discovery activities and to preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Research and development expenses include:

 

   

external research and development expenses, including lab materials and supplies and payments to contract research organizations, investigative sites and consultants to conduct our clinical trials and preclinical and non-clinical studies;

 

   

salaries, payroll taxes, employee benefits and stock-based compensation charges for those individuals involved in research and development efforts;

 

   

costs related to manufacturing our product candidates for clinical trials and preclinical studies, including fees paid to third-party manufacturers; and

 

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facilities and other allocated expenses which include direct and allocated expenses for rent, insurance and other supplies.

Our direct research and development expenses consist principally of external costs, such as fees paid to contract research organizations and consultants in connection with our preclinical and toxicology studies and costs related to manufacturing materials for our preclinical studies. Since our inception and through September 30, 2020, the vast majority of our third-party expenses related to the research and development of BDC-1001. With the exception of our collaboration with Toray, we do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including other indirect costs, to specific product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research as well as for managing our preclinical development, process development, manufacturing and clinical development activities. We deploy our personnel across all of our research and development activities and, as our employees work across multiple programs, we do not currently track our costs by product candidate.

We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates, particularly as product candidates in later stages of development generally have higher development costs than those in earlier stages of development. We cannot determine with certainty the timing of initiation, the duration or the completion costs of future clinical trials and preclinical studies of our product candidates due to the inherently unpredictable nature of clinical and preclinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations.

We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our future clinical development costs may vary significantly based on factors such as:

 

   

the number and scope of preclinical and IND-enabling studies;

 

   

per-patient trial costs;

 

   

the number of trials required for approval;

 

   

the number of sites included in the trials;

 

   

the countries in which the trials are conducted;

 

   

the length of time required to enroll eligible patients;

 

   

the number of patients who participate in the trials;

 

   

the number of doses that patients receive;

 

   

the drop-out or discontinuation rates of patients;

 

   

potential additional safety monitoring requested by regulatory agencies;

 

   

the duration of patient participation in the trials and through all follow-up;

 

   

the cost and timing of manufacturing our product candidates;

 

   

the phase of development of our product candidates; and

 

   

the safety and efficacy profile of our product candidates.

 

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General and Administrative

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and facility-related costs.

We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development activities and increased costs of operating as a public company. These increased costs will likely include higher expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.

Other Income (Expense), Net

Interest Income, Net

Interest income consists of interest on our cash, cash equivalents and short-term investments.

Change in Fair Value of Preferred Stock Purchase Right Liability

In connection with the issuance of our Series A-1 convertible preferred stock in September 2016, our Series B convertible preferred stock in July 2018 and our Series C-1 convertible preferred stock in June 2020, the investors agreed to buy, and we agreed to sell, additional shares of such preferred convertible stock at the original issue price upon the achievement of pre-defined milestones. These contractual obligations were required to be accounted for as liabilities and remeasured to fair value at each reporting date, with any change in the fair value reported as a component of other income (expense). In February 2018 and July 2019, we issued such additional shares of Series A-1 convertible preferred stock and Series B convertible preferred stock, respectively, and accordingly these contractual obligations were settled and the preferred stock purchase right liabilities were remeasured to fair value on the purchase date and reclassified to permanent equity.

Results of Operations

Comparison of the Nine Months Ended September 30, 2019 and 2020

 

     Nine Months Ended
September 30,
       
     2019     2020     Change  
    

(In thousands)

 

Collaboration revenue

   $ 150     $ 231     $ 81  

Operating expenses:

      

Research and development

     18,567       25,493       6,926  

General and administrative

     3,045       6,998       3,953  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     21,612       32,491       10,879  
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (21,462     (32,260     (10,798

Other income (expense), net:

      

Interest income

     379       187       (192

Change in fair value of convertible preferred stock purchase right liability

     (42     2,380       2,422  
  

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     337       2,567       2,230  
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (21,125   $ (29,693   $ (8,568
  

 

 

   

 

 

   

 

 

 

 

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Collaboration Revenue

Revenue increased $0.1 million from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The increase in revenue was a result of the execution of the Toray Development Agreement in March 2019 and the recognition of revenue over time as we fulfill our performance obligations to Toray.

Research and Development Expenses

Research and development expenses increased by $6.9 million from $18.6 million for the nine months ended September 30, 2019 to $25.5 million for the nine months ended September 30, 2020. The increase was primarily due to $2.6 million of higher expenses related to the ongoing BDC-1001 clinical trial, $3.8 million in higher personnel-related expenses due to an increase in headcount from 29 to 50 employees as of the end of the respective period, and $1.2 million in higher facility-related expenses, partially offset by a decrease of $1.0 million in manufacturing expenses related to the timing of batch production of our product candidates.

General and Administrative Expenses

General and administrative expenses increased by $4.0 million from $3.0 million for the nine months ended September 30, 2019 to $7.0 million for the nine months ended September 30, 2020. The increase was primarily due to $1.6 million in higher professional services expenses related to accounting services, legal fees and other professional services, $1.6 million of higher personnel-related expenses due to an increase in headcount from four to 13 employees as of the end of the respective period, and $0.6 million in higher facility-related expenses.

Other Income (Expense), Net

Interest Income

Interest income was $0.4 million and $0.2 million for the nine months ended September 30, 2019 and 2020, respectively. The decrease is primarily due to lower yields on cash, cash equivalents and short-term investment balances, partially offset by the effect of higher cash, cash equivalents and short-term investment balances.

Change in Fair Value of Convertible Preferred Stock Purchase Right Liability

The change in fair value of convertible preferred stock purchase right liability increased $2.4 million from a charge of $42,000 for the nine months ended September 30, 2019 to income of $2.4 million for the nine months ended September 30, 2020, primarily due to the decrease in the fair value of the outstanding Series C-2 preferred stock purchase right liability resulting from fewer possible outcome scenarios and their estimated timing and associated probabilities of occurrence since the June 2020 Series C-1 preferred stock financing. We issued the shares associated with the Series B convertible preferred stock purchase right liability in July 2019, accordingly, this obligation no longer exists. We will continue to mark the Series C-2 convertible preferred stock purchase right liability to market until we issue the additional shares under the obligation.

 

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Comparison of the Years Ended December 31, 2018 and 2019

 

     Years Ended December 31,        
     2018     2019     Change  
           (In thousands)        

Collaboration revenue

   $     $ 215     $ 215  

Operating expenses:

      

Research and development

     9,420       26,002       16,582  

General and administrative

     2,209       5,182       2,973  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     11,629       31,184       19,555  
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (11,629     (30,969     (19,340

Other income (expense), net

     40       482       442  
  

 

 

   

 

 

   

 

 

 

Net loss and comprehensive loss

   $ (11,589   $ (30,487   $ (18,898
  

 

 

   

 

 

   

 

 

 

Collaboration Revenue

Revenue increased $0.2 million from 2018 to 2019. The increase in revenue was a result of the execution of the Toray Development Agreement in March 2019 and the recognition of the transaction price proportional to the hours incurred and the total estimated hours to be incurred to perform the services over the period using an input method based on project hours.

Research and Development Expenses

Research and development expenses increased by $16.6 million from $9.4 million in 2018 to $26.0 million in 2019. The increase was due primarily to $5.8 million of higher expenses related to process development and manufacturing and $1.5 million of higher clinical expenses as we prepared BDC-1001 for a clinical trial, $4.4 million of higher core research and development expenses across our pipeline, as well as $2.9 million in higher personnel-related expenses due to an increase in headcount from 26 to 34 employees as of the end of the respective period, and $1.2 million in higher facilities-related expenses.

General and Administrative Expenses

General and administrative expenses increased by $3.0 million from $2.2 million in 2018 to $5.2 million in 2019. The increase was due primarily to $1.2 million in higher professional services expenses related to accounting services, legal fees and other professional services and $1.5 million in higher personnel-related expenses due to an increase in headcount from 3 to 5 employees as of the end of the respective period, including the hiring of a chief executive officer.

Other Income (Expense), Net

Net other income was approximately $0.1 million and $0.5 million in 2018 and 2019, respectively. The increase is primarily due to higher interest income as a result of higher cash and cash equivalent balances resulting from the net proceeds of $48.6 million from our sale of our convertible preferred stock in July 2019 and the receipt of $10.0 million from the sale of our convertible preferred stock and the execution of the Toray Development Agreement in March 2019. The change in fair value of our convertible preferred stock purchase right liability was not material in 2018 and 2019.

Liquidity and Capital Resources

Sources of Liquidity

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of September 30, 2020, we had an accumulated

 

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deficit of $77.4 million. Our net loss was $11.6 million, $30.5 million and $29.7 million for 2018, 2019 and the nine months ended September 30, 2020, respectively, and we expect to incur additional losses in the future. We evaluated our current cash position, historical results, forecasted cash flows and plans in regards to liquidity. Considering all of these factors, we believe, absent this offering, that there is substantial doubt about our ability to continue as a going concern for the next 12 months.

To date, we have funded our operations primarily through the private placement of our convertible preferred stock and have received gross proceeds of $121.7 million from such sales. As of September 30, 2020, we had cash, cash equivalents and short-term investments of $37.7 million. In June 2020, we received aggregate net proceeds of $41.3 million from the sale of 36,135,260 shares of Series C-1 convertible preferred stock at $1.15 per share. Upon the achievement of a specified milestone, the purchasers have agreed to purchase, and we have agreed to sell, an additional 39,277,459 shares of Series C-2 convertible preferred stock at $1.3225 per share for potential additional gross proceeds of $51.9 million. The obligations of the parties with respect to the Series C-2 convertible preferred stock will terminate upon the closing of this offering.

The following table sets forth a summary of our cash flows for each of the periods indicated:

 

     Years Ended
December 31,
    Nine Months Ended
September 30,
 
     2018     2019     2019     2020  
     (In thousands)  

Net cash provided by (used in)

        

Operating activities

   $ (9,872   $ (26,343   $ (20,081   $ (34,418

Investing activities

     (290     (508     (441     (22,296

Financing activities

     19,094       48,627       48,601       40,662  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

   $ 8,932     $ 21,776     $ 28,079     $ (16,052
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Activities

Net cash used in operating activities was $20.1 million and $34.4 million for the nine months ended September 30, 2019 and 2020, respectively. Net cash used in operating activities for the nine months ended September 30, 2019 was primarily due to our net loss of $21.1 million, adjusted for $1.1 million of non-cash charges. The non-cash charges were primarily comprised of $0.6 million of non-cash lease related expense, $0.2 million for stock-based compensation and $0.2 million for depreciation and amortization expense. The change in net operating assets was primarily due to an increase in deferred revenue resulting from the up-front payment received in connection with the Toray Development Agreement entered into in March 2019, offset by an increase in our prepaid expenses and other assets. Net cash used in operating activities for the nine months ended September 30, 2020 was primarily due to our net loss of $29.7 million, adjusted for $0.2 million of non-cash charges and a $4.9 million change in operating assets and liabilities. The non-cash items were primarily comprised of $2.4 million for the change in fair value of the C-2 convertible preferred stock purchase right liability, partially offset by charges of $1.4 million of non-cash lease related expense, $0.9 million for stock-based compensation and $0.4 million for depreciation and amortization expense. The change in net operating assets was primarily due to decreases in our operating lease liabilities related to payments made for leasehold improvements and increases in our prepaid expenses and other assets, offset by increases in accounts payable and accrued expenses related to the timing of vendor payments.

Net cash used in operating activities was $9.9 million and $26.3 million for 2018 and 2019, respectively. Net cash used in operating activities for 2018 was primarily due to our net loss of $11.6 million, adjusted for $0.6 million of non-cash charges and a $1.1 million change in operating assets and liabilities. The change in net operating assets was primarily due to increases in our accounts payable and accrued expenses related to an increase in research and development expenses and the timing of vendor payments. Net cash used in operating activities for 2019 was primarily due to our net loss of $30.5 million, adjusted for $1.9 million of non-cash

 

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charges and a $2.3 million change in operating assets and liabilities. The change in net operating assets was primarily due to increases in our accounts payable and accrued expenses related to an increase in research and development expenses and the timing of vendor payments, as well as an increase in our deferred revenue related to the unsatisfied performance obligation under the Toray Development Agreement entered into in March 2019, partially offset by a decrease in our operating lease liabilities.

Investing Activities

Net cash used in investing activities of $0.4 million for the nine months ended September 30, 2019 was due to purchases of property and equipment. Net cash used in investing activities of $22.3 million for the nine months ended September 30, 2020 was due to the net purchases of short-term investments of $19.9 million and purchases of property and equipment of $2.4 million.

Net cash used in investing activities in the years ended December 31, 2018 and 2019 was due to purchases of other assets and property and equipment.

Financing Activities

Net cash provided by financing activities of $48.6 million during the nine months ended September 30, 2019 was due to net proceeds of $8.5 million from the issuance of 5,022,601 shares of our convertible preferred stock in connection with the Toray Development Agreement in March 2019 and the receipt of proceeds of $40.1 million for the issuance of 34,891,072 shares of our convertible preferred stock in July 2019. Net cash provided by financing activities of $40.7 million during the nine months ended September 30, 2020 was primarily due to net proceeds received from the issuance of 36,135,260 shares of our convertible preferred stock in June 2020, partially offset by payments of deferred offering costs.

Net cash provided by financing activities was $19.1 million for 2018 was due to net proceeds of $19.1 million from the issuance of 11,630,344 shares of our convertible preferred stock in July 2018. Net cash provided by financing activities was $48.6 million for 2019 was due to net proceeds of $48.6 million from the issuance of 39,913,673 shares of our convertible preferred stock.

Funding Requirements

Without giving effect to the anticipated net proceeds from this offering, we do not believe our existing cash, cash equivalents and short-term investments will be sufficient to fund our operations through the next 12 months. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern. See Note 1 to our financial statements included elsewhere in this prospectus for additional information on our assessment. Similarly, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2019, describing the existence of substantial doubt about our ability to continue as a going concern.

Based upon our current operating plans, we believe that the estimated net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments, will be sufficient to fund our operations for at least the next                months from the date of this prospectus. In particular, we expect the net proceeds from this offering will allow us to conduct our clinical trials, fund continued research and development of BDC-1001 in several applications, and fund other research and development activities. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

 

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Our future capital requirements will depend on many factors, including:

 

   

the type, number, scope, progress, expansions, results, costs and timing of our clinical trials;

 

   

preclinical studies for our product candidates or other potential product candidates or indications which we are pursuing or may choose to pursue in the future;

 

   

the outcome, timing and costs of regulatory review of our product candidates;

 

   

the costs and timing of manufacturing for our product candidates, including commercial manufacturing;

 

   

our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

 

   

the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;

 

   

the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;

 

   

our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third party payors and adequate market share and revenue for any approved products;

 

   

patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors;

 

   

the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;

 

   

the costs of obtaining, maintaining, defending and enforcing our patent and other intellectual property rights; and

 

   

costs associated with any product candidates, products or technologies that we may in-license or acquire.

Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams or research programs or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

 

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments at December 31, 2019:

 

     Payments Due by Period  
     Total      Less
than

1 Year
     1-3
Years
     3-5
Years
     More
than

5 Years
 
     (In thousands)  

Operating lease obligations(1)

   $ 11,863      $ 3,644      $ 4,051      $ 3,198      $ 970  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 11,863      $ 3,644      $ 4,051      $ 3,198      $ 970  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Our operating lease obligations relate to our two facilities in Redwood City, California. We lease 9,400 square feet of office space under an operating lease that expires in January 2023 and 25,956 square feet of office and laboratory space under an operating lease that expires in July 2025. Subsequent to December 31, 2019, we entered into a lease agreement for 45,690 square feet of office and laboratory space adjacent to our headquarters facility in Redwood City, California, which is anticipated to expire in May 2031. The new lease agreement also provides a lease for our existing 25,956 square foot facility making it coterminous with the new facility. Our contractual obligations for the term of the new lease agreement are approximately $33.8 million for the new facility and approximately $11.8 million for the extension of our existing facility.

We enter into contracts in the normal course of business with clinical trial sites and clinical supply manufacturers and with vendors for preclinical studies and other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts and not included in the table above.

We have not included in the table above potential contingent payment obligations pursuant to the supply agreement and license agreements discussed below, as the timing and likelihood of such payments is not known. These payments generally become due and payable only upon achievement of certain development, regulatory or commercial milestones.

Contract Supply Agreement

In March 2019, we entered into a supply agreement with EirGenix, Inc., pursuant to which EirGenix agreed to supply us, on a non-exclusive basis, bulk drug substance of EG12014, its monoclonal antibody being developed as a biosimilar of trastuzumab, which we use in the manufacture of our BDC-1001 HER2 Boltbody ISAC. Under this agreement, we are required to make milestone payments to EirGenix up to an aggregate of $2.0 million based on achievement of certain regulatory milestones by our HER2 Boltbody ISAC. For more information regarding our supply agreement with EirGenix, please see “Business—Manufacturing.”

License and Collaboration Agreements

In May 2015 and June 2018, we entered into license agreements with Stanford, pursuant to which Stanford granted us worldwide exclusive licenses under certain patents related to our proprietary Boltbody ISAC technology and myeloid modulation for cancer immunotherapy, respectively. Under these agreements, we are obligated to pay annual license maintenance fees, which are nominal and will be creditable against any royalties payable to Stanford under such agreement in the applicable year. We are required in each agreement to make milestone payments up to an aggregate of $0.4 million for the first licensed product under such agreement that meets certain patent issuance, clinical and regulatory milestones, and an additional milestone payment of $0.2 million for each additional regulatory approval. We also agreed in each agreement to pay Stanford tiered royalties on our and our sublicensees’ net sales of licensed products, at low single-digit percentage rates, subject to certain customary reductions. Our royalty obligations continue for the term of each agreement and we are required to pay royalties on any licensed products made, used, imported or offered for sale during the term of

 

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such agreement but sold after the term of the agreement. In addition, we are obligated in each agreement to pay Stanford a sub-teen double digit to low teen double-digit percentage, based on the date of sublicensing, of certain consideration we receive as a result of granting sublicenses to the licensed patents. Pursuant to each agreement, we will reimburse Stanford’s patent expenses, including reasonable costs incurred in assisting us with prosecuting and maintaining licensed patents. For more information regarding our license agreement with Stanford, please see “Business—License and Collaboration Agreements.”

Off-Balance Sheet Arrangements

During 2018 and 2019 and the nine months ended September 30, 2020, we did not have any off-balance sheet arrangements as defined under the rules and regulations of the SEC.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

As of September 30, 2020, our cash, cash equivalents and short-term investments consist of cash in readily available checking accounts, money market accounts and corporate debt securities with strong credit ratings. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us. Due to the short-term maturities of our cash equivalents and short-term investments, and the low risk profile of our short-term investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents and short-term investments.

Foreign Currency Risk

We are exposed to market risk related to changes in foreign currency exchange rates. We contract with vendors that are located outside the United States and certain invoices are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with the arrangements. We do not currently hedge our foreign currency exchange risk. As of September 30, 2020, we had liabilities of $0.1 million denominated in foreign currencies. Due to the nature of our cash and cash equivalents, an immediate hypothetical 10% change in interest rates would not have a material effect on the fair value of our cash and cash equivalents.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this prospectus, we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.

Revenue Recognition

Effective January 1, 2018, we adopted the provisions of ASC Topic 606, Revenue from Contracts with Customers, or ASC 606, using a modified retrospective method of transition. Under ASC 606, we recognize revenue as research and development activities are performed in an amount that reflects the consideration we expect to receive in exchange for those goods and services.

 

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For all periods presented, we recognized revenue in accordance with the provisions of ASC 606. In accordance with ASC 606, we perform the following five steps in determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of these agreements:

 

   

identification of the promised goods and services in the contract;

 

   

determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

 

   

measurement of the transaction price, including any constraint on variable consideration;

 

   

allocation of the transaction price to the performance obligations; and

 

   

recognition of revenue when, or as, we satisfy each performance obligation.

If an agreement includes a license to our intellectual property and that license is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

With respect to our assessment of the Toray Development Agreement, we identified multiple promises to deliver goods and services, which include at inception of the agreement: (i) a license to technology and patents, information and know-how; and (ii) development services, including research services, technical and regulatory support provided by us. We have identified one performance obligation for all the deliverables under the agreement since the delivered elements are either not capable of being distinct or are not distinct within the context of the contract. Accordingly, we will recognize revenue for the fixed or determinable collaboration in an amount proportional to the hours incurred and the total estimated hours to be incurred over the period over which it expects to deliver its performance obligations. We periodically review and update the estimated hours, when appropriate, which adjusts the percentage of revenue that is recognized for the period. While such changes to our estimates have no impact on our reported cash flows, the amount of revenue recorded in the period could be materially impacted.

Amounts received prior to satisfying the above revenue recognition criteria were recognized as deferred revenue until all applicable revenue recognition criteria were met. Deferred revenue represented the portion of payments received that have not been earned.

Accrued Research and Development Expenses

We are required to estimate our expenses resulting from our obligations under contracts with vendors, consultants and CROs, in connection with conducting research and development activities. The financial terms of these contracts vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. We reflect research and development expenses in our financial statements by matching those expenses with the period in which services and efforts are expended.

We account for these expenses according to the progress of the preclinical study as measured by the timing of various aspects of the study or related activities. We determine accrual estimates through review of the underlying contracts along with discussions with our third-party services providers and our personnel as to the progress of studies, or other services being conducted. During the course of a study, we adjust our rate of expense recognition if actual results differ from its estimates.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services

 

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performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Preferred Stock Purchase Right Liabilities

We have entered into convertible preferred stock financings where, in addition to the initial closing, investors agree to buy, and we agree to sell, additional shares of that convertible preferred stock at a fixed price in the event that certain agreed-upon milestones are achieved. We evaluate this purchase right and assesses whether it meets the definition of a freestanding instrument and, if it does, determine the fair value of the purchase right liability and record it on the balance sheet with the remainder of the proceeds raised being allocated to convertible preferred stock. The preferred stock purchase right liability is revalued at each reporting period with changes in the fair value of the liability recorded as a component of other income (expense), net in the statements of operations and comprehensive loss. The preferred stock purchase right liability is revalued at settlement and the resultant fair value is then reclassified to convertible preferred stock at that time. The estimated fair value of the preferred stock purchase right liability is determined using valuation models that consider the probability of achieving the requisite milestones, our cost of capital, the estimated time period the preferred stock right would be outstanding, consideration received for the convertible preferred stock, the number of shares to be issued to satisfy the preferred stock purchase right and at what price, and probability of the consummation of an initial public offering, as applicable.

There are significant judgments and estimates inherent in the determination of the fair value of our preferred stock purchase right liability. If we had made different assumptions, the carrying value of our preferred stock, net loss and net loss per common share could have been significantly different.

Stock-Based Compensation Expense

Stock-based compensation expense represents the cost of the grant date fair value of equity awards recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. We estimate the fair value of stock option awards using the Black-Scholes option pricing model and recognize forfeitures as they occur.

For restricted stock awards, the fair value of the award is the estimated fair value of our common stock on the grant date, as determined by our board of directors.

The Black-Scholes option pricing model requires the use of subjective assumptions, including the risk-free interest rate, the expected stock price volatility, the expected term of stock options, the expected dividend yield and the fair value of the underlying common stock on the date of grant. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop. See Note 10 to our financial statements included elsewhere in this prospectus for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in 2018 and 2019 and during the nine months ended September 30, 2020.

In 2018, 2019 and the nine months ended September 30, 2020, stock-based compensation expense related to stock options was $0.1 million, $0.5 million and $0.9 million, respectively. As of September 30, 2020, the unrecognized stock-based compensation expense related to stock options was $6.8 million and is expected to be recognized as expense over a weighted-average period of approximately 3.4 years.

Subsequent to September 30, 2020, we granted additional options to purchase 1,200,000 shares of common stock with a weighted-average exercise price of $0.63 per share and expect to recognize total stock-based compensation expense related to such grants of approximately $0.6 million over four years.

 

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Common Stock Valuations

We are required to estimate the fair value of the common stock underlying our equity awards when performing fair value calculations. The fair value of the common stock underlying our equity awards was determined on each grant date by our board of directors, taking into account input from management and independent third-party valuation analyses. All options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant. In the absence of a public trading market for our common stock, on each grant date we develop an estimate of the fair value of our common stock in order to determine an exercise price for the option grants. Our determinations of the fair value of our common stock were made using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the Practice Aid.

Our board of directors considered various objective and subjective factors, along with input from management, to determine the fair value of our common stock, including:

 

   

our stage of development and business strategy, including the status of research and development efforts of our product candidates and the material risks related to our business and industry;

 

   

our results of operations and financial position, including our levels of available capital resources;

 

   

the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies;

 

   

the lack of marketability of our common stock as a private company;

 

   

the prices of our convertible preferred stock sold to investors in arm’s length transactions and the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock;

 

   

the likelihood of achieving a liquidity event for the holders of our common stock, such as an initial public offering or a sale of our company, given prevailing market conditions;

 

   

trends and developments in our industry; and

 

   

external market conditions affecting the life sciences and biotechnology industry sectors.

The Practice Aid prescribes several valuation approaches for setting the value of an enterprise, such as the cost, income and market approaches and various methodologies for allocating the value of an enterprise to its common stock. The cost approach establishes the value of an enterprise based on the cost of reproducing or replacing the property less depreciation and functional or economic obsolescence, if present. The income approach establishes the value of an enterprise based on the present value of future cash flows that are reasonably reflective of our future operations, discounting to the present value with an appropriate risk adjusted discount rate or capitalization rate. The market approach is based on the assumption that the value of an asset is equal to the value of a substitute asset with the same characteristics. Each valuation methodology was considered in our valuations.

Through December 31, 2019, we estimated the enterprise value of our business and underlying stock option grants using the income approach and the Option Pricing Method, or OPM, to allocate enterprise value to the various share classes. The present value of future cash flows was utilized to estimate our current equity value. Under the OPM, shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The values of the preferred and common stock are inferred by analyzing these options. We believed the OPM was the most appropriate method at that time given the uncertainty of various potential liquidity outcomes and the difficulty of selecting and supporting specific outcomes given our early stage of development. In 2020, we changed to a hybrid of the OPM and Probability-Weighted Expected Return Method, or PWERM, because of a near-term potential IPO scenario that

 

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also factored in the inherent uncertainty associated with being able to complete an IPO. The PWERM is a scenario-based analysis that estimates the value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to us, as well as the economic and control rights of each share class. Under this hybrid method, we considered the expected initial public offering liquidity scenario, but also used the OPM to capture all other scenarios in the event a near-term initial public offering does not occur. The IPO liquidity scenario equity value was estimated based on recent IPO valuations in the life sciences and biotechnology sectors, discounted to present value based on anticipated IPO timing. The OPM scenario equity value was determined based on the terms of a recent arm’s-length convertible preferred stock financing, which implies an equity value by taking into account our capital structure and the rights and preferences of each class of our stock.

We further adjusted the fair value of our common stock to recognize the lack of liquidity associated with shares of our common stock due to the fact that our stockholders do not have access to public trading markets similar to those enjoyed by stockholders of public companies. Accordingly, we applied discounts to reflect this lack of marketability of our common stock based on the weighted-average expected time to liquidity.

There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These judgments and estimates include assumptions regarding our future operating performance, the time to complete an initial public offering or other liquidity event and the determination of the appropriate valuation methods. If we had made different assumptions, our stock-based compensation expense, net loss and net loss per common share could have been significantly different. Following the closing of this offering, the fair value of our common stock will be based on the closing price of our common stock as reported by the Nasdaq Global Market.

Based on the assumed public offering price of $        per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, the intrinsic value of all outstanding stock options as of September 30, 2020 was $        million, of which $        million related to vested options and $        million related to unvested options. The aggregate intrinsic value of options granted subsequent to September 30, 2020 was $         million, all of which options are unvested as of the date of this prospectus.

Emerging Growth Company and Smaller Reporting Company Status

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250 million as of the last business day of the second fiscal quarter or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of the last business day of the second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

 

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Net Operating Loss and Research and Development Carryforwards and Other Income Tax Information

As of December 31, 2019, we had federal and state NOL carryforwards of $46.2 million and $46.3 million, respectively. The federal NOLs include $4.4 million that may be used to offset up to 100% of future taxable income and will begin to expire in 2035 unless previously utilized and $41.8 million that are not subject to expiration. The net operating loss carryforwards subject to expiration could expire unused and be unavailable to offset future income tax liabilities. The federal NOLs not subject to expiration are available to offset up to 80% of taxable income each year indefinitely. The state NOL carryforwards will begin to expire in 2035, unless previously utilized. As of December 31, 2019, we also had federal and state research credit carryforwards of $1.5 million and $1.3 million, respectively. The federal research and development tax credit carryforwards expire beginning in 2038 unless previously utilized, and the state research and development tax credit carryforwards do not expire. We have established valuation allowances against our NOLs and research and development credits due to the uncertainty surrounding the realization of these assets.

We have not completed a Section 382 study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since our formation due to the complexity and cost associated with such a study and the fact that there may be additional such ownership changes in the future. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of our NOL and research and development tax credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842). ASU 2016-02 provides new comprehensive lease accounting guidance that supersedes existing lease guidance. The new standard establishes a right-of-use, or ROU, model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The guidance is effective for all public business entities and certain not-for-profit entities in fiscal years beginning after December 15, 2018, and for all other entities in fiscal years beginning after December 15, 2021. We adopted Topic 842 on January 1, 2019 using the modified retrospective method and did not restate comparative periods. We elected to apply the “practical expedient package,” which permits us to not reassess previous conclusions around lease identification, lease classification and initial direct costs. Further, we made an accounting policy election to exclude leases with terms of 12 months or less from the recognition requirements. We did not elect the use of the hindsight practical expedient. As a result of the adoption of the standard on January 1, 2019, we recognized lease liabilities based on the present value of the total fixed payments for our leases in the amount of $1.9 million and ROU assets in the amount of $2.0 million on our balance sheet. The adoption of the new standard did not have a material impact on our statements of operations and comprehensive loss or cash flows.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. The new guidance better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The new guidance also makes certain targeted improvements to simplify the application of hedge accounting guidance and ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. The standard is effective for fiscal years beginning after December 15, 2018, and early adoption is permitted. We elected to early adopt the standard on January 1, 2018. The adoption of the new standard did not have a material impact on our financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The primary focus of the standard is to improve the effectiveness of the disclosure requirements for fair value measurements. We adopted the standard on January 1, 2020, and the adoption did not have a material impact on our financial statements and related disclosures.

 

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BUSINESS

Overview

We are a clinical-stage immuno-oncology company developing tumor-targeted therapies that leverage the power of the innate and adaptive immune systems. Our proprietary Boltbody ISAC approach uses immunostimulants to engage and activate myeloid cells, including macrophages and dendritic cells, that directly kill tumor cells via phagocytosis and expose tumor neoantigens to the adaptive immune system. This leads to recruitment of cytotoxic T cells and additional tumor-killing myeloid cells thereby converting immunologically “cold” tumors to “hot” tumors. We believe that this process leads to the development of systemic immunological memory with epitope spreading to neoantigens that is critical to achieving a long-term anti-tumor response. Our lead product candidate BDC-1001 is a HER2 Boltbody ISAC comprised of a HER2-targeting biosimilar of trastuzumab conjugated to one of our proprietary TLR7/8 agonists, for the treatment of patients with HER2-expressing solid tumors, including those with HER2-low tumors. We have demonstrated robust single agent anti-tumor activity in multiple preclinical models, including elimination of large tumors (~500 mm3), as well as tumors that are refractory to trastuzumab or ado-trastuzumab emtansine. In our preclinical safety studies, BDC-1001 was well tolerated and no adverse safety signals were observed. We believe these findings are encouraging for the therapeutic potential of BDC-1001. We initiated a Phase 1/2 trial of BDC-1001 in the first quarter of 2020 for the treatment of patients with HER2-expressing solid tumors. We are currently in the dose escalation portion of the trial and expect to move into Phase 2 dose expansions in key solid tumor indications with unmet medical need in 2021. We anticipate that our Phase 1/2 data will provide us with clinical proof of concept for our HER2 Boltbody ISAC approach. We are also advancing additional Boltbody ISAC product candidates targeting CEA and PD-L1, both of which are currently in preclinical development. We anticipate advancing our CEA Boltbody ISAC into the clinic in 2022.

Our Boltbody ISAC approach is pioneering a new category of immunotherapies that combines the precision of antibody targeting with the strength of the innate and adaptive immune systems by activating and recruiting myeloid cells, thereby re-programming the tumor microenvironment to invoke an adaptive immune response. Our Boltbody ISACs are delivered systemically but act locally through a highly targeted approach that triggers a localized anti-tumor immune cascade through the following “Three-Factor Authentication” process designed to optimize safety and avoid systemic immune stimulation.

 

  1.  

Tumor antigen recognition: Our selective and specific tumor-targeting Boltbody ISACs recognize and bind specifically to the target antigen-expressing tumors.

 

  2.  

FcR-dependent phagocytosis: Engagement of optimized Fc domains triggers myeloid-mediated phagocytosis of the Boltbody ISAC-bound tumor cell. This process directly kills antigen-expressing tumor cells and delivers tumor neoantigens to myeloid cells.

 

  3.  

TLR-mediated activation: Our proprietary TLR agonist conjugates activate myeloid cells and enable the presentation of tumor-associated neoantigens to cytotoxic T cells, thereby initiating the body’s adaptive anti-tumor immune response and converting immunologically “cold” tumors to “hot” tumors. Furthermore, these activated myeloid cells also encourage additional myeloid cell-mediated phagocytosis to amplify the innate and adaptive immune responses.

During this “Three-Factor Authentication,” tumor-associated myeloid cells engulf the Boltbody ISAC-bound tumor cells, become armed with tumor neoantigens, and migrate to the lymph nodes where they mediate the activation and rapid expansion of tumor-reactive T cells to eliminate tumor cells, including those without the initial target antigen. As a result, the patient’s immune system determines which neoantigens are most important to eliminate the target tumors. We believe that this represents the development of systemic immunological memory with epitope spreading to neoantigens that will result in long-term anti-tumor responses.

Unlike immuno-oncology approaches that solely seek to relieve immune suppression, Boltbody ISACs act by engaging the immune system at multiple points in the cancer immunity cycle. Boltbody ISACs activate tumor-associated myeloid cells, leading to tumor phagocytosis and the presentation of tumor neoantigens to

 

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T cells that enable a productive anti-cancer response. The following key features provide us with the opportunity to develop robust applications across various solid tumors designed to deliver effective and safe therapeutics that provide durable responses.

 

   

Ability to address difficult-to-treat solid tumors including those refractory to current treatments;

 

   

Engaging the body’s innate and adaptive immune responses;

 

   

Generation of immunological memory with epitope spreading to provide long-term anti-tumor responses and protect against recurrence;

 

   

Ability to target tumor antigens with less dense cell surface expression;

 

   

Capability to modulate myeloid cell activity via TLR potency and selectivity and Fc engineering;

 

   

Well tolerated in preclinical studies by avoiding unintended systemic immune stimulation; and

 

   

Potential to benefit patients who have a defective adaptive immune response.

Our lead product candidate, BDC-1001, is currently in clinical development for the treatment of patients with HER2-expressing solid tumors, including those with HER2-low tumors. We have designed BDC-1001 as a Boltbody ISAC comprised of a HER2-targeting biosimilar trastuzumab conjugated to one of our proprietary TLR7/8 agonists to maximize the potential anti-tumor response. Through our preclinical studies in mice, we have demonstrated that systemic administration of HER2 Boltbody ISACs exhibited localized immune activation that resulted in single agent activity that eliminated large (~500 mm3) tumors and generated immunological memory against cancers with epitope spreading. Furthermore, preclinical data showed anti-tumor activity against established tumors resistant to trastuzumab and ado-trastuzumab emtansine, and immunological memory providing protection against tumor cells that no longer express the HER2 antigen. Our observed preclinical anti-tumor response coupled with a lack of adverse safety signals in our non-human primate GLP toxicology studies leads us to believe that BDC-1001 offers the potential for long-term and meaningful response for patients with HER2-expressing cancers, including HER2-low tumors. We initiated a Phase 1/2 trial of BDC-1001 in the first quarter of 2020 for the treatment of patients with HER2-expressing solid tumors. We are currently in the dose escalation portion of the trial and expect to advance into Phase 2 dose expansions in 2021 in four clinically important and commercially compelling indications. We anticipate that our Phase 1/2 data will provide us with clinical proof of concept for our HER2 Boltbody ISAC approach.

Our second program focuses on CEA, a well-known tumor antigen that is overexpressed in various solid tumors with significant unmet medical need including, but not limited to, colorectal cancer, non-small cell lung cancer, pancreatic cancer and breast cancer. CEA is upregulated on the cell surface of these cancers and displays minimal receptor-mediated internalization into the cancer cell. CEA allows us to target these cancers, some of which are immunologically “cold.” In our preclinical studies, we have observed promising in vivo and in vitro activity with notable anti-tumor activity in xenograft models. We anticipate advancing our CEA Boltbody ISAC into the clinic in 2022.

Our third program, a PD-L1 Boltbody ISAC, focuses on the treatment of patients with tumors that are nonresponsive or become refractory to immune checkpoint blockade. This encompasses more than 15 different tumor types impacting the lives of millions of patients yearly. Our PD-L1 program is a trifunctional therapeutic with the following mechanism: 1) Antibody-dependent cellular phagocytosis of the tumor, 2) Myeloid activation and engagement of an adaptive T cell response, and 3) PD-L1/PD-1 checkpoint inhibition. In our preclinical studies, we have observed enhanced anti-tumor activity compared to checkpoint inhibition alone, and induced immunological memory in syngeneic mice models with our PD-L1 Boltbody ISAC.

Our Pipeline

We are leveraging our myeloid biology expertise to build a robust pipeline of immune-stimulating, myeloid-engaging therapeutics. Our current pipeline is represented in the figure below. In addition to the programs below,

 

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we are also exploring various well-known targets that have been traditionally difficult to drug and where our myeloid expertise and the Boltbody ISAC approach may unlock the potential of these promising antigens as viable cancer targets. We hold exclusive worldwide rights to all of the listed programs.

 

 

LOGO

In this graphic, HER2 = human epidermal growth factor receptor 2; CEA = carcinoembryonic antigen; PD-L1 = programmed cell death-ligand 1; TAM1 = tumor-associated macrophage 1 antigen; NSCLC = non-small cell lung cancer; CRC = colorectal cancer; and SCLC = small cell lung cancer. A registrational trial is a Phase 2 or a Phase 3 clinical trial that is intended to obtain sufficient data and results to support the filing of an application for regulatory approval, including accelerated approval.

Our Corporate History and Team

Our company was founded in 2015 to capture the pioneering work of our founder Dr. Edgar G. Engleman, who is Professor of Pathology and Medicine at Stanford University School of Medicine and Co-Director of the Immunology and Immunotherapy Program of the Stanford Cancer Institute. Dr. Engleman’s expertise in translating cancer immunotherapeutics from bench to bedside includes the discovery of a dendritic cell-based technology that was the basis for the first active immunotherapy approved by the FDA. It was also at the Engleman Laboratory that the promising new immunotherapy activating dendritic cells in tumors in situ, without requiring their removal and activation in vitro, was discovered in collaboration with Dr. Yaron Carmi and led to the founding of Bolt Biotherapeutics. Continued research in the Engleman Laboratory led Dr. Michael Alonso, a scientific co-founder, and Dr. Shelley Ackerman along with Dr. Engleman to invent the technology that formed the basis of our promising Boltbody ISAC platform.

We have assembled a highly qualified management team with broad experience in myeloid biology, drug discovery and development to execute our mission. Our scientific founders and our management team collectively have extensive experience in immunology, oncology drug development and patient care. We are industry veterans with prior experience at companies such as Alder, Astellas, Gilead, Jazz, Roche / Genentech, Sunesis and others. Together, our team has a proven track record in the discovery, development and commercialization of numerous approved therapeutics such as Alecensa, Cytovene, Evenity, Gazyva, Herceptin, Kadcyla, Polivy, Perjeta, Rituxan, Tecentriq, Valcyte, Venclexta and Vyepti while at other companies. Since our inception through September 30, 2020, we have raised an aggregate of $122 million of gross proceeds and our investors include Novo Holdings, Vivo Capital, Pivotal bioVenture Partners, Sofinnova Investments, Nan Fung Life Sciences, RA Capital Management, Surveyor Capital (a Citadel Company), Rock Springs Capital, Pfizer Ventures and Samsara BioCapital.

 

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Strategy

Our goal is to become a leading immuno-oncology company, leveraging our myeloid biology expertise and proprietary Boltbody ISAC approach to discover, develop and commercialize transformative treatments to address key unmet medical needs in cancer. The key components of our strategy are to:

 

   

Leverage our Boltbody ISAC approach and myeloid expertise to develop our pipeline of immune-activating therapies. Our expertise in myeloid biology and immuno-oncology has led us to research various tumor antigens across solid tumors where significant unmet medical needs remain. Our expertise in medicinal chemistry and mAb engineering and our ability to modulate TLR linker-payloads allow us to optimize the therapeutic profile of our product candidates for any particular tumor antigen as part of our research and discovery efforts to produce durable anti-tumor responses. We believe that our approach is applicable to a broad spectrum of tumor-associated antigens expressed on cancers, including those that are refractory to existing therapies.

 

   

Rapidly advance the development of our lead Boltbody ISAC product candidate, BDC-1001, for the treatment of patients with HER2-expressing cancers. BDC-1001 is currently in an ongoing Phase 1/2 clinical trial for the treatment of patients with HER2-expressing solid tumors. Based on our promising preclinical activity, BDC-1001 has the potential to be effective both as a monotherapy and in combination with existing therapies for patients with HER2-expressing solid tumors. While currently approved HER2-targeting agents are important and effective treatment options for some patients with HER2-expressing solid tumors, a large percentage of patients do not respond to these therapies, develop tumor progression after initial response or are not indicated for current HER2-targeting therapies. These sizable patient populations do not have adequate treatment options available to them. Therefore, we intend to rapidly advance development of BDC-1001 across multiple HER2-expressing cancers, including in both HER2-expressing and certain HER2-low cancers.

 

   

Expeditiously advance our pipeline focused on additional promising targets including CEA and PD-L1. Our robust pipeline includes a CEA Boltbody program and a PD-L1 Boltbody program for which we have observed promising preclinical activity. These programs represent additional opportunities to differentiate our Boltbody ISAC approach from traditional immuno-oncology therapies that seek to inhibit key oncology pathways. By contrast, our Boltbody ISACs utilize target tumor antigens to bring nearby myeloid cells to the targeted tumor microenvironment to initiate robust innate and adaptive immune responses. We believe that this differentiated approach could improve the lives of patients by producing durable anti-tumor responses.

 

   

Continue to invest in our myeloid expertise and Boltbody ISAC approach to explore the full potential of our targeted immunotherapies for the treatment of cancer. Our expertise, rigor and unbiased data-driven approach may lead to additional research and discovery programs that are complementary or independent of our Boltbody ISAC approach and our growing library of innate immune stimulators. Our research and discovery efforts are exploring additional immune agonists for the Boltbody ISAC approach as well as identifying novel targets in tumor-associated myeloid cells that can be targeted for anti-tumor outcomes. We believe such agents have the potential to reprogram tumor-supportive macrophages into tumor-destructive macrophages to elicit a productive anti-tumor immune response. This approach could potentially provide an avenue to further develop precision medicine with an immune modulator.

 

   

Selectively enter into collaborations to expand and enhance our proprietary Boltbody ISAC approach and myeloid expertise to increase the impact of our future product candidates. In order to advance treatment options for patients, we may selectively collaborate with other companies with complementary technology or resources that could maximize the value of our product candidates and also expand our pipeline. Such collaborations may provide us with novel technologies, targets, agents or approaches that complement our myeloid expertise and innovative Boltbody ISAC approach to improve the lives of patients with cancer.

 

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Background of Myeloid Cell Biology

Overview of Myeloid Cell Biology in Cancer

Myeloid cells are a group of immune cells that belong to the innate immune system, consisting of cell types known as monocytes, macrophages, dendritic cells and granulocytes. These cells serve various essential roles in the body’s immune system. In particular, myeloid antigen presenting cells, or myeloid APCs, which include monocytes, macrophages and dendritic cells, are critically involved in the regulation of T cell responses and thereby bridge our body’s innate and adaptive immune systems. Due to various immunosuppressive factors produced in the tumor microenvironment, the normal function of these cells can be inhibited and limited in their ability to create a productive anti-tumor immune response. The source of these immunosuppressive factors can be from cancer cells, cancer-associated fibroblasts, tumor-associated neutrophils, T regulatory cells, tumor-associated macrophages or myeloid-derived suppressor cells. When functioning properly, myeloid APCs can stimulate anti-tumor effects in the body, including direct tumor cell killing by phagocytosis and subsequent activation of T cells to effect long lasting tumor cell killing. This type of T cell response, which is critical for durable anti-tumor immunity, begins when the Boltbody ISAC targets the antigen-expressing tumor cells for phagocytosis by myeloid APCs such as dendritic cells. When appropriately activated by a Boltbody ISAC or other stimuli, these myeloid cells transform into effective antigen-presenting cells that can migrate to the lymph nodes to activate tumor antigen-specific T cells that are critical to direct tumor cell killing. These activated myeloid APCs also secrete pro-inflammatory chemokines and cytokines that help convert immunologically “cold” tumors into “hot” tumors. As such, tumor-supportive myeloid cells are converted to tumor-destructive myeloid cells, further amplifying the innate and adaptive immune responses and thereby leading to a productive and durable anti-tumor immune response.

Overview of Toll-Like Receptors and Their Use in Cancer

Toll-like receptors, or TLRs, are a class of pattern recognition receptors that bind to molecules present on bacteria, viruses and other microorganisms. They are highly expressed by myeloid APCs and other innate immune cells and play a key role in the activation of the immune system in response to microbial invasion. Stimulation of the TLRs by their natural ligands or synthetic agonists induces the secretion of pro-inflammatory cytokines as well as the upregulation of molecules involved in antigen processing and presentation. As part of TLR activation, certain pathogens may be phagocytosed and digested and their antigens presented to T cells that further enhance the innate immune response. These events culminate in the bridging of the innate and adaptive immune responses leading to the induction of a robust T cell response by TLR-activated myeloid APCs, which is critical for the development of durable immunity against foreign pathogens and cancerous cells.

TLR7 and TLR8 are often described together in scientific literature due to their high degree of homology and shared function. They are both intracellular TLRs that detect virus-associated single-stranded RNA (ssRNA) and are expressed at varying levels by myeloid APCs, including monocytes, macrophages and dendritic cells. TLR8 is unique in that its expression is restricted to myeloid APCs, whereas TLR7 is expressed by myeloid APCs, B cells and plasmacytoid dendritic cells, or pDCs. Furthermore, pDCs produce interferon alpha that amplifies the immune response by bolstering dendritic cell and T cell activity. Importantly, both TLR7 and TLR8 agonists can strongly activate myeloid APCs and elicit protective T cell responses. Targeting both TLR7 and TLR8 thus activates a broader set of immune cells that contribute to a productive anti-tumor immune response.

TLR agonists have been tested to activate the innate immune response to generate anti-tumor activity. If administered systemically, TLR agonists by themselves pose a risk of systemic immune activation that can lead to cytokine release syndrome. As such, they have been administered via intratumoral injection. Examples of intratumoral TLR approaches include CMP-001, SD-101 and NKTR-262. While TLR agonists may have anti-tumor efficacy as a monotherapy, our publication in Nature indicates that anti-tumor responses can be greatly augmented if immune stimulants are co-administered with tumor-targeting antibody as the combination enables myeloid cells to more effectively uptake (phagocytosis) and present tumor neoantigens to T cells. Furthermore, our preclinical data demonstrate that conjugation of TLR agonists to tumor-targeting antibodies greatly enhances anti-tumor activity beyond co-administration of unconjugated TLR agonists and tumor-targeting antibodies.

 

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Boltbody ISACs Initiate a New Innate Anti-tumor Immune Response which Leads to Adaptive Immunity with Subsequent Immunological Memory

 

LOGO

While the majority of the current immunotherapy approaches are focused largely on the adaptive immune response, the right-hand side of the above cancer immunity cycle, there remains limited approaches to successfully engage the innate immune response that is depicted on the left-hand (shaded) side of the cancer immunity cycle. Our ISACs are designed to elicit an all-encompassing immune response by engaging the innate immune system to trigger a new adaptive immune response using a single therapeutic agent.

Current immunotherapies seek to address the immune suppression aspects of tumor survival. While these approaches have had a tremendous impact on the lives of patients, they also have several shortcomings and limitations:

 

   

T cell exhaustion: Due to chronic antigen stimulation, activated T cells become less effective over time, losing much of their function due to sustained expression of inhibitory receptors

 

   

Complexities and costs of “personalized” T cell approaches: Personalized approaches have significant costs which limit their utilization and complexities with manufacturing and administration further restricts access to primarily academic centers

 

   

Re-treatment in the event of relapse: Lack of engagement with adaptive immunity reduces likelihood of a long-term anti-tumor response as tumor survival mechanisms often evolve to shed the initial antigen and lead to relapse/recurrence of tumor

 

   

Inability to target “undruggable” tumor targets: Limited number of accessible antigen targets reduce the ability of therapies to fully engage the immune system

 

   

Systemic overstimulation of the immune system: Limited ability to directly target the tumor can lead to cytokine release syndrome and life-threatening toxicity, narrowing a treatment’s therapeutic window

 

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We address each of these pitfalls by engaging an entirely new immune response via our tumor-targeted Boltbody ISACs, which have the potential to safely stimulate the TLRs within the myeloid cells ultimately leading to a T cell-driven anti-tumor response.

Our Boltbody ISAC Approach

Our Boltbody ISAC approach is pioneering a new category of targeted immunotherapies engineered for systemic administration such that circulating Boltbody ISACs reprogram the tumor microenvironment. In the tumor microenvironment, the Boltbody ISACs initiate anti-tumor activity through a “Three-Factor Authentication” process that involves the following:

 

  1.  

Tumor antigen recognition: Our selective and specific tumor-targeting Boltbody ISACs recognize and bind specifically to the target antigen-expressing tumors.

 

  2.  

FcR-dependent phagocytosis: Engagement of optimized Fc domains triggers myeloid-mediated phagocytosis of the Boltbody ISAC-bound tumor cell. This process directly kills antigen-expressing tumor cells and delivers tumor neoantigens to myeloid cells.

 

  3.  

TLR-mediated activation: Our proprietary TLR agonist conjugates activate myeloid cells and enable the presentation of tumor-associated neoantigens to cytotoxic T cells, thereby initiating the body’s adaptive anti-tumor immune response and converting immunologically “cold” tumors to “hot” tumors. Furthermore, these activated myeloid cells also encourage additional myeloid cell-mediated phagocytosis to amplify the innate and adaptive immune responses.

The “Three-Factor Authentication” process provides an added safety benefit to ensure that the immune system is selectively targeted and only fully activated when all three steps have been met. This ensures an initially localized immune effect. During the “Three-Factor Authentication,” tumor-associated myeloid APCs engulf the Boltbody ISAC-bound tumors, become armed with tumor neoantigens, and migrate to the lymph nodes where they mediate the activation and rapid expansion of tumor-reactive T cells to eliminate tumor cells, including those without the initial target antigen. This process enables the body’s own immune system to determine which neoantigens are most important to eliminate the target tumors. We believe that this represents the development of systemic immunological memory with epitope spreading to neoantigens that will result in long-term anti-tumor responses in patients.

 

 

LOGO

 

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The Boltbody Immune-Stimulating Antibody Conjugate

We designed our Boltbody ISACs with three primary components: a tumor antigen-targeting antibody, a linker that can be designed either as cleavable or non-cleavable and a proprietary immune stimulant to activate the patient’s innate and adaptive immune systems. Together these components allow us to believe that our Boltbody ISACs have the potential to overcome the limitations of existing immunotherapies by triggering both the body’s innate and adaptive immune systems through different stages of the cancer immunity cycle to produce long-term anti-tumor activity.

The figure below depicts the mechanism of action of our Boltbody ISACs starting with systemic administration followed by 1) tumor antigen recognition, 2) FcR-dependent phagocytosis and 3) TLR-mediated activation, to target tumors locally and activate the body’s innate and adaptive immune systems, leading to systemic immunological memory with epitope spreading to neoantigens.

 

 

LOGO

Key Features of Our Boltbody ISAC Approach

We believe the following key features are critical to the successful engineering of Boltbody ISACs and set our approach apart from traditional immunotherapies. These advantages provide us with the opportunity for robust applications across various solid tumors designed to deliver effective and safe therapeutics to provide durable anti-tumor responses.

 

   

Ability to address difficult-to-treat solid tumors including those refractory to current treatments: We have observed in vivo anti-tumor activity in large, well-established tumors as well as in tumors refractory to current therapies;

 

   

Engaging the body’s innate and adaptive immune responses: Targeted activation of myeloid APCs for antigen presentation encourages the patient’s own adaptive immune system to reveal relevant tumor neoantigens;

 

   

Generation of immunological memory with epitope spreading to provide long-term anti-tumor responses and protect against recurrence: Our preclinical experiments indicate that Boltbody ISACs generate immunological memory and epitope spreading to tumor antigens that are distinct from the Boltbody ISAC target. This process may prevent tumor recurrence and kill related tumors that do not express the original Boltbody ISAC target antigen;

 

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Ability to target tumor antigens with less dense cell surface expression: We have observed in preclinical studies that Boltbody ISACs demonstrated promising anti-tumor activity even at low levels of target antigen expression;

 

   

Capability to modulate myeloid cell activity via TLR potency and selectivity and Fc engineering: Our medicinal chemistry and mAb engineering expertise allow us to modulate potency, selectivity and specificity of our TLR agonists as well as enhance the stability, PK/PD profile and safety of our Boltbody ISACs;

 

   

Well tolerated in preclinical studies by avoiding unintended systemic immune stimulation: Our “Three-Factor Authentication” system provides additional layers of safety for an initially localized immune effect that may avoid unintended systemic immune activation. In our preclinical safety studies, BDC-1001 was well tolerated and no adverse safety signals were observed. We believe this will potentially enable us to treat patients earlier in the course of their disease. This can be used as monotherapy or as part of a combination therapy strategy; and

 

   

Potential to benefit patients who have a defective adaptive immune response: Some patients’ tumors may have defects at presenting neoantigens that makes them resistant to T cell-mediated killing. Boltbody ISACs overcome this barrier by activating myeloid cells and enhancing their phagocytic capacity resulting in anti-tumor activity.

Our Lead Program: BDC-1001

BDC-1001—Overview

Our lead product candidate, BDC-1001, is currently in clinical development for the treatment of patients with HER2-expressing solid tumors, including those with HER2-low tumors. BDC-1001 provides a compelling example of the potential of Boltbody ISACs to address unmet medical needs in solid tumors. BDC-1001 is delivered systemically and acts locally by targeting HER2-expressing tumors and related metastatic disease, triggering their destruction by the innate and adaptive immune systems. BDC-1001 consists of a biosimilar of the humanized monoclonal antibody trastuzumab that is chemically conjugated to one of our proprietary TLR7/8 agonists via a non-cleavable linker. We have observed through our preclinical studies that BDC-1001 is an activator of human myeloid antigen presenting cells that may kill tumors via three distinct mechanisms: trastuzumab-mediated cell killing, robust immune activation and induction of immunological memory. Our observed preclinical anti-tumor response coupled with a lack of adverse safety signals in our non-human primate GLP toxicology studies leads us to believe that BDC-1001 offers the potential for long-term and meaningful response for patients with HER2-expressing cancers, including certain HER2-low tumors. We initiated a Phase 1/2 trial of BDC-1001 in the first quarter of 2020 for the treatment of patients with HER2-expressing solid tumors. We are currently in the dose escalation portion of the trial and expect to move into Phase 2 dose expansions in 2021. We anticipate that our Phase 1/2 data will provide us with clinical proof of concept for our HER2 Boltbody ISAC approach.

BDC-1001—Mechanism of Action

BDC-1001 stimulates anti-tumor activity with a three-pronged approach: direct tumor cell killing by trastuzumab-mediated mechanisms, localized phagocytosis and elimination of HER2-expressing tumor cells by activated myeloid APCs and durable immunity manifested by T cells reactive to tumor-associated antigens or neoantigens. These mechanisms are supported by our in vivo data demonstrating tumor elimination and immunological memory when treated with our BDC-1001 surrogates.

The mechanism governing myeloid cell activation is tripartite with BDC-1001 binding to HER2-expressing tumor cells via the antibody variable region, leading to phagocytosis and tumor cell killing by myeloid APCs expressing Fcg receptors, or FcRs, such as macrophages, dendritic cells and monocytes. Once internalized, the

 

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TLR7/8 agonist attached to BDC-1001 gains access to the phagolysosome and mediates downstream events associated with TLR7/8 activation, including increased cytotoxicity, cytokine secretion, recruitment of immune effector cells and the processing and presentation of tumor-associated antigens that stimulate T cell-mediated immunity. Taken together, the downstream effects of myeloid APC activation induced by BDC-1001 results in the conversion of immunologically “cold” tumors into “hot” tumors.

Activated myeloid APCs migrate to the draining lymph nodes following BDC-1001 mediated phagocytosis of HER2-expressing tumor cells. Upon arrival to the draining lymph nodes, activated APCs present the full diversity of potential tumor-associated antigens and neoantigens located within the phagocytosed tumor cells on peptide-MHC complexes to naïve and antigen experienced or previously exhausted T cells. This process, in conjunction with elevated co-stimulatory molecule expression following TLR7/8 recognition in myeloid APCs, leads to the polyclonal activation and expansion of T cells. As a result, the patients’ own immune system determines which are the relevant T cells to mobilize for tumor destruction and subsequent immunosurveillance, providing a compelling example of how an off-the-shelf targeted immunotherapeutic such as BDC-1001 can deliver a personalized therapeutic outcome.

 

 

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BDC-1001—Design / Selection Process

To demonstrate the promise of our Boltbody ISAC approach, we sought a target that was well-validated and was present in cancer indications that continue to have significant unmet medical need. We selected HER2 as the target for our first Boltbody ISAC as it met these criteria and is expressed at high levels in multiple malignancies and remains expressed at a high level in the majority of patients who unfortunately develop tumor progression while on HER2-targeted therapies. HER2-expressing tumors also tend to be rich in myeloid cells, which BDC-1001 utilizes to initiate the ISAC-mediated anti-tumor cascade that ultimately resulted in tumor elimination and immunological memory in our various preclinical studies.

We selected a biosimilar of trastuzumab as the antibody backbone for BDC-1001 based on the following parameters: 1) trastuzumab is a well-validated and successful monoclonal antibody that induces meaningful clinical responses in patients with a well understood safety profile, 2) trastuzumab is effective at promoting

 

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antibody-dependent cellular phagocytosis, or ADCP, which is a key step in unlocking the full power of our mechanism of action, 3) trastuzumab has low rates of immunogenicity in patients, 4) trastuzumab has been commercialized as a biosimilar, thereby making biosimilars of trastuzumab available for the manufacturing of Boltbody ISACs and 5) our preclinical data demonstrated that trastuzumab-based ISACs outperformed pertuzumab-based ISACs with the same payloads.

The other key design element of a Boltbody ISAC is the linker payload, which is designed to promote immune stimulation. For BDC-1001, the combination of TLR7 and TLR8 was selected as the immune stimulant for the following reasons: 1) targeting of an endosomal TLR was desirable when considering the safety of the ISAC, as FcR-mediated uptake into the myeloid APC is required for access to the TLR, 2) gene expression data demonstrated that TLR7 and TLR8 are largely restricted to expression on cells of myeloid lineage including monocytes, macrophages and dendritic cells, 3) TLR7 is also expressed on B cells and plasmacytoid dendritic cells, which stimulate type I interferon and antibody responses following stimulation, 4) the expression pattern of murine TLR7 recapitulates the combination of TLR7 and TLR8 expression in the human, which enables us to use murine tumor models as an appropriate setting to investigate our ISAC-mediated mechanisms and 5) we generated data in preclinical experiments demonstrating that dual TLR7/8 agonists outperformed TLR7-specific and TLR8-specific agonists for activating myeloid cells. Therefore, we believe that a dual TLR7/8 agonist will enhance the potential for a productive anti-tumor immune response.

BDC-1001 was designed with safety in mind. The final linker-payload selection was motivated by the goal to demonstrate a favorable safety profile in IND-enabling toxicology studies. Our preclinical data demonstrated that non-cleavable linkers lead to increased myeloid activation and provide a favorable pharmacokinetic profile and a lack of adverse safety signals, as compared to cleavable linkers. In addition, non-cleavable linkers are also less likely to release an active TLR agonist, further reducing the potential for systemic toxicity. We selected both a non-cleavable linker and the TLR7/8 agonist payload because it conferred a favorable immunogenicity profile and pharmacokinetic profile for BDC-1001 in non-human primate studies, and importantly, did not induce cytokine release syndrome. Furthermore, the BDC-1001 linker-payload is cell membrane impermeable which limits off target activity and enables our “Three-Factor Authentication” process for added safety.

BDC-1001—Validation of the HER2 Boltbody ISAC Approach

Boltbody ISACs Outperform Equimolar Mixture of Unconjugated TLR7/8 Agonist and Trastuzumab

To demonstrate that our Boltbody ISAC approach is more potent than the mixture of unconjugated TLR7/8 agonist and trastuzumab, we implanted mice with a HER2-expressing tumor cell line (HCC1954) and treated mice that have functional murine myeloid cells but are deficient in B, T, and NK cells with our BDC-1001 surrogate, trastuzumab alone or trastuzumab and an unconjugated TLR7/8 agonist. We observed that a single administration of our BDC-1001 surrogate resulted in markedly improved anti-tumor activity as compared to an equimolar mixture of the unconjugated TLR7/8 agonist and trastuzumab. Therefore, we believe that covalent attachment of a TLR7/8 agonist to a tumor-targeting antibody such as trastuzumab in the form of a Boltbody ISAC dramatically improves the immunostimulatory outcome and anti-tumor activity of otherwise intratumorally administered, unconjugated TLR agonists.

 

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Figure 1: BDC-1001 Surrogate Delivers Enhanced Anti-Tumor Activity vs. Unconjugated TLR7/8 Agonist and Trastuzumab

 

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SCID/beige mice were dosed once with 5 mg/kg of BDC-1001 Surrogate, trastuzumab, or an equimolar mixture of trastuzumab and TLR7/8 agonist. Data are shown as mean and standard error of the mean, or SEM, with 3-5 mice per group.

Myeloid APCs Eliminate Tumors via Phagocytosis Following Boltbody ISAC “Three-Factor Authentication”

To assess that Boltbody ISAC activity is governed by three key factors: tumor-targeting, FcR engagement and TLR agonism, we performed experiments in which each step was perturbed and measured the subsequent anti-tumor effects. In each experiment, mice were implanted with a HER2-expressing tumor cell line and were randomized when the tumor volume reached 50 – 75 mm3. The figures below demonstrate that our Boltbody ISACs follow a “Three-Factor Authentication” process, in which tumor-targeting, FcR and TLR engagement are essential to initiate myeloid mediated tumor destruction, even in the absence of the adaptive immune system.

To demonstrate the requirement for tumor targeting, mice were treated systemically with our BDC-1001 surrogate, trastuzumab, isotype mAb or isotype ISAC. We observed that while our BDC-1001 surrogate led to tumor elimination, an isotype ISAC that does not recognize the HER2 tumor antigen showed no anti-tumor activity.

Figure 2: BDC-1001 Surrogate Activity Requires Tumor-Targeting

 

 

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NSG mice were dosed systemically with 5 mg/kg every 5 days through day 25. Data are shown as mean and SEM with 5 mice per group.

 

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To demonstrate the requirement for Fc-mediated engagement and TLR agonism, we altered the ISAC by inactivating the Fc domain (Fc-Null ISAC) or by inactivating the payload (TLR-Null ISAC). In the figure below, mice were treated systemically with our BDC-1001 surrogate, trastuzumab, Fc-Null ISAC or TLR-Null ISAC. We observed that only the BDC-1001 surrogate mediated anti-tumor activity, confirming the requirement for both Fc-mediated engagement and TLR agonism.

Figure 3: BDC-1001 Surrogate Activity Dependent on Both FcR Engagement and TLR Agonism

 

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NSG mice were dosed systemically with 5 mg/kg every 5 days through day 25. Data are shown as mean and SEM with 5 mice per group.

Lastly, to demonstrate that BDC-1001 activity is dependent on the presence of phagocytes, tumor cells were implanted into mice, and phagocytes were depleted prior to and during BDC-1001 surrogate treatment using clodronate-loaded liposomes. We observed that depletion of phagocytes, including myeloid APCs, significantly reduced our BDC-1001 surrogate-mediated anti-tumor activity.

Figure 4: BDC-1001 Surrogate Activity Dependent on Presence of Phagocytes

 

 

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SCID/Beige were dosed systemically with 5 mg/kg on day 0, 5 and 10. Phagocytes were depleted using clodronate loaded liposomes through day 21. Data are shown as mean and SEM with 4-6 mice per group.

Boltbody ISAC-stimulated CD8+ Cytotoxic T cells Infiltrate and Eliminate Large Syngeneic Tumors

To assess the capacity of ISACs to mediate anti-tumor activity in the presence of functional innate and adaptive immune systems, we utilized an immunologically “cold” syngeneic mouse mammary carcinoma, or MMC, tumor model. To minimize cross-species immunogenicity associated with rat HER2, or rHER2, expression in the MMC tumor, transgenic mice that endogenously express rat HER2 were used as the host.

 

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In the figure below, mice were implanted with the MMC tumor cell line and the tumors were allowed to grow until they were very large (~500 mm3) and well established. Mice were then treated systemically with our BDC-1001 surrogate, rHER2 mAb or isotype ISAC. We observed that systemic administration of the BDC-1001 surrogate was well tolerated and the only agent that led to tumor elimination.

Figure 5: BDC-1001 Surrogate Mediated Tumor Elimination in Very Large Well-Established Tumors

 

 

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FVB Erbb2 transgenic mice were dosed systemically with 5 mg/kg on days 0 and 5. Data are shown as mean and SEM with 4-7 mice per group.

To demonstrate the induction of immunological memory, BDC-1001 surrogate treated mice with tumor elimination for >60 days after their last treatment were re-challenged with the MMC tumor cell line; tumor naïve mice served as implantation controls. We observed that our BDC-1001 surrogate generated immunological memory as the previously treated, tumor-free mice were protected against tumor re-challenge and remained tumor-free without retreatment for the duration of the study.

Figure 6: BDC-1001 Surrogate Generated Immunological Memory

 

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FVB Erbb2 transgenic mice that eliminated their tumors for >60 days after the last treatment with BDC-1001 surrogate or tumor naïve mice were challenged with MMC tumor cells. Date are shown as mean and SEM with 5 mice per group.

To demonstrate that BDC-1001 also results in a T cell-mediated adaptive immune response, mice were implanted with the MMC tumor cell line and then pre-treated with anti-CD8 depleting antibody with rIgG2b serving as the non-depleting control. Mice were then treated with our BDC-1001 surrogate. We observed that BDC-1001 surrogate-driven tumor regression was heavily dependent on CD8 T cell activity, as depletion of CD8

 

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T cells reduced anti-tumor activity. Furthermore, significant increases in phagocytes and CD8 T cells were measured in tumors following BDC-1001 surrogate treatment, further supporting a mechanism that bridges the innate and adaptive immune systems.

Figure 7: BDC-1001 Surrogate Activity Dependent on CD8 T Cell Activity

 

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FVB Erbb2 transgenic mice were treated systemically with 5 mg/kg at days 0 and 5 with BDC-1001 surrogate or rHER2 mAb. CD8 T cells were depleted through day 21. Data are shown as mean and SEM with 6 mice per group.

Boltbody ISACs Generate Immunological Memory & Evidence of Epitope Spreading Beyond HER2

To demonstrate that BDC-1001 surrogate-induced T cell response and immunological memory extend beyond HER2-expressing tumor cells, as would be expected if epitope spreading occurred, we developed a CT26 cell line that stably expresses rat HER2 (CT26-rHER2) where approximately 10% of the CT26 cells did not express rHER2 after tumor implantation. We observed that treatment with BDC-1001 surrogate resulted in tumor elimination in approximately 75% of mice whereas none of the mice treated with the unconjugated antibody had their tumors eliminated. These data demonstrate that the BDC-1001 surrogate was capable of eliminating tumor cells expressing HER2 as well as those with no HER2 expression, suggesting that BDC-1001 surrogate induced epitope spreading. This is an important observation as human tumors are heterogeneous with regards to cell surface HER2 expression. A tumor determined to be HER2-positive will have tumor cells with varying levels of HER2 expression and BDC-1001 should be capable of eliminating even those tumor cells with low or no HER2 expression.

We performed a re-challenge experiment to further assess the potential for immunological memory with epitope spreading. Mice that experienced tumor elimination, i.e. were tumor-free, following BDC-1001 surrogate treatment were re-challenged with the parental CT26 cell line that lacked rHER2 expression or a genetically distinct tumor cell line, 4T1, in the presence and absence of CD4/CD8 T cells. We observed that mice were protected from re-challenge with the parental CT26 line and that this protection required the presence of CD4/CD8 T cells. Finally, we observed that the development of immunological memory and potential epitope spreading was specific to CT26 as tumor growth of 4T1 tumors was not impacted.

 

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Figure 8: BDC-1001 Surrogate Elicits Tumor Elimination with Epitope Spreading and Immunological Memory

 

 

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Balb/c mice were dosed systemically with 10 mg/kg every 5 days through day 25. Mice that eliminated their tumors for >21 days after the last treatment with BDC-1001 surrogate or tumor naïve mice were challenged with CT26 tumor cells without rHER2 expression. Data are shown as mean and SEM with 3-8 mice per group.

BDC-1001 Is an Activator of Human Myeloid APCs at Various Levels of HER2 Expression

BDC-1001 activates human myeloid APCs to a greater extent than trastuzumab following co-culture with variable HER2-expressing cancer cell lines. As demonstrated in the figure below, BDC-1001 stimulation led to increased expression of CD86, a co-stimulatory molecule that is essential for T cell activation. BDC-1001 also led to increased expression of the co-stimulatory molecule CD40 and increased TNFa secretion, each of which is indicative of a robust myeloid activation response. Importantly, BDC-1001 activated myeloid APCs to a similar extent when co-cultured with tumor cell lines expressing high (IHC3+) or lower levels of HER2 (IHC2+ or IHC1+). These data suggest that BDC-1001 can activate myeloid cells even in the presence of low levels of HER2 surface expression on the tumor cells. These data highlight the potential benefit of BDC-1001 in patients with HER2-low tumors, currently a population for which trastuzumab is not approved.

 

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Figure 9: BDC-1001 Activates Human Myeloid APCs in Tumor Co-culture Assays

 

 

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Pooled myeloid APCs were incubated with the indicated cancer cell line and trastuzumab or BDC-1001. Median fluorescence intensity of CD86 is shown. Data are shown as mean and SEM from 3 experiments with 18 donors.

In a separate set of experiments, we confirmed the requirement for “Three-Factor Authentication,” as FcR-mediated internalization was needed to bring the linker-payload inside the cell to drive myeloid activation through TLR7/8 agonism. We also confirmed that BDC-1001 retains native trastuzumab functionality, as determined by HER2 binding and in vitro tumor growth inhibition assays.

BDC-1001 Is Well Tolerated in Non-Human Primates

To assess the potential safety and tolerability of BDC-1001, we performed a multi-dose non-human primate GLP toxicology study where we administered vehicle, 10, 30 or 90 mg/kg of BDC-1001 at weekly intervals for a total of 4 dose administrations (n=7 per group). We did not observe any BDC-1001-related clinical signs or changes in any of the in-life observations/examinations (e.g., body weights, respiratory rate, as well as ophthalmological, cardiac and neurological endpoints). Furthermore, we did not observe any BDC-1001-related changes in the serum cytokines evaluated and there were no BDC-1001-related organ weight changes. As a result, it was concluded that BDC-1001 was well-tolerated in non-human primates and that the no observed adverse effect level, or NOAEL, for BDC-1001 was 90 mg/kg, the highest dose tested.

BDC-1001—Overview of HER2 Indications and Treatment Paradigms

HER2 is a proto-oncogene that encodes a transmembrane protein involved in signal transduction pathways that promote cell growth and differentiation. HER2 protein overexpression and gene amplification have been documented across multiple cancers. Targeting HER2 with mAbs and small molecule tyrosine kinase inhibitors has had a major impact on patients with HER2-expressing breast and gastric cancer, but there remains a significant unmet medical need on an individual and global patient basis. Our BDC-1001 program seeks to improve therapeutic outcomes for patients with HER2-expressing tumors across three categories: 1) HER2-positive breast and gastric cancer refractory to existing anti-HER2 therapies, 2) tumors with lower expression of HER2 that are not indicated for approved therapies, and 3) other HER2-positive tumors not indicated for approved therapies. In addition, the innovative Boltbody ISAC approach of BDC-1001 seeks to address this critically important unmet medical need not only in patients with the aforementioned advanced tumors, but also to extend that innovation to neoadjuvant and adjuvant settings.

As is widely scientifically accepted and as shown in a 2015 study in the Cancer Metastasis Review, HER2-positivity (IHC 3+ or gene amplification) has been identified in a wide range of malignancies including breast, gastric, bladder, lung, esophageal, colorectal, ovarian, salivary gland, pancreatic, cervical cancers and others. Prevalence of HER2 overexpressing or amplified tumors varies across indications.

 

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Figure 10: Estimated Percentage Prevalence of HER2 Positivity by Protein Expression Across Solid Tumor Indications

 

 

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Although there is broad prevalence of HER2 expression across tumor types, HER2-targeting agents have only been approved for patients with HER2-positive breast and gastric cancers, with HER2-positivity based on protein overexpression or gene amplification. Only trastuzumab is approved for both indications. Additional approved HER2-targeting agents for HER2-positive breast cancer include the following: pertuzumab, trastuzumab emtansine, trastuzumab-hyaluronidase-oysk, lapatinib, neratinib, and most recently, trastuzumab-deruxtecan and tucatinib. According to Evaluate Ltd., a third party that provides commercial intelligence for the pharmaceutical industry, HER2-targeting therapeutics generated approximately $11 billion in worldwide revenues in 2019, and Evaluate Ltd.’s consensus estimated sales of these currently approved agents is projected to grow to $15.9 billion in 2026.

According to epidemiology data publicly presented by F. Hoffmann-La Roche AG/Genentech, Inc., the 2018 annual drug-treated incidence of breast cancer in the United States and in France, Germany, Italy, Spain and the UK (formerly known as the “EU5”) was estimated to be approximately 477,800 patients in the aggregate. Of these, we estimate that only approximately 75,800 patients are HER2-positive. We estimate HER2-low patients to be more than 50% of the total population, including approximately 86,900 patients who are IHC2+ without gene amplification and approximately 155,500 patients who are IHC1+ without gene amplification. We plan to explore this HER2-low population in breast cancer starting with the IHC2+ group first.

 

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Figure 11: Annual Drug-Treated Breast Cancer Incidence and Established Segments in HER2+ Breast Cancer

 

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Trastuzumab-deruxtecan and tucatinib are important recently approved agents for the treatment of patients with previously treated advanced HER2-positive breast cancer. While both these agents provide important options for patients with advanced breast cancer, it is important to highlight the large percentage of patients who do not respond to these therapies or develop tumor progression after initial response. There are no approved treatments for either of these patient groups.

Despite the availability of these HER2-targeted agents, most patients with advanced disease and many with early disease are not cured and require multiple lines of therapy to achieve disease control, improve quality of life and extend survival. Additionally, there are patients not recognized in the current HER2-positive treatment paradigm such as those with lower HER2-expressing tumors or with HER2-expressing tumor types other than breast and gastric. This unmet medical need includes patients with other tumor types, such as gastric cancer, NSCLC, CRC and bladder cancer, both for HER2-positive and HER2-low cancers. HER2 protein expression and overexpression have been well documented in a wide range of malignancies. Relative patient numbers for HER2 protein expression in these select tumor types are detailed in the figure below. This represents a large opportunity for a HER2 therapy utilizing our Boltbody ISAC approach.

Figure 12: 2020 Estimated Incidence in the U.S. of Selected Tumor Types by HER2 Protein Status

 

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BDC-1001—Clinical Development Overview

We are currently conducting a four-part, Phase 1/2 multiple ascending dose and dose-expansion trial of BDC-1001 administered as a single agent or in combination with an immune checkpoint inhibitor. We initiated the trial in the first quarter of 2020 and plan to enroll up to 390 patients at 20 or more sites worldwide. This trial will evaluate safety, tolerability, pharmacokinetics, pharmacodynamics and preliminary anti-tumor activity in patients with HER2-positive disease (IHC3+ or HER2 gene amplification) as well as patients whose tumors have lower HER2 expression (defined as IHC2+). Collectively, we call these groups “HER2-expressing.” All patients in our study have metastatic disease and disease progression after prior therapies.

Monotherapy

 

   

Part 1: Monotherapy dose escalation to evaluate safety and determine a maximum tolerated dose, or MTD, or recommended Phase 2 dose, or RP2D.

 

   

Part 3: Monotherapy dose expansion to evaluate safety and preliminary responses in 4 predefined tumor types (HER2-positive breast cancer, HER2 Low breast cancer, HER2-positive gastric cancer and other HER2-positive cancers).

Combination with Checkpoint Inhibitor

 

   

Part 2: Combination with checkpoint inhibitor dose escalation to evaluate safety and determine a MTD or RP2D.

 

   

Part 4: Combination therapy with an immune checkpoint inhibitor to evaluate safety and preliminary responses in 4 predefined tumor types (HER2-positive breast cancer, HER2 Low breast cancer, HER2-positive gastric cancer and other HER2-positive cancers).

Monotherapy—Parts 1 and 3

 

 

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Combination Therapy with Checkpoint Inhibitor—Parts 2 and 4

 

 

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Biomarker analyses will be performed and assessed in both tumor tissue and blood. BDC-1001 biological activity will be evaluated by exploring pharmacodynamics or predictive biomarkers that may correlate with activity or help identify patients likely to respond to BDC-1001 as monotherapy or BDC-1001 in combination with specific anti-cancer therapies. Patients may receive study drug up to 24 months after Cycle 1 and may be followed for survival up to 2 years after their last dose. They will remain on treatment until confirmed progressive disease, initiation of alternative cancer therapy, unacceptable toxicity, withdrawal of consent or if other reasons to discontinue treatment occur.

We are currently in the Part 1 dose escalation portion of the trial and expect to move into Phase 2 dose expansions in 2021. We anticipate that our Phase 1/2 data will provide clinical proof of concept for our HER2-targeted Boltbody ISAC approach in general and for our BDC-1001 product profile in the HER2 space.

CEA Program

Our second program focuses on CEA, a well-known tumor antigen that is overexpressed in various solid tumors with significant unmet medical need including, but not limited to, colorectal cancer, non-small cell lung cancer, pancreatic cancer and breast cancer. CEA is upregulated on the cell surface of these cancers and displays minimal receptor-mediated internalization into the cancer cell. In our preclinical studies, we have observed promising anti-tumor activity in vivo with potent in vitro ADCP.

Immune profiling of various solid tumors has revealed that myeloid cells are present in immunologically “hot” and “cold” tumors. Immunologically “cold” tumors include, but are not limited to, colorectal cancer and pancreatic cancer. CEA is overexpressed in these immunologically “cold” cancers. We believe that this, combined with the aforementioned properties, makes CEA-expressing tumors an attractive therapeutic opportunity for our Boltbody ISAC approach. We anticipate advancing our CEA Boltbody ISAC into the clinic in 2022.

Preclinical Data

In our preclinical experiments we have identified a CEA-targeting mAb that has the desired CEA binding properties as well as selectivity over other key members of the CEACAM family. We believe this selectivity will reduce unwanted off-target effects that could lead to safety complications. The favorable binding properties of this mAb will permit increased residence time on CEA to permit an opportunity for myeloid cells to engage the Fc portion of the CEA mAb through Fc receptors.

We also tested the ability of CEA-targeting mAbs to invoke activity in a cellular-based assay that measures ADCP. We observed that our lead CEA-targeting mAb (CEA mAb) has prominent ADCP activity relative to other mAbs tested. We believe this will serve as a strong foundational mAb for the CEA-ISAC since ADCP is a key part of the ISAC mechanism that leads to a productive anti-tumor immune response.

To assess the potential efficacy of our CEA Boltbody ISAC program targeting CEA-expressing tumors, we conducted in vivo xenograft experiments in mice engrafted with the human pancreatic cancer cell line HPAFII. The cell surface expression of CEA on HPAFII tumors is believed to represent the typical CEA expression levels found in human pancreatic cancers. In this study we compared the anti-tumor activity of our lead CEA mAb to a CEA Boltbody ISAC prototype (CEA-ISAC). In addition, we also compared both of these groups to mice that did not receive either therapy (Untreated). Measuring tumor volumes throughout the course of the study revealed that the HPAFII model was refractory to naked CEA mAb with no evidence of anti-tumor activity compared to the Untreated group of animals. In contrast, CEA Boltbody ISAC displayed anti-tumor activity in all animals. We believe that these data support continued research and development of a CEA Boltbody ISAC for patients with CEA-expressing cancers.

 

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Figure 13: In vivo Activity of CEA Boltbody ISAC in HPAFII Human Pancreatic Xenograft Model

 

 

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SCID/beige mice were dosed systemically with 5 mg/kg every 5 days through day 15. Data are shown as mean and SEM with 6 mice per group.

PD-L1 Program

Our third program, a PD-L1 Boltbody ISAC, focuses on another area with significant unmet medical need, the treatment of patients with tumors that are nonresponsive or become refractory to immune checkpoint blockade, such as NSCLC, CRC, breast and other cancers. PD-L1 is an immune checkpoint protein that can be expressed on cancer and immune cells. Expression of PD-L1 on the cell surface of these cells engages the PD-1 checkpoint and results in the inhibition of a productive anti-tumor immune response. More specifically, T cell-mediated immune responses are significantly dampened since the expression of PD-L1 on the cancer cells engages with the PD-1 on the cell surface of T cells and acts as a brake on the immune system. Inhibition of the PD-L1/PD-1 axis has shown potent anti-tumor immune responses in numerous types of cancers; however, a substantial number of cancer patients’ tumors are non-responsive or become refractory to immune checkpoint blockade. These patients with checkpoint refractory tumors represent a significant unmet medical need. We believe that a PD-L1 Boltbody ISAC has the potential to overcome the limitations of current anti-PD-L1 therapies.

Our PD-L1 Boltbody ISAC is designed to be a trifunctional therapeutic to overcome such limitations. As such, our PD-L1 ISAC is built to elicit: 1) antibody-dependent cellular phagocytosis of the tumor, 2) activation of myeloid cells in the tumor microenvironment to enhance neoantigen presentation and consequential T cell-dependent tumor killing and immunological memory, and 3) inhibition of the PD-L1/PD1 axis that can thwart T cell-dependent responses.

Preclinical Data

In our preclinical experiments, we have identified PD-L1-targeting mAbs that have the desired activity in a cellular-based assay that measures ADCP. Our PD-L1-targeting mAbs have ADCP activity and meet the criteria for the PD-L1 Boltbody ISAC given ADCP is a key part of the ISAC mechanism that leads to a productive anti-tumor immune response.

PD-1/PD-L1 blockade is a key property for our desired PD-L1 Boltbody ISAC in order to endow the molecule with a trifunctional mechanism of action. In our preclinical experiments, we observed the ability of our PD-L1-targeting mAbs to disrupt the PD-L1/PD-1 interaction in a cellular-based reporter assay. All three of our top PD-L1-targeting mAbs show robust PD-L1/PD-1 blockade. We believe this property within a PD-L1 Boltbody ISAC would provide a substantial increase in the capacity to elicit a robust anti-tumor immune response.

 

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To further assess and characterize the PD-1/PD-L1 blockade capacity of each of our PD-L1 mAbs, we conducted mixed lymphocyte reaction, or MLR, in vitro assays experiments. All three of our top PD-L1-targeting mAbs demonstrated robust production of IFNg, a cytokine produced as a result of PD-L1/PD-1 blockade. These data, combined with the PD-L1/PD-1 blockade cellular reporter assay, suggest that our PD-L1 mAbs have the desired PD-L1/PD-1 blockade function required for a PD-L1 Boltbody ISAC.

To assess the potential efficacy of our PD-L1 Boltbody ISAC program targeting PD-L1-expressing tumors, we conducted in vivo syngeneic experiments in mice engrafted with the murine colorectal cancer cell line, MC38 that expresses human PD-L1. In this preclinical study we compared the tumor elimination of one of our PD-L1-targeting mAb (PD-L1 mAb) to the same PD-L1-targeting mAb conjugated to a murine TLR7 agonist (PD-L1 ISAC). In addition, we also compared both of these groups to animals that received a non-tumor-targeting mAb (isotype mAb). We observed that MC38-hPD-L1 was partially sensitive to our PD-L1-targeting mAbs relative to the isotype mAb-treated animals; however, no complete responses were observed. In contrast, PD-L1 ISAC displayed marked tumor elimination with complete responses observed in 75% of animals tested. We believe that these data support continued research and development of a PD-L1 Boltbody ISAC for PD-L1-expressing cancers for the potential treatment of patients with checkpoint refractory tumors.

Figure 14: In vivo Activity of PD-L1 Boltbody ISAC in MC38-hPD-L1 Colorectal Syngeneic Tumor Model

 

 

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C57BL/6J mice were dosed systemically with 5 mg/kg every 3 days through day 9. Data are shown as mean and SEM with 4 mice per group.

Myeloid Modulators and Future Research

Our expertise in myeloid biology and immuno-oncology has led us to research various tumor antigens across solid tumors where significant unmet medical need remains. In addition, we have expertise in modulating the various properties of a Boltbody ISAC that would further optimize the profile for any particular tumor antigen in our research and discovery programs. Our Boltbody ISAC approach is designed to elicit a robust anti-tumor immune response with a favorable safety profile. We believe this approach has the potential to enable us to develop product candidates to treat patients with a wide variety of tumors.

Our expertise may lead to additional research and discovery programs that are independent, but may complement, our Boltbody ISAC approach and our growing library of innate immune stimulators. Importantly, tumor-associated myeloid cells tend to be tumor-supportive rather than tumor destructive. Additional ways of modulating tumor-associated myeloid cells are warranted given the heterogeneity of human cancers with respect to tumor mutational burden as well as immunological profile. Our research and discovery efforts are exploring additional immune agonists for the Boltbody ISAC approach as well as identifying novel targets in tumor-associated myeloid cells that can be targeted with other therapeutic modalities.

An example from these efforts is shown in the figure below where we have identified mAbs (Antibodies 1-4) in our laboratories that are capable of binding to and agonizing a novel cell surface protein, which we refer

 

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to as TAM1, on tumor-supportive macrophages. TAM1 agonism results in the production of pro-inflammatory cytokines more consistent with the characteristics of tumor-destructive myeloid cells. We believe such molecule may have the potential to reprogram tumor-supportive macrophages into tumor-destructive macrophages to elicit a productive anti-tumor immune response. Additionally, KRAS and TP53 mutations may upregulate TAM1 on tumor-associated myeloid cells and could provide an avenue to develop precision medicine with an immune modulator.

Figure 15: Capacity of TAM1 Binding mAbs to Enhance TNFa Secretion from Tumor-Supportive Macrophages

 

 

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TNFa secretion by human M-CSF differentiated macrophages stimulated with TAM1 binding mAbs for 20 hours. Data are shown as mean and SEM with 5 donors.

License and Collaboration Agreements

License Agreements with Stanford University

In May 2015, we entered into a license agreement with Stanford, or the 2015 Stanford Agreement, pursuant to which Stanford granted us a worldwide exclusive, sublicenseable license under certain patents related to our proprietary Boltbody ISAC technology, to develop, manufacture and commercialize licensed products incorporating such technology. In consideration for the rights granted to us under the 2015 Stanford Agreement, we paid Stanford a nominal nonrefundable license issue fee and issued Stanford and two co-inventors an aggregate of 366,819 shares of our common stock. Stanford retained the right under the 2015 Stanford Agreement, on behalf of itself and all other non-profit research institutions, to practice the licensed patents for any non-profit purpose, including sponsored research and collaborations, but excluding delivery of paid or reimbursed healthcare. However, Stanford retained the right to practice the licensed patents for the delivery of its own paid or reimbursed healthcare.

In June 2018, we entered into a second license agreement with Stanford, or the 2018 Stanford Agreement, and collectively with the 2015 Stanford Agreement, the Stanford Agreements. Pursuant to the 2018 Stanford Agreement, Stanford granted us a worldwide exclusive license, under certain patents related to myeloid modulation for cancer immunotherapy to develop, manufacture and commercialize products containing such technology. In consideration for the rights granted to us under the 2018 Stanford Agreement, we paid Stanford a nominal nonrefundable license issue fee and reimbursed Stanford for past patent expenses, together totaling less than $0.1 million. Stanford retained the right under the 2018 Stanford Agreement, on behalf of itself, Stanford Health Care, Lucile Packard Children’s Hospital at Stanford and all other non-profit research institutions, to practice the licensed patents for any non-profit purpose, including sponsored research and collaborations. The licensed patents are additionally subject to a nonexclusive, worldwide license held by the Howard Hughes Medical Institute to exercise such intellectual property rights for research purposes, with the right to sublicense to non-profit and governmental entities.

 

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The technology claimed by the patents licensed under both Stanford Agreements was developed using U.S. government funding and the licenses are therefore subject to a nonexclusive license held by the U.S. government, certain requirements that licensed products be manufactured in the United States (unless waived according to U.S. government process) and U.S. government march-in rights. For more information on risks related to technology developed using government funding see “Risk Factors—Risks Related to Our Intellectual Property.”

Under each Stanford Agreement, we are obligated to pay annual license maintenance fees, which are nominal and will be creditable against any royalties payable to Stanford under such agreement in the applicable year. We are required in each Stanford Agreement to make milestone payments up to an aggregate of $0.4 million for the first licensed product under such agreement that meets certain patent issuance, clinical and regulatory milestones, and an additional milestone payment of $0.2 million for each additional regulatory approval. We also agreed in each Stanford Agreement to pay Stanford tiered royalties on our and our sublicensees’ net sales of licensed products, at low single-digit percentage rates, subject to certain customary reductions. Our royalty obligations continue for the term of each Stanford Agreement and we are required to pay royalties on any licensed products made, used, imported or offered for sale during the term of such agreement but sold after the term of the agreement. In addition, we are obligated in each Stanford Agreement to pay Stanford a sub-teen double digit to low teen double-digit percentage of certain consideration we receive as a result of granting sublicenses to the licensed patents. Pursuant to each Stanford Agreement, we will reimburse Stanford’s patent expenses, including reasonable costs incurred in assisting us with prosecuting and maintaining licensed patents.

Under each Stanford Agreement, we are obligated to use commercially reasonable efforts to develop and commercialize licensed products and we are also required to achieve certain funding, development and/or regulatory milestones by certain dates, which can be extended a limited number of times upon the payment of a nominal fee.

The Stanford Agreements continue until terminated. We may terminate either of the Stanford Agreements at any time for any reason by providing at least 30 days’ written notice to Stanford. Stanford may terminate either of the Stanford Agreements if we breach certain provisions of such Stanford Agreement, including the payment and funding, development and/or regulatory milestone obligations, and fail to remedy such breach within 60 days after written notice of such breach by Stanford.

Joint Development and License Agreement with Toray Industries

In March 2019, we entered into the Toray Development Agreement to develop and commercialize collaboration products, each containing a proprietary antibody owned by Toray, or the Toray Antibody, or a related antibody against the same novel tumor antigen target, and our Boltbody technology, for cancer in the United States, Japan and the European Union, or the Territory. In conjunction with the Toray Development Agreement, Toray purchased 5,022,601 shares of our preferred stock at an aggregate purchase price of $10.0 million.

Under the Toray Development Agreement, we granted Toray a co-exclusive (with us) license under certain of our patents and know-how related to our Boltbody technology, and we received from Toray a co-exclusive (with Toray) license under certain of its patents and know-how related to the Toray Antibody. Both co-exclusive licenses are limited to the development, manufacture and commercialization of collaboration products in the Territory for the diagnosis, treatment and prevention of a specified number of cancer indications to be selected by the parties, or the Indications. The parties are obligated to work exclusively on each collaboration product, and neither party is permitted to independently develop or commercialize any collaboration product, or independently use the other party’s technology or patents generated during the collaboration that are specific to collaboration products. The terms of the Toray Development Agreement do not restrict our use of our Boltbody technology independent of the Toray Antibody and related antibodies against the same antigen target, nor do they restrict Toray’s use of the Toray Antibody and related antibodies independent of our Boltbody technology.

 

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Each party is required to use commercially reasonable efforts to conduct development and regulatory activities assigned to it under a development plan. Toray will be solely responsible for both parties’ development costs up to the conclusion of the first Phase I clinical trial and Toray is entitled to reimbursement for 50% of such development costs from our share of revenues collected from the sale or licensing of collaboration products. After the conclusion of the first Phase I clinical trial, the parties will share equally all costs of development activities necessary for obtaining regulatory approval of collaboration products in the Indications in the Territory, unless either party elects to opt out of its co-funding obligations or reduce them by half, which election can be on a region-by-region basis or for the Territory as a whole. Unless a party has made such an election, the parties will share equally all commercialization and outlicense revenues and other consideration received from collaboration activities.

If either party opts out of its co-funding obligation, then the other party will have the exclusive, sublicensable right to develop and commercialize collaboration products in the Indications in the applicable regions of the Territory. The opting-out party, instead of equally sharing revenues from the sale of collaboration products in the opt-out regions, will receive royalties on other party’s net sales of collaboration products in such regions, at rates from a mid-single digit to high teens percentage, subject to certain customary reductions, as well as a portion of any outlicensing revenue.

Unless earlier terminated, the Toray Development Agreement will remain in effect until collaboration products are no longer sold in the Territory. Either party has the right to terminate the Toray Development Agreement for the other party’s uncured material breach or insolvency. The parties additionally may terminate the Toray Development Agreement by mutual agreement. The Toray Development Agreement will automatically terminate if the results of preclinical studies or the first Phase I clinical trial of the collaboration product do not meet the success criteria that are specified in the Toray Development Agreement. In the event of termination all licenses granted under the Toray Development Agreement and all development and commercialization obligations under the Toray Development Agreement will terminate. If either party elects to reduce its co-funding obligations by half in any region, then it will receive an adjusted share of revenues from the collaboration in such region to reflect such reduced funding.

Manufacturing

We do not own or operate any manufacturing facilities. We rely on third-party CMOs for production and testing of our clinical material, including the linkers, payloads and antibodies used to make our Boltbody ISACs, and we expect to continue to do so to meet our toxicology, clinical and commercial activities. We believe there are multiple sources for all of the materials required for the manufacture of our product candidates.

Manufacturing Agreement with Piramal

In June 2018, we entered into a master services agreement with Piramal pursuant to which Piramal provides development and cGMP manufacturing services to us on a non-exclusive basis, with initial statements of work covering our BDC-1001 drug substance and drug product. The agreement has an initial term of five years, and will continue for consecutive one-year renewal terms unless terminated by either party upon written notice to the other party prior to the end of the then current term. We may terminate the agreement or any statement of work upon prior written notice to Piramal, and may be required to pay cancellation fees if we cancel scheduled cGMP manufacturing slots without sufficient advance notice prior to the planned start date. In addition, either party may terminate the agreement for the other party’s uncured material breach.

Supply Agreement with EirGenix

In March 2019, we entered into a supply agreement with EirGenix, Inc., pursuant to which EirGenix agreed to supply to us, on a non-exclusive basis, bulk drug substance of EG12014, its monoclonal antibody being developed as a biosimilar of trastuzumab, which we use in the manufacture of our BDC-1001 HER2 Boltbody

 

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ISAC. In addition, EirGenix provides us access to its regulatory data package to facilitate our development and commercialization efforts and we are required to make milestone payments to EirGenix up to an aggregate of $2.0 million based upon achievement of certain regulatory milestones by our HER2 Boltbody ISAC. The agreement will remain in effect as long as we, or any of our affiliates or licensees, continue to pursue the development or commercialization of any Boltbody ISAC, unless earlier terminated. We may terminate the agreement if EirGenix fails to supply sufficient quantities of EG12014, or if EirGenix does not obtain regulatory approval for EG12014 as a standalone biosimilar product. We may also terminate the EirGenix Agreement upon prior written notice to EirGenix. EirGenix may terminate the agreement if we do not actively develop a HER2 Boltbody ISAC for more than two years. In addition, either party may terminate the agreement for the other party’s uncured material breach or insolvency.

Competition

The biotechnology and pharmaceutical industries, including the immuno-oncology subsector, are characterized by rapidly advancing technologies, fierce competition and a strong emphasis on proprietary drugs and defense of intellectual property. We face potential competition from many sources, including pharmaceutical and biotechnology companies, academic institutions, public and private research institutions and governmental agencies. Any drug candidates that we successfully develop and commercialize will compete with existing treatments and new treatments that are in development and may become available in the future.

Oncology therapeutics on the market and in development range from traditional cancer therapies, including chemotherapy, to new therapies that harness the body’s own immune system to fight cancer. A significant part of the immune response to cancer involves myeloid cells, including macrophages, dendritic cells, neutrophils, monocytes and granulocytes, all of which dynamically regulate tumor growth and progression. There are several therapies targeting myeloid cells on the market or in development. We view companies developing ISACs containing TLR agonists as the closest competitors for our lead program, BDC-1001. At least two other TLR agonist-containing ISACs are in development for oncology indications including Novartis’ NJH-395 and Silverback’s SBT6050. We currently do not consider any company potentially developing unconjugated TLR agonists to be direct competitors given our Boltbody ISAC approach has demonstrated greater effectiveness and differentiating biology compared to an unconjugated TLR agonist and such agents typically are administered intratumorally or have significant toxicities when administered systemically.

We are initially developing BDC-1001 for the treatment of HER2-expressing cancers. HER2 is a well-known and validated oncology target and there are marketed therapies and others in development addressing this target. Marketed therapies include Roche’s Herceptin, Perjeta and Kadcyla, Novartis’ Tykerb, Seattle Genetics’ TUKYSA, as well as Daiichi Sankyo and AstraZeneca’s ENHERTU. We are aware of several therapies in development for patients with HER2-expressing tumors including Zymework’s zanidatamab and ZW49, MacroGenics’ margetuximab, Merus’ MCLA-128 and Ambrx’s ARX788.

Many of the companies against which we currently are competing or which we may compete with in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical and clinical development, obtaining regulatory approvals and marketing approved drugs than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and enrolling subjects for our clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our success is contingent in part upon the successful development and commercialization of BDC-1001 and our other pipeline candidates from the Boltbody ISAC approach that prove to be more effective or safer than competing products in our target indications. We could see a reduction or elimination of our commercial opportunity if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than BDC-1001 or any other drug that we may

 

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develop. Our competitors also may be more successful than us in obtaining FDA or other regulatory approvals for their drugs more rapidly than we may obtain approval for BDC-1001 or our other drugs, which could result in our competitors establishing a strong market position before we are able to enter the market.

Intellectual Property

Our commercial success depends in part on our ability to obtain, maintain and protect intellectual property and other proprietary rights for our current and future product candidates, and our Boltbody ISAC approach through a variety of methods, including seeking and maintaining patents intended to cover our Boltbody ISAC approach, our products and compositions, their methods of use and processes for their manufacture and any other inventions that are commercially important to the development of our business, novel discoveries, product development technologies and know-how, to operate without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of others and to prevent others from infringing, misappropriating or violating our intellectual property and proprietary rights. We also rely on trademarks, trade secrets, know-how, continuing technological innovation and confidential information to develop and maintain our proprietary position.

Regardless of the coverage we seek under our existing patent applications, there is always a risk that an alteration to the product or process may provide sufficient basis for a competitor to avoid infringement claims. In addition, the coverage claimed in a patent application can be significantly reduced before a patent is issued and courts can reinterpret patent scope after issuance. Moreover, many jurisdictions, including the United States, permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims. Moreover, we cannot provide any assurance that any patents will be issued from our pending or any future applications or that any current or future issued patents will adequately protect our intellectual property. For this and other risks related to our proprietary technology, inventions, improvements, Boltbody ISAC approach and product candidates, please see the section entitled “Risk Factors—Risks Related to Our Intellectual Property.”

As of December 31, 2020, we have one issued U.S. patent which we co-own with Stanford and for which Stanford has exclusively licensed their rights to us under the 2015 Stanford Agreement. The issued U.S. patent contains claims to our lead product candidate BDC-1001 and will expire in 2037. In addition, as of December 31, 2020, we own, co-own with Stanford or exclusively license from Stanford approximately 71 pending patent applications (21 of which are pending in the United States).

In particular, we have 21 pending patent applications, including two pending U.S. nonprovisional patent applications, 18 pending foreign patent applications and one Patent Cooperation Treaty (PCT) application that have yet to enter the national phase in any countries, which contain claims to our lead product candidate BDC-1001 and which we co-own with Stanford and for which Stanford has exclusively licensed its rights to us under the 2015 Stanford Agreement. These pending patent applications, if issued, are expected to expire between 2037 and 2040, excluding any extension of patent term that may be available. We also have two pending U.S. provisional patent applications, which we solely own, directed to the clinical use of our lead product candidate BDC-1001, as well as one pending U.S. nonprovisional patent application and one pending European patent application, which we solely own, directed to a method of preparing immunoconjugates, which could be utilized to prepare our lead product candidate BDC-1001 or other Boltbody ISACs. These pending patent applications, if issued, are expected to expire between 2038 and 2040, excluding any extension of patent term that may be available.

In addition, we have 46 pending patent applications directed to potential products and methods other than our lead product candidate BDC-1001 and the use thereof, including 28 pending patent applications that are solely owned by us, five pending patent applications that we co-own with Stanford and have exclusively licensed under the 2015 Stanford Agreement, five pending patent applications that are solely owned by Stanford and that we have exclusively licensed under the 2015 Stanford Agreement and eight pending patent applications that are

 

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solely owned by Stanford and that we have exclusively licensed under the 2018 Stanford Agreement. Of these 46 pending patent applications, 10 are U.S. provisional patent applications, 12 are PCT applications that have yet to enter the national phase in one or more countries, six are U.S. nonprovisional patent applications and 18 are foreign patent applications. These pending patent applications, if issued, are expected to expire between 2035 and 2040 excluding any extension of patent term that may be available.

The patents and patent applications licensed from Stanford are subject to retained rights by Stanford to allow academic and non-profit research institutions to practice the licensed technology and patents for non-commercial purposes. The patents and patent applications licensed from Stanford pursuant to the 2018 Stanford Agreement are additionally subject to a non-exclusive, worldwide license held by the Howard Hughes Medical Institute to exercise such intellectual property rights for research purposes, with the right to sublicense to non-profit and governmental entities.

For more information regarding our license agreements with Stanford, please see “—License and Collaboration Agreements.”

Some of our pending patent applications in the United States are provisional patent applications. Provisional patent applications are not eligible to become issued patents until, among other things, we file a non-provisional patent application within 12 months of filing of one or more of our related provisional patent applications. If we do not timely file any non-provisional patent applications, we may lose our priority date with respect to our provisional patent applications and any patent protection on the inventions disclosed in our provisional patent applications. While we intend to timely file non-provisional patent applications relating to our provisional patent applications, we cannot predict whether any such patent applications will result in the issuance of patents that provide us with any competitive advantage.

The term of individual issued patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, utility patents issued for applications filed in the United States are granted a term of 20 years from the earliest effective filing date of a non-provisional patent application, assuming the patent has not been terminally disclaimed over a commonly-owned patent or a patent naming a common inventor, or over a patent not commonly owned but that was disqualified as prior art as the result of activities undertaken within the scope of a joint research agreement. The life of a patent, and the protection it affords, is therefore limited and once the patent life of our issued patents have expired, we may face competition, including from other competing technologies. In addition, in certain instances, the term of a U.S. patent can be extended to recapture a portion of the delay by the USPTO in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years, the total patent term including the restoration period must not exceed 14 years following FDA approval, only one patent applicable to each regulatory review period may be extended and only those claims covering the approved drug or a method for using it may be extended. We may not receive an extension if we fail to exercise due diligence during the testing phase or regulatory review process, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. There can be no assurance that we will benefit from any patent term extension or favorable adjustment to the term of any of our patents. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. The actual protection afforded by a patent may vary on a product-by-product basis and from country to country and can depend upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

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competitive position and aspects of our business that are not amenable to, or that we do not presently consider appropriate for, patent protection and prevent competitors from reverse engineering or copying our technologies. However, the foregoing rights, technologies and information are difficult to protect. We seek to protect them by, in part, using confidentiality agreements with our employees and consultants and any potential commercial partners and collaborators and invention assignment agreements with our employees. We also have implemented or intend to implement confidentiality agreements or invention assignment agreements with our selected consultants and any potential commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not have adequate remedies for any breach. There can be no assurance that these agreements will be self-executing or otherwise provide meaningful protection for our trade secrets or other intellectual property or proprietary information, In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Our commercial success will also depend in part on not infringing, misappropriating or otherwise violating the intellectual or proprietary rights of third parties. The issuance of third-party patents could require us to alter our development or commercial strategies, change our products or processes, obtain licenses to additional third-party patents or other intellectual property or cease certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize our future products may have an adverse impact on us. Given that patent applications in the United States and certain other jurisdictions are maintained in secrecy for 18 months or potentially longer, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the patent protection being sought by third parties and/or the priority of inventions covered by such patent applications. Moreover, we may have to participate in interference, revocation, derivation, re-examination, post-grant review, inter partes review, or opposition proceedings brought by third parties or declared by the USPTO or an equivalent foreign body. See “Risk Factors—Risks Related to Our Intellectual Property” for additional information regarding these and other risks related to our intellectual property portfolio and their potential effect on us.

Government Regulation

Government authorities in the United States at the federal, state and local level and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products, such as our investigational medicines and any future investigational medicines. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

Regulatory Approval in the United States

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The FDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Biological products used for the prevention, treatment or cure of a disease or condition of a human being are subject to regulation under the FDCA, except the section of the FDCA that governs the approval of new drug applications, NDAs. Biological products, such as our Boltbody ISAC product candidates, are approved for marketing under provisions of the Public Health Service Act. the PHSA, via a BLA. However, the application process and

 

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requirements for approval of BLAs are very similar to those for NDAs, and biologics are associated with similar approval risks and costs as drugs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending NDAs or BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Our investigational medicines and any future investigational medicines must be approved by the FDA pursuant to a BLA before they may be legally marketed in the United States. The process generally involves the following:

 

   

completion of extensive preclinical laboratory and animal studies in accordance with applicable regulations, including studies conducted in accordance with GLP requirements;

 

   

submission to the FDA of an IND, which must become effective before human clinical trials may begin;

 

   

approval by an IRB or independent ethics committee at each clinical trial site before each clinical trial may be commenced;

 

   

performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, GCP requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for each proposed indication;

 

   

submission to the FDA of a BLA;

 

   

payment of any user fees for FDA review of the BLA;

 

   

a determination by the FDA within 60 days of its receipt of a BLA to accept the filing for review;

 

   

satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the biologic, or components thereof, will be produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the biologic’s identity, strength, quality and purity;

 

   

satisfactory completion of any potential FDA audits of the clinical trial sites that generated the data in support of the BLA to assure compliance with GCPs and integrity of the clinical data;

 

   

FDA review and approval of the BLA, including consideration of the views of any FDA advisory committee; and

 

   

compliance with any post-approval requirements, including REMS, where applicable, and post-approval studies required by the FDA as a condition of approval.

The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, or at all.

Preclinical Studies

Before testing any biological product candidates in humans, the product candidate must undergo rigorous preclinical testing. Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective

 

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before human clinical trials may begin. Some long-term preclinical testing may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with GCPs, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors; as well as (iii) under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated in the trial. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.

There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information about certain clinical trials, including clinical trial results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website. Information related to the product, patient population, phase of investigation, clinical trial sites and investigators and other aspects of the clinical trial is then made public as part of the registration. Disclosure of the results of these clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.

A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a BLA. The FDA will accept a well-designed and well-conducted foreign clinical trial not conducted under an IND if the clinical trial was conducted in accordance with GCP requirements, and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials are generally conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3:

 

   

Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacokinetics, pharmacologic action, side effect tolerability, safety of the product candidate, and, if possible, early evidence of effectiveness.

 

   

Phase 2 clinical trials generally involve studies in disease-affected patients to evaluate proof of concept and/or determine the dosing regimen(s) for subsequent investigations. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted.

 

   

Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product labeling. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the biologic.

 

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These Phases may overlap or be combined. For example, a Phase 1/2 clinical trial may contain both a dose-escalation stage and a dose-expansion stage, the latter of which may confirm tolerability at the recommended dose for expansion in future clinical trials (as in traditional Phase 1 clinical trials) and provide insight into the anti-tumor effects of the investigational therapy in selected subpopulation(s).

Typically, during the development of oncology therapies, all subjects enrolled in Phase 1 clinical trials are disease-affected patients and, as a result, considerably more information on clinical activity may be collected during such trials than during Phase 1 clinical trials for non-oncology therapies. A single Phase 3 or Phase 2 trial with other confirmatory evidence may be sufficient in rare instances to provide substantial evidence of effectiveness (generally subject to the requirement of additional post-approval studies).

Phase 1, Phase 2, Phase 3 and other types of clinical trials may not be completed successfully within any specified period, if at all. The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including non-compliance with regulatory requirements or a finding that the patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated checkpoints based on access to certain data from the trial.

Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug or biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength, quality, potency and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the investigational medicines do not undergo unacceptable deterioration over their shelf life.

FDA Review Process

Following completion of the clinical trials, the results of preclinical studies and clinical trials are submitted to the FDA as part of a BLA, along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant data. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic or drug may be marketed in the United States.

The cost of preparing and submitting a BLA is substantial. Under the PDUFA, each BLA must be accompanied by a substantial user fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication. The applicant under an approved BLA is also subject to an annual program fee.

The FDA reviews all submitted BLAs before it accepts them for filing and may request additional information. The FDA must make a decision on accepting a BLA for filing within 60 days of receipt, and such decision could include a refusal to file by the FDA. Once the submission is accepted for filing, the FDA begins an in-depth review of the BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months, from the filing date, in which to complete its initial review of an original BLA for a new molecular entity and respond to the applicant, and six months from the filing date of an original BLA designated for priority review. The review process for both standard and priority review may be extended by the FDA for three

 

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additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and the review process can be extended by FDA requests for additional information or clarification.

Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.

The FDA also may audit data from clinical trials to ensure compliance with GCP requirements and the integrity of the data supporting safety and efficacy. Additionally, the FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it generally follows such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process.

After the FDA evaluates a BLA, it will issue either an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the biologic with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter generally outlines the deficiencies in the BLA and may require additional clinical data, additional pivotal clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing in order for FDA to reconsider the application. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing. The FDA has committed to reviewing such resubmissions in two or six months, depending on the type of information included. Even if such data and information are submitted, the FDA may decide that the BLA does not satisfy the criteria for approval.

As a condition of BLA approval, the FDA may require a REMS to help ensure that the benefits of the biologic outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals and elements to assure a product’s safe use, or ETASU. An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States but for which there is no reasonable expectation that the cost of developing and making the product for this type of disease or condition will be recovered from sales of the product in the United States.

Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation on its own does not convey any advantage in or shorten the duration of the regulatory review and approval process.

 

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If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same product for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care, or in instances of drug supply issues. Competitors, however, may receive approval of either a different product for the same indication or the same product for a different indication. In the latter case, because healthcare professionals are free to prescribe products for off-label uses, the competitor’s product could be used for the orphan indication despite another product’s orphan exclusivity.

FDA’s determination of whether two ADCs are the same product for purposes of orphan drug exclusivity is based on a determination of sameness of the monoclonal antibody element and the functional element of the conjugated molecule. Two ADCs are deemed to be the same product if the complementarity determining region sequences of the antibody and the functional element of the conjugated molecule are the same. A difference in either of those two elements can result in a determination that the molecules are different.

Expedited Development and Review Programs

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.

Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor of a new biologic candidate can request the FDA to designate the candidate for a specific indication for fast track status concurrent with, or after, the submission of the IND for the candidate. The FDA must determine if the biologic candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request. 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 BLA before the application is complete. This “rolling review” is 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. Any product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval.

Breakthrough therapy designation may be granted for products that are intended, alone or in combination with one or more other products, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new biologic candidate may request that the FDA designate the candidate for a specific indication as a breakthrough therapy concurrent with, or after, the submission of the IND for the biologic candidate. The FDA must determine if the biological product qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request. 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 studies in an efficient manner.

Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional