As filed with the Securities and Exchange Commission on July 22, 2021
Registration No. 333-257733
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ICOSAVAX, INC.
(Exact name of registrant as specified in its charter)
Delaware | 2836 | 82-3640549 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
1616 Eastlake Avenue E., Suite 208
Seattle, Washington 98102
(206) 737-0085
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Adam Simpson
Chief Executive Officer
Icosavax, Inc.
1616 Eastlake Avenue E., Suite 208
Seattle, Washington 98102
(206) 737-0085
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Cheston J. Larson Matthew T. Bush Latham & Watkins LLP 12670 High Bluff Drive San Diego, California 92130 (858) 523-5400 |
Lisa Firenze Jeffries L. Oliver-Li Wilmer Cutler Pickering Hale & Dorr LLP 7 World Trade Center 250 Greenwich Street New York, New York 10007 (212) 230-8800 |
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, 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
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TITLE OF EACH CLASS OF
SECURITIES TO BE REGISTERED |
AMOUNT TO BE
REGISTERED (1) |
PROPOSED MAXIMUM
OFFERING PRICE PER SHARE |
PROPOSED MAXIMUM
AGGREGATE OFFERING PRICE (2) |
AMOUNT OF
REGISTRATION FEE (3) |
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Common Stock, $0.0001 par value per share |
11,500,000 shares | $16.00 | $184,000,000 | $20,075 | ||||
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(1) | Includes 1,500,000 shares of common stock that the underwriters have the option to purchase. |
(2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended. |
(3) | $10,910 of this registration fee was previously paid by the Registrant in connection with the filing of its Registration Statement on Form S-1 on July 7, 2021. |
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.
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 prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED July 22, 2021
PRELIMINARY PROSPECTUS
10,000,000 Shares
Common Stock
We are offering 10,000,000 shares of our common stock. This is the initial public offering of our common stock.
Prior to this offering, there has been no public market for our shares. We expect that the initial public offering price will be between $14.00 and $16.00 per share. We have applied to list our common stock on the Nasdaq Global Select Market under the symbol ICVX.
We are an emerging growth company under applicable Securities and Exchange Commission rules and have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.
Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of the material risks of investing in our common stock under the heading Risk Factors starting on page 12 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission approved or disapproved of the securities that may be offered under this prospectus, nor have any of these organizations determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
PER SHARE |
TOTAL |
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Public offering price |
$ | $ | ||||||
Underwriting discount (1) |
$ | $ | ||||||
Proceeds, before expenses, to us |
$ | $ |
(1) | We refer you to Underwriting beginning on page 179 of this prospectus for additional information regarding underwriting compensation. |
Delivery of the shares of common stock is expected to be made on or about , 2021.
We have granted the underwriters an option for a period of 30 days to purchase an additional 1,500,000 shares of our common stock. If the underwriters exercise the option in full, the total underwriting discounts and commissions payable by us will be $ , and the total proceeds to us, before expenses, will be $ .
Jefferies | Cowen | Evercore ISI | William Blair |
The date of this prospectus is , 2021.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS |
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F-1 |
Neither we nor the underwriters have authorized anyone to provide you with information other than that contained in this prospectus or any free writing prospectus prepared by or on behalf of us or to which we have referred you. 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 and the underwriters are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
Through and including , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery is in addition to a dealers obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
For investors outside of the United States: We have not, and the underwriters have not, 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 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 common stock and the distribution of this prospectus outside of the United States.
This summary highlights 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, especially the sections titled Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations, and our financial statements and related notes included elsewhere in this prospectus, before making an investment decision. As used in this prospectus, unless the context otherwise requires, references to we, us, our, the Company and Icosavax refer to Icosavax, Inc.
Overview
We are a biopharmaceutical company leveraging our innovative virus-like particle (VLP) platform technology to develop vaccines against infectious diseases, with an initial focus on life-threatening respiratory diseases. Our VLP platform technology is designed to enable multivalent, particle-based display of complex viral antigens, which we believe will induce broad, robust, and durable protection against the specific viruses targeted. Our pipeline includes vaccine candidates targeting some of the most prevalent viral causes of pneumonia. We are developing these candidates for older adults, a patient population with high unmet need. Our vaccine candidate IVX-A12 is a bivalent candidate, or a mixture of two different VLP candidates. IVX-A12 combines IVX-121, a vaccine candidate designed to target respiratory syncytial virus (RSV), and IVX-241, a vaccine candidate designed to target human metapneumovirus (hMPV). There are currently no vaccines approved for either RSV or hMPV, which are two common causes of pneumonia in older adults. We filed a clinical trial application (CTA) for IVX-121 with the regulatory authority in Belgium (FAMHP) in June 2021 and plan to initiate a clinical trial of IVX-121 in the second half 2021, with topline data expected in the first half of 2022. Assuming favorable results from the IVX-121 clinical trial and favorable preclinical data for IVX-241, we plan to submit an investigational new drug application (IND) to the U.S. Food and Drug Administration (FDA) in the first half of 2022 and, thereafter, initiate a clinical trial of our combination vaccine candidate, IVX-A12. Additionally, we are developing two severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) vaccine candidates, IVX-411 and IVX-421, and initiated a Phase 1/2 clinical trial of IVX-411 in Australia in June 2021, with proof-of-concept data expected in the first half of 2022. We believe that our pipeline and platform can deliver a meaningful impact globally in preventing life-threatening infectious diseases.
Global Vaccine Market Opportunity
The global market for vaccines was over $50 billion in 2020, of which over $12.5 billion was from vaccines for influenza and pneumococcus, two of the leading causes of pneumonia. Lower respiratory infection, including pneumonia, is the leading cause of death and hospitalization from infections and the fourth highest cause of death globally. Older adults are particularly susceptible to respiratory pathogens and it is estimated that prior to COVID-19, lower respiratory infection caused over one million deaths globally in people over the age of 70 every year. RSV is estimated to cause 177,000 hospitalizations and 14,000 deaths in adults 65 years of age or older annually in the United States alone. Many of the viral causes of pneumonia have no approved vaccines, limited treatment options, and result in high morbidity and mortality in the older adult population. There are currently no marketed vaccines for RSV or hMPV, two common causes of pneumonia.
Our Two-Component Computationally Designed VLP Technology
Our technology platform is based on the VLP approach to vaccine development. VLPs enable multivalent display of antigens in a manner that closely resembles viruses but contain no genetic material. Approved vaccines that are derived from naturally occurring VLPs have shown efficacy when formulated as combination vaccines and have shown the ability to induce high and sustained levels (titers) of neutralizing antibodies (nAbs) in adults, which have generally been associated with protective immunity. However, VLPs engineered to display complex viral antigens have in general been difficult to develop or successfully manufacture at scale, limiting the pathogens that can be addressed by this approach.
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Our vaccine technology was licensed from the Institute for Protein Design at the University of Washington (UW IPD) and is designed to enable the application of VLP-based vaccines against a broader array of pathogens than has been possible with naturally occurring VLPs and to overcome the manufacturing challenges experienced with these VLPs as well as other VLP technologies. Our licensed VLP technology encompasses VLPs formed from two protein components that are separately produced using traditional recombinant protein manufacturing techniques. The antigenic Component A consists of a trimeric protein that is genetically fused to the target antigen of interest and produced in eukaryotic cells. The second protein, Component B, is a pentameric structural protein that is produced by bacterial fermentation and is common across all candidates in our pipeline.
Using our VLP platform technology we engineer vaccine candidates comprised of self-assembling proteins that are designed to have the following potential benefits:
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Robust, durable, and broad immune responses. The icosahedral symmetry of our VLPs mimics viral geometry and is designed to allow for increased antigen density. In addition, we believe our VLPs are within the optimal size range (20-100 nm) that enables efficient trafficking to the lymph nodes as seen with natural VLPs. Both increased antigen density and lymph node trafficking are known to trigger robust B cell immune responses. We believe that preclinical data support the potential of our platform to generate VLPs that induce high nAb levels, durable immunogenicity and cross-protection against related viral strains. |
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Potential to display complex heterologous antigens. Our approach allows for the multivalent display of complex antigens that would not normally form into VLPs. |
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Highly scalable manufacturing and ease of purification. Our two-component technology facilitates the use of standard, scalable recombinant protein methods for vaccine manufacturing and purification with well-established cell line and fermentation technologies. |
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Increased antigen stability. Our VLPs are designed to confer increased stability to our vaccine candidates, which we believe will allow for improved storage and distribution. |
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Our Programs
Our initial focus is on developing vaccine candidates for viral causes of pneumonia in older adults. The following chart summarizes our current candidates.
*^ | VLP technology underlying all candidates is licensed from the University of Washington |
* | Icosavax does not plan to pursue the IVX-121 RSV monovalent candidate as a standalone candidate for RSV in older adults, and plans to transition development to the IVX-A12 bivalent RSV/hMPV candidate following Phase 1. The RSV antigen incorporated into IVX-121 is licensed from the National Institutes of Health; key mutations in the hMPV antigen incorporated into IVX-A12 are licensed from the National Institute of Health and the University of Texas at Austin |
^ | Icosavax has worldwide nonexclusive rights with exception of South Korea (which is not included in the licensed territory), which will convert to exclusive rights in North America and Europe (including Switzerland and United Kingdom) starting in 2025, with non-exclusivity maintained elsewhere. |
IVX-A12 (RSV-hMPV vaccine candidate), a bivalent combination of IVX-121 (RSV vaccine candidate) and IVX-241 (hMPV vaccine candidate)
IVX-A12 is a bivalent combination of IVX-121, which is designed to target RSV, and IVX-241, which is designed to target hMPV. IVX-121 and IVX-241 have been designed to display prefusion stabilized F antigens of RSV and hMPV, respectively. The F (fusion) proteins of these viruses are critical for viral entry. F proteins are also one of the main targets for nAbs and are a focus of most vaccine efforts for respiratory viruses such as RSV and hMPV. We have licensed a prefusion stabilized form of the RSV F antigen, DS-Cav1, from the National Institutes of Health (NIH) that has been demonstrated in clinical trials conducted by the NIH to be a robust immunogen. An initial clinical trial with DS-Cav1 showed an induction of nAb titers much higher than had previously been seen with other vaccine approaches to RSV. We have incorporated DS-Cav1 into our VLP candidate IVX-121. Preclinical data with hMPV antigens provide support for the F antigen as a potential target for protective immunity, and we have incorporated a prefusion F antigen into our VLP candidate IVX-241. The prefusion F antigen in IVX-241 incorporates key mutations that we have licensed from the NIH and the University of Texas at Austin (UT). We plan to assess different ratios of IVX-121 and IVX-241 in preclinical studies in an effort to identify the ratio least likely to induce immunologic interference between product candidates prior to initiating clinical trials of IVX-A12. We also plan to conduct a Phase 2 clinical trial to evaluate the optimal ratio of IVX-121 to IVX-241 in humans. We believe that multivalent display of these prefusion F antigens on the surface of our VLPs has the potential to induce a robust nAb response capable of conferring protection against infection of both viruses, which we also plan to assess in clinical trials.
We plan to initiate clinical development of IVX-A12 with a clinical trial of IVX-121. We filed a CTA in Belgium for IVX-121 in June 2021 and plan to initiate a Phase 1/1b clinical trial in the second half of 2021 to assess the safety and immunogenicity of IVX-121 in adults aged 18-45 and 60-75. We expect to report topline data from this trial in the first half of 2022. Assuming favorable results, we plan to submit an IND to the FDA and, thereafter, initiate a Phase 1 clinical trial of IVX-A12 to assess its safety and immunogenicity in adults aged 18-45 and 60-85, though we have not yet discussed this development plan with the FDA. We believe that a bivalent VLP vaccine targeting RSV and hMPV is the optimal approach to prevent these two common causes of pneumonia, neither of which has an approved vaccine to date.
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SARS-CoV-2
In addition to RSV and hMPV, we are developing two SARS-CoV-2 VLP vaccine candidates, IVX-411 and IVX-421. IVX-411 is designed to present 60 copies of the receptor binding domain (RBD) protein from the SARS-CoV-2 virus strain first identified in China (original viral strain). IVX-421 has been designed with a similar structure and incorporates the key B.1.351 RBD mutations found in the variant strain first identified in South Africa (beta variant strain). For our SARS-CoV-2 candidates, we have a license from the University of Washington (UW) that is nonexclusive worldwide, with the exception of South Korea (which is not included in the licensed territory). This license will become exclusive in the United States, Canada, Mexico and Europe (including Switzerland and United Kingdom) starting in 2025 with non-exclusivity maintained elsewhere. SK Biosciences (SK) has also licensed the technology for use in SARS-CoV-2 vaccines. SK has initiated a Phase 1/2 clinical trial in South Korea, and has recently submitted an IND to the South Korea Ministry of Food and Drug Safety (South Korea MFDS) for a Phase 3 clinical trial, for a product candidate similar to IVX-411 and is also pursuing variant vaccine candidates.
The SARS-CoV-2 vaccine landscape is currently very crowded, with several vaccines having received Emergency Use Authorization (EUA) from the FDA and similar authorizations from other regulatory authorities, as well as additional vaccine candidates in development. However, we believe that given the global demand for SARS-CoV-2 vaccines, our vaccine candidates, if successfully developed and approved, may help address specific gaps in access, either as primary vaccines or as boosters to already authorized vaccines. In October 2020, we announced a grant for $10 million, awarded by the Bill & Melinda Gates Foundation, a global non-profit dedicated to improving global health. We are using this grant to evaluate IVX-411 in a Phase 1/2 clinical trial that we initiated in Australia in June 2021 where we plan to assess its safety and potential to induce a robust functional immune response against the original viral strain as well as emerging viral variants. In this clinical trial, we will also be evaluating the potential of IVX-411 to stimulate increased nAb titers in previously vaccinated individuals for its potential use as a booster vaccine. We are also planning to conduct a Phase 2 clinical trial to evaluate the potential of IVX-411 to stimulate increased nAb titers in previously infected individuals. We will evaluate our plans for the clinical development of IVX-421 based on the initial results from these trials as well as the results of additional preclinical studies planned to evaluate IVX-421.
Our Strategy
Our goal is to utilize our VLP platform technology to develop vaccines against infectious diseases with an initial focus on life-threatening respiratory diseases. Key elements of our strategy include:
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advancing our combination RSV-hMPV VLP vaccine candidate, IVX-A12, through clinical development and regulatory approval for the prevention of respiratory disease and pneumonia in older adults; |
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leveraging our VLP platform technology to pursue additional vaccine candidates in indications with high unmet need; |
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building manufacturing scale-up capability early in the development process; |
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further optimizing our VLP platform technology; and |
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maximizing the value of our vaccine candidates through selective partnerships. |
Our Team and Investors
We were formed in 2017 to advance the breakthrough VLP technology from the UW IPD with the goal to discover, develop, and commercialize vaccines against infectious diseases. We have assembled an experienced management team, board of directors, and scientific advisory board, who bring extensive industry experience to our company. Our scientific co-founders, Neil King and David Baker, are world leaders in protein design. The Chair of our Board of Directors, Tachi Yamada, is a leader in vaccine development, as the previous head of Global Health at the Bill & Melinda Gates Foundation as well as the previous Chief Medical and Scientific Officer at Takeda responsible for expanding their vaccine business unit. Our CEO, Adam Simpson, has over 20 years of experience in the biotechnology industry, and previously served as CEO of PvP Biologics, a company based on IPD recombinant protein technology, which was acquired by Takeda. Other members of our executive team have deep experience in discovering, developing, manufacturing, and commercializing pharmaceuticals, including vaccines. This includes having worked at major pharmaceutical companies such as GlaxoSmithKline, Novartis, Takeda, Gilead, and Merck.
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Since our inception we have raised over $150 million from leading investors in the life science and biotechnology industry. Investors with 5% or greater ownership are Qiming Venture Partners USA, Adams Street Partners, RA Capital Management, Sanofi Ventures and ND Capital.
Summary of Risks Related to Our Business
Our ability to execute our business strategy is subject to numerous risks, as more fully described in Risk Factors immediately following this Prospectus Summary. These risks include, among others:
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We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it. |
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We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development programs, commercialization efforts or other operations. |
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We are early in our development efforts and all but one of our development programs are still in preclinical development. If we are unable to successfully develop, obtain regulatory approval or ultimately commercialize vaccine candidates, or experience significant delays in doing so, our business will be materially harmed. |
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Our approach to the discovery and development of vaccine candidates is unproven, including our plan to pursue combination vaccine candidates using our VLP technology, and we do not know whether we will be able to develop any products of commercial value, or if competing approaches will limit the commercial value of our vaccine candidates. |
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Our business is highly dependent on the success of IVX-A12, which is in the early stages of development. If we are unable to obtain approval for IVX-A12 or effectively commercialize IVX-A12, our business would be significantly harmed. |
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Preclinical and clinical development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results. We have not completed clinical trials for any of our vaccine candidates and we may not have favorable results in preclinical studies or clinical trials, or receive regulatory approval on a timely basis, if at all. |
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Any difficulties or delays in the commencement or completion, or the termination or suspension, of our planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue or adversely affect our commercial prospects. |
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We rely on third parties to conduct many of our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, our development programs and our ability to seek or obtain regulatory approval for or commercialize our vaccine candidates may be delayed. |
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We rely on third parties for the manufacture of our vaccine candidates for preclinical and clinical development and expect to continue to do so for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our vaccine candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts. |
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We face significant competition, and if our competitors develop technologies or vaccine candidates more rapidly than we do or their technologies are more effective, our business and our ability to develop and successfully commercialize products may be adversely affected. |
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Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide. |
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Our business is subject to risks arising from the COVID-19 pandemic and other epidemic diseases. |
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If we are unable to obtain and maintain patent protection for our vaccine candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our vaccine candidates may be adversely affected. |
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We rely heavily on certain license agreements with the UW and also depend on intellectual property licensed from other third parties, and these licensors may not always act in our best interest. If we fail to comply with our obligations under our intellectual property licenses, if the licenses are terminated, or if disputes regarding these licenses arise, we could lose significant rights that are important to our business. |
Corporate Information
We were originally founded as a Delaware corporation on November 1, 2017. Our principal executive offices are located at 1616 Eastlake Avenue E., Suite 208, Seattle, Washington 98102, and our telephone number is (206) 737-0085. Our website address is www.icosavax.com. The information contained in, or accessible
through, our website does not constitute part of this prospectus. We have included our website address as an inactive textual reference only.
We use our trademarks in this prospectus as well as trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus appear without the ® and symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.
Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). As an emerging growth company, we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
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being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced Managements Discussion and Analysis of Financial Condition and Results of Operations disclosure; |
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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (Sarbanes-Oxley); |
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements, unless the SEC determines the new rules are necessary for protecting the public; |
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reduced disclosure obligations regarding executive compensation; and |
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the Securities Act), which such fifth anniversary will occur in 2026. However, if certain events occur prior to the end of such five-year period, including if we become a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the Exchange Act), our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced
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reporting requirements in future filings. As a result, the information in this prospectus and that we provide to our stockholders in the future may be different than what you might receive from other public reporting companies in which you hold equity interests.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not 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. 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 Sarbanes-Oxley.
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
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THE OFFERING
Common stock offered by us |
10,000,000 shares. |
Common stock to be outstanding immediately after this offering |
35,376,565 shares (or 36,876,565 shares if the underwriters exercise their option to purchase additional shares of common stock in full). |
Option to purchase additional shares |
The underwriters have a 30-day option to purchase up to a total of 1,500,000 additional shares of our common stock. |
Use of proceeds |
We estimate that the net proceeds from this offering will be approximately $136.0 million (or approximately $156.9 million if the underwriters exercise their option to purchase additional shares in full), based on an assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commission and estimated offering expenses payable by us. |
We intend to use the net proceeds of this offering, together with our existing cash and restricted cash, to fund the continued development of IVX-A12, to fund ongoing development of our other vaccine candidates and for research and development and general and administrative headcount costs, cross-program research and development activities, and other general corporate purposes and working capital. See the section titled Use of Proceeds. |
Risk factors |
See the section titled Risk Factors and other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock. |
Directed share program |
At our request, the underwriters have reserved up to 5% of the shares offered by this prospectus for sale at the initial public offering price in a directed share program to our directors, officers, employees and related persons. The number of shares of common stock available for sale to the general public in the offering will be reduced to the extent these persons purchase the directed shares in the program. Any directed shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares. Directed shares purchased in the program will not be subject to a lock-up restriction, with the exception of directed shares purchased by our directors and officers, which will be subject to a 180-day lock-up restriction. See the section titled Underwriting for additional information. |
Proposed Nasdaq Global Select Market symbol |
ICVX |
The number of shares of our common stock to be outstanding after this offering set forth above is based on 25,376,565 shares of our common stock outstanding as of March 31, 2021, including 849,884 shares subject to forfeiture or our right of repurchase, after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 21,634,898 shares of our common stock immediately prior to the closing of this offering, and excludes:
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1,717,446 shares of common stock issuable upon the exercise of outstanding stock options as of March 31, 2021, at a weighted-average exercise price of $1.00 per share; |
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3,413,872 shares of common stock issuable upon the exercise of stock options granted after March 31, 2021, at a weighted-average exercise price of $6.13 per share; |
∎ |
1,051,500 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under our 2021 Incentive Award Plan (the 2021 Plan), which will become effective in connection with this offering, to certain of our executive officers, directors, employees and consultants, at an exercise price equal to the initial public offering price in this offering; |
∎ |
355,750 shares of our common stock issuable upon the vesting of restricted stock units to be granted to certain of our executive officers, directors, employees and consultants under the 2021 Plan in connection with this offering; |
∎ |
the remaining 4,067,465 shares of common stock reserved for future issuance under the 2021 Plan after giving effect to the issuance of the options and restricted stock units described above (which number includes 874,715 shares of common stock reserved for issuance under our 2017 Equity Incentive Plan (the 2017 Plan), which shares will be added to the 2021 Plan upon its effectiveness, but does not include any potential evergreen increases pursuant to the terms of the 2021 Plan); and |
∎ |
400,000 shares of common stock reserved for future issuance under our 2021 Employee Stock Purchase Plan (the ESPP), which will become effective in connection with this offering (which number does not include any potential evergreen increases pursuant to the terms of the ESPP). |
Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:
∎ |
the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, each of which will occur immediately prior to the closing of this offering; |
∎ |
the automatic conversion of all outstanding shares of our convertible preferred stock into 21,634,898 shares of our common stock immediately prior to the closing of this offering; |
∎ |
a one-for-4.1557 reverse stock split of our common stock, which we effected on July 21, 2021; |
∎ |
no exercise of the outstanding options described above; and |
∎ |
no exercise by the underwriters of their option to purchase 1,500,000 additional shares of our common stock. |
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SUMMARY FINANCIAL DATA
The following tables summarize our financial data as of and for the periods indicated. We have derived the summary statements of operations and comprehensive loss data for the years ended December 31, 2019 and 2020 from our audited financial statements included elsewhere in this prospectus. We have derived the summary statements of operations and comprehensive loss data for the three months ended March 31, 2020 and 2021 and the summary balance sheet data as of March 31, 2021 from our unaudited interim condensed financial statements included elsewhere in this prospectus. Our unaudited interim condensed financial statements have been prepared on a basis consistent with our audited financial statements and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the financial information in those statements.
Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with the section of this prospectus titled Managements Discussion and Analysis of Financial Condition and Results of Operations and our audited financial statements and related notes included elsewhere in this prospectus.
YEAR ENDED DECEMBER 31, |
THREE MONTHS ENDED
MARCH 31, |
|||||||||||||||
2019 | 2020 | 2020 | 2021 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except
share and per share data) |
||||||||||||||||
Statement of Operations and Comprehensive Loss Data: |
||||||||||||||||
Grant revenue |
$ | | $ | 1,616 | $ | | $ | 2,001 | ||||||||
Operating expenses: |
||||||||||||||||
Research and development |
$ | 4,157 | $ | 17,667 | $ | 2,920 | $ | 5,553 | ||||||||
General and administrative |
1,241 | 2,659 | 612 | 1,091 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
5,398 | 20,326 | 3,532 | 6,644 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(5,398 | ) | (18,710 | ) | (3,532 | ) | (4,643 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Change in fair value of derivative liability |
| 187 | | (205 | ) | |||||||||||
Loss on extinguishment of convertible promissory note |
| | | (754 | ) | |||||||||||
Interest and other income (expense) |
101 | (331 | ) | 61 | (249 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense) |
101 | (144 | ) | 61 | (1,208 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss and comprehensive loss |
$ | (5,297 | ) | $ | (18,854 | ) | $ | (3,471 | ) | (5,851 | ) | |||||
Series 1 preferred stock dividends |
(272 | ) | | | | |||||||||||
Series 1 preferred stock extinguishment |
(400 | ) | | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to common stockholders |
$ | (5,969 | ) | (18,854 | ) | $ | (3,471 | ) | $ | (5,851 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Net loss per share attributable to common stockholders, basic and diluted (1) |
$ | (3.76 | ) | $ | (8.40 | ) | $ | (1.76 | ) | $ | (2.11 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average shares of common stock outstanding, basic and diluted (1) |
1,588,083 | 2,245,223 | 1,976,305 | 2,769,962 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited) (2) |
$ | (1.82 | ) | $ | (0.35 | ) | ||||||||||
|
|
|
|
|||||||||||||
Pro forma weighted average common shares outstanding, basic and diluted (unaudited) (2) |
10,240,553 | 15,213,880 | ||||||||||||||
|
|
|
|
- 10 -
(1) | See Note 2 to our audited financial statements and Note 2 to our unaudited interim condensed financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted net loss per share attributable to common stockholders and the number of shares used in the computation of the per share amounts. |
(2) | The calculations for the unaudited pro forma net loss per share attributable to common stockholders, basic and diluted, for the year ended December 31, 2020, exclude the $187,000 change in fair value of the derivative liability and $417,000 of interest expense from the convertible notes, resulting in pro forma net loss attributable to common stockholders of $18.6 million for the year ended December 31, 2020. The unaudited pro forma weighted average common shares outstanding, basic and diluted, assume the conversion of all our outstanding shares of preferred stock into 7,748,113 shares of our common stock, as if the conversion had occurred at the beginning of the period presented, or the issuance date, if later, and the conversion of our convertible notes into shares of our common stock, resulting in an additional 247,197 weighted average shares of our common stock. |
The calculations for the unaudited pro forma net loss per share attributable to common stockholders, basic and diluted, for the three months ended March 31, 2021, exclude the $205,000 change in fair value of the derivative liability and $264,000 of interest expense from the convertible notes, resulting in pro forma net loss attributable to common stockholders of $5.4 million for the three months ended March 31, 2021. The unaudited pro forma weighted average common shares outstanding, basic and diluted, assume the conversion of all our outstanding shares of preferred stock into 11,866,263 shares of our common stock, as if the conversion had occurred at the beginning of the period presented, or the issuance date, if later, and the conversion of our convertible notes into shares of our common stock, resulting in an additional 577,655 weighted average shares of our common stock.
AS OF MARCH 31, 2021 | ||||||||||||
ACTUAL | PRO FORMA (1) |
PRO FORMA
AS ADJUSTED (2)(3) |
||||||||||
(unaudited) (in thousands) |
||||||||||||
Balance Sheet Data: |
||||||||||||
Cash and restricted cash |
$ | 124,961 | $ | 124,961 | $ | 260,961 | ||||||
Working capital (4) |
119,539 | 119,539 | 255,539 | |||||||||
Total assets |
125,411 | 125,411 | 261,330 | |||||||||
Total liabilities |
5,959 | 5,959 | 5,959 | |||||||||
Convertible preferred stock |
151,638 | | | |||||||||
Accumulated deficit |
(32,949 | ) | (32,949 | ) | (32,949 | ) | ||||||
Total stockholders (deficit) equity |
(32,186 | ) | 119,452 | 255,371 |
(1) | Gives effect to (i) the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 21,634,898 shares of our common stock and the related reclassification of the convertible preferred stock to permanent equity in connection with the closing of this offering and (ii) the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the closing of this offering. |
(2) | Gives effect to (i) the pro forma adjustments set forth above and (ii) our sale of 10,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
(3) | Pro forma as adjusted balance sheet data is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) pro forma as adjusted cash and restricted cash, working capital, total assets and total stockholders deficit by approximately $9.3 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. We may also increase or decrease the number of shares we are offering. A one million share increase (decrease) in the number of shares offered by us would increase or decrease pro forma as adjusted cash and restricted cash, working capital, total assets and total stockholders deficit by approximately $14.0 million, assuming that the assumed initial offering price to the public remains the same, and after deducting estimated underwriting discounts and commissions. |
(4) | We define working capital as current assets less current liabilities. See our financial statements and the related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities. |
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Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including our financial statements and related notes included elsewhere in this prospectus and the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations, before making an investment decision. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline and you could lose part or all of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See Special Note Regarding Forward-Looking Statements.
Risks Related to Our Limited Operating History, Financial Position and Capital Requirements
We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it.
Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are a biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. We commenced operations in 2017, and, to date, we have focused primarily on organizing and staffing our company, business planning, raising capital, in-licensing intellectual property rights related to and developing our VLP platform technology, identifying vaccine candidates, establishing our intellectual property portfolio, process development for manufacturing, manufacturing our product candidates to support preclinical studies and clinical trials, and preparing for our ongoing and planned preclinical studies and clinical trials. Our approach to the discovery and development of vaccine candidates based on our VLP platform technology is unproven, and we do not know if any of our vaccine candidates will succeed in clinical development or become products of commercial value.
Only one of our vaccine candidates is in the clinical stage and the rest are in the preclinical stage. 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 would be if we had a history of successfully developing and commercializing vaccines.
We have incurred significant operating losses since our inception. We do not have any products approved for sale and have not generated any revenue since our inception. If our vaccine candidates are not successfully developed and approved, we may never generate any significant revenue. Our net losses were $5.3 million and $18.9 million for the years ended December 31, 2019 and December 31, 2020, respectively, and $5.9 million for the three months ended March 31, 2021. As of March 31, 2021, we had an accumulated deficit of $32.9 million. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. All of our vaccine candidates will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase substantially as we continue our development of, seek regulatory approval for and potentially commercialize any of our vaccine candidates and seek to identify, assess, acquire, in-license or develop additional vaccine candidates.
To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our vaccine candidates, obtaining regulatory approval for these vaccine candidates, and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability. In addition, we have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently
- 12 -
encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical industry. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if, we will be able to achieve profitability. 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 may have an adverse effect on the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our vaccine candidates or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development programs, commercialization efforts or other operations.
The development of vaccine candidates is capital-intensive. We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our ongoing and planned preclinical studies and clinical trials for our vaccine candidates and seek regulatory approval for our current vaccine candidates and any future vaccine candidates we may develop. In addition, if we are able to progress our vaccine candidates through development and commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our VLP platform technology or other technologies necessary for our vaccine candidates. If we obtain regulatory approval for any of our vaccine candidates, we also expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Because the outcome of any preclinical study or clinical trial is highly uncertain, we cannot reliably estimate the actual amounts necessary to successfully complete the development and commercialization of our vaccine candidates. Furthermore, following the completion of this offering, we expect to incur additional costs associated with operating as a public company.
Based on our current operating plan, we believe that the net proceeds from this offering, together with our existing cash and restricted cash, will enable us to fund our operations through at least 2024. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. The net proceeds of this offering, together with our existing cash and restricted cash, will not be sufficient to complete development of IVX-A12, IVX-411, or any other vaccine candidate, and after this offering, we will require substantial capital in order to advance our current and future vaccine candidates through clinical trials, regulatory approval and commercialization. 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 could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other capital sources, including potential collaborations, licenses, non-dilutive sources of financing, such as grants, and other similar arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Attempting to secure additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop our vaccine candidates.
Our future capital requirements will depend on many factors, including, but not limited to:
∎ |
the initiation, type, number, scope, results, costs and timing of, our ongoing and planned preclinical studies and clinical trials of our vaccine candidates or other potential product candidates we may choose to pursue in the future, including any modifications to our preclinical or clinical development plans based on feedback that we may receive from regulatory authorities; |
∎ |
the costs and timing of manufacturing for current or future product candidates, including commercial scale manufacturing, if any product candidate is approved; |
∎ |
the costs, timing and outcome of regulatory reviews of current or future product candidates; |
∎ |
any delays and cost increases that may result from the COVID-19 pandemic; |
- 13 -
∎ |
the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights; |
∎ |
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 business grows, including additional executive officers and clinical development personnel; |
∎ |
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; |
∎ |
the timing and amount of the milestone or other payments we must make to current and future licensors; |
∎ |
the costs and timing of establishing or securing sales and marketing capabilities if any current or future product candidates are 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; |
∎ |
vaccine recipients willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors; and |
∎ |
costs associated with any products or technologies that we may in-license or acquire. |
Further, identifying potential vaccine 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 commercialize our vaccine candidates. If approved, our vaccine candidates may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish rights to our technologies or vaccine candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, including potential collaborations, licenses and other similar arrangements. In addition, though we may seek non-dilutive grant funding or collaborations to fund the continued development, preclinical studies and clinical trials of our Sars-CoV-2 vaccine candidates, we may not be successful in securing such funding in a sufficient amount, if at all. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may 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 and preferred 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. Such restrictions could adversely impact our ability to conduct our operations and execute our business plan.
If we raise additional funds through future collaborations, licenses and other similar arrangements, we may be required to relinquish valuable rights to our future revenue streams, research programs, vaccine candidates or proprietary technology, or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed or on terms acceptable to us, we would be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market vaccine candidates that we might otherwise prefer to develop and market ourselves.
- 14 -
Risks Related to the Discovery, Development and Regulatory Approval of Our Vaccine Candidates
We are early in our development efforts and all but one of our development programs are still in preclinical development. If we are unable to successfully develop, obtain regulatory approval or ultimately commercialize vaccine candidates, or experience significant delays in doing so, our business will be materially harmed.
We are early in our development efforts and have only one vaccine candidate, IVX-411, in clinical development and four vaccine candidates, IVX-121, IVX-241, IVX-421 and IVX-A12, in preclinical development. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our vaccine candidates. The success of our vaccine candidates will depend on several factors, including the following:
∎ |
successful completion of preclinical studies with favorable results, including toxicology and other studies designed to be compliant with good laboratory practices (GLP) and dose finding studies in animals; |
∎ |
acceptance of INDs by the FDA, or of similar regulatory filings by comparable foreign regulatory authorities for the conduct of clinical trials of our vaccine candidates and our proposed design of future clinical trials; |
∎ |
successful initiation and enrollment of clinical trials and completion of clinical trials with favorable results; |
∎ |
demonstrating the safety, purity, immunogenicity and efficacy of our vaccine candidates to the satisfaction of applicable regulatory authorities; |
∎ |
receipt of marketing approvals from applicable regulatory authorities, including approvals of biologics license applications (BLAs) from the FDA, and maintaining such approvals; |
∎ |
making arrangements with our third-party manufacturers for, or establishing, commercial manufacturing capabilities; |
∎ |
establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others; |
∎ |
establishing and maintaining patent and trade secret protection or regulatory exclusivity for our vaccine candidates; |
∎ |
maintaining an acceptable safety profile of our products following approval; and |
∎ |
maintaining and growing an organization of people who can develop and commercialize our products and technology. |
In addition, our development plan for our IVX-A12 program targets the population of adults greater than 60 years of age. Our interactions and feedback from regulatory agencies could limit our target population to a subset of this population such as a more narrow age range or individuals without certain underlying health conditions common within this age range. These restrictions could negatively impact our ability to complete clinical trials along our planned timeline and could limit our commercial potential.
If we are unable to develop, obtain regulatory approval for, or, if approved, successfully commercialize our vaccine candidates, we may not be able to generate sufficient revenue to continue our business.
Our approach to the discovery and development of vaccine candidates is unproven, including our plan to pursue combination vaccine candidates using our VLP technology, and we do not know whether we will be able to develop any products of commercial value, or if competing approaches will limit the commercial value of our vaccine candidates.
The success of our business depends primarily upon our ability to identify, develop and commercialize our vaccine candidates based on our VLP platform technology. While there are a number of approved vaccines based on VLPs, we have not yet succeeded and may not succeed in demonstrating safety, purity, immunogenicity, and/or efficacy for any vaccine candidates based on our VLP platform technology in clinical trials or in obtaining marketing approval thereafter. IVX-A12 is in the late preclinical development stage, and we have not yet submitted an IND or commenced or completed any clinical trials for this candidate. In addition, while we believe our pipeline will yield multiple additional INDs for our development programs in the future, we may not be successful in our discovery efforts, and even if successful, we may not be able to submit INDs and have such INDs authorized to enable us to commence clinical trials on the timelines we expect, if at all. Our research methodology and VLP technology may be unsuccessful in identifying additional vaccine candidates, and any vaccine candidates may be shown to have harmful side effects or may have other characteristics that may necessitate additional clinical testing
- 15 -
or make the vaccine candidates unmarketable or unlikely to receive marketing approval. 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. Further, because all of our vaccine candidates and development programs are based on our VLP platform, 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, we are in the process of developing combination candidates using our VLP technology, such as IVX-A12, which we have not tested in clinical trials. Combining multiple vaccine candidates may result in immunologic interference between vaccine candidates, which may reduce the immunogenicity of either or both of the combined vaccine candidates. We will not be able to ascertain the degree of immunologic interference, if any, between any vaccine candidates within any of our combined vaccine candidates in humans until our Phase 2 clinical trials.
We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process based on our VLP platform technology or transferring that process to third-party manufacturers, which may prevent us from completing our clinical trials or commercializing our vaccine candidates on a timely or profitable basis, if at all. In addition, since we have not yet completed a clinical trial, we do not know the specific doses that may be effective in clinical trials or, if approved, commercially. Any delays in finding a suitable dose may delay our anticipated clinical development timelines.
In addition, the biotechnology and biopharmaceutical industries are characterized by rapidly advancing and often competing technologies. Our future success will depend in part on our ability to maintain a competitive position with our VLP platform technology. While we believe that clinical data has shown that VLPs may perform more effectively than soluble proteins, to our knowledge there are no published clinical trials conducting a head-to-head comparison. Further, some preclinical studies have suggested that soluble proteins may perform with equal or greater efficacy than VLPs. For example, in certain preclinical studies of IVX-121, IVX-121 induced similar increases in nAb
titers as soluble DS-Cav1 at high dose levels, and a formulation of IVX-121 using Adjuphos induced similar increases in nAb titers as soluble DS-Cav1 formulated with Adjuphos. If we fail to develop VLP technology superior to soluble proteins, or if we otherwise fail to stay at the forefront of technological change in utilizing our VLP platform to create and develop vaccine candidates, we may be unable to compete effectively. Our competitors may render our VLP platform technology obsolete, or limit the commercial value of our vaccine candidates, through advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages that we believe we derive from our scientific approach and technologies. By contrast, adverse effects using VLP technologies generally may negatively impact the actual or perceived value of our VLP platform technology and potential of our vaccine candidates. If any of these events occur, we may be forced to abandon our development efforts for our vaccine candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations.
Our business is highly dependent on the success of IVX-A12, which is in the early stages of development. If we are unable to obtain approval for IVX-A12 or effectively commercialize IVX-A12, our business would be significantly harmed.
We have invested a significant portion of our efforts and financial resources in developing our lead candidate, IVX-A12, a bivalent combination of our vaccine candidates IVX-121 and IVX-241. To date, we have only conducted independent preclinical studies of IVX-121 and IVX-241. We have not commenced clinical testing of IVX-121 or IVX-241, nor have we initiated clinical trials of the combination of these vaccine candidates in IVX-A12. Although IVX-121 and IVX-241 have produced successful results in animal studies, IVX-A12 may not demonstrate the same properties in humans and may interact with human biological systems in unforeseen, ineffective or harmful ways. Our business prospects are highly dependent on our ability to develop, obtain marketing approval for and successfully commercialize IVX-A12, which will require us to succeed in a range of challenging activities that are subject to numerous risks and uncertainties, including those described in this Risk Factors section. Many of these risks and uncertainties are beyond our control, including the clinical development and regulatory approval process; potential threats to our intellectual property rights; and the manufacturing, marketing and sales efforts of any current or future third-party contractors. Furthermore, given the early stage of development of IVX-A12, it will be years before we are potentially able to demonstrate the safety and efficacy of IVX-A12 sufficient to warrant marketing approval, and we may never be able to do so. If we are unable to develop, receive marketing approval for and successfully commercialize IVX-A12, or if we experience delays as a result of any of these factors or otherwise, our business would be significantly harmed.
- 16 -
Preclinical and clinical development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results. We have not completed clinical trials for any of our vaccine candidates and we may not have favorable results in preclinical studies or clinical trials, or receive regulatory approval on a timely basis, if at all.
Preclinical and clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. We cannot guarantee that any preclinical studies or clinical trials will be conducted as planned or completed on schedule, if at all, and failure can occur at any time during the preclinical study or clinical trial process. Despite promising preclinical or clinical results, any vaccine candidate can unexpectedly fail at any stage of preclinical or clinical development. The historical failure rate for vaccine candidates in our industry is high, particularly in the early stages of development.
The results from preclinical studies or clinical trials of a vaccine candidate or a competitors vaccine candidate in the same class may not predict the results of later clinical trials of such vaccine candidate, and interim, topline, or preliminary results of a clinical trial are not necessarily indicative of final results. Vaccine candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials. While we have conducted certain preclinical studies of certain of our vaccine candidates, we do not know whether they or our other potential vaccine candidates will perform in future clinical trials as they have performed in these prior studies. Specifically, immunosenescence in older adults (our targeted population) cannot be fully replicated in preclinical studies, which increases the risk that the results at certain dose levels or formulations of our vaccine candidates tested in our preclinical models may not be predictive of results in clinical trials. In addition, formulations and adjuvants can behave differently in different species, so results of preclinical studies with specific formulations may not be replicated in clinical trials. Animals used in preclinical studies are often highly inbred, with homogenous genetic backgrounds that lead to results that are not replicable across diverse human populations. Preclinical models of infection that rely on host-pathogen interactions that do not normally occur in nature can generate misleading results as the pathogens are not well adapted to replicate and infect the animals used in the model, making it possible to protect against infection with weaker immune responses than would be required to provide protection in humans from the same pathogen. For these reasons and others, it is not uncommon to observe results in clinical trials that are unexpected based on preclinical studies and early clinical trials, many vaccine candidates fail in clinical trials despite very promising early results, and a number of companies in the biopharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier preclinical studies and clinical trials.
As a result, we cannot be certain that our ongoing and planned preclinical studies and clinical trials will be successful. Any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our vaccine candidates in those and other indications, which could have a material adverse effect on our business, financial condition and results of operations.
Any difficulties or delays in the commencement or completion, or the termination or suspension, of our planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue or adversely affect our commercial prospects.
Before obtaining marketing approval from regulatory authorities for the sale of our vaccine candidates, we must conduct extensive clinical trials to demonstrate the safety, purity, immunogenicity and efficacy of the vaccine candidates in humans. Before we can initiate clinical trials for our vaccine candidates, we must submit the results of preclinical studies to the FDA or comparable foreign regulatory authorities along with other information, including information about vaccine candidate chemistry, manufacturing and controls and our proposed clinical trial protocol, as part of an IND or similar regulatory filing required for authorization to proceed with clinical development. For example, our planned initiation of a clinical trial for IVX-121 is subject to our submission of a CTA (the regulatory filing in Belgium, where we plan to conduct a Phase 1/1b trial of IVX-121) and acceptance of such CTA by the FAMHP, and our planned initiation of a clinical trial for IVX-A12 is subject to our submission of an IND and the acceptance of such IND by the FDA. Acceptance by the FDA of our planned IND will be subject to the FDAs agreement with our proposal to initiate clinical trials of IVX-A12 based upon data from our Phase 1 clinical trial of IVX-121 and preclinical data with respect to IVX-241 and IVX-231. If the FDA does not agree with this proposal, it may require us to conduct clinical evaluation of IVX-241 before progressing to clinical evaluation of IVX-A12. The FAMHP, FDA or comparable foreign regulatory authorities may require us to conduct additional preclinical studies, or
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added clinical evaluation under any CTA, IND or similar regulatory filing, which may lead to delays and increase the costs of our preclinical and clinical development programs. Moreover, even if we commence clinical trials, issues may arise that could cause regulatory authorities to suspend or terminate such clinical trials. Any such delays in the commencement or completion of our ongoing and planned clinical trials for our vaccine candidates could significantly affect our product development timelines and product development costs.
We do not know whether our planned clinical trials will begin on time or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:
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inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials; |
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obtaining regulatory authorizations to commence a trial or reaching a consensus with regulatory authorities on trial design; |
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the FDA or comparable foreign regulatory authorities disagreeing as to the implementation of our clinical trials; |
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any failure or delay in reaching an agreement with contract research organizations (CROs) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
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delays in identifying, recruiting and training suitable clinical investigators; |
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obtaining approval from one or more institutional review boards (IRBs) or ethics committees at clinical trial sites; |
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IRBs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial; |
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major changes or amendments to the clinical trial protocol; |
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clinical sites deviating from the trial protocol or dropping out of a trial; |
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failure by our CROs to perform in accordance with good clinical practice (GCP) requirements or applicable regulatory guidelines in other countries; |
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manufacturing sufficient quantities of a vaccine candidate for use in clinical trials, which could be impacted by the COVID-19 pandemic; |
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subjects failing to enroll or remain in our trials at the rate we expect, or failing to return for post-treatment follow-up, including subjects failing to remain in our trials due to movement restrictions, heath reasons or otherwise resulting from the COVID-19 pandemic; |
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individuals choosing an alternative vaccine for the indication for which we are developing our vaccine candidates, or participating in competing clinical trials; |
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lack of adequate funding to continue the clinical trial; |
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subjects experiencing severe or serious unexpected vaccine-related adverse effects; |
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occurrence of vaccine-related serious adverse events in trials of other protein-based vaccine candidates conducted by other companies that could be considered similar to our vaccine candidates; |
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selection of clinical endpoints that require prolonged periods of clinical observation or extended analysis of the resulting data; |
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transfer of manufacturing processes to larger-scale facilities operated by a contract manufacturing organization (CMO), delays or failure by our CMOs or us to make any necessary changes to such manufacturing process, or failure of our CMOs to produce clinical trial materials in accordance with current good manufacturing (cGMP) regulations or other applicable requirements; and |
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third parties being unwilling or unable to satisfy their contractual obligations to us in a timely manner. |
In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned clinical trials. Specific COVID-19 or future pandemic-related mandates, such as mask-wearing and limits to congregating, could also result in a diminished circulation of target respiratory viruses, which could result in challenges establishing efficacy in our planned late-stage clinical trials that have endpoints specific to rates of infection in placebo- versus vaccine- treated groups.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA or comparable
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foreign regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.
Further, conducting clinical trials in foreign countries, as we plan to do for our vaccine candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled subjects in foreign countries to adhere to clinical protocols as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, and political and economic risks relevant to such foreign countries.
In addition, many of the factors that cause, or lead to, the termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a vaccine candidate. We may make formulation or manufacturing changes to our vaccine candidates, in which case we may need to conduct additional preclinical studies to bridge our modified vaccine candidates to earlier versions. Any resulting delays to our clinical trials could shorten any period during which we may have the exclusive right to commercialize our vaccine candidates. In such cases, our competitors may be able to bring products to market before we do, and the commercial viability of our vaccine candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.
We may find it difficult to enroll subjects in our clinical trials. If we encounter difficulties enrolling subjects in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Successful and timely completion of clinical trials will require that we identify and enroll a specified number of subjects for each of our clinical trials. We may not be able to initiate or continue clinical trials for our vaccine candidates if we are unable to identify and enroll a sufficient number of eligible subjects to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Subject enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the subject population, the severity of the disease under investigation, the proximity of subjects to clinical sites, the eligibility and exclusion criteria for the trial, the design of the clinical trial, the ability to obtain and maintain informed consents, the risk that enrolled subjects will not complete a clinical trial, our ability to recruit clinical trial investigators with the appropriate competencies and experience, and competing clinical trials and clinicians and subjects perceptions as to the potential advantages and risks of the vaccine candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating as well as any vaccine candidates under development. For our Phase 1/2 clinical trial in Australia of our SARS-CoV-2 candidate IVX-411, we intend to assess our vaccine candidate as a booster vaccine following completion of an alternative licensed vaccine regimen. We are dependent on the ability to recruit subjects that have received a full vaccine regimen of an alternative vaccine and may be delayed if the vaccine rollout in Australia is slower than anticipated and we are therefore unable to recruit subjects at our projected pace. Additionally, across our ongoing and anticipated clinical trials and target subjects, other pharmaceutical companies targeting these same diseases are recruiting clinical trial subjects from these target populations, which may make it more difficult to fully enroll our clinical trials.
In addition, the process of finding and diagnosing subjects may prove costly. The timing of our clinical trials depends, in part, on the speed at which we can recruit subjects to participate in our trials, as well as completion of required follow-up periods. The eligibility criteria of our clinical trials, once established, may further limit the pool of available trial participants. If subjects are unwilling or unable to participate in our trials for any reason, including the existence of concurrent clinical trials for similar target populations, negative perceptions of vaccines generally or of any of our vaccine candidates in particular, the availability of approved or authorized therapies, the effects of the COVID-19 pandemic, or the fact that enrolling in our trials would prevent subjects from taking a different vaccine, or we otherwise have difficulty enrolling a sufficient number of subjects, the timeline for recruiting subjects, conducting trials and obtaining regulatory approval of our vaccine candidates may be delayed. Our inability to enroll
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a specified number of subjects for any of our future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. In addition, we rely on, and will continue to rely on, CROs and clinical trial sites to ensure proper and timely conduct of our preclinical studies and clinical trials. Though we have entered into agreements governing their services, we will have limited influence over their actual performance.
We cannot assure you that our assumptions used in determining expected clinical trial timelines are correct or that we will not experience delays in enrollment, which would result in the delay of completion of such trials beyond our expected timelines.
If the incidence rates of infection for the specific pathogens we are targeting are smaller than we believe they are, our clinical development may be adversely affected, and our business may suffer.
Our projections of both the number of people who have respiratory diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our vaccine candidates, are based on our estimates. These estimates have been derived from a variety of sources, including scientific literature, epidemiologic surveys, and market research based on healthcare databases, and may prove to be incorrect or imprecise. In addition, precise incidence for all the respiratory conditions we aim to address with our vaccine candidates may vary from season to season, similar to influenza. Further, new trials or information may change the estimated incidence of these diseases. Our planned clinical trial sizes for later stage efficacy trials are based on our current estimates for rates of infection for the specific pathogens targeted by our vaccine candidates. If our estimates are incorrect, this may impact the number of subjects that need to be recruited for our clinical trials, may result in us having to repeat a clinical trial, or could impact the likelihood of success of our clinical development. In particular, the incidence rate of hMPV is uncertain. We are planning our own epidemiological assessment of hMPV and RSV infections in older adults prior to commencing our planned Phase 2b clinical trial to inform our determination of the size of the patient population to be enrolled in the trial. If the outcome of that assessment is a lower incidence rate than we are currently anticipating, we may need to plan for a larger Phase 2b clinical trial than we are currently planning for, which would result in increased clinical development costs.
Use of our vaccine candidates could be associated with adverse side effects, adverse events or other safety risks, which could delay or preclude approval, cause us to suspend or discontinue clinical trials, abandon a vaccine candidate, limit the commercial profile of an approved label or result in other significant negative consequences that could severely harm our business, prospects, operating results and financial condition.
As is the case with biopharmaceuticals generally, it is likely that there may be adverse side effects associated with our vaccine candidates use. We cannot provide assurance that our vaccine candidates will not have similar effects to other experimental or licensed vaccines as we have not evaluated any vaccine candidates in clinical trials.
We will monitor for expected and unexpected side effects in our clinical trials. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of expected or unexpected side effects. Vaccine-related side effects could affect subject recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Undesirable side effects caused by our vaccine candidates when used alone or in combination with approved drugs, biologics or vaccines could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or lead to the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. Any of these occurrences may harm our business, financial condition and prospects significantly. For example, we plan to assess reactogenicity and immunogenicity of our RSV/hMPV bivalent candidate IVX-A12 when administered concurrently with a quadrivalent influenza vaccine in our planned Phase 2 clinical trial. This could lead to unanticipated side effects or interfere with the potential immunogenicity of IVX-A12. An inability to be dosed concurrently with a quadrivalent influenza vaccine could limit the commercial potential of IVX-A12.
Moreover, if our vaccine candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may elect to abandon their development or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for the vaccine candidate if approved. We may also be required to modify our development and clinical trial plans based on findings after we commence clinical trials. Many compounds that initially showed promise in early-stage testing have later been found to cause side effects that prevented further development of the compound. In addition, regulatory authorities may draw different conclusions or require additional testing to confirm these determinations.
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We will also monitor in our clinical trials for less common adverse events of special interest to regulatory authorities, such as enhanced respiratory disease after vaccination. It is possible that as we test our vaccine candidates in larger, longer and more extensive clinical trials, or if the use of these vaccine candidates becomes more widespread following regulatory approval, more illnesses, injuries, discomforts and other adverse events than were observed in earlier trials, as well as new conditions that did not occur or went undetected, may be discovered. If such side effects become known later in development or upon approval, if any, such findings may harm our business, financial condition and prospects significantly.
In addition, if one or more of our vaccine candidates receives marketing approval, and we or others later identify undesirable side effects caused by such vaccine a number of potentially significant negative consequences could result, including:
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regulatory authorities may withdraw, suspend or limit approvals of such vaccine or seek an injunction against its manufacture or distribution; |
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we may be required to recall a vaccine or change the way such vaccine is administered to individuals; |
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regulatory authorities may require additional warnings on the label, such as a black box warning or a contraindication; |
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we may be required to implement a Risk Evaluation and Mitigation Strategy (REMS) or create a medication guide outlining the risks of such side effects for distribution to individuals; |
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we may be required to change the way a vaccine is distributed or administered, conduct additional clinical trials or change the labeling of a vaccine or be required to conduct additional post-marketing studies or surveillance; |
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we could be sued and held liable for harm caused to vaccine recipients; |
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sales of the vaccine may decrease significantly or the vaccine could become less competitive; and |
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our reputation may suffer. |
Any of these events could prevent us from achieving or maintaining market acceptance of the particular vaccine candidate, if approved, and could significantly harm our business, results of operations and prospects.
As an organization, we have never completed any clinical trials, and may be unable to do so for any of our vaccine candidates.
We have initiated clinical trials for one of our vaccine candidates, with our other vaccine candidates in the preclinical development stage. We will need to successfully complete our planned clinical trials in order to seek FDA or comparable foreign regulatory approval to market our vaccine candidates. Carrying out clinical trials and the submission of a successful BLA is a complicated process. We have received regulatory authorization to conduct and have initiated our first clinical trial of our vaccine candidate IVX-411 in Australia and we plan to initiate clinical trials for other vaccine candidates beginning in 2021, subject to receiving authorization to proceed with clinical trials under INDs or comparable applications submitted to foreign regulatory authorities. We have not previously completed any clinical trials, have limited experience as a company in preparing, submitting and prosecuting regulatory filings and our company has only previously submitted a Clinical Trial Notification in Australia for IVX-411 and has otherwise not previously submitted any IND, BLA or other comparable foreign regulatory submission. We also plan to conduct a number of clinical trials for multiple vaccine candidates in parallel over the next several years, which may be a difficult process to manage with our limited resources and which may divert the attention of management. In addition, for our IVX-121 program, through June 30, 2021, we have had limited interactions with only one regulatory authority outside the United States on our development and clinical trial plans. We have not had any discussions with the FDA. Therefore, we cannot be certain how many clinical trials of our IVX-121, IVX-241, IVX-412 or IVX-A12 vaccine candidates will be required or how such trials should be designed, or that we will not encounter material delays in our plans to commence clinical development. For example, we may be required to conduct additional preclinical studies of the individual vaccine candidates comprising our combination candidate, IVX-A12, prior to testing IVX-A12 in clinical trials. We may also be required to conduct clinical testing of our hMPV candidate IVX-241 prior to testing IVX-A12, which would cause a delay in the development of our IVX-A12 candidate. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials in a way that leads to regulatory submission and approval of any of our vaccine candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of
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vaccine candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in submitting BLAs for and commercializing our vaccine candidates.
We have licensed the rights in our technology for a limited number of infectious diseases in certain jurisdictions, which may limit our ability to obtain regulatory approval, commercialize our vaccine candidates, or expand our pipeline to fully realize the commercial potential of our VLP platform.
We have a prescribed list of infectious disease applications for which we have obtained licenses from UW to develop vaccine candidates using our VLP technology platform. For certain infectious disease applications, such as SARS-CoV-2, these licenses may only be available to us in certain jurisdictions. Third parties may also have licensed or will license the same VLP technology from UW for use in infectious disease applications or jurisdictions where we do not have an exclusive license. Any adverse developments that occur during clinical trials related to these infectious disease applications conducted by third parties in other jurisdictions may result in delays, limitations or denials of regulatory approvals of our vaccine candidates, may cause regulators to require us to conduct additional clinical trials as a condition to marketing approval, may result in the withdrawal of any approvals of our vaccine candidates that we receive in the future, or may result in further restrictions on our ability to commercialize our vaccine candidates. Such adverse developments may also negatively impact the perception of our vaccine candidates, which may reduce the enrollment of subjects in our clinical trials or inhibit our ability to market our vaccine candidates in the future if approved. For example, SK Bioscience has initiated a Phase 1/2 clinical trial in South Korea, and has recently submitted an IND to the South Korea MFDS for a Phase 3 clinical trial, for a vaccine candidate that is similar to IVX-411 and uses the same VLP technology that we have licensed from UW for our vaccine candidates, and adverse developments related to such clinical trial could negatively impact the development of IVX-411 and our other vaccine candidates.
In addition, the expansion of our pipeline to target additional infectious diseases for which we do not currently have a license will require us to seek additional licenses, which could increase our costs. Failure to acquire such licenses would reduce the infectious diseases that we may target with the vaccine candidates that we develop, which would prevent us from realizing the full potential of our VLP technology platform.
Our vaccine candidates are subject to extensive regulation and compliance, which is costly and time consuming, and such regulation and compliance may cause unanticipated delays or prevent the receipt of the required approvals and licenses to commercialize our vaccine candidates.
The clinical development, manufacturing, labeling, packaging, storage, record-keeping, advertising, promotion, import, export, marketing, distribution and adverse event reporting, including the submission of safety and other information, of our vaccine candidates are subject to extensive regulation by the FDA in the United States and by comparable foreign regulatory authorities in foreign markets. In the United States, we are not permitted to market our vaccine candidates until we receive regulatory approval from the FDA, which is referred to as licensure. The process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the vaccine candidates involved, as well as the target indications and populations. Approval policies or regulations may change, and the FDA has substantial discretion in the vaccine approval process, including the ability to delay, limit or deny approval of a vaccine candidate for many reasons. Despite the time and expense invested in clinical development of vaccine candidates, regulatory approval is never guaranteed. Neither we nor any current or future collaborator is permitted to market any of our vaccine candidates in the United States until we receive approval of a BLA from the FDA.
Prior to obtaining approval to commercialize a vaccine candidate in the United States or abroad, we or our collaborators must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such vaccine candidates are safe, pure and potent for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the preclinical or clinical data for our vaccine candidates are promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authorities, as the case may be, may also require us to conduct additional preclinical studies or clinical trials for our vaccine candidates either prior to approval or post-approval, or may object to elements of our clinical development program.
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The FDA or comparable foreign regulatory authorities can delay, limit or deny approval of a vaccine candidate for many reasons, including:
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such authorities may disagree with the design or implementation of our current or future collaborators clinical trials; |
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negative or ambiguous results from our clinical trials, or results may not otherwise meet the level of statistical significance required by the FDA or comparable foreign regulatory agencies for approval; |
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serious and unexpected vaccine-related side effects may be experienced by participants in our clinical trials or by individuals using vaccines similar to our vaccine candidates; |
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such authorities may not accept clinical data from trials that are conducted at clinical facilities or in countries where the standard of care is potentially different from those of their respective home countries; |
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we or any of our current or future collaborators may be unable to demonstrate that a vaccine candidate is safe and effective, and that such vaccine candidates clinical and other benefits outweigh its safety risks; |
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such authorities may disagree with our interpretation of data from preclinical studies or clinical trials; |
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such authorities may not agree that the data collected from clinical trials of our vaccine candidates are acceptable or sufficient to support the submission of a BLA or other marketing application, and such authorities may impose requirements for additional preclinical studies or clinical trials; |
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such authorities may disagree regarding the formulation, labeling and/or the specifications of our vaccine candidates; |
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approval may be granted only for indications that are significantly more limited than what we apply for and/or be subject to other significant restrictions on distribution and use; |
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such authorities may find deficiencies in the manufacturing processes, approval policies or facilities of our third-party manufacturers with which we or any of our future collaborators contract for clinical and commercial supplies; |
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regulations of such authorities may significantly change in a manner rendering our or any of our potential future collaborators clinical data insufficient for approval; or |
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such authorities may not accept a submission due to, among other reasons, the content or formatting of the submission. |
Of the large number of vaccines and biologics in development, only a small percentage successfully complete the FDA or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our vaccine candidates, which would significantly harm our business, results of operations and prospects.
With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed biopharmaceuticals may result in increased cautiousness by the FDA and comparable foreign regulatory authorities in reviewing new drugs based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals.
Further, the COVID-19 pandemic has created a more uncertain regulatory landscape that may adversely impact our ability to receive approvals for our vaccine candidates. For example, it is unclear how the increased population of individuals receiving SARS-CoV-2 vaccines will impact the approval processes of other vaccine candidates for SARS-CoV-2. In addition, there is a less clearly defined regulatory path for booster vaccines, which may be our target development path for our SARS-CoV-2 vaccine candidates. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us or any of our potential future collaborators from commercializing our vaccine candidates.
We may expend our limited resources to pursue a particular vaccine candidate and fail to capitalize on vaccine candidates 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 specific vaccine candidates, development programs and indications. We are also conducting and plan to conduct several clinical trials for multiple vaccine candidates in parallel over the next several years, which may make our decision as to which vaccine candidates to focus on more difficult. As a result, we may forgo or delay pursuit of opportunities with other vaccine candidates that
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could have had greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and vaccine candidates for specific indications may not yield any commercially viable vaccine candidates. If we do not accurately evaluate the commercial potential or target market for a particular vaccine candidate, we may relinquish valuable rights to that vaccine candidate through collaborations, licenses and other similar arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such vaccine candidate.
We may seek an EUA from the FDA or comparable emergency authorizations from foreign regulatory authorities with respect to IVX-411 or IVX-421, and if we fail to obtain or maintain such authorizations, we may be required to pursue a more lengthy clinical development process than we expect, and our business may be harmed.
We may seek an EUA from the FDA or comparable emergency authorizations with respect to our SARS-CoV-2 vaccine candidates, IVX-411 and IVX-421. The FDA has the authority to issue an EUA during a public health emergency if it determines that, based on the totality of the scientific evidence it is reasonable to believe that the product may be effective, that the known and potential benefits of the product outweigh the known and potential risks, and that there are no adequate, approved, and available alternatives, and if other regulatory criteria are met. The FDAs standards for granting an EUA are lower than for approving BLAs in accordance with traditional review procedures, and even if we seek and obtain an EUA for one or more of our vaccine candidates, we cannot assure you that the FDA would approve a BLA for such vaccine candidate, if such approval is required. Accordingly, even if we obtain an EUA for one or more of our vaccine candidates, we may be required to conduct additional clinical trials before we are able to submit BLAs or comparable marketing applications for such vaccine candidates.
In addition, the FDAs policies regarding an EUA can change unexpectedly, and the FDA may revoke an EUA if the Secretary of Health and Human Services determines that the underlying health emergency no longer exists or warrants such authorization, or if the FDA identifies safety or efficacy concerns with the authorized product. We cannot predict how long any authorization, if obtained, will remain in place. The FDAs policies regarding vaccines and other products used to diagnose, treat or mitigate COVID-19 remain in flux as the FDA responds to new and evolving public health information and clinical evidence. Therefore, even if we obtain an EUA or other emergency authorizations for one or more of our vaccine candidates, it is possible that such EUA or other authorizations may be revoked and we may be required to cease any commercialization activities, which would adversely impact our business, financial condition and results of operations.
We plan to conduct certain of our clinical trials for our vaccine candidates outside of the United States. However, the FDA and other foreign equivalents may not accept data from such trials, in which case our development plans will be delayed, which could materially harm our business.
We plan to conduct certain of our clinical trials for our vaccine candidates outside the United States, including a planned Phase 1/1b clinical trial in Belgium of IVX-121 in adults aged 18-45 and 60-75 and our Phase 1/2 clinical trial of IVX-411 in Australia. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain conditions imposed by the FDA. Where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will not approve the application on the basis of foreign data alone unless those data are applicable to the U.S. population and U.S. medical practice; the trials were performed by clinical investigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. For clinical trials that are conducted only at sites outside of the United States and not subject to an IND, the FDA requires the clinical trial to have been conducted in accordance with GCPs, and the FDA must be able to validate the data from the clinical trial through an on-site inspection if it deems such inspection necessary. For such trials not subject to an IND, the FDA generally does not provide advance comment on the clinical protocols for the trials, and therefore there is an additional potential risk that the FDA could determine that the trial design or protocol for a non-U.S. clinical trial was inadequate, which could require us to conduct additional clinical trials. There can be no assurance the FDA will accept data from clinical trials conducted outside of the United States. If the FDA does not accept data from our clinical trials of our vaccine candidates, it would likely result in the need for additional clinical trials, which would be costly and time consuming and delay or permanently halt our development of our vaccine candidates.
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Conducting clinical trials outside the United States also exposes us to additional risks, including risks associated with:
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additional foreign regulatory requirements; |
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variability in expense due to foreign currency exchange fluctuations; |
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compliance with foreign manufacturing, customs, shipment and storage requirements; |
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cultural differences in medical practice and clinical research; and |
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diminished protection of intellectual property in some countries. |
Interim, topline and preliminary data from our preclinical studies and clinical trials that we announce or publish from time to time may change as more subject data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim, preliminary or topline data from our preclinical studies and clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, preliminary or topline results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available.
In particular, we may disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as subject enrollment continues and more clinical trial data become available. Adverse differences between interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock after this offering.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular vaccine candidate or product and the value of our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product, vaccine candidate or our business. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our vaccine candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.
The ability of the FDA and other government agencies to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, a government agencys ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the government agencys ability to perform routine functions. Average review times at the FDA and other government agencies have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new biologics or modifications to approved biologics to be reviewed and/or approved by necessary government
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agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.
Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most inspections of foreign manufacturing facilities and products. Subsequently, on March 18, 2020 the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Additionally, on April 15, 2021, the FDA issued a guidance document in which the FDA described its plans to conduct voluntary remote interactive evaluations of certain drug manufacturing facilities and clinical research sites. According to the guidance, the FDA intends to request such remote interactive evaluations in situations where an in-person inspection would not be prioritized, deemed mission-critical, or where direct inspection is otherwise limited by travel restrictions, but where the FDA determines that remote evaluation would be appropriate. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Risks Related to Our Reliance on Third Parties
We rely on third parties to conduct many of our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, our development programs and our ability to seek or obtain regulatory approval for or commercialize our vaccine candidates may be delayed.
We are dependent on third parties to conduct our preclinical studies and clinical trials for our vaccine candidates, and expect to rely on third parties for the conduct of any preclinical studies and clinical trials for our future vaccine candidates. Specifically, we have used and relied on, and intend to continue to use and rely on, medical institutions, clinical investigators, CROs and consultants to conduct our preclinical studies and clinical trials, in each case in accordance with our clinical protocols and regulatory requirements. These CROs, investigators and other third parties play a significant role in the conduct and timing of these trials and subsequent collection and analysis of data. Though we carefully manage our relationships with our CROs, investigators and other third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects. Further, we have and will have agreements governing the activities of our third-party contractors, we have limited influence over their actual performance. Nevertheless, we are responsible for ensuring that each of our preclinical studies and clinical trials are conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on our CROs and other third parties does not relieve us of our regulatory responsibilities. For example, toxicology studies of our vaccine candidates must be completed under GLP regulations and our or our CROs failure to comply with these regulations may delay our ability to initiate clinical trials. In addition, we and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of our vaccine candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or trial sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Furthermore, our clinical trials must be conducted with vaccine candidates produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
There is no guarantee that any of our CROs, investigators or other third parties will devote adequate time and resources to our preclinical studies or clinical trials or perform as contractually required. If any of these third parties
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fails to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed or terminated. In addition, many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting preclinical studies, clinical trials or other development activities that could harm our competitive position.
Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA of any BLA we submit. Any such delay or rejection could prevent us from commercializing our vaccine candidates.
Our CROs have the right to terminate their agreements with us in the event of an uncured material
breach, and under other specified circumstances. If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third parties on commercially reasonable terms or at all. Switching or adding additional CROs, investigators and other third parties involves additional cost and requires our managements time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we work to carefully manage our relationships with our CROs, investigators and other third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
We rely on third parties for the manufacture of our vaccine candidates for preclinical and clinical development and expect to continue to do so for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our vaccine candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not own or operate manufacturing facilities and have no plans to develop our own clinical or commercial-scale manufacturing capabilities. We rely, and will continue to rely, on third parties for the manufacture of our vaccine candidates and related raw materials for preclinical and clinical development, as well as for commercial manufacture if any of our vaccine candidates receive marketing approval. The facilities used by third-party manufacturers to manufacture our vaccine candidates must be approved by the FDA and any comparable foreign regulatory authority pursuant to inspections that will be conducted after we submit an BLA to the FDA or any comparable submission to a foreign regulatory authority. We do not control the manufacturing process of, and are completely dependent on, third-party manufacturers for compliance with cGMP requirements for manufacture of products. In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Furthermore, the process of manufacturing biologics is complex and highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects, other supply disruptions and higher costs. If microbial, viral or other contaminations are discovered at the facilities of our third-party manufacturers, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials, result in higher costs of drug product and adversely affect our business.
If our third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or any comparable foreign regulatory authority, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA or any comparable foreign regulatory authority does not approve these facilities for the manufacture of our vaccine candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our vaccine candidates, if approved. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of vaccine candidates or products, operating restrictions and criminal
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prosecutions, any of which could significantly and adversely affect supplies of our products. Additionally, our third-party manufacturers may rely on single source suppliers for certain of the raw materials for our preclinical and clinical product supplies. If current or future suppliers are delayed or unable to supply sufficient raw materials to manufacture product for our preclinical studies and clinical trials, we may experience delays in our development efforts as materials are obtained or we locate and qualify new raw material manufacturers.
Our or a third partys failure to execute on our manufacturing requirements on commercially reasonable terms and in compliance with cGMP or other regulatory requirements could adversely affect our business in a number of ways, including:
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an inability to initiate clinical trials of our vaccine candidates under development; |
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delay in submitting regulatory applications, or receiving marketing approvals, for our vaccine candidates; |
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subjecting third-party manufacturing facilities or our potential future manufacturing facilities to additional inspections by regulatory authorities; |
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requirements to cease development or to recall batches of our vaccine candidates; and |
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in the event of approval to market and commercialize our vaccine candidates, an inability to meet commercial demands for our vaccine candidates or any other future vaccine candidates. |
In addition, we may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
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failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance; |
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breach of the manufacturing agreement by the third party; |
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failure to manufacture our product according to our specifications, our schedule, or at all; |
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misappropriation of our proprietary information, including our trade secrets and know-how; and |
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termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us. |
Our vaccine candidates and any products that we may develop may compete with other vaccine candidates and products for access to manufacturers and manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. In addition, the COVID-19 pandemic has reduced manufacturing capacity worldwide and limited access to materials needed to manufacture key components of our vaccine candidates. Further, certain of our in-license agreements require that vaccine products sold in the United States be manufactured in the United States, which limits the number of manufacturers available to us. Increased competition amongst developers to access manufacturers and materials could increase the costs of, or otherwise limit our ability to, manufacture our vaccine candidates.
Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval, and any related remedial measures may be costly or time consuming to implement. We do not currently have arrangements in place for redundant supply or a second source for all required raw materials used in the manufacture of our vaccine candidates. If our existing or future third-party manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all.
Our current and anticipated future dependence upon others for the manufacture of our vaccine candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.
We and our third-party manufacturers may face difficulty scaling up manufacturing capabilities which could delay our development timelines, or substantially increase our overall development costs.
As part of our development strategy, we plan to initiate scale-up of manufacturing process development activities to enable incorporation of final process changes early in the overall development cycle. However, we may face significant challenges in this scale-up of manufacturing capabilities, including challenges with respect to large scale process development, analytical development and quality control testing, and manufacturing our vaccine candidates to our specifications and in a timely manner to support our preclinical and clinical trials. We may also face challenges in identifying and securing third-party manufacturers to support our manufacturing development activities
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and to produce sufficient quantities at an acceptable cost. Delays in establishing and scaling up our manufacturing process and in securing third-party manufacturers may materially delay or disrupt our development efforts, and increase our overall development costs.
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 currently rely on third parties to manufacture our vaccine candidates and to perform quality testing, we must, at times, share our proprietary technology and confidential information, including 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. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are intentionally or 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 and despite our efforts to protect our trade secrets, a competitors discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations and prospects.
We may seek to enter into collaborations, licenses and other similar arrangements and may not be successful in doing so, and even if we are, we may relinquish valuable rights and may not realize the benefits of such relationships.
We may seek to enter into collaborations, joint ventures, licenses and other similar arrangements for the development or commercialization of our vaccine candidates, due to capital costs required to develop or commercialize the vaccine candidate or manufacturing constraints. We may not be successful in our efforts to establish or maintain such collaborations for our vaccine candidates because our research and development pipeline may be insufficient, our vaccine candidates may be deemed to be at too early of a stage of development for collaborative effort or third parties may not view our vaccine candidates as having the requisite potential to demonstrate safety and efficacy or significant commercial opportunity. In addition, we face significant competition in seeking appropriate strategic partners, and the negotiation process can be time-consuming and complex. We may need to relinquish valuable rights to our future revenue streams, research programs, vaccine candidates or VLP platform, or grant licenses on terms that may not be favorable to us, as part of any such arrangement, and such arrangements may restrict us from entering into additional agreements with other potential collaborators. We cannot be certain that, following a collaboration, license or strategic transaction, we will achieve an economic benefit that justifies such transaction.
Even if we are successful in our efforts to establish such collaborations, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such collaborations if, for example, the development or approval of a vaccine candidate is delayed, the safety of a vaccine candidate is questioned or the sales of an approved vaccine candidate are unsatisfactory.
Collaborations involving our vaccine candidates would pose significant risks to us, including the following:
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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; |
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collaborators may not perform their obligations as expected; |
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we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; |
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collaborators may not pursue development and commercialization of any vaccine candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; |
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collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a vaccine candidate, repeat or conduct new clinical trials or require a new formulation of a vaccine candidate for clinical testing; |
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collaborators could independently develop, or develop with third parties, vaccines that compete directly or indirectly with our vaccine candidates if the collaborators believe that competitive vaccines are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; |
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vaccine candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own vaccine candidates or drugs, which may cause collaborators to cease to devote resources to the commercialization of our vaccine candidates; |
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a collaborator with marketing and distribution rights to one or more of our vaccine candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such vaccines; |
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a collaborators sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings; |
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disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays in or termination of the research, development or commercialization of vaccine candidates, might lead to additional responsibilities for us with respect to vaccine candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; |
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collaborators may not properly maintain or defend our or their intellectual property rights or may use our or their proprietary information in such a way as to invite litigation that could jeopardize or invalidate such intellectual property or proprietary information or expose us to potential litigation; |
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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; |
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collaborators may not provide us with timely and accurate information regarding development, regulatory or commercialization status or results, which could adversely impact our ability to manage our own development efforts, accurately forecast financial results or provide timely information to our stockholders regarding our out-licensed vaccine candidates; |
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if a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated; and |
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collaborations may be terminated, including for the convenience of the collaborator, and, if terminated, we may find it more difficult to enter into future collaborations or be required to raise additional capital to pursue further development or commercialization of the applicable vaccine candidates. |
Any termination of collaborations we enter into in the future, or any delay in entering into collaborations related to our vaccine candidates, could delay the development and commercialization of our vaccine candidates and reduce their competitiveness if they reach the market, which could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Commercialization of Our Vaccine Candidates
Even if we receive regulatory approval for any vaccine candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally, our vaccine candidates, if approved, could be subject to labeling and other restrictions on marketing or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our vaccine candidates, when and if any of them are approved.
Any regulatory approvals that we may receive for our vaccine candidates will require the submission of reports to regulatory authorities, subject us to surveillance to monitor the safety and efficacy of the product, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements. For example, the FDA may require a REMS as a condition of approval of our vaccine 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. In addition, if the FDA or a comparable foreign regulatory authority approves our vaccine candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our
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products will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCP requirements for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with our products, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
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restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls; |
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restrictions on product distribution or use, or requirements to conduct post-marketing studies or clinical trials; |
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restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials; |
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fines, restitutions, disgorgement of profits or revenues, warning letters, untitled letters or holds on clinical trials; |
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refusal by the FDA or other regulatory authorities to approve pending applications or supplements to approved applications submitted by us or suspension or revocation of approvals; |
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warning letters, untitled letters, or adverse publicity requirements; |
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product seizure or detention, or refusal to permit the import or export of our products; and |
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injunctions or the imposition of civil or criminal penalties. |
The occurrence of any event or penalty described above may inhibit our ability to commercialize our vaccine candidates and generate revenue and could require us to expend significant time and resources in response and could generate negative publicity.
The FDAs and other regulatory authorities policies may change and additional government regulations may be promulgated that could prevent, limit or delay marketing authorization of any product candidates we develop. 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 be subject to enforcement action and we may not achieve or sustain profitability
Our vaccine candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Patient Protection and Affordable Care Act (as amended by the Health Care and Education Reconciliation Act, collectively, the ACA) includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (BPCIA), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a highly similar or biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first approved by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first approved. During this 12-year period of exclusivity, the FDA may approve a full BLA for the competing product containing the sponsors own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. We believe that any of our vaccine candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our vaccine candidates to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated.
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The commercial success of our vaccine candidates will depend upon the degree of market acceptance of such vaccine candidates by healthcare providers, vaccine recipients, healthcare payors and others in the medical community.
Our vaccine candidates may not be commercially successful. Even if any of our vaccine candidates receive regulatory approval, they may not gain market acceptance among healthcare providers, individuals within our target population, healthcare payors, national immunization technical advisory groups (NITAGs) or the medical community. The commercial success of any of our current or future vaccine candidates will depend significantly on the broad adoption and use of the resulting product by these individuals and organizations for approved indications. The degree of market acceptance of our products will depend on a number of factors, including:
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demonstration of clinical efficacy and safety compared to other more-established products; |
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the indications for which our vaccine candidates are approved; |
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any anti-vaccine sentiments within our targeted patient population; |
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the limitation of our targeted population and other limitations or warnings contained in any FDA-approved labeling; |
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acceptance of a competing vaccine for the relevant indication by healthcare providers and their patients; |
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acceptance of, and preference for, a therapeutic that treats the condition our vaccine targets, by healthcare providers and their patients; |
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the pricing and cost-effectiveness of our products, as well as the cost of treatment with our products in relation to alternative treatments and therapies; |
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our ability to obtain and maintain sufficient third-party coverage and adequate reimbursement from government healthcare programs, including Medicare and Medicaid, private health insurers and other third-party payors; |
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receiving recommendations from U.S. Center for Disease Controls (CDC) Advisory Committee on Immunization Practices (ACIP), or other foreign NITAGs, for use, as well as placement of our vaccine candidates on national immunization programs, which may impact the likelihood of third-party coverage and extent of healthcare provider acceptance; |
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the willingness of vaccine recipients 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; |
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any restrictions on the use of our products, and the prevalence and severity of any adverse effects; |
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potential product liability claims; |
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the timing of market introduction of our products as well as competitive drugs; |
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the effectiveness of our or any of our current or potential future collaborators sales and marketing strategies; and |
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unfavorable publicity relating to the product. |
In the United States, the ACIP develops vaccine recommendations, and there are similar NITAG agencies in other jurisdictions around the world that develop vaccine recommendations. To develop its recommendations, the ACIP forms working groups that gather, analyze and prepare scientific information. The ACIP also considers many of the factors above, as well as myriad additional factors such as the value of vaccination for the target population regarding the outcomes, health economic data and implementation issues. The ACIP recommendations are also made within categories, such as in an age group or a specified risk group and vaccines that receive a preferred ACIP recommendation are generally widely adopted in the United States. We expect that other developers of RSV vaccine candidates that are in later stages of development will secure a recommendation from the ACIP. The failure of these developers to secure such an ACIP recommendation, or any limitations of any ACIP recommendations secured by these developers, may limit the market opportunity of our vaccine candidates or otherwise require us to seek an ACIP recommendation ourselves, which may cause us to expend additional time and/or resources. If any vaccine candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors or patients, we may not generate sufficient revenue from that product and may not become or remain profitable.
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The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found or alleged to have improperly promoted off-label uses, we may become subject to significant liability.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the products approved labeling. If any of our vaccine candidates are approved, and we are found to have promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The government has also required companies to enter into consent decrees or imposed permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our vaccine candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.
The successful commercialization of our vaccine candidates, if approved, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our products could limit our ability to market those products and decrease our ability to generate revenue.
The availability of coverage and the adequacy of reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most vaccine recipients to be able to afford prescription medications such as our vaccine candidates, if approved. Our ability to achieve coverage and acceptable levels of reimbursement for our products by third-party payors will have an effect on our ability to successfully commercialize those products. Accordingly, we will need to successfully implement a coverage and reimbursement strategy for any approved vaccine candidate. Even if 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 vaccine recipients 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.
There is significant uncertainty related to third-party payor 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 vaccines will be covered. Some third-party payors may require pre-approval of coverage for new or innovative products before they will reimburse healthcare providers who use such products. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our vaccine candidates. In addition, certain ACA marketplace and other private payor plans are required to include coverage for certain preventative services, including vaccinations recommended by the ACIP and on the CDCs National Immunization Program, without cost share obligations (i.e., co-payments, deductibles or co-insurance) for plan members. Children through 18 years of age without other health insurance coverage may be eligible to receive such vaccinations free-of-charge through the CDCs Vaccines for Children program. For Medicare beneficiaries, vaccines may be covered for reimbursement under either the Part B program or Part D depending on several criteria, including the type of vaccine and the beneficiarys coverage eligibility. If our vaccine candidates, if approved, are reimbursed only under the Part D program, healthcare providers may be less willing to use our products because of the claims adjudication costs and time related to the claims adjudication process and collection of co-payment associated with the Part D program.
Obtaining and maintaining reimbursement status is time consuming, costly and uncertain. 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. However, 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 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.
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Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of our products. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our products. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.
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 products. We expect to experience pricing pressures in connection with the sale of any of our products 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 and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
We face significant competition, and if our competitors develop technologies or vaccine candidates more rapidly than we do or their technologies are more effective, our business and our ability to develop and successfully commercialize products may be adversely affected.
The biotechnology and biopharmaceutical industries are characterized by rapid advancing technologies, intense competition and a strong emphasis on proprietary and novel products and vaccine candidates. We compete with (i) developers of vaccine candidates using technologies other than VLP technologies that target the same or similar infectious diseases targeted by our vaccine candidates and (ii) other developers of VLP technologies. Our competitors have developed, are developing or may develop products, vaccine candidates and processes competitive with our vaccine candidates. Any vaccine candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we may attempt to develop vaccine candidates. In particular, there is intense competition in the VLP technology field and the RSV, hMPV and SARS-CoV-2 vaccine fields. Our competitors include larger and better funded pharmaceutical, biopharmaceutical, biotechnological and therapeutics companies. Moreover, we may also compete with universities and other research institutions who may be active in respiratory vaccine research and could be in direct competition with us. We also compete with these organizations to recruit management, scientists and clinical development personnel, which could negatively affect our level of expertise and our ability to execute our business plan. We will also face competition in establishing clinical trial sites, enrolling subjects for clinical trials and in identifying and in-licensing new vaccine candidates. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
A number of companies have initiated trials, announced plans to initiate trials, or completed trials, of non-VLP vaccine candidates targeting RSV, hMPV and SARS-CoV-2. For example, GlaxoSmithKline, Pfizer, Bavarian Nordic, Janssen, Moderna, Codagenix and Meissa are currently developing vaccines against RSV for use in older adults, and Moderna, Pfizer/BioNTech, AstraZeneca and Janssen, along with many other companies, are currently marketing SARS-CoV-2 vaccines. We also compete with companies that have developed VLP technologies targeting SARS-Cov-2 and may target RSV or hMPV in the future. These companies include SpyBiotech, VLP Therapeutics, VBI Vaccines, Medicago and Artes Biotechnology. To the extent these companies develop vaccines or vaccine candidates that provide or have the potential to provide comparable or better efficacy than our vaccine candidates, these efforts could create competition for subject recruitment into our trials and our commercial opportunity.
Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do. If we successfully obtain approval for any vaccine candidate, we will face competition based on many different factors, including the safety and effectiveness of our products, the ease with which our products can be administered, the extent to which vaccine recipients accept relatively new vaccines, the
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timing and scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, more convenient, less expensive or marketed and sold more effectively than any products we may develop. Competitive products approaches may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our vaccine candidates. We plan to pursue development of a combination RSV and hMPV vaccine candidate, and it takes significant manufacturing and development resources to develop combination candidates. Our competitors may have greater resources than we do, allowing them to advance combination candidates faster than we are able to or allowing them to advance additional combination vaccine candidates incorporating more pathogens in a single candidate. These combination candidates could limit the commercialization potential of our combination candidates. If we are unable to compete effectively, our opportunity to generate revenue from the sale of our products we may develop, if approved, could be adversely affected.
We currently have no marketing and sales organization and have no experience as a company in commercializing products, and we may need to invest significant resources to develop these capabilities. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate product revenue.
We have no internal sales, marketing or distribution capabilities, nor have we commercialized a product. If any of our vaccine candidates ultimately receives regulatory approval, we must build a marketing and sales organization with technical expertise and supporting distribution capabilities to commercialize each such product in major markets, which will be expensive and time consuming. Alternatively, we may need to collaborate with third parties that have direct sales forces and established distribution systems, in lieu of or to augment our own sales force and distribution systems. We have no prior experience as a company in the marketing, sale and distribution of biopharmaceutical products and there are significant risks involved in building and managing of a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. We may not be able to enter into collaborations or hire consultants or external service providers to assist us in sales, marketing and distribution functions on acceptable financial terms, or at all. In addition, our product revenues and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and distribute any products that we develop ourselves. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we are not successful in commercializing our products, either on our own or through arrangements with one or more third parties, we may not be able to generate any future product revenue and we would incur significant additional losses.
Our future growth may depend, in part, on our ability to operate in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Our future growth may depend, in part, on our ability to develop and commercialize our vaccine candidates in foreign markets. We are not permitted to market or promote any of our vaccine candidates before we receive regulatory approval from applicable regulatory authorities in foreign markets, and we may never receive such regulatory approvals for any of our vaccine candidates. To obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of our vaccine candidates. If we obtain regulatory approval of our vaccine candidates and ultimately commercialize our products in foreign markets, we would be subject to additional risks and uncertainties, including:
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different regulatory requirements for approval of drugs in foreign countries; |
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reduced protection for intellectual property rights; |
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the existence of additional third-party patent rights of potential relevance to our business; |
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pricing pressure from vaccine procurement organizations; |
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determinations by NITAGs not to include our vaccine products in immunization schedules for our target patient population, older adults; |
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unexpected changes in tariffs, trade barriers and regulatory requirements; |
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economic weakness, including inflation, or political instability in particular foreign economies and markets; |
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; |
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compliance with export control and import laws and regulations; |
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; |
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foreign reimbursement, pricing and insurance regimes; |
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workforce uncertainty in countries where labor unrest is common; |
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differing regulatory requirements with respect to manufacturing of vaccine products; |
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and |
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires. |
We received a grant from the Bill & Melinda Gates Foundation, which subjects certain of our vaccine candidates to pricing and other restrictions.
On September 24, 2020, we entered into a grant agreement (the Grant Agreement) with the Bill & Melinda Gates Foundation (BMGF), pursuant to which BMGF awarded us a grant (the Grant) to help fund our development of a SARS-CoV-2 vaccine. We are using the Grant to develop IVX-411. The Grant Agreement, along with the Global Access and Price Commitment Agreement (the GACA), which we entered into with BMGF on February 17, 2021, subjects our SARS-CoV-2 vaccine candidates, including IVX-411, to certain pricing requirements in certain geographies, global access requirements and reporting and other covenants to ensure that such vaccine candidates are made available by us worldwide and on a nondiscriminatory basis. Such covenants may limit the prices we can charge for such vaccine candidates in low and middle income countries, and include a license to use certain of our proprietary technology related to such vaccine candidates for use in low and middle income countries if we do not comply with the Grant Agreement or GACA. Such price limitations or license, if invoked, could limit the prices we charge, or in some cases, restrict our control over the manufacturing and distribution of certain of our vaccine candidates targeting SARS-CoV-2, which could harm our ability to initiate or continue clinical trials of such vaccine candidates, adversely affect the development or commercialization of such vaccine candidates, or otherwise negatively impact our market position.
Risks Related to Our Business Operations and Industry
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:
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the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our vaccine candidates, which may change from time to time; |
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coverage and reimbursement policies with respect to our vaccine candidates, if approved, and potential future drugs that compete with our products; |
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the cost of manufacturing our vaccine candidates, which may vary depending on the quantity of production and the terms of our agreements with third-party manufacturers; |
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expenditures that we may incur to acquire, develop or commercialize additional vaccine candidates and technologies; |
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the level of demand for any approved products, which may vary significantly; |
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future accounting pronouncements or changes in our accounting policies; and |
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the timing and success or failure of preclinical studies or clinical trials for our vaccine candidates or competing vaccine candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners. |
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The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.
This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.
We are dependent on the services of our management and other clinical and scientific personnel, and if we are not able to retain these individuals or recruit additional management or clinical and scientific personnel, our business will suffer.
Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel. We are highly dependent upon our senior management, as well as our senior scientists and other members of our management team. The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, initiation or completion of our preclinical studies and clinical trials or the commercialization of our vaccine candidates. Although we have executed employment agreements or offer letters with each member of our senior management team, these agreements are terminable at will with or without notice and, therefore, we may not be able to retain their services as expected. We do not currently maintain key person life insurance on the lives of our executives or any of our employees. This lack of insurance means that we may not have adequate compensation for the loss of the services of these individuals.
We will need to expand and effectively manage our managerial, operational, financial and other resources in order to successfully pursue our clinical development and commercialization efforts. We may not be successful in maintaining our unique company culture and continuing to attract or retain qualified management and scientific and clinical personnel in the future due to the intense competition for qualified personnel among biopharmaceutical, biotechnology and other businesses, particularly in the Seattle area. Our industry has experienced a high rate of turnover of management personnel in recent years. If we are not able to attract, integrate, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy.
We may encounter difficulties in managing our growth and expanding our operations successfully.
We had 22 full-time employees as of June 30, 2021. As we continue development and pursue the potential commercialization of our vaccine candidates, as well as function as a public company, we will need to expand our financial, development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. In addition, we may need to expand our facilities, including laboratory operations, and may be unable to do so on commercially reasonable terms, or at all. Our future financial performance and our ability to develop and commercialize our vaccine candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively.
We are subject to various U.S. federal, state and foreign healthcare laws and regulations, which could increase compliance costs, and our failure to comply with these laws and regulations could harm our results of operations and financial condition.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers expose us to broadly applicable foreign, federal and state fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute any products for which we obtain marketing approval. Such laws include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, in return for, either the referral |
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of an individual or the purchase, lease, or order, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation; |
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the federal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the 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 or causing to be made a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; |
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the federal Health Insurance Portability and Accountability Act of 1996 (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 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; |
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the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Childrens Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare & Medicaid Services (CMS), information related to payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by such healthcare professionals and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and transfers of value provided, as well as ownership and investment interests held, during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives; and |
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; some state laws require biotechnology companies to comply with the biotechnology industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; some state laws that require biotechnology companies to report information on the pricing of certain drug products; and some state and local laws require the registration or pharmaceutical sales representatives. |
Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare and privacy laws and regulations will involve ongoing substantial costs. It is possible that governmental authorities will conclude that our business practices, including consulting agreements with certain physicians who are paid in the form of stock or stock options as compensation for services provided to us, may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations. Defending against any such actions can be costly, 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. Further, if any of the physicians or other healthcare providers or
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entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare program.
Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize our vaccine candidates and may affect the prices we may set.
In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system, including cost-containment measures that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any vaccine candidates for which we obtain marketing approval. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare.
For example, in March 2010, the ACA was enacted in the United States. Among the provisions of the ACA of importance to our potential vaccine candidates, the ACA: established an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents; extended manufacturers Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; expanded eligibility criteria for Medicaid programs; expanded the entities eligible for discounts under the Public Health program; increases the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; created a new Medicare Part D coverage gap discount program; established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending.
Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and on June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Courts decision, President Biden had issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the healthcare reform measures of the Biden administration, or other efforts to challenge the ACA, if any, will impact the ACA or our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, resulted in reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through December 31, 2021, unless additional Congressional action is taken. In addition, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient assistance programs, and reform government program reimbursement methodologies for products. At the federal level, the former Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
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At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our vaccine candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.
We expect that the ACA, these new laws and other healthcare reform measures that may be adopted in the future may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product. 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 vaccine candidates, if approved.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products.
We face an inherent risk of product liability as a result of the clinical trials of our vaccine candidates and will face an even greater risk if we commercialize our vaccine candidates. For example, we may be sued if our vaccine candidates allegedly cause injury or are found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the vaccine candidate, negligence, strict liability and a breach of warranties. Claims may be brought against us by clinical trial participants, vaccine recipients or others using, administering or selling products that may be approved in the future. Claims could also be asserted under state consumer protection acts.
If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit or cease the commercialization of our products. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
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decreased demand for our products; |
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injury to our reputation and significant negative media attention; |
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withdrawal of clinical trial participants; |
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costs to defend the related litigation; |
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a diversion of our managements time and our resources; |
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substantial monetary awards to trial participants or vaccine recipients; |
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product recalls, withdrawals or labeling, marketing or promotional restrictions; |
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significant negative financial impact; |
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the inability to commercialize our vaccine candidates; and |
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a decline in our stock price. |
We currently hold $15 million of clinical trial liability insurance coverage. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our vaccine candidates. Insurance coverage is increasingly expensive. Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of our vaccine candidates. Although we will maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies will also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts
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awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
Our insurance policies are expensive and only protect us from some business risks, which will leave us exposed to significant uninsured liabilities.
We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include property, general liability, employment benefits liability, business automobile, workers compensation, products liability, malicious invasion of our electronic systems, and clinical trials, and directors and officers, employment practices and fiduciary liability insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our financial position and results of operations.
We and any of our potential future collaborators will be required to report to regulatory authorities if any of our approved products cause or contribute to adverse medical events, and any failure to do so would result in sanctions that would materially harm our business.
If we or any of our potential future collaborators are successful in commercializing our products, the FDA and foreign regulatory authorities would require that we and such collaborators report certain information about adverse medical events if those products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date we become aware of the adverse event as well as the nature of the event. We and any of our potential future collaborators or CROs may fail to report adverse events within the prescribed timeframe. If we or any of our current or potential future collaborators or CROs fail to comply with such reporting obligations, the FDA or a foreign regulatory authority could take action, including criminal prosecution, the imposition of civil monetary penalties, seizure of our products or delay in approval or clearance of future products.
We and our service providers may be subject to a variety of privacy and data security laws and contractual obligations, which could increase compliance costs and actual or perceived failure to comply with them could subject us to potentially significant fines or penalties and otherwise harm our business. Our internal computer systems, or those of any of our service providers, may fail or suffer security breaches, which could result in a material disruption of our product development programs.
We and our service providers maintain and will maintain a large quantity of sensitive information, including confidential business and patient health information in connection with our preclinical studies and planned clinical trials, and are subject to laws and regulations governing the privacy and security of such information. The global data protection landscape is rapidly evolving, and we may be affected by or subject to new, amended or existing laws and regulations in the future, including as our operations continue to expand or if we operate in foreign jurisdictions. These laws and regulations may be subject to differing interpretations, which adds to the complexity of processing personal data. Guidance on implementation and compliance practices are often updated or otherwise revised. This may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
As our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the United States, numerous federal and state laws and regulations, including health information privacy laws, data breach notification laws and 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 addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts and circumstances, we could be subject to significant penalties if we violate HIPAA.
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In addition, certain state laws govern the privacy and security of health and other information in certain circumstances. These laws are evolving rapidly and may differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. By way of example, the California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020, gives California residents individual privacy 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. The CCPA may increase our compliance costs and potential liability and many similar laws have been proposed at the federal level and in other states. Further, the California Privacy Rights Act (CPRA) recently passed in California. The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required. Other states are exploring their own laws, which may or may not be similar to CCPA or the CPRA. In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
There also are a wide variety of privacy laws in other countries that may impact our operations, now or in the future. For example, in Europe, the General Data Protection Regulation (GDPR) imposes stringent requirements regarding the collection, use, disclosure, transfer or other processing of personal data of individuals within the European Economic Area (EEA). Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to 20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The GDPR also confers a private right of action in some circumstances on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR. Among other things, the GDPR requires the establishment of a lawful basis for the processing of data, imposes requirements relating to the consent of the individuals to whom the personal data relates, including detailed notices for clinical trial subjects and investigators, as well as requirements regarding the security of personal data and notification of data processing obligations to the competent national data processing authorities. In addition, the GDPR increases the scrutiny of transfers of personal data from clinical trial sites located in the EEA to the United States and other jurisdictions that the European Commission does not recognize as having adequate data protection laws. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the United States. For example, on July 16, 2020, the Court of Justice of the European Union (CJEU) invalidated the EU-US Privacy Shield Framework (Privacy Shield) under which personal data could be transferred from the EEA to United States entities that had self-certified under the Privacy Shield scheme. While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain. The European Commission issued revised standard contractual clauses on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board. The revised standard contractual clauses must be used for relevant new data transfers from September 27, 2021; existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022. There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
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Further, following the withdrawal of the United Kingdom from the European Union and the EEA and the end of the transition period, from January 1, 2021, we have to comply with the GDPR and separately the GDPR as implemented in the United Kingdom, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR and has the ability to fine up to the greater of 20 million/£17 million or 4% of global turnover. The relationship between the United Kingdom and the European Union and the EEA in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term. The European Commission has adopted an adequacy decision in favor of the United Kingdom, enabling data transfers from EU member states to the United Kingdom without additional safeguards. However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews or extends that decision.
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. If we fail to follow these security standards, even if no personal 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 U.S. 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.
Compliance with U.S. and international 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, update our data privacy and security policies and procedures, or in some cases, impact our ability to operate in certain jurisdictions. Failure by us or our collaborators and service providers to comply with U.S. and international 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 adversely affect our business, financial condition, results of operations and prospects. Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In addition, attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. These attacks can present meaningful risks to our operations, data and commercial information. As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Any security breach or other incident, whether actual or perceived, could impact our reputation and/or operations, cause us to incur significant costs, including legal expenses, harm customer confidence, hurt our expansion into new markets, cause us to incur remediation costs, or cause us to lose existing customers. For example, the loss of clinical trial data from clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. We also rely on third parties to manufacture our vaccine candidates, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any actual or perceived disruption or security breach affects our systems (or those of our third-party collaborators, service providers, contractors or consultants) or were to result in a loss of or accidental, unlawful or unauthorized access to, use of, release of, or other processing of personally identifiable information, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, the further development and commercialization of our vaccine candidates could be delayed, and we could be subject to significant fines, penalties or liabilities for any noncompliance to certain privacy and security laws.
Further, despite the implementation of security measures, our internal technology systems (including infrastructure) and those of our current and any future CROs and other contractors, consultants and collaborators are vulnerable to
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damage from computer viruses, cybersecurity threats (such as denial-of-service attacks, cyber-attacks or cyber-intrusions over the Internet, hacking, phishing and other social engineering attacks), unauthorized access or use, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations or result in the unauthorized disclosure of or access to personally identifiable information or individually identifiable health information, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other similar disruptions. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information. If our third-party vendors fail to protect their information technology systems and our confidential and proprietary information, we may be vulnerable to disruptions in service and unauthorized access to our confidential or proprietary information and we could incur liability and reputational damage. Some of the federal, state and foreign government requirements include obligations of companies to notify individuals of security breaches involving particular categories of personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have formed strategic relationships.
Our business is subject to risks arising from the COVID-19 pandemic and other epidemic diseases.
The current COVID-19 worldwide pandemic has presented substantial public health and economic challenges and is affecting our employees, clinical trial subjects, physicians and other healthcare providers, communities and business operations, as well as the U.S. and global economies and financial markets. International and U.S. governmental authorities in impacted regions have taken, and are continuing to take, actions in an effort to slow the spread of COVID-19, including issuing varying forms of stay-at-home orders, and restricting business functions outside of ones home. In response, our administrative employees have worked remotely and we have limited the number of staff in our research and development laboratories. To date we have not experienced material disruptions in our business operations. However, while it is not possible at this time to estimate the impact that COVID-19 could have on our business in the future, particularly as we advance our vaccine candidates through clinical development, the continued spread of COVID-19 and the measures taken by the governmental authorities, and any future epidemic disease outbreaks, could disrupt the supply chain and the manufacture or shipment of drug substances and finished drug products for our vaccine candidates for use in our research, preclinical studies and clinical trials, delay, limit or prevent our employees and CROs from continuing research and development activities, impede our clinical trial initiation and recruitment and the ability of subjects to continue in clinical trials, impede testing, monitoring, data collection and analysis and other related activities, any of which could delay our preclinical studies and clinical trials and increase our development costs, and have a material adverse effect on our business, financial condition and results of operations. The COVID-19 pandemic and any future epidemic disease outbreak could also potentially further affect the business of the FDA or other regulatory authorities, which could result in delays in meetings related to planned clinical trials. The COVID-19 pandemic and mitigation measures have had and may continue to have, and any future epidemic disease outbreak may have, an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise capital when needed. The extent to which the COVID-19 pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
Our business could be affected by litigation, government investigations and enforcement actions.
We currently operate in a number of jurisdictions in a highly regulated industry and we could be subject to litigation, government investigation and enforcement actions on a variety of matters in the United States. or foreign jurisdictions, including, without limitation, intellectual property, regulatory, product liability, environmental, whistleblower, false claims, privacy, anti-kickback, anti-bribery, securities, commercial, employment and other claims and legal proceedings which may arise from conducting our business. Any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition of fines, civil and criminal penalties, equitable remedies, including disgorgement, injunctive relief and/or other sanctions against us, and remediation of any such findings could have an adverse effect on our business operations.
Legal proceedings, government investigations and enforcement actions can be expensive and time consuming. An adverse outcome resulting from any such proceeding, investigations or enforcement actions could result in significant damages awards, fines, penalties, exclusion from the federal healthcare programs, healthcare debarment, injunctive relief, product recalls, reputational damage and modifications of our business practices, which could have a material adverse effect on our business and results of operations.
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Our employees and independent contractors, including principal investigators, CROs, consultants and vendors, may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk that our employees and independent contractors, including principal investigators, CROs, consultants and vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate: (i) the laws and regulations of the FDA and other similar regulatory requirements, including those laws that require the reporting of true, complete and accurate information to such authorities, (ii) manufacturing standards, including cGMP requirements, (iii) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and abroad or (iv) laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. 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. In addition, 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 defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, 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 curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.
From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of intellectual property, products or technologies. Additional potential transactions that we may consider in the future include a variety of business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any future transactions could increase our near and long-term expenditures, result in potentially dilutive issuances of our equity securities, including our common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research and development expenses, any of which could affect our financial condition, liquidity and results of operations. Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all. These transactions may never be successful and may require significant time and attention of our management. In addition, the integration of any business that we may acquire in the future may disrupt our existing business and may be a complex, risky and costly endeavor for which we may never realize the full benefits of the acquisition. Accordingly, although there can be no assurance that we will undertake or successfully complete any additional transactions of the nature described above, any additional transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our vaccine candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our vaccine candidates may be adversely affected.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our therapeutic programs and other proprietary technologies we may develop. We seek to protect our proprietary position, in part, by exclusively licensing and filing company-owned patent applications in the United States and abroad relating to our vaccine candidates, VLP technology, manufacturing processes, and methods of use. If we or our principal licensor, UW, are unable to obtain or maintain patent protection, our business, financial condition, results of operations and prospects could be materially harmed.
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Changes in either the patent laws or their interpretation in the United States and other jurisdictions may diminish our ability to protect our intellectual property, obtain, maintain and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our protection. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection against competitors or other third parties.
The patent prosecution process is expensive, time-consuming, and complex, and we or our licensors may not be able to file, prosecute or maintain all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. 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, third party 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, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. Furthermore, 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 any of our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. For example, many of the patent applications related to discoveries in the SARS-CoV-2 field have not yet published and could impact our freedom to operate using our technology in the SARS-CoV-2 space. This may result in us needing to obtain additional licenses, which could have a financial impact, or ceasing development of our candidates if not able to obtain additional necessary licenses.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our patent applications may not result in patents being issued which protect our vaccine candidates or proprietary technologies we may develop or which effectively prevent others from commercializing competitive technologies and products.
Moreover, the claim coverage in a patent application can be significantly reduced before the patent is granted. Even if our 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. Any patents issuing from our patent applications may be challenged, narrowed, circumvented or invalidated by third parties. Our competitors or other third parties may avail themselves of safe harbors under the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Amendments) to conduct research and clinical trials. Consequently, we do not know whether our therapeutic programs and other proprietary technology will be protectable or remain protected by valid and enforceable patents. Even if a patent is granted, our competitors or other third parties may be able to circumvent the patent by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations and prospects. In addition, given the amount of time required for the development, testing and regulatory review of our therapeutic programs and eventual vaccine candidates, patents protecting the vaccine candidates might expire before or shortly after such vaccine candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability and our patents may be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third-party pre-issuance submission of prior art to the United States Patent and Trademark Office (USPTO) or become involved in opposition, derivation, revocation, reexamination, post-grant review, inter partes review, or other similar proceedings challenging our patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our patent rights, allow third parties to commercialize our therapeutic programs and other proprietary technologies we may develop and compete directly
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with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. 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, some of our owned and in-licensed patent rights may in the future be, co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners interest in such patent rights, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of such patent rights in order to enforce such patent rights against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
We rely heavily on certain license agreements with UW and also depend on intellectual property licensed from other third parties, and these licensors may not always act in our best interest. If we fail to comply with our obligations under our intellectual property licenses, if the licenses are terminated, or if disputes regarding these licenses arise, we could lose significant rights that are important to our business.
We are dependent, in part, on patents, know-how and proprietary technology licensed from others. We are a party to a number of license agreements under which we are granted rights to intellectual property that are important to our business and we may enter into additional license agreements in the future. Our existing license agreements impose, and we expect that any future license agreements where we in-license intellectual property will impose on us, various development, regulatory and/or commercial diligence obligations, payment of milestones and/or royalties and other obligations. Specifically, we are party to various option and license agreements with UW including (i) an exclusive, worldwide, royalty-bearing, sublicensable license under certain UW patents to make, use, sell, offer to sell, import and otherwise exploit any product covered by the licensed patents or products for the prophylactic and/or therapeutic treatment of RSV, hMPV and four other infectious diseases, (ii) a non-exclusive, worldwide (excluding South Korea), sublicensable license under certain UW patents to make, use, sell, offer to sell, import or otherwise exploit any product covered under the licensed patents for the prophylactic and/or therapeutic treatments of SARS-CoV-2 infection with an option for an exclusive license in certain jurisdictions, and (iii) certain non-exclusive licenses to use certain know-how related to the foregoing. These licenses and, if exercised, options impose various diligence, milestone payment, royalty, and other obligations on us, and any future license agreements we enter into may do the same. In addition, we rely on in-licensing antigens from third parties other than UW to combine with our VLP platform. If we fail to comply with our obligations under these agreements, or we are subject to bankruptcy-related proceedings, the licensor may have the right to terminate the license, in which event we would not be able to develop or market the products covered by the license. In addition, we may need to obtain additional licenses from our existing licensors and others to advance our research or allow commercialization of vaccine 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, if at all. In either event, we may be required to expend significant time and resources to redesign our technology, vaccine 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 technology or vaccine candidates.
If we or our licensors fail to adequately protect our licensed intellectual property, our ability to commercialize vaccine candidates could suffer. We do not have complete control over the maintenance, prosecution and litigation of our in-licensed patents and patent applications and may have limited control over future intellectual property that may be in-licensed. For example, we cannot be certain that activities such as the maintenance and prosecution by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. It is possible that our licensors infringement proceedings or defense activities may be less vigorous than had we conducted them ourselves, or may not be conducted in accordance with our best interests. Furthermore, there may be certain limitations to our right to enforce certain exclusively licensed patents, including, for example, the requirement that we obtain the licensors consent prior to settling such lawsuits in a manner that would adversely affect the licensors rights, and a general prohibition on enforcement against non-profit entities.
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In addition, the agreements under which we license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant patents, know-how and proprietary technology, or increase what we believe to be our financial or other obligations under the relevant agreement. Disputes that may arise between us and our licensors regarding intellectual property subject to a license agreement could include disputes regarding:
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the scope of rights granted under the license agreement and other interpretation-related issues; |
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whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; |
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our right to sublicense patent and other rights to third parties under collaborative development relationships; |
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our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our vaccine candidates and what activities satisfy those diligence obligations; and |
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the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us. |
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 technology or vaccine candidates. As a result, any termination of or disputes over our intellectual property licenses could result in the loss of our ability to develop and commercialize our vaccine candidates, or we could lose other significant rights, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Furthermore, our licensed patent rights are or may be subject to retained or reserved rights by the licensor or one or more third parties. For example, UW retained rights to conduct academic research for itself and other rights necessary for UW to comply with its obligations to BMGF, which funded in part the research resulting in certain of our licensed patent rights and technology under the UW agreements. With respect to our SARS-CoV-2 vaccine candidate, we granted BMGF a humanitarian license that allows BMGF to make our SARS-CoV-2 vaccine available to certain developing countries. Further, because our licensed patent rights allow the licensor to continue their research on the licensed technology, a licensor may develop new inventions that we may want to license in the future. Any such licenses provided to us will increase our costs. Alternatively, if a licensor does not provide us with a license, we may be limited in our ability to develop competitive vaccine candidates in the future. For additional information on our material license agreements, see BusinessMaterial Agreements.
Intellectual property discovered through government funded programs may be subject to federal regulations such as march-in rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights and limit our ability to contract with non-U.S. manufacturers.
We have in-licensed certain patents and patent applications that were generated through the use of U.S. government funding or grants, and we may acquire or license in the future intellectual property rights that have been generated through the use of U.S. government funding or grants. Pursuant to the Bayh-Dole Act of 1980, the U.S. government has certain rights in inventions developed with government funding. These U.S. government rights include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right, under certain limited circumstances, to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third-party if it determines that: (1) adequate steps have not been taken to commercialize the invention; (2) government action is necessary to meet public health or safety needs; or (3) government action is necessary to meet requirements for public use under federal regulations (also referred to as march-in rights). If the U.S. government exercises its march-in rights in our current or future intellectual property rights that are generated through the use of U.S. government funding or grants, we could be forced to license or sublicense intellectual property developed by us or that we license on terms unfavorable to us, and there can be no assurance that we would receive compensation from the U.S. government for the exercise of such rights. The U.S. government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also
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subject to certain reporting requirements, compliance with which may require us or the applicable licensor to expend substantial resources. In addition, the U.S. government requires that any products embodying any of these inventions or produced through the use of any of these inventions be manufactured substantially in the United States. This preference for U.S. industry may be waived by the federal agency that provided the funding if the owner or assignee of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. industry may limit our ability to contract with non-U.S. product manufacturers for products covered by such intellectual property. Any failure by us to comply with federal regulations regarding intellectual property rights that were developed through the use of U.S. government funding could have a material adverse effect on our business, financial condition, results of operations, and prospects.
For example, because the research resulting in certain of our licensed patent rights and technology under the UW agreements and the agreement with the National Institutes of Health was funded in whole or in part by the U.S. government, the U.S. government has certain rights to such patent rights and technology, including a non-exclusive license authorizing the government to use the invention for non-commercial purposes and march-in rights, and impose certain reporting and domestic manufacturing requirements. These rights apply to IVX-121, IVX-241, IVX-A12, IVX-411, and IVX-421 and may permit the U.S. government to disclose our confidential information to third parties and to exercise march-in rights to use or allow third parties to use our licensed technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the government-funded technology, because action is necessary 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 are and may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the government of such rights could harm our competitive position, business, financial condition, results of operations and prospects.
We may not be able to protect our intellectual property and proprietary rights throughout the world.
Filing, prosecuting and defending patents on our vaccine candidates and/or VLP technology in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of 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 intellectual property in and into the United States or other jurisdictions. Competitors may use our intellectual property in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. In addition, some jurisdictions, such as Europe, Japan and China, may have a higher standard for patentability than in the United States, including, for example, the requirement of claims having literal support in the original patent filing and the limitation on using supporting data that is not in the original patent filing. Under those heightened patentability requirements, we may not be able to obtain sufficient patent protection in certain jurisdictions even though the same or similar patent protection can be secured in the United States and other jurisdictions.
Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.
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Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
Certain provisions of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS Agreement) limit the use of compulsory licenses by World Trade Organization (WTO) members. Several WTO members and various public interest advocates have proposed the WTO implement a waiver of such provision of the TRIPS Agreement so that members may improve the supply of COVID-19 vaccines without fear of trade retaliation. In May 2021, the United States Trade Representative announced that the Biden Administration will actively participate in text-based negotiations at the World Trade Organization (WTO) needed to make that happen. Those negotiations will take time given the consensus-based nature of the institution and the complexity of the issues involved. A waiver is unlikely to impact patent protection in the jurisdictions where we anticipate having the majority of our sales. Rather, with respect to our SARS-CoV-2 vaccine candidates, BMGF has retained or been granted rights in the jurisdictions where patent protection would be impacted. Nevertheless, the outcome of these negotiations is highly uncertain, and if the WTO agrees to waive provisions of the TRIPS Agreement relevant to our SARS-CoV-2 vaccine candidates, our business, financial condition, results of operations and prospects may be adversely affected.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our owned or licensed patents and applications. In certain circumstances, we rely on our licensors to pay these fees due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process. We are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations, and prospects. The COVID-19 pandemic may impair our and our licensors ability to comply with these procedural, document submission, fee payment, and other requirements imposed by government patent agencies, which may materially and adversely affect our ability to obtain or maintain patent protection for our products and vaccine candidates.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of 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 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 (the America Invents 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. A third party that files a patent application in the USPTO after March 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (i) file any patent application
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related to our therapeutic programs and other proprietary technologies we may develop or (ii) invent any of the inventions claimed in our patent applications.
The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may 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. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of patents issuing from those patent applications, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future.
Issued patents covering our vaccine candidates and VLP technology could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
If we initiated legal proceedings against a third party to enforce a patent covering our vaccine candidates or VLP technology, the defendant could counterclaim that such patent is invalid or unenforceable. 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 or non-enablement. 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 raise claims challenging the validity or enforceability of a patent before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, 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 vaccine candidates or VLP technology. 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 or our licensing partners and the patent examiner were unaware during prosecution. If a third party 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 our vaccine candidates. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations and prospects.
Patent terms may be inadequate to protect the competitive position of our vaccine 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 or international patent application filing date. Various extensions may be available, including by patent term adjustment (PTA) due to delays at the USPTO. Conversely, patent terms may be reduced by a terminal disclaimer that is necessary to overcome a double patenting rejection during patent prosecution. Such a terminal disclaimer could obviate any extension or adjustment that may be available. Irrespective of whether extensions are available, the life of a patent, and the protection it affords, is limited. Even if patents covering our vaccine candidates are obtained, once the patent has expired, we may be vulnerable to competition from competitive products, including generics or biosimilars. Given the amount of time
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required for the development, testing and regulatory review of new vaccine candidates, patents protecting such vaccine candidates might expire before or shortly after such vaccine candidates are commercialized. 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.
If we do not obtain patent term extension for our vaccine candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any vaccine candidate we have or may develop, one or more of our patents issuing from our U.S. patent applications may be eligible for limited patent term extension under the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended, and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. Similar patent term restoration provisions to compensate for commercialization delay caused by regulatory review are also available in certain foreign jurisdictions, such as in Europe under Supplemental Protection Certificate. However, we may not be granted an extension for various reasons, including failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or failing to satisfy other applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and prospects could be materially harmed.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We may be subject to claims that former employees, collaborators or other third parties have an interest in our patent rights, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our vaccine candidates and other proprietary technologies we may develop. Litigation may be necessary to defend against these and other claims challenging inventorship or our patent rights, trade secrets or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our vaccine candidates and other proprietary technologies we may develop. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our management and other employees. Any of the foregoing could have a material adverse effect on 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.
In addition to seeking patent protection for our vaccine candidates and proprietary technologies, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. 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, third-party 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 have 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 be subject to claims that third parties have an ownership interest in our trade secrets. For example, we may have disputes arise from conflicting obligations of our employees, consultants or others who are involved in developing our vaccine candidate. Litigation may be necessary to defend against these and other claims challenging ownership of our trade secrets. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable trade secret rights, such as exclusive ownership of, or right to use, trade secrets that are important to our therapeutic programs and other proprietary technologies we may develop. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our management and other employees. Any of the foregoing could have a material adverse effect on 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 products and vaccine candidates.
We cannot guarantee that any of our 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 current and future products and vaccine candidates in any jurisdiction. The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patents prosecution history. Our interpretation of the relevance or the scope of a patent or a pending patent application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products or vaccine candidates are not covered by a third-party patent or may incorrectly predict whether a third partys pending patent 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, and our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products. Further, we may need to share our proprietary information, including trade secrets, with our current and future business partners, collaborators, contractors and others located in countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or foreign actors, and those affiliated with or controlled by state actors. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may be subject to claims that our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.
Some of our employees, consultants and advisors are currently or were previously employed at universities, including UW, or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. 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 individuals current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our management.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or 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 or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of operations and prospects.
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Third-party claims of intellectual property infringement, misappropriation or other violations against us or our potential future collaborators could be expensive and time consuming and may prevent or delay the development and commercialization of our vaccine candidates and other proprietary technologies.
Our commercial success depends in part on our ability to avoid infringing, misappropriating and otherwise violating the patents and other intellectual property rights of third parties. There is a substantial amount of complex litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. As discussed above, recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grant review have also been implemented. As stated above, this reform adds uncertainty to the possibility of challenge to our patents in the future.
Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are commercializing or plan to commercialize our vaccine candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases that our vaccine candidates, proprietary technologies and commercializing activities may give rise to claims of infringement of the patent rights of others. We cannot assure you that our vaccine candidates or proprietary technologies will not infringe existing or future patents owned by third parties. We may not be aware of patents that have already been issued for which a third party, such as a competitor in the fields in which we are developing our vaccine candidates, might accuse us of infringing. It is also possible that patents owned by third parties of which we are aware, but which we do not believe we infringe or that we believe we have valid defenses to any claims of patent infringement, could be found to be infringed by us. It is not unusual that corresponding patents issued in different countries have different scopes of coverage, such that in one country a third-party patent does not pose a material risk, but in another country, the corresponding third-party patent may pose a material risk to our vaccine candidates. As such, we monitor third-party patents in the relevant pharmaceutical markets. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that we may infringe.
Defense of infringement claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. In the event of a successful claim of infringement against us, we may be enjoined from further developing or commercializing the infringing products or technologies. In addition, we may be required to pay substantial damages, including treble damages and attorneys fees for willful infringement, obtain one or more licenses from third parties, pay royalties and/or redesign our infringing products or technologies, which may be impossible or require substantial time and monetary expenditure. Further, we cannot predict whether any required license would be available at all or whether it would be available on commercially reasonable terms. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product or be forced to cease some aspect of our business operations as a result of actual or threatened patent infringement claims.
Even if resolved in our favor, the foregoing proceedings could be very expensive, particularly for a company of our size, and time-consuming. Such 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 proceedings adequately. Further, some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. 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. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.
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If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be opposed, challenged, infringed, circumvented, invalidated, cancelled, or declared generic or determined to be infringing on other marks. During trademark registration proceedings, we may receive rejections of our applications by the USPTO or in other foreign jurisdictions. Although we are given an opportunity to respond to such rejections, we may be unable to overcome them. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, which may not survive such proceedings. Moreover, any name we may propose to use with our vaccine candidate in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. Similar requirements exist in Europe. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA or an equivalent administrative body in a foreign jurisdiction objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. Furthermore, in many countries, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark.
We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. 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. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, domain name or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect 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:
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others may be able to make products that are similar to our vaccine candidates or utilize similar technology but that are not covered by the claims of the patents that we license or may own; |
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we might not have been the first to make the inventions covered by our current or future patent applications; |
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we might not have been the first to file patent applications covering our inventions; |
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others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; |
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it is possible that our current or future patent applications will not lead to issued patents; |
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any patent issuing from our current or future patent applications may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; |
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our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
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we may not develop additional proprietary technologies that are patentable; |
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the patents of others may harm our business; and |
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we may choose not to file for patent protection in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent application covering such intellectual property. |
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Should any of the foregoing occur, it could adversely affect our business, financial condition, results of operations and prospects.
We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses.
The growth of our business may depend in part on our ability to acquire, in-license or use third-party proprietary rights. For example, our vaccine candidates may require specific formulations to work effectively and efficiently, we may develop vaccine candidates containing our compounds and pre-existing pharmaceutical compounds, which could require us to obtain rights to use intellectual property held by third parties. For example, we may find from our preclinical or clinical trials that our vaccine candidates achieve improved efficacy through combination with proprietary adjuvants. We may not be able to achieve long-term access to these adjuvants or may be only able to do so under unfavorable terms. This could limit the effectiveness of our vaccine candidates if we are unable to obtain access to these adjuvants or could impact our potential profitability if we can only obtain access under unfavorable terms. In addition, with respect to any patents we may co-own with third parties, we may require licenses to such co-owners interest to such patents. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify as necessary or important to our business operations. In addition, we may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. Were that to happen, we may need to cease use of the compositions or methods covered by those third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe on those intellectual property rights, which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, which means that our competitors may also receive access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology.
Additionally, we may collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In certain cases, these institutions provide us with an option to negotiate a license to any of the institutions rights in technology resulting from the collaboration. Even if we hold such an option, we may be unable to negotiate a license from the institution within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others, potentially blocking our ability to pursue our program.
The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies that may be more established or have greater resources than we do may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our vaccine candidates. More established companies may have a competitive advantage over us due to their size, cash 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. There can be no assurance that we will be able to successfully complete these types of negotiations and ultimately acquire the rights to the intellectual property surrounding the additional vaccine candidates that we may seek to develop or market. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of certain programs and our business financial condition, results of operations and prospects could suffer.
Risks Related to Our Common Stock, This Offering and Being a Public Company
There has been no public market for our common stock and an active, liquid and orderly market for our common stock may not develop, and you may not be able to resell your common stock at or above the public offering price.
Prior to this offering, there has been no public market for our common stock. Although we have applied to list our common stock on the Nasdaq Global Select Market (Nasdaq), an active trading market for our common stock may never develop or be sustained following this offering. We and the representatives of the underwriters will determine the initial public offering price of our common stock through negotiation. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, an active trading market may not develop following the consummation of this offering or, if it is developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them
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or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies using our shares as consideration, which, in turn, could materially adversely affect our business.
The trading price of the shares of our common stock could be highly volatile, and purchasers of our common stock could incur substantial losses.
Our stock price is likely to be volatile. The stock market in general and the market for stock of biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. The market price for our common stock may be influenced by those factors discussed in this Risk Factors section and many others, including:
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results of our preclinical studies and clinical trials, and the results of trials of our competitors or those of other companies in our market sector; |
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our ability to enroll subjects in our future clinical trials; |
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regulatory approval of our vaccine candidates, or limitations to specific label indications or target populations for its use, or changes or delays in the regulatory review process; |
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regulatory developments in the United States and foreign countries; |
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changes in the structure of healthcare payment systems; |
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the success or failure of our efforts to develop, acquire or license additional vaccine candidates; |
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innovations, clinical trial results, product approvals and other developments regarding our competitors; |
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
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manufacturing, supply or distribution delays or shortages; |
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any changes to our relationship with any manufacturers, suppliers, collaborators or other strategic partners; |
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achievement of expected product sales and profitability; |
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variations in our financial results or those of companies that are perceived to be similar to us; |
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market conditions in the biopharmaceutical sector and issuance of securities analysts reports or recommendations; |
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trading volume of our common stock; |
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an inability to obtain additional funding; |
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sales of our stock by insiders and stockholders; |
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general economic, industry and market conditions other events or factors, many of which are beyond our control; |
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additions or departures of key personnel; |
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intellectual property, product liability or other litigation against us; |
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changes in our capital structure, such as future issuances of securities and the incurrence of additional debt; and |
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changes in accounting standards, policies, guidelines, interpretations or principles. |
In addition, in the past, stockholders have initiated class action lawsuits against biopharmaceutical 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 our managements attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.
We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve.
Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in Use of Proceeds. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment, and the failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-and intermediate-term, interest-bearing
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obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected results, which could cause our stock price to decline.
You will suffer immediate and substantial dilution in the net tangible book value of the common stock you purchase.
The 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 outstanding common stock immediately after the completion of this offering. Purchasers of common stock in this offering will experience immediate dilution of approximately $7.78 per share, assuming an initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus. In the past, we issued options to acquire common stock at prices significantly below the initial public offering price. To the extent these outstanding options are ultimately exercised, investors purchasing common stock in this offering will sustain further dilution. For a further description of the dilution that you will experience immediately after this offering, see Dilution.
After this offering, our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to significantly influence all matters submitted to stockholders for approval.
Following the completion of this offering, our executive officers, directors and greater than 5% stockholders, in the aggregate, will own approximately 41.8% of our outstanding common stock (assuming no exercise of the underwriters option to purchase additional shares and no exercise of outstanding options or warrants and without giving effect to any potential purchases by such persons in this offering, including pursuant to the directed share program relating to this offering). As a result, such persons, acting together, will have the ability to significantly influence all matters submitted to our board of directors or stockholders for approval, including the appointment of our management, the election and removal of directors and approval of any significant transaction, as well as our management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.
We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation, if any, in the price of our common stock.
We have never declared or paid any cash dividend on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.
Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
Based on shares of common stock outstanding as of March 31, 2021, upon the closing of this offering, we will have outstanding a total of 35,376,565 shares of common stock, assuming no exercise of the underwriters option to purchase additional shares and no exercise of outstanding options. Of these shares, only the 10,000,000 shares of common stock sold in this offering by us, plus any shares sold upon exercise of the underwriters option to purchase additional shares, will be freely tradable, without restriction, in the public market immediately following this offering, unless they are purchased by one of our affiliates.
Our directors and executive officers and holders of substantially all of our outstanding securities have entered into lock-up agreements with the underwriters pursuant to which they may not, with limited exceptions, for a period of 180 days from the date of this prospectus, offer, sell or otherwise transfer or dispose of any of our securities, without the prior written consent of Jefferies LLC, Cowen and Company, LLC and Evercore Group L.L.C. The underwriters may permit our officers, directors and other securityholders who are subject to the lock-up agreements to sell shares prior to the expiration of the lock-up agreements at any time in their sole discretion. See Underwriting. Sales of these shares, or perceptions that they will be sold, could cause the trading price of our common stock to decline.
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After the lock-up agreements expire, up to an additional 25,376,565 shares of common stock will be eligible for sale in the public market, of which 14,773,308 shares are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act in each case based on shares of common stock outstanding as of March 31, 2021 and without giving effect to any potential purchases by such persons in this offering, including pursuant to the directed share program relating to this offering.
In addition, promptly following this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act registering the issuance of approximately 10,606,033 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 the restrictions of Rule 144 in the case of our affiliates. If these additional shares of common stock 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.
After this offering, the holders of 24,212,800 shares of our outstanding common stock, or approximately 68.4% of our total outstanding common stock based on shares outstanding as of March 31, 2021, will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to vesting and the 180-day lock-up agreements described above. See Description of Capital StockRegistration Rights. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
We are an emerging growth company and a smaller reporting company, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a large accelerated filer, as defined under the Exchange Act, our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
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being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced Managements Discussion and Analysis of Financial Condition and Results of Operations disclosure; |
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not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley); |
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements, unless the U.S. Securities and Exchange Commission (SEC) determines the new rules are necessary for protecting the public; |
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reduced disclosure obligations regarding executive compensation; and |
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we 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 our stock price may be reduced or more volatile. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise
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apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect immediately prior to the consummation of this offering will contain provisions that could significantly reduce the value of our shares to a potential acquiror or delay or prevent changes in control or changes in our management without the consent of our board of directors. The provisions in our charter documents will include the following:
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a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; |
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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
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the exclusive right of our board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
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the required approval of at least 66-2/3% of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause; |
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the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; |
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the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; |
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the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; |
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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; |
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an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings; |
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the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and |
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advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquirors own slate of directors or otherwise attempting to obtain control of us. |
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.
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Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the Court of Chancery of the State of Delaware is the exclusive forum for 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 pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided, that, this provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, our amended and restated certificate of incorporation will also provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. These choice of forum provisions may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. By agreeing to this provision, however, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provisions in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
General Risk Factors
We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We will be subject to the reporting requirements of the Exchange Act, which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, Sarbanes-Oxley, as well as rules subsequently adopted by the SEC and Nasdaq to implement provisions of Sarbanes-Oxley, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory say on pay voting requirements that will apply to us when we cease to be an emerging growth company. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
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We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We could face criminal liability and other serious consequences for violations, which could harm our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Departments Office of Foreign Assets Controls and anti-corruption and anti-money laundering laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, CROs, contractors and other collaborators and partners from authorizing, promising, offering, providing, soliciting or receiving, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the United States, to sell our products abroad once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, CROs, contractors and other collaborators and partners, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which we are predominantly self-insured. We rely on third-party manufacturers to produce our vaccine candidates. Our ability to obtain clinical supplies of our vaccine candidates could be disrupted if the operations of these suppliers were affected by a man-made or natural disaster or other business interruption. In addition, our corporate headquarters is located in Seattle, Washington, near earthquake faults and fire zones, and the ultimate impact on us of being located near earthquake faults and fire zones and being consolidated in a certain geographical area is unknown. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
We and any of our third-party manufacturers or suppliers may use potent chemical agents and hazardous materials, and any claims relating to improper handling, storage or disposal of these materials could be time consuming or costly.
We and any of our third-party manufacturers or suppliers and current or potential future collaborators will use biological materials, potent chemical agents and may use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety of the environment. Our operations and the operations of our third-party manufacturers and suppliers also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product development efforts. In addition, we cannot eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. In the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended. Although we maintain workers compensation insurance for certain costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for toxic tort claims that may be asserted against us in connection with our storage or disposal of biologic, hazardous or radioactive materials.
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In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations, which have tended to become more stringent over time. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.
Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with this offering or other ownership changes.
We have incurred substantial losses during our history, do not expect to become profitable in the near future and may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire (if at all). At December 31, 2020, we had federal and state net operating loss (NOL) carryforwards of approximately $21.0 million and $2.2 million, respectively.
Under the Tax Cuts and Jobs Act (the Tax Act), federal NOL carryforwards generated in periods after December 31, 2017, may be carried forward indefinitely. The deductibility of federal NOL carryforwards, particularly for tax years beginning after December 31, 2020, may be limited. It is uncertain if and to what extent various states will conform to the Tax Act or the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). In addition, our NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service (IRS), and state tax authorities. Under Section 382 of the Internal Revenue Code (the Code), our federal NOL carryforwards may be or become subject to an annual limitation in the event we have had or have in the future certain cumulative changes in the ownership of our company. An ownership change pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a companys stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. We have not yet determined the amount of the cumulative change in our ownership resulting from this offering or other transactions, or any resulting limitations on our ability to utilize our NOL carryforwards and other tax attributes. However, we believe that our ability to utilize our NOL carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with this offering. If we earn taxable income, such limitations could result in increased future income tax liability to us and our future cash flows could be adversely affected. We have recorded a full valuation allowance related to our NOL carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
Changes in U.S. tax law may materially adversely affect our financial condition, results of operations and cash flows.
On March 27, 2020, the CARES Act was signed into law to address the COVID-19 crisis. The CARES Act is an approximately $2 trillion emergency economic stimulus package that includes numerous U.S. federal income tax provisions, including the modification of: (i) NOL rules (as discussed above), (ii) the alternative minimum tax refund and (iii) business interest deduction limitations under Section 163(j) of the Code.
The Tax Act also significantly changed the U.S. federal income taxation of U.S. corporations. The Tax Act remains unclear in many respects and has been, and may continue to be, the subject of amendments and technical
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corrections, as well as interpretations and implementing regulations by the IRS, which have lessened or increased certain adverse impacts of the Tax Act and may continue to do so in the future. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. We continue to work with our tax advisors and auditors to determine the full impact the Tax Act and the CARES Act will have on us.
Congress may enact additional legislation in connection with the COVID-19 pandemic, and as a result of changes in the U.S. presidential administration and control of the U.S. Senate, additional tax legislation may also be enacted, which could have an impact on our company. We urge our investors to consult with their legal and tax advisors with respect to the Tax Act, the CARES Act, and possible changes in U.S. tax law and the potential tax consequences of investing in our common stock.
If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of these analysts ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volume to decline.
If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.
Pursuant to Section 404 of Sarbanes-Oxley, our management will be required to report upon the effectiveness of our internal control over financial reporting beginning with the annual report for our fiscal year ending December 31, 2022. When we lose our status as an emerging growth company and do not otherwise qualify as a smaller reporting company with less than $100 million in annual revenue, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, we may need to upgrade our information technology systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. If we or, if required, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.
We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us, because biotechnology and biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of our managements attention and resources, which could harm our business.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and planned clinical trials for our vaccine candidates, the timing and likelihood of regulatory filings and approvals for our vaccine candidates, our ability to commercialize our vaccine candidates, if approved, the impact of COVID-19 on our business, the pricing and reimbursement of our vaccine candidates, if approved, the potential to develop future vaccine candidates, the potential benefits of strategic collaborations and our intent to enter into any strategic arrangements, the timing and likelihood of success, plans and objectives of management for future operations, and future results of anticipated product development efforts, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as may, will, should, expect, plan, anticipate, could, intend, target, project, contemplates, believes, estimates, predicts, potential or continue or the negative of these terms or other similar expressions. The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties and assumptions described under the sections titled Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See the section titled Where You Can Find More Information.
In addition, statements that we believe and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to rely unduly upon them.
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We obtained the industry, market and competitive position data used throughout this prospectus from our own internal estimates and research, as well as from independent market research, industry and general publications and surveys, governmental agencies and publicly available information in addition to research, surveys and studies conducted by third parties. Internal estimates are derived from publicly available information released by industry analysts and third-party sources, our internal research and our industry experience, and are based on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires. In addition, while we believe the industry, market and competitive position data included in this prospectus is reliable and based on reasonable assumptions, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed in the section titled Risk Factors. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties or by us.
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We estimate that the net proceeds to us from this offering will be approximately $136.0 million (or approximately $156.9 million if the underwriters exercise their option to purchase additional shares in full) from the sale of the shares of common stock offered by us in this offering, assuming an initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $9.3 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. A one million share increase (decrease) in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $14.0 million, assuming that the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial public offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital.
The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We intend to use the net proceeds from this offering, together with our existing cash and restricted cash, as follows:
∎ |
approximately $120.0 million to fund the continued development of IVX-A12, including completion of nonclinical studies, chemistry, manufacturing and controls (CMC) development and clinical development through a Phase 2b clinical trial, as well as manufacturing scale-up activities; |
∎ |
approximately $35.0 million to fund ongoing development of our other vaccine candidates, including completion of Phase 1/2 and Phase 2 clinical trials of IVX-411 and potential expansion of our research pipeline; and |
∎ |
the remainder for research and development and general and administrative headcount costs, cross-program research and development activities, and other general corporate purposes and working capital. |
We may also use a portion of the remaining net proceeds to in-license, acquire or invest in complementary businesses, technologies, products or assets, although we have no current agreements, commitments or understandings to do so.
Based on our current operating plan, we believe our existing cash and restricted cash, together with the estimated net proceeds from this offering, will be sufficient to meet our anticipated cash requirements through at least 2024. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. The net proceeds of this offering, together with our existing cash and restricted cash, will not be sufficient to complete development of IVX-A12, IVX-411, or any other vaccine candidate, and after this offering, we will require substantial capital in order to advance our current and future vaccine candidates through clinical trials, regulatory approval and commercialization.
Our expected use of existing cash and restricted cash and our net proceeds from this offering represent our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. Predicting the costs necessary to develop vaccine candidates can be difficult and we will need substantial additional capital to complete our clinical development of any of our vaccine candidates. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress and costs of our development activities, the status of and results from clinical trials, as well as the status and results from our current and any future collaborations with third parties for our vaccine candidates, and any unforeseen cash needs.
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Our management will have broad discretion in the application of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of those net proceeds. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending these uses, we plan to invest these net proceeds in short-term, interest bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States.
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We have never declared or paid, and do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.
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The following table sets forth our cash and restricted cash and capitalization as of March 31, 2021:
∎ |
on an actual basis; |
∎ |
on a pro forma basis, giving effect to (i) the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 21,634,898 shares of our common stock and the related reclassification of the convertible preferred stock to permanent equity in connection with the closing of this offering and (ii) the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the closing of this offering; and |
∎ |
on a pro forma as adjusted basis to reflect (i) the pro forma adjustments set forth above and (ii) our sale of 10,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
You should read the information in this table together with our financial statements and related notes included elsewhere in this prospectus and the sections titled Selected Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations.
AS OF MARCH 31, 2021 | ||||||||||||
ACTUAL |
PRO
FORMA |
PRO FORMA
AS ADJUSTED (1) |
||||||||||
(unaudited, in thousands, except share and per
share data) |
||||||||||||
Cash and restricted cash |
$ | 124,961 | $ | 124,961 | $ | 260,961 | ||||||
|
|
|
|
|
|
|||||||
Convertible preferred stock, par value $0.0001 per share, 89,908,215 shares authorized, 89,908,215 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted |
151,638 | | | |||||||||
Stockholders (deficit) equity: |
||||||||||||
Preferred stock, par value $0.0001 per share; no shares authorized, issued and outstanding, actual; 50,000,000 shares authorized and no shares issued or outstanding pro forma and pro forma as adjusted |
| | | |||||||||
Common stock, par value $0.0001 per share; 134,329,408 shares authorized, 3,741,667 shares issued and 2,891,776 shares outstanding, actual; 500,000,000 shares authorized pro forma and pro forma as adjusted; 25,376,565 shares issued and 24,526,674 outstanding, pro forma; and 35,376,656 shares issued and 34,526,674 outstanding, pro forma as adjusted |
2 | 11 | 12 | |||||||||
Additional paid-in capital |
761 | 152,390 | 288,308 | |||||||||
Accumulated deficit |
(32,949 | ) | (32,949 | ) | (32,949 | ) | ||||||
|
|
|
|
|
|
|||||||
Total stockholders (deficit) equity |
(32,186 | ) | 119,452 | 255,371 | ||||||||
|
|
|
|
|
|
|||||||
Total capitalization |
$ | 119,452 | $ | 119,452 | $ | 255,371 | ||||||
|
|
|
|
|
|
(1) | The pro forma as adjusted information set forth above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 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 amount of each of cash and restricted cash, additional paid-in capital, total stockholders equity and total capitalization by approximately $9.3 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. A one million share increase (decrease) in the number of shares offered by us at the assumed initial public offering price per share of $15.00 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 amount of each of cash and restricted cash, additional paid-in capital, total stockholders equity and total capitalization by approximately $14.0 million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
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The table above is based on the number of shares of common stock outstanding as of March 31, 2021, which excludes:
∎ |
1,717,446 shares of common stock issuable upon the exercise of outstanding stock options as of March 31, 2021, at a weighted-average exercise price of $1.00 per share; |
∎ |
3,413,872 shares of common stock issuable upon the exercise of stock options granted after March 31, 2021, at a weighted-average exercise price of $6.13 per share; |
∎ |
1,051,500 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under our 2021 Incentive Award Plan (the 2021 Plan), which will become effective in connection with this offering, to certain of our executive officers, directors, employees and consultants, at an exercise price equal to the initial public offering price in this offering; |
∎ |
355,750 shares of our common stock issuable upon the vesting of restricted stock units to be granted to certain of our executive officers, directors, employees and consultants under the 2021 Plan in connection with this offering; |
∎ |
the remaining 4,067,465 shares of common stock reserved for future issuance under the 2021 Plan after giving effect to the issuance of the options and restricted stock units described above (which number includes 874,715 shares of common stock reserved for issuance under our 2017 Equity Incentive Plan (the 2017 Plan), which shares will be added to the 2021 Plan upon its effectiveness, but does not include any potential evergreen increases pursuant to the terms of the 2021 Plan); and |
∎ |
400,000 shares of common stock reserved for future issuance under the ESPP, which will become effective in connection with this offering (which number does not include any potential evergreen increases pursuant to the terms of the ESPP). |
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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 of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
As of March 31, 2021, our historical net tangible book value (deficit) was $(32.2) million, or $(8.60) per share of our common stock, based on 3,741,667 shares of common stock issued as of such date. Our historical net tangible book value (deficit) per share represents the amount of our total tangible assets less total liabilities and convertible preferred stock, which is not included in our stockholders deficit, divided by the total number of shares of common stock outstanding at March 31, 2021.
After giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 21,634,898 shares of our common stock and the related reclassification of the carrying value of our convertible preferred stock to permanent equity, in connection with the closing of this offering, and assuming the occurrence of such conversion on March 31, 2021, our pro forma net tangible book value as of March 31, 2021 would have been approximately $119.5 million, or approximately $4.71 per share of our common stock.
Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after closing of this offering. After giving further effect to the sale of 10,000,000 shares of our common stock that we are offering at the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2021 would have been $255.4 million, or approximately $7.22 per share. This amount represents an immediate increase in pro forma net tangible book value of $2.51 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $7.78 per share to new investors participating in this offering.
Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors. The following table illustrates this dilution:
Assumed initial public offering price per share |
$ | 15.00 | ||||||
|
|
|||||||
Historical net tangible book value (deficit) per share at March 31, 2021 |
(8.60 | ) | ||||||
Pro forma increase in historical net tangible book value (deficit) per share as of March 31, 2021 attributable to conversion of all outstanding shares of convertible preferred stock |
13.31 | |||||||
|
|
|||||||
Pro forma net tangible book value per share as of March 31, 2021, before giving effect to this offering |
4.71 | |||||||
Increase in pro forma net tangible book value per share attributable to investors participating in this offering |
2.51 | |||||||
|
|
|||||||
Pro forma as adjusted net tangible book value per share after this offering |
7.22 | |||||||
|
|
|||||||
Dilution per share to new investors participating in this offering |
$ | 7.78 | ||||||
|
|
Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 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 approximately $0.26, and dilution in pro forma net tangible book value per share to new investors by approximately $0.74, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase of one million shares in the number of shares offered by us, as set
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forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $0.19 and decrease the dilution to investors participating in this offering by approximately $0.19 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. Similarly, a decrease of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this offering by approximately $0.20 and increase the dilution to investors participating in this offering by approximately $0.20 per share, assuming the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.
If the underwriters exercise their option to purchase up to 1,500,000 additional shares of our common stock in full in this offering, the pro forma as adjusted net tangible book value after the offering would be $7.49 per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $0.27 per share and the dilution per share to new investors would be $0.27 per share, in each case assuming an initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus.
To the extent that outstanding options with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share are exercised, new investors will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
The following table summarizes, on a pro forma as adjusted basis as of March 31, 2021, the number of shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid to us in cash and the average price per share paid by existing stockholders for shares issued prior to this offering and the price to be paid by new investors in this offering. The calculation below is based on the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table below shows, investors participating in this offering will pay an average price per share substantially higher than our existing stockholders paid.
SHARES PURCHASED | TOTAL CONSIDERATION |
WEIGHTED-
AVERAGE PRICE PER SHARE |
||||||||||||||||||
NUMBER | PERCENT | AMOUNT | PERCENT | |||||||||||||||||
Existing stockholders |
25,376,565 | 72 | % | $ | 150,887,000 | 50 | % | $ | 5.95 | |||||||||||
Investors participating in this offering |
10,000,000 | 28 | 150,000,000 | 50 | $ | 15.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
35,376,565 | 100.0 | % | $ | 300,887,000 | 100.0 | % | $ | 8.51 | |||||||||||
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase in the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase total consideration paid by new investors, total consideration paid by all stockholders and the average price per share paid by all stockholders by $10.0 million, $10.0 million and $0.28, respectively, while each $1.00 decrease in the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would decrease total consideration paid by new investors, total consideration paid by all stockholders and the average price per share paid by all stockholders by $10.0 million, $10.0 million and $0.28, respectively, and assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
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Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the average price per share paid by all stockholders by approximately $15.0 million, $15.0 million and $0.18, respectively, assuming the assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The foregoing tables and calculations exclude:
∎ |
1,717,446 shares of common stock issuable upon the exercise of outstanding stock options as of March 31, 2021, at a weighted-average exercise price of $1.00 per share; |
∎ |
3,413,872 shares of common stock issuable upon the exercise of stock options granted after March 31, 2021, at a weighted-average exercise price of $6.13 per share; |
∎ |
1,051,500 shares of our common stock issuable upon the exercise of stock options to be granted in connection with this offering under the 2021 Plan, which will become effective in connection with this offering, to certain of our executive officers, directors, employees and consultants, at an exercise price equal to the initial public offering price in this offering; |
∎ |
355,750 shares of our common stock issuable upon the vesting of restricted stock units to be granted to certain of our executive officers, directors, employees and consultants under the 2021 Plan in connection with this offering; |
∎ |
the remaining 4,067,465 shares of common stock reserved for future issuance under the 2021 Plan after giving effect to the issuance of the options and restricted stock units described above (which number includes 874,715 shares of common stock reserved for issuance under the 2017 Plan, which shares will be added to the 2021 Plan upon its effectiveness, but does not include any potential evergreen increases pursuant to the terms of the 2021 Plan); and |
∎ |
400,000 shares of common stock reserved for future issuance under the ESPP, which will become effective in connection with this offering (which number does not include any potential evergreen increases pursuant to the terms of the ESPP). |
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The following tables set forth our selected historical financial data as of, and for the periods ended on, the dates indicated. We have derived the selected statements of operations and comprehensive loss data for the years ended December 31, 2019 and 2020 and the selected balance sheet data as of December 31, 2019 and 2020 from our audited financial statements included elsewhere in this prospectus. We have derived the selected statements of operations and comprehensive loss data for the three months ended March 31, 2020 and 2021 and the selected balance sheet data as of March 31, 2021 from our unaudited interim condensed financial statements included elsewhere in this prospectus. Our unaudited interim condensed financial statements have been prepared on a basis consistent with our audited financial statements and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the financial information in those statements.
You should read these data together with our financial statements and related notes included elsewhere in this prospectus and the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations. Our historical results for any prior period are not necessarily indicative of our future results.
YEAR ENDED DECEMBER 31, |
THREE MONTHS ENDED
MARCH 31, |
|||||||||||||||
2019 | 2020 | 2020 | 2021 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except
share and per share data) |
||||||||||||||||
Statement of Operations and Comprehensive Loss Data: |
||||||||||||||||
Grant revenue |
$ | | $ | 1,616 | $ | | $ | 2,001 | ||||||||
Operating expenses: |
||||||||||||||||
Research and development |
$ | 4,157 | $ | 17,667 | $ | 2,920 | $ | 5,553 | ||||||||
General and administrative |
1,241 | 2,659 | 612 | 1,091 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
5,398 | 20,326 | 3,532 | 6,644 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(5,398 | ) | (18,710 | ) | (3,532 | ) | (4,643 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Change in fair value of derivative liability |
| 187 | | (205 | ) | |||||||||||
Loss on extinguishment of convertible promissory note |
| | | (754 | ) | |||||||||||
Interest and other income (expense) |
101 | (331 | ) | 61 | (249 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense) |
101 | (144 | ) | 61 | (1,208 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss and comprehensive loss |
$ | (5,297 | ) | $ | (18,854 | ) | $ | (3,471 | ) | (5,851 | ) | |||||
Series 1 preferred stock dividends |
(272 | ) | | | | |||||||||||
Series 1 preferred stock extinguishment |
(400 | ) | | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to common stockholders |
$ | (5,969 | ) | (18,854 | ) | $ | (3,471 | ) | $ | (5,851 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Net loss per share attributable to common stockholders, basic and diluted (1) |
$ | (3.76 | ) | $ | (8.40 | ) | $ | (1.76 | ) | $ | (2.11 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average shares of common stock outstanding, basic and diluted (1) |
1,588,083 | 2,245,223 | 1,976,305 | 2,769,962 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited) (2) |
$ | (1.82 | ) | $ | (0.35 | ) | ||||||||||
|
|
|
|
|||||||||||||
Pro forma weighted average common shares outstanding, basic and diluted (unaudited) (2) |
10,240,553 | 15,213,880 | ||||||||||||||
|
|
|
|
(1) | See Note 2 to our audited financial statements and Note 2 to our unaudited interim condensed financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted net loss per share attributable to common stockholders and the number of shares used in the computation of the per share amounts. |
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(2) | The calculations for the unaudited pro forma net loss per share attributable to common stockholders, basic and diluted, for the year ended December 31, 2020, exclude the $187,000 change in fair value of the derivative liability and $417,000 of interest expense from the convertible notes, resulting in pro forma net loss attributable to common stockholders of $18.6 million for the year ended December 31, 2020. The unaudited pro forma weighted average common shares outstanding, basic and diluted, assume the conversion of all our outstanding shares of preferred stock into 7,748,113 shares of our common stock, as if the conversion had occurred at the beginning of the period presented, or the issuance date, if later, and the conversion of our convertible notes into shares of our common stock, resulting in an additional 247,197 weighted average shares of our common stock. |
The calculations for the unaudited pro forma net loss per share attributable to common stockholders, basic and diluted, for the three months ended March 31, 2021, exclude the $205,000 change in fair value of the derivative liability and $264,000 of interest expense from the convertible notes, resulting in pro forma net loss attributable to common stockholders of $5.4 million for the three months ended March 31, 2021. The unaudited pro forma weighted average common shares outstanding, basic and diluted, assume the conversion of all our outstanding shares of preferred stock into 11,866,263 shares of our common stock, as if the conversion had occurred at the beginning of the period presented, or the issuance date, if later, and the conversion of our convertible notes into shares of our common stock, resulting in an additional 577,655 weighted average shares of our common stock.
(1) | Working capital is defined as current assets less current liabilities. See our financial statements and the related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities. |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in the section titled Risk Factors and elsewhere in this prospectus. You should carefully read the Risk Factors section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled Special Note Regarding Forward-Looking Statements.
Overview
We are a biopharmaceutical company leveraging our innovative VLP platform technology to develop vaccines against infectious diseases, with an initial focus on life-threatening respiratory diseases. Our VLP platform technology is designed to enable multivalent, particle-based display of complex viral antigens, which we believe will induce broad, robust, and durable protection against the specific virus targeted. Our pipeline includes vaccine candidates targeting some of the most prevalent viral causes of pneumonia. We are developing these candidates for older adults, a patient population with high unmet need. Our vaccine candidate IVX-A12 is a bivalent candidate, or a mixture of two different VLP candidates. IVX-A12 combines IVX-121, a vaccine candidate designed to target RSV, and IVX-241, a vaccine candidate designed to target hMPV. There are currently no vaccines approved for either RSV or hMPV, which are two common causes of pneumonia in older adults. We filed a CTA for IVX-121 and plan to initiate a clinical trial of IVX-121 in Belgium in the second half of 2021, with interim topline data expected in the first half of 2022. Assuming favorable results from the IVX-121 clinical trial and favorable preclinical data for IVX-241, we plan to submit an IND to the FDA in the first half of 2022 and, thereafter, initiate a clinical trial for our combination vaccine candidate, IVX-A12. Additionally, we are developing two SARS-CoV-2 vaccine candidates, IVX-411 and IVX-421, and initiated a Phase 1/2 clinical trial of IVX-411 in Australia in June 2021, with proof-of-concept data expected in the first half of 2022.
We commenced our operations in 2017 and have devoted substantially all of our resources to date to organizing and staffing our company, business planning, raising capital, in-licensing intellectual property rights, developing vaccine candidates, scaling up manufacturing of vaccine candidates, and preparing for our ongoing and planned preclinical studies and clinical trials. Our operations to date have been funded primarily through the sale and issuance of convertible promissory notes and our convertible preferred stock. From our inception through March 31, 2021, we had raised a total of $150.3 million to fund our operations, comprised of gross proceeds from the sale and issuance of convertible promissory notes and our convertible preferred stock. As of March 31, 2021, we had cash of $121.9 million and restricted cash of $3.1 million.
We have incurred significant operating losses since inception. Our net losses for the years ended December 31, 2019 and 2020 were $5.3 million and $18.9 million, respectively, and for the three months ended March 31, 2020 and 2021, were $3.5 million and $5.9 million, respectively. As of March 31, 2021, we had an accumulated deficit of $32.9 million. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical development activities, other research and development activities and capital expenditures. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate our expenses will increase substantially as we seek to advance our vaccine candidates through preclinical and clinical development, expand our research and development activities, develop new vaccine candidates, complete clinical trials, seek regulatory approval and, if we receive regulatory approval, commercialize our products, as well as hire additional personnel, protect our intellectual property, and, following this offering, incur additional costs associated with being a public company.
Based on our current operating plan, we believe that the estimated net proceeds from this offering, together with our existing cash and restricted cash, will be sufficient to fund our operations through at least 2024. We have never generated any revenue from product sales and do not expect to generate any revenues from product sales unless and
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until we successfully complete development of and obtain regulatory approval for our vaccine candidates, which will not be for several years, if ever. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our vaccine candidates, if ever, we expect to finance our cash needs through equity offerings, or debt financings or other capital sources, including potential collaborations, licenses, and other similar arrangements. However, we may not be able to raise additional funds or enter into such other arrangements when needed or on favorable terms, or at all. If we are unable to raise additional capital or enter into such arrangements when needed, we could be forced to delay, limit, reduce or terminate our research and development programs or future commercialization efforts, or grant rights to develop and market our vaccine candidates to third parties where we might otherwise prefer to develop and market such vaccine candidates ourselves.
The global COVID-19 pandemic continues to evolve, and we will continue to monitor the COVID-19 situation closely. The extent of the impact of the COVID-19 pandemic on our business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including its impact on our clinical trial enrollment, trial sites, manufacturers, CROs and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. The ultimate impact of the COVID-19 pandemic, including the impact of new variants of the virus that causes COVID-19, or a similar health epidemic is highly uncertain and subject to change. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and most of our non-lab-based employees working remotely. We will continue to actively monitor the evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At this point, the extent to which the COVID-19 pandemic may affect our business, operations and development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain and is subject to change.
Components of Results of Operations
Grant Revenue
To date, we have not generated any revenues from the commercial sale of approved products, and we do not expect to generate revenues from the commercial sale of our vaccine candidates for at least the foreseeable future, if ever. For the year ended December 31, 2020 and the three months ended March 31, 2021, revenue was derived from the Grant Agreement we entered into in September 2020 with BMGF, under which we were awarded a grant totaling up to $10.0 million, in support of our development of a SARS-CoV-2 vaccine. Unless terminated earlier by BMGF, the Grant Agreement will continue in effect until March 31, 2022. We do not currently expect future grant revenues to be a material source of funding. No revenue was recognized for the year ended December 31, 2019 and the three months ended March 31, 2020.
Operating Expenses
Research and Development
Research and development expenses consist primarily of external and internal costs related to the development of vaccine 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.
External costs include:
∎ |
expenses incurred in connection with research, laboratory consumables and preclinical studies; |
∎ |
expenses incurred in connection with conducting clinical trials and site payments for time and pass-through expenses and expenses incurred under agreements with CROs, other vendors, or service providers engaged to conduct our trials; |
∎ |
expenses incurred in connection with manufacturing of our vaccine candidates and related intermediates under agreements with contract development and manufacturing organizations or other service providers; |
∎ |
the cost of consultants engaged in research and development related services and the cost to manufacture vaccine candidates for use in our preclinical studies and clinical trials; |
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∎ |
costs related to regulatory compliance; and |
∎ |
the cost of annual license fees and milestone payments under our license agreements. |
Internal costs include:
∎ |
employee-related expenses, including salaries, related benefits, travel and stock-based compensation expenses for employees engaged in research and development functions; and |
∎ |
facilities, depreciation and other expenses, which include allocated expenses for rent and maintenance of facilities, insurance and supplies. |
Research and development activities are central to our business model. There are numerous factors associated with the successful development and regulatory approval of any of our vaccine candidates, including future trial design and various regulatory requirements, as well as the safety and efficacy of our vaccine candidates, which cannot be determined with accuracy at this time. We may never succeed in obtaining regulatory approval for any of our vaccine candidates. Vaccine candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our vaccine candidates. In addition, we cannot forecast which vaccine 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. However, we expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities in the near term and in the future.
Our future development costs may vary significantly based on factors such as:
∎ |
the number and scope of preclinical and regulatory filing-enabling studies; |
∎ |
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 that participate in the trials; |
∎ |
the number of doses evaluated in the trials; |
∎ |
the costs and timing of manufacturing our vaccine candidates; |
∎ |
the drop-out or discontinuation rates of clinical trial subjects; |
∎ |
potential additional safety monitoring requested by regulatory agencies; |
∎ |
the duration of subject participation in the trials and follow-up; |
∎ |
the phase of development of the vaccine candidate; |
∎ |
the impact of any interruptions to our operations or to those of the third parties with whom we work due to the ongoing COVID-19 pandemic; and |
∎ |
the efficacy and safety profile of the vaccine candidate. |
General and Administrative
General and administrative expenses consist of personnel-related costs, including salaries, payroll taxes, employee benefits, and stock-based compensation charges for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will increase substantially for the foreseeable future to support our continued research and development activities, pre-commercial preparation activities for our vaccine candidates, and, if any vaccine candidate receives marketing approval, commercialization activities. Following the completion of this offering, we also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company.
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Change in Fair Value of Derivative Liability
We issued a convertible promissory note in August 2020. We bifurcated certain embedded features that were required to be accounted for separately as a single derivative liability. The initial recognition of the fair value of the derivative resulted in a reduction to the carrying value of the convertible promissory note, a discount which is then amortized to interest expense over the term of the note. We adjusted the carrying value of the derivative liability to its estimated fair value at each reporting date, with any related changes in fair value recorded as change in fair value of derivative liability in our statements of operations and comprehensive loss. The convertible promissory note converted into 2,805,850 shares of our Series B-2 convertible preferred stock in March 2021.
Prior to the conversion of the convertible promissory note into our Series B-2 convertible preferred stock in March 2021, the fair value of the derivative liability was estimated using a scenario-based analysis comparing the probability-weighted present value of the convertible promissory note payoff at maturity with and without the bifurcated features, considering possible outcomes available to the noteholders, including various financing dissolution scenarios.
Loss on Extinguishment of Convertible Promissory Note
We recorded a loss on extinguishment of convertible promissory note of $0.8 million during the three months ended March 31, 2021 in connection with the conversion of our convertible promissory note issued in August 2020. See Note 7 to the unaudited interim condensed financial statements included elsewhere in this prospectus for more information on this transaction.
Interest Income
Interest income consists of interest income earned on interest bearing demand accounts.
Interest Expense
Interest expense consisted of interest on our outstanding convertible promissory note at a per annum interest rate of 6.0% and non-cash interest expense related to discount amortization prior to its conversion into shares of our Series B-2 convertible preferred stock in March 2021.
Results of Operations
Comparison of the Three Months Ended March 31, 2020 and 2021
The following table summarizes our results of operations for the three months ended March 31, 2020 and 2021 (in thousands):
THREE MONTHS
ENDED MARCH 31, |
||||||||||||
2020 | 2021 | CHANGE | ||||||||||
(Unaudited) | ||||||||||||
Grant Revenue |
$ | | $ | 2,001 | $ | 2,001 | ||||||
Operating expenses: |
||||||||||||
Research and development |
2,920 | 5,553 | 2,633 | |||||||||
General and administrative |
612 | 1,091 | 479 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
3,532 | 6,644 | 3,112 | |||||||||
|
|
|
|
|
|
|||||||
Loss from operations |
(3,532 | ) | (4,643 | ) | (1,111 | ) | ||||||
Other income (expense): |
||||||||||||
Change in fair value of derivative liability |
| (205 | ) | (205 | ) | |||||||
Loss on extinguishment of convertible promissory note |
| (754 | ) | (754 | ) | |||||||
Interest and other income (expense) |
61 | (249 | ) | (310 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss and comprehensive loss |
$ | (3,471 | ) | $ | (5,851 | ) | $ | (2,380 | ) | |||
|
|
|
|
|
|
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Grant Revenue
There was no grant revenue for the three months ended March 31, 2020 compared to $2.0 million for the three months ended March 31, 2021. For the three months ended March 31, 2021, revenue was derived from the Grant Agreement we entered into in September 2020 with BMGF, under which we were awarded a grant totaling up to $10.0 million, in support of our development of a SARS-CoV-2 vaccine.
Research and Development Expenses
Research and development expenses were $2.9 million for the three months ended March 31, 2020, compared to $5.6 million for the three months ended March 31, 2021. The increase of $2.7 million was primarily due to a $2.3 million increase in direct costs related to non-clinical development and manufacturing, a $0.3 million increase in personnel related expenses due to increased headcount to support our development activities, and a $0.1 million increase related to stock-based compensation expense. The $2.3 million increase for direct costs primarily related to development of IVX-241 and IVX-411, including completion of nonclinical immunogenicity studies and GLP toxicology studies, bioanalytical assay development, as well as process development and cGMP manufacturing of drug substance intermediates, drug substance, and drug product to support upcoming clinical trials.
We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on a program-by-program basis.
Research and development expenses are summarized by program in the table below (in thousands):
THREE MONTHS
ENDED MARCH 31, |
||||||||
2020 | 2021 | |||||||
(Unaudited) | ||||||||
IVX-121 |
$ | 2,092 | $ | 2,105 | ||||
IVX-241 |
| 513 | ||||||
IVX-411 |
| 1,992 | ||||||
Unallocated research and development expense |
828 | 943 | ||||||
|
|
|
|
|||||
Total research and development expense |
$ | 2,920 | $ | 5,553 | ||||
|
|
|
|
General and Administrative Expenses
General and administrative expenses were $0.6 million for the three months ended March 31, 2020, compared to $1.1 million for the three months ended March 31, 2021. The increase of $0.5 million consisted of increased personnel-related expenses of $0.2 million, increased legal fees of $0.1 million related to corporate and intellectual property matters, increased professional services of $0.1 million, and increased stock-based compensation expense of $0.1 million.
Other Income (Expense)
Other income (expense) was income of $0.1 million for the three months ended March 31, 2020, compared to expense of $1.2 million for the three months ended March 31, 2021. The increase of $1.3 million in expense for the three months ended March 31, 2021 was the result of an increase in interest expense of $0.3 million, an increase in expense recognized on the change in fair value of derivative liability of $0.2 million, and a loss on extinguishment of convertible promissory note of $0.8 million recorded during the three months ended March 31, 2021.
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Comparison of the Years Ended December 31, 2019 and 2020
The following table summarizes our results of operations for the years ended December 31, 2019 and 2020 (in thousands):
YEAR ENDED
DECEMBER 31, |
CHANGE | |||||||||||
2019 | 2020 | |||||||||||
Grant Revenue |
$ | | $ | 1,616 | $ | 1,616 | ||||||
Operating expenses: |
||||||||||||
Research and development |
$ | 4,157 | $ | 17,667 | $ | 13,510 | ||||||
General and administrative |
1,241 | 2,659 | 1,418 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
5,398 | 20,326 | 14,928 | |||||||||
|
|
|
|
|
|
|||||||
Loss from operations |
(5,398 | ) | (18,710 | ) | (13,312 | ) | ||||||
Other income (expense): |
||||||||||||
Change in fair value of derivative liability |
| 187 | 187 | |||||||||
Interest and other income (expense) |
101 | (331 | ) | (432 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss and comprehensive loss |
$ | (5,297 | ) | $ | (18,854 | ) | $ | (13,557 | ) | |||
|
|
|
|
|
|
Grant Revenue
There was no grant revenue for the year ended December 31, 2019 compared to $1.6 million for the year ended December 31, 2020. For the year ended December 31, 2020, revenue was derived from the Grant Agreement we entered into in September 2020 with BMGF, under which we were awarded a grant totaling up to $10.0 million, in support of our development of a SARS-CoV-2 vaccine.
Research and Development Expenses
Research and development expenses were $4.2 million for the year ended December 31, 2019, compared to $17.7 million for the year ended December 31, 2020. The increase of $13.5 million was primarily due to a $11.3 million increase in direct costs related to non-clinical development and manufacturing, a $2.1 million increase in personnel related expenses due to increased headcount to support our development activities, and a $0.1 million increase related to stock-based compensation expense. The $11.3 million increase for direct costs primarily related to development of IVX-121 and IVX-411, including completion of nonclinical immunogenicity studies and GLP toxicology studies, bioanalytical assay development, as well as process development and cGMP manufacturing of drug substance intermediates, drug substance, and drug product to support upcoming clinical trials.
We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on a program-by-program basis. Research and development expenses are summarized by program in the table below (in thousands):
YEAR ENDED
DECEMBER 31, |
||||||||
2019 | 2020 | |||||||
IVX-121 |
$ | 2,132 | $ | 12,242 | ||||
IVX-241 |
| 588 | ||||||
IVX-411 |
| 1,415 | ||||||
Unallocated research and development expense |
2,025 | 3,422 | ||||||
|
|
|
|
|||||
Total research and development expense |
$ | 4,157 | $ | 17,667 | ||||
|
|
|
|
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General and Administrative Expenses
General and administrative expenses were $1.2 million for the year ended December 31, 2019, compared to $2.6 million for the year ended December 31, 2020. The increase of $1.4 million consisted of increased personnel-related expenses of $0.9 million, increased legal fees of $0.2 million related to corporate and intellectual property matters, increased other operating expenses including expenses for facility- and employee-related costs of $0.2 million, and increased stock-based compensation expense of $0.1 million.
Other Income (Expense)
Other income (expense) was income of $0.1 million for the year ended December 31, 2019, compared to expense of $0.1 million for the year ended December 31, 2020. The increase of $0.2 million in expense for the year ended December 31, 2020 was the result of an increase in interest expense of $0.4 million, partially offset by $0.2 million of income recognized on the change in fair value of derivative liability in 2020.
Liquidity and Capital Resources
We have incurred significant operating losses since our inception and anticipate we will continue to incur significant operating losses for the foreseeable future as we continue to develop our current and future vaccine candidates and may never become profitable. As of March 31, 2021, we had been financed primarily through net proceeds of approximately $149.5 million from the sale of our equity securities and convertible promissory notes. Additionally, we may receive up to $10.0 million under the Grant Agreement. As of March 31, 2021, we had cash of $121.9 million, restricted cash of $3.1 million and an accumulated deficit of $32.9 million.
Funding Requirements
Based on our current operating plan, without giving effect to the anticipated net proceeds from this offering, we believe that our existing cash and restricted cash will be sufficient to meet our anticipated operating expenses and capital expenditures through at least 12 months following the date of this prospectus. Further, based on our current operating plan, we believe that our existing cash and restricted cash, together with the estimated net proceeds from this offering, will be sufficient to meet our anticipated operating expenses and capital expenditures through at least 2024. 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 vaccine candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.
Our future capital requirements will depend on many factors, including:
∎ |
the initiation, type, number, scope, results, costs and timing of, our ongoing and planned clinical trials and preclinical studies or clinical trials of other potential vaccine candidates we may choose to pursue in the future, including feedback received from regulatory authorities; |
∎ |
the costs and timing of manufacturing for current or future vaccine candidates, including commercial scale manufacturing if any vaccine candidate is approved; |
∎ |
the costs, timing and outcome of regulatory review of current or future vaccine candidates; |
∎ |
any delays and cost increases that may result from the COVID-19 pandemic; |
∎ |
the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights; |
∎ |
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 business grows, including additional executive officers and clinical development personnel; |
∎ |
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; |
∎ |
the timing and amount of the milestone or other payments we must make to current and future licensors; |
∎ |
the costs and timing of establishing or securing sales and marketing capabilities if current or future vaccine 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; |
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∎ |
patients willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors; and |
∎ |
costs associated with any products or technologies that we may in-license or acquire. |
The net proceeds of this offering, together with our existing cash and restricted cash, will not be sufficient to complete development of IVX-A12, IVX-411, IVX-421 or any other vaccine candidate. Accordingly, we will be required to obtain further funding to achieve our business objectives.
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through equity offerings, 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 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 technologies, future revenue streams, research programs or vaccine candidates or 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 vaccine candidates to third parties where we might otherwise prefer to develop and market such vaccine candidates ourselves.
Cash Flows
The following table sets forth a summary of the net cash flow activity for each of the periods set forth below (in thousands):
YEAR ENDED
DECEMBER 31, |
THREE MONTHS
ENDED MARCH 31, |
|||||||||||||||
2019 | 2020 | 2020 | 2021 | |||||||||||||
(Unaudited) | ||||||||||||||||
Net cash provided by (used in): |
||||||||||||||||
Operating activities |
$ | (4,569 | ) | $ | (14,208 | ) | $ | (3,543 | ) | $ | (4,182 | ) | ||||
Investing activities |
| (11 | ) | (5 | ) | (134 | ) | |||||||||
Financing activities |
26,742 | 6,638 | 66 | 113,779 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in cash |
$ | 22,173 | $ | (7,581 | ) | $ | (3,482 | ) | $ | 109,463 | ||||||
|
|
|
|
|
|
|
|
Operating Activities
We have incurred significant operating losses since inception. Net cash used in operating activities for the year ended December 31, 2019 was $4.6 million consisting primarily of our net loss incurred during the period of $5.3 million adjusted for $0.1 million of non-cash charges and $0.6 million for net changes in operating assets and liabilities. Non-cash charges consisted of $0.1 million in stock-based compensation expense. The net change in operating assets and liabilities related to a $0.7 million increase in accounts payable and accrued and other current liabilities, partially offset by a $0.1 million increase in prepaid and other current assets in support of the growth in our operating activities.
Net cash used in operating activities for the year ended December 31, 2020 was $14.2 million, consisting primarily of our net loss incurred during the period of $18.8 million adjusted for $0.5 million of non-cash charges, and $4.1 million for net changes in operating assets and liabilities. Non-cash charges consisted primarily of $0.4 million non-cash interest expense and $0.3 million in stock-based compensation, which were partially offset by $0.2 million of non-cash income recognized related to the change in fair value of the derivative liability. The net change in
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operating assets and liabilities consisted of a $2.2 million increase in accounts payable and accrued and other current liabilities and $2.4 million increase in deferred revenue, partially offset by a $0.5 million increase in prepaid and other current assets in support of the growth in our operating activities.
Net cash used in operating activities for the three months ended March 31, 2020 was $3.5 million, consisting primarily of our net loss incurred during the period of $3.5 million.
Net cash used in operating activities for the three months ended March 31, 2021 was $4.2 million, consisting primarily of our net loss incurred during the period of $5.9 million adjusted for $1.5 million of non-cash charges, and $0.2 million for net changes in operating assets and liabilities. Non-cash charges consisted primarily of $0.2 million non-cash interest expense, $0.2 million of non-cash expense recognized related to the change in fair value of the derivative liability, $0.3 million in stock-based compensation, and $0.8 million loss on extinguishment of convertible promissory note. The net change in operating assets and liabilities consisted of a $0.7 million increase in deferred revenue and $0.4 million decrease in prepaid and other current assets, partially offset by a $0.9 million decrease in accounts payable and accrued and other current liabilities.
Investing Activities
We did not use cash in investing activities for the year ended December 31, 2019. Net cash used in investing activities for the year ended December 31, 2020 was less than $0.1 million, for purchases of property and equipment.
Net cash used in investing activities for the three months ended March 31, 2020 and 2021 was less than $0.1 million and $0.1 million, respectively, for purchases of property and equipment.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2019 was $26.7 million consisting of $0.6 million in proceeds related to the issuance of Series 1 convertible preferred stock in January 2019, $25.9 million in proceeds related to the issuance of Series A-1 convertible preferred stock in August 2019 and $0.2 million proceeds from early exercises of stock options.
Net cash provided by financing activities for the year ended December 31, 2020 was $6.6 million, consisting of $6.4 million related to issuance of a convertible promissory note in August 2020, and $0.2 million proceeds from early exercises of stock options.
Net cash provided by financing activities for the three months ended March 31, 2020 was less than $0.1 million for the proceeds from early exercises of stock options.
Net cash provided by financing activities for the three months ended March 31, 2021 was $113.8 million consisting of $21.0 million in proceeds related to the issuance of Series A-1 convertible preferred stock in February 2021, $92.7 million in proceeds related to the issuance of Series B-1 convertible preferred stock in March 2021, and $0.1 million proceeds from exercises of stock options, including early exercises.
Contractual Obligations and Commitments
We had no contractual obligations and commitments as of December 31, 2020 and March 31, 2021.
Under our license agreements, we have milestone payment obligations that are contingent upon the achievement of specified development, regulatory, and commercial sales milestones and are required to make certain royalty payments in connection with the sale of products developed under the agreements. As of December 31, 2020 and March 31, 2021, we are unable to estimate the timing or likelihood of achieving the milestones or making future product sales and, therefore, any related payments are not reflected as contractual obligations herein. See the descriptions of these agreements provided below and in the section of this prospectus titled BusinessMaterial Agreements for additional information on these license agreements.
We enter into contracts in the normal course of business for contract research services, contract manufacturing services, professional services 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 as contractual obligations herein.
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License Agreement with the National Institutes of Health
On June 28, 2018, we entered into a non-exclusive patent license agreement (NIH Agreement) with the National Institutes of Health, represented by National Institute of Allergy and Infectious Disease (NIAID). The NIH Agreement was amended in September 2018 and September 2020. Under the NIH Agreement, we obtained a non-exclusive, worldwide, royalty-bearing, sublicensable license under certain NIAID patent rights, and transfer of know-how and biological materials for use in adjuvanted or non-adjuvanted vaccines for the prevention, cure, or treatment of RSV and metapneumovirus infection in humans.
Under the NIH Agreement, we are required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. In consideration of the rights granted to us under the NIH Agreement, we paid a licensing fee upon execution of the NIH Agreement in the low six figures, amendment issue fees in the high five figures, and will pay annual minimum royalty payments starting in the second year after the initial sale of each licensed product which can be credited against any earned royalties due for sales made in the year. There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for the licensed products in the future. We are obligated to pay aggregate potential milestone payments of up to $2.1 million with respect to future development and regulatory based milestones, and up to $6.5 million with respect to future sales milestones following commercialization. Additionally, we have agreed to pay a tiered royalty of a low single digit percentage on net sales of all products applicable to the license. Additional royalties would be due in connection with sublicenses. Our royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
The NIH Agreement will terminate upon the last expiration of the patent rights or we may terminate the entirety of the agreement upon discontinuation of development or sales of licensed products and provision of written notice thereof to NIH.
During the years ended December 31, 2019 and 2020, we paid $37,500 and $50,000, respectively, in fees associated with the license, which were recorded as research and development expenses.
During the three months ended March 31, 2020 and 2021, we paid $0 and $25,000, respectively, in fees associated with the license, which were recorded as research and development expenses.
License Agreements with University of Washington
On June 29, 2018, we entered into an exclusive license agreement with UW (the UW License Agreement) for an exclusive license to covered intellectual property, a non-exclusive, worldwide license to use licensed know-how, and rights to sublicense for computationally designed nanoparticles and vaccines. The UW License Agreement was amended in July 2019 and again in November 2020. Our rights and obligations under the UW License Agreement are subject to certain U.S. government rights, certain global access commitment rights for humanitarian purposes to BMGF, certain rights to Howard Hughes Medical Institute, and certain other limited rights retained by UW.
We issued 192,276 shares of common stock on August 1, 2018 in exchange for the UW License Agreements exclusive license. The shares issued were recorded at their estimated fair value, which is de minimis, with the related expense classified as research and development in 2018.
Under the UW License Agreement, we are required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. In consideration of the rights granted to us under the UW License Agreement, we are required to pay an annual maintenance fee in the mid four figures. Additionally, we are required to pay minimum annual royalties following the first year after commercial sale of each licensed product. There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for licensed products in the future. The aggregate potential milestone payments for future development, regulatory, and sales-based milestones are $1.35 million per indication, up to a maximum of $6.75 million in total milestone payments. Additionally, we have agreed to pay a royalty of a low single digit percentage on net sales of all licensed products. Additional royalties would be due in connection with sublicenses and additional sales milestones. Our royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
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The UW License Agreement will terminate when all licensed rights have been terminated and all obligations due to UW have been fulfilled, or we may terminate the entirety of the agreement upon written notice thereof to UW.
During the year ended December 31, 2019, we paid $78,000 in fees associated with the license, which were expensed as incurred.
During the year ended December 31, 2020, we paid $5,000 in fees associated with the license, which were expensed as incurred.
During the three months ended March 31, 2020 and 2021, we did not make any payments associated with the license.
On July 2, 2020, we entered into a non-exclusive license agreement with respect to specified intellectual property with options for exclusivity in North America and Europe subject to the performance of certain development milestones, with UW (the Option and License Agreement). Under the Option and License Agreement we also received a non-exclusive, worldwide (excluding South Korea) license to use specific know-how, and rights to sublicense for computationally designed nanoparticles and vaccines; this license will become exclusive in the United States, Canada, Mexico and Europe (including Switzerland and the United Kingdom) in 2025. The Option and License Agreement was amended in August 2020 and in May 2021. Our rights and obligations under the Option and License Agreement are subject to certain U.S. government rights, certain global access commitment rights for humanitarian purposes to BMGF, certain rights to Howard Hughes Medical Institute, and certain other limited rights retained by the UW.
Under the Option and License Agreement, we are required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. We have agreed to pay a royalty of a low single digit percentage on net sales of all products applicable to the license. However, we will not be required to pay royalties on net sales of any licensed product under the Option and License Agreement if we are required to pay royalties on net sales under the UW License Agreement. Additional royalties would be due in connection with sublicenses and milestones. Our royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
The Option and License Agreement will terminate when all licensed rights have been terminated and all obligations due to the UW have been fulfilled, or we may terminate the entirety of the agreement upon written notice thereof to the UW.
During the year ended December 31, 2020, we reimbursed the UW for patent expenses under the UW License Agreement and the Option and License Agreement of $139,000, which were expensed as incurred.
During the years ended December 31, 2019 and 2020, we did not incur any other fees or make any payments associated with the Option and License Agreement.
During the three months ended March 31, 2020 and 2021, we reimbursed the University of Washington for patent expenses under the UW 2018 Agreement and UW 2020 Agreement as amended of $43,000 and $27,000, respectively, which were expensed as incurred. During the three months ended March 31, 2020 and 2021, we did not incur any other fees or make any payments associated with the UW 2020 Agreement as amended.
License Agreement with the University of Texas
In June 2021, we entered into an exclusive patent license agreement with an academic entity, the University of Texas at Austin (the UT Agreement). Under the UT Agreement, we obtained an exclusive, worldwide, royalty-bearing, sublicensable license under certain patent rights, to use licensed know-how for prevention, cure, amelioration or treatment of respiratory disease caused by metapneumovirus infection in all vaccine fields, excluding mRNA-based vaccines.
There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for licensed products in the future. We are obligated to pay aggregate potential milestone payments of up to $775,000 with respect to future development and regulatory based milestones, and up to $3.75 million with respect to future sales milestones following commercialization for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
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The UT Agreement will terminate upon the last expiration of the patent rights or we may terminate the entirety of the agreement upon written notice thereof to the University of Texas at Austin.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs, and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are 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. Our actual results may differ materially from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2 to our audited financial statements and Note 2 to our unaudited interim condensed financial statements included elsewhere in this prospectus, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.
Grant Revenue
Our current revenue consists of revenue under the Grant Agreement with BMGF. We are reimbursed for certain costs that support development activities, including our regulatory filing preparations for and planned first-in-human Phase 1/2 clinical trial of a SARS-CoV-2 vaccine candidate. The Grant Agreement does not provide a direct economic benefit to BMGF. Rather, we entered into an agreement with BMGF to make a certain amount of any resulting vaccine available and accessible at affordable pricing to people in certain low- and middle-income countries. We assessed this cost reimbursement agreement to determine if the agreement should be accounted for as an exchange transaction or a contribution. Such an agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred. Contributions are recognized as grant revenue when all donor-imposed conditions have been met.
Accrued Research and Development Expenses
We are required to estimate our obligations for expenses incurred under contracts with vendors, consultants and CROs, in connection with conducting research and development activities. The financial terms of these contracts are subject to negotiations, which 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 recognizing those expenses in the periods in which services and efforts are expended. We account for these expenses according to the progress of the preclinical study or clinical trial as measured by the timing of various aspects of the study, trial or related activities. We determine accrual estimates through review of the underlying contracts along with preparation of financial models taking into account discussions with research and other key personnel as to the progress of studies or trials, or other services being conducted. During the course of a study or trial, we adjust our rate of expense recognition if actual results differ from our 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 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.
Deferred Offering Costs
We have deferred offering costs consisting of legal, accounting and other fees and costs directly attributable to our planned IPO. The deferred offering costs will be offset against the proceeds received upon the completion of the planned IPO. In the event the planned IPO is terminated, all of the deferred offering costs will be expensed within our statements of operations and comprehensive loss.
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Fair Value of Derivative Liability and Convertible Promissory Note
We adjusted the carrying value of the derivative liability that was bifurcated from our convertible promissory note to the estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as change in fair value of derivative liability in the statements of operations. There were significant judgments and estimates inherent in the determination of the fair value of these liabilities. If we had made different assumptions including, among others, those related to the timing and probability of various financing scenarios, discount rates, volatilities and exit valuations, the carrying values of our derivative liability and convertible promissory note, and our net loss and net loss per share of common stock could have been significantly different. The derivative liability was settled in March 2021 upon conversion of the underlying convertible note into Series B convertible preferred stock, resulting in a loss on extinguishment of convertible promissory note.
Stock-Based Compensation Expense
Stock-based compensation expense represents the cost of the grant date fair value of employee, officer, director and non-employee stock options. We estimate the fair value of stock options on the date of grant using the Black-Scholes option pricing model and recognize the expense over the requisite service period of the awards, which is generally the vesting period, on a straight-line basis. We account for forfeitures when they occur and reverse any compensation cost previously recognized for awards for which the requisite service has not been completed, in the period that the award is forfeited.
The Black-Scholes option pricing model uses inputs which are highly subjective assumptions, including the fair value of the underlying common stock, expected term of the option before exercise, expected volatility of our common stock, risk-free interest rate and expected dividend.
See Note 8 to our audited financial statements and Note 8 to our unaudited interim condensed financial statements included elsewhere in this prospectus for more 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. Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.
We recorded stock-based compensation expense of $0.1 million for the year ended December 31, 2019, compared to $0.3 million for the year ended December 31, 2020. We recorded stock-based compensation expense of $0.1 million for the three months ended March 31, 2020, compared to $0.3 million for the three months ended March 31, 2021. As of March 31, 2021, there was $5.2 million of total unrecognized stock-based compensation expense related to unvested stock options which we expect to recognize over a remaining weighted-average period of 3.5 years. We expect to continue to grant stock options and other equity-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
The intrinsic value of all outstanding options as of March 31, 2021 was $24.1 million, based on the assumed initial public offering price of $15.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), of which approximately $1.6 million was related to vested options and approximately $22.5 million was related to unvested options.
In April 2021, we granted stock options to purchase approximately 2.9 million shares of our common stock at an exercise price of $5.90 per share, which generally vest over a requisite service period of four years. Additionally, in May and June 2021 we granted stock options to purchase approximately 0.5 million shares of our common stock in the aggregate at an exercise price of $7.44 per share. The exercise prices for the stock options we granted in the second quarter of 2021 were equal to the fair value of a share of our common stock on the grant date as determined by our board of directors on the date of grant. In light of progress made towards completion of an IPO and our obtaining a 409A valuation of our common stock of $7.44 on April 16, 2021 and information received in estimation of our initial public offering price range, we established the fair value of the April 2021 grants for financial reporting purposes based on the April 16, 2021 valuation of $7.44 per common share, and we established the fair value of the May and June grants for financial reporting purposes based on a straight-line interpolation from our April 16, 2021 valuation to the midpoint of the initial price range for this offering in order to determine the appropriate stock-based compensation expense. Therefore, while we have not yet prepared financial statements for the second quarter
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of 2021, we expect, solely for financial reporting purposes, to recognize stock-based compensation expense for the April, May and June 2021 grants of approximately $20.8 million, or $5.2 million per year, on an annualized basis, over the requisite service period of four years. The amount of stock-based compensation expense related to these options is based upon our estimates, and could change as events and circumstances change.
Common Stock Valuation
We are required to estimate the fair value of the common stock underlying our stock-based awards when performing fair value calculations using the Black-Scholes option pricing model. Because our common stock is not currently publicly traded, the fair value of the common stock underlying our stock-based awards has been determined on each grant date by our board of directors, with input from management, considering our most recently available third-party valuation of common shares. 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.
Our determination of the value of our common stock was performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants (AICPA), Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation (AICPA Practice Aid). In addition, our board of directors considered various objective and subjective factors to determine the fair value of our common stock, including:
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valuations of our common stock performed by independent third-party valuation specialists; |
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the anticipated capital structure that will directly impact the value of the currently outstanding securities; |
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our results of operations and our financial position; |
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the status of our research and development efforts; |
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the composition of, and changes to, our management team and board of directors; |
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the lack of liquidity of our common stock as a private company; |
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our stage of development and business strategy and the material risks related to our business and industry; |
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external market conditions affecting the life sciences and biotechnology industry sectors; |
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U.S. and global economic conditions; |
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the likelihood of achieving a liquidity event for the holders of our common stock, such as an IPO or a sale of our company, given prevailing market conditions; and |
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the market value and volatility of comparable companies. |
The AICPA Practice Aid prescribes several valuation approaches for setting the value of an enterprise, such as the cost, income and market approaches and the back-solve method, 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. The back-solve method assigns an implied enterprise value based on the most recent round of funding or investment and allows for the incorporation of the implied future benefits and risks of the investment decision assigned by an outside investor. In determining a fair value for our common stock, we estimated the enterprise value of our business using either the market approach or back-solve method.
In accordance with the AICPA Practice Aid, we considered the various methods for allocating the enterprise value to determine the fair value of our common stock at the valuation date. Under the option pricing method (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 value of the common stock is inferred by analyzing these options. The probability weighted expected return method (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.
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Based on our early stage of development and other relevant factors, we determined that an OPM was the most appropriate method for allocating our enterprise value to determine the estimated fair value of our common stock for valuations performed prior to April 30, 2021. For valuations performed after this date, we used the PWERM method to determine the estimated fair value of our common stock. In determining the estimated fair value of our common stock, our board of directors also considered the fact that our stockholders could not freely trade our common stock in the public markets. Accordingly, we applied discounts to reflect the 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 completing an IPO 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 share of common stock could have been significantly different.
Following the closing of this offering, the fair value of our common stock will be equal to the closing price of our common stock as reported on the date of the grant.
Income Taxes
We are subject to corporate U.S. federal and state income taxation. As of December 31, 2019 and 2020, we had federal net operating loss carryforwards of $7.0 million and $21.0 million, respectively, and state net operating loss carryforwards of $0.5 million, and $2.2 million, respectively. As a result of the Tax Cuts and Jobs Act of 2017, for U.S. income tax purposes, net operating losses generated after January 1, 2018 will be carried forward indefinitely. As of December 31, 2020, we had research and development tax credit carryforwards of approximately $1.0 million, which begin to expire in 2037. Additionally, as of December 31, 2020, we had state research and development credit carryforwards of approximately $45,000, which carryforward indefinitely.
Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. This annual limitation may result in the expiration of net operating losses and credits before utilization. We have not performed an analysis to determine the limitation of our net operating loss carryforwards.
We estimate our income tax provision, including deferred tax assets and liabilities, based on managements judgment. We record a valuation allowance to reduce our deferred tax assets to the amounts that are more likely than not to be realized. We consider future taxable income, ongoing tax planning strategies and our historical financial performance in assessing the need for a valuation allowance. If we expect to realize deferred tax assets for which we have previously recorded a valuation allowance, we will reduce the valuation allowance in the period in which such determination is first made.
We record liabilities related to uncertain tax positions in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
JOBS Act and Smaller Reporting Company
As an emerging growth company under the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to 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 Sarbanes-Oxley.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of this offering, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the first day of the fiscal year in which we are deemed to be a large
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accelerated filer as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of the prior year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Recent Accounting Pronouncements
See Note 2 to our audited financial statements and Note 2 to our unaudited interim condensed financial statements included elsewhere in this prospectus for recent accounting pronouncements.
Off-Balance Sheet Arrangements
During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our cash and restricted cash consist of cash in readily available checking accounts and money market funds. As a result, the fair value of our portfolio is relatively insensitive to interest rate changes.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe inflation has had a material effect on our results of operations during the periods presented in our financial statements included elsewhere in this prospectus.
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Overview
We are a biopharmaceutical company leveraging our innovative virus-like particle (VLP) platform technology to develop vaccines against infectious diseases, with an initial focus on life-threatening respiratory diseases. Our VLP platform technology is designed to enable multivalent, particle-based display of complex viral antigens, which we believe will induce broad, robust, and durable protection against the specific viruses targeted. Our pipeline includes vaccine candidates targeting some of the most prevalent viral causes of pneumonia. We are developing these candidates for older adults, a patient population with high unmet need. Our vaccine candidate IVX-A12 is a bivalent candidate, or a mixture of two different VLP candidates. IVX-A12 combines IVX-121, a vaccine candidate designed to target respiratory syncytial virus (RSV), and IVX-241, a vaccine candidate designed to target human metapneumovirus (hMPV). There are currently no vaccines approved for either RSV or hMPV, which are two common causes of pneumonia in older adults. We filed a clinical trial application (CTA) for IVX-121 with the regulatory authority in Belgium (FAMHP) in June 2021 and plan to initiate a clinical trial of IVX-121 in the second half of 2021, with topline data expected in the first half of 2022. Assuming favorable results from the IVX-121 clinical trial and favorable preclinical data for IVX-241, we plan to submit an investigational new drug application (IND) to the U.S. Food and Drug Administration (FDA) in the first half of 2022 and, thereafter, initiate a clinical trial of our combination vaccine candidate, IVX-A12. Additionally, we are developing two severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) vaccine candidates, IVX-411 and IVX-421, and initiated a Phase 1/2 clinical trial of IVX-411 in Australia in June 2021, with proof-of-concept data expected in the first half of 2022.
Global Vaccine Market Opportunity
The global market for vaccines was over $50 billion in 2020, of which over $12.5 billion was from vaccines for influenza and pneumococcus, two of the leading causes of pneumonia. Lower respiratory infection, including pneumonia, is the leading cause of death and hospitalization from infections and the fourth highest cause of death globally. Older adults are particularly susceptible to respiratory pathogens and it is estimated that prior to COVID-19, lower respiratory infection caused over one million deaths globally in people over the age of 70 every year. The world adult population over the age of 60 is expected to double by 2050, so prevention of respiratory disease in older adults is a growing commercial opportunity. Many of the viral causes of pneumonia have no approved vaccines, limited treatment options, and result in high morbidity and mortality in the older adult population.
RSV is estimated to cause 177,000 hospitalizations and 14,000 deaths in adults 65 years of age or older annually in the United States alone. Costs per hospitalization for RSV in older adults are estimated to be at least as great as those of influenza due to longer hospital stays and greater pulmonary complications. The U.S. economic burden for RSV-related hospitalizations alone is estimated to be greater than $2.5 billion per year. Rates of hospitalization and severity of disease for hMPV have been shown to be similar to that seen with RSV and influenza. There are currently no marketed vaccines for RSV or hMPV, two common causes of pneumonia.
VLP Technology
Our technology platform is based on the VLP approach to vaccine development, which we believe has been validated through the regulatory approvals and commercial success of third-party VLP vaccines and has several benefits. Naturally occurring VLPs have shown the ability to induce high and sustained levels (titers) of neutralizing antibodies (nAbs) in both older and younger adults, which have generally been associated with protective immunity. In addition, we believe VLPs can be used in combination vaccines as VLPs enable multivalent display of antigens in a manner that closely resembles viruses but contain no genetic material. However, VLPs engineered to display complex viral antigens have in general been difficult to develop or successfully manufacture at scale, limiting the pathogens that can be addressed by this approach.
Our vaccine technology was licensed from the Institute for Protein Design at the University of Washington (UW IPD) and is designed to enable the application of VLP-based vaccines against a broader array of pathogens than has been possible with naturally occurring VLPs and to overcome the manufacturing challenges experienced with these VLPs as well as other VLP technologies. Our licensed VLP technology utilizes a two-component computationally designed protein structure that self-assembles without interfering with the structure of the displayed antigens. The individual
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protein components are expressed and purified using traditional recombinant protein techniques, which we believe will allow us to manufacture our VLP vaccine candidates more efficiently at scale.
Our initial focus is on the development of vaccines to prevent respiratory disease and pneumonia caused by viral pathogens in older adults. We believe there is a need for effective vaccines to combat infections in older adults, who are generally less able to mount an immune response against pathogens compared to other age groups due to the gradual deterioration of the immune system as adults age, also called immunosenescence. Immunosenescence causes older adults to be more susceptible to severe symptoms and death from infections and results in a weaker response to vaccination with conventional vaccines. For RSV, hMPV, and SARS-CoV-2 there is a strong correlation between nAb levels and increased protection against disease. For this reason, vaccines able to induce the highest nAb titers will likely be the most protective against infection, particularly in older adults. We believe that VLP vaccines may provide an optimal approach for driving this robust antibody response. In addition, we believe our platform has the potential to address the global need for thermostable, low-cost, and readily manufacturable vaccines. We are working on SARS-CoV-2 vaccine candidates to help meet this need in the near term, and plan to evaluate the potential to combine this vaccine candidate with others to develop a combination vaccine candidate in the medium-to-long term.
Our Programs
Our initial focus is on developing vaccine candidate for viral causes of pneumonia in older adults. The following chart summarizes our current programs.
*^ | VLP technology underlying all candidates is licensed from the University of Washington |
* | Icosavax does not plan to pursue the IVX-121 RSV monovalent candidate as a standalone candidate for RSV in older adults, and plans to transition development to the IVX-A12 bivalent RSV/hMPV candidate following Phase 1. The RSV antigen incorporated into IVX-121 is licensed from the National Institutes of Health; key mutations in the hMPV antigen incorporated into IVX-A12 are licensed from the National Institute of Health and the University of Texas at Austin |
^ | Icosavax has worldwide nonexclusive rights with exception of South Korea (which is not included in the licensed territory), which will convert to exclusive rights in North America and Europe (including Switzerland and United Kingdom) starting in 2025, with non-exclusivity maintained elsewhere. |
IVX-A12 (RSV-hMPV vaccine candidate), a bivalent combination of IVX-121 (RSV vaccine candidate) and IVX-241 (hMPV vaccine candidate)
IVX-A12 is a bivalent combination of IVX-121, which is designed to target RSV, and IVX-241, which is designed to target hMPV. Both IVX-121 and IVX-241 have been designed to display prefusion stabilized F antigens of RSV and hMPV, respectively. The F (fusion) proteins of these viruses are critical for viral entry. F proteins are also one of the main targets for nAbs and are a focus of most vaccine efforts for respiratory viruses such as RSV and hMPV. We have licensed a prefusion stabilized form of the RSV F antigen, DS-Cav1, from the National Institutes of Health (NIH) that has been demonstrated in clinical trials conducted by the NIH to be a robust immunogen. An initial clinical trial with DS-Cav1 showed an induction of nAb titers much higher than had previously been seen with other vaccine approaches to RSV. We have incorporated DS-Cav1 into our VLP candidate IVX-121. Preclinical data with hMPV antigens provide support for the F antigen as a potential target for protective immunity, and we have incorporated a prefusion F antigen into our VLP candidate IVX-241. The prefusion F antigen in IVX-241 incorporates key mutations that we have licensed from the NIH and the University of Texas at Austin (UT). We plan to assess different ratios of IVX-121 and IVX-241 in preclinical studies in an effort to identify the ratio least likely to induce immunologic interference between them prior to initiating clinical trials of IVX-A12. We also plan to conduct a Phase 2 clinical trial to evaluate the optimal ratio of
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IVX-121 to IVX-241 in humans. We believe that multivalent display of these prefusion F antigens on the surface of our VLPs has the potential to induce a robust nAb response capable of conferring protection against infection of both viruses, which we also plan to assess in clinical trials.
We plan to initiate clinical development of IVX-A12 with a clinical trial of IVX-121. We filed a CTA in Belgium for IVX-121 in June 2021 and plan to initiate a Phase 1/1b clinical trial in the second half of 2021 to assess the safety and immunogenicity of IVX-121 in adults aged 18-45 and 60-75. We expect to report topline data from this trial in the first half of 2022. Assuming favorable results, we plan to submit an IND to the FDA and, thereafter, initiate a Phase 1 clinical trial of IVX-A12 to assess its safety and immunogenicity in adults aged 18-45 and 60-85, though we have not yet discussed this development plan with the FDA. We believe that a bivalent VLP vaccine targeting RSV and hMPV is the optimal approach to prevent these two common causes of pneumonia, neither of which has an approved vaccine to date.
SARS-CoV-2
In addition to RSV and hMPV, we are developing two SARS-CoV-2 VLP vaccine candidates, IVX-411 and IVX-421. IVX-411 is designed to present 60 copies of the receptor binding domain (RBD) protein from the SARS-CoV-2 virus strain first identified in China (original viral strain). IVX-421 has been designed with a similar structure and incorporates the key B.1.351 RBD mutations found in the variant strain first identified in South Africa (beta variant strain). For our SARS-CoV-2 candidates, we have a license from the University of Washington (UW) that is nonexclusive worldwide, with the exception of South Korea (which is not included in the licensed territory). This license will become exclusive in the United States, Canada, Mexico and Europe (including Switzerland and United Kingdom) starting in 2025 with non-exclusivity maintained elsewhere. SK Biosciences (SK) has also licensed the technology for use in SARS-CoV-2 vaccines. SK has initiated a Phase 1/2 clinical trial in South Korea, and has recently submitted an IND to the South Korea Ministry of Food and Drug Safety (South Korea MFDS) for a Phase 3 clinical trial, for a product candidate similar to IVX-411 and is also pursuing variant vaccine candidates.
The SARS-CoV-2 vaccine landscape is currently very crowded, with several vaccines having received Emergency Use Authorization (EUA) from the FDA and similar authorizations from other regulatory authorities, as well as additional vaccine candidates in development. However, we believe that given the global demand for SARS-CoV-2 vaccines, our vaccine candidates, if successfully developed and approved, may help address specific gaps in access, either as primary vaccines or as boosters to already authorized vaccines. In October 2020, we announced a grant for $10 million, awarded by the Bill & Melinda Gates Foundation (BMGF), a global non-profit dedicated to improving global health. We are using this grant to evaluate IVX-411 in a Phase 1/2 clinical trial that we initiated in Australia in June 2021 where we plan to assess its safety and potential to induce a robust functional immune response against the original viral strain as well as emerging viral variants. In this clinical trial, we will also be evaluating the potential of IVX-411 to stimulate increased nAb titers in previously vaccinated individuals for its potential use as a booster vaccine. We are also planning to conduct a Phase 2 clinical trial to evaluate the potential of IVX-411 to stimulate increased nAb titers in previously infected individuals. We will evaluate our plans for the clinical development of IVX-421 based on the initial results from these trials as well as the results of additional preclinical studies planned to evaluate IVX-421.
Our Team and Investors
We were formed in 2017 to advance the breakthrough VLP technology from the UW IPD with the goal to discover, develop, and commercialize vaccines against infectious diseases. We have assembled an experienced management team, board of directors, and scientific advisory board, who bring extensive industry experience to our company. Our scientific co-founders, Neil King and David Baker, are world leaders in protein design. The Chair of our Board of Directors, Tachi Yamada, is a leader in vaccine development, as the previous head of Global Health at BMGF as well as the previous Chief Medical and Scientific Officer at Takeda responsible for expanding their vaccine business unit. Our CEO, Adam Simpson, has over 20 years of experience in the biotechnology industry, and previously served as CEO of PvP Biologics, a company based on IPD recombinant protein technology, which was acquired by Takeda. Other members of our executive team have deep experience in discovering, developing, manufacturing, and commercializing pharmaceuticals, including vaccines. This includes having worked at major pharmaceutical companies such as GlaxoSmithKline, Novartis, Takeda, Gilead and Merck.
Since our inception we have raised over $150 million from leading investors in the life science and biotechnology industry. Investors with 5% or greater ownership are Qiming Venture Partners USA, Adams Street Partners, RA Capital Management, Sanofi Ventures and ND Capital.
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Our Strategy
Our goal is to utilize our VLP platform technology to develop vaccines against infectious diseases with an initial focus on life-threatening respiratory diseases. Key elements of our strategy include:
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Advancing our combination RSV-hMPV VLP vaccine candidate, IVX-A12, through clinical development and regulatory approval for the prevention of respiratory disease and pneumonia in older adults. We have filed a CTA in Belgium for our RSV VLP vaccine candidate, IVX-121, and plan to initiate a Phase 1/1b clinical trial in the second half of 2021 to assess the safety and immunogenicity of IVX-121 in adults aged 18-45 and 60-75. We expect to report topline data from this trial in the first half of 2022. Assuming favorable results, we plan to combine IVX-121 with our hMPV VLP vaccine candidate, IVX-241, to produce our bivalent vaccine candidate, IVX-A12, and to advance this combination vaccine candidate into clinical development. We plan to submit an IND to the FDA for IVX-A12 in the first half of 2022 and, thereafter, initiate a Phase 1 clinical trial of IVX-A12 to assess the safety and immunogenicity of IVX-A12 in adults aged 18-45 and 60-85. We believe that a bivalent RSV and hMPV targeted VLP vaccine has the potential to provide an optimal approach to preventing these two common causes of pneumonia, neither of which has an approved vaccine. |
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Leveraging our VLP platform technology to pursue additional vaccine candidates in indications with high unmet need. We believe our VLP vaccine technology has broad applicability beyond RSV and hMPV. We initiated a Phase 1/2 clinical trial evaluating IVX-411 in healthy adults aged 18-69 in June 2021. In addition, we plan to evaluate other VLP candidates for indications with high unmet need. |
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Building manufacturing scale-up capability early in the development process: For all of our programs, we plan to identify and contract with large-scale commercial contract development and manufacturing organizations early in the development process. We plan to initiate scale-up of manufacturing process development activities immediately following commencement of clinical trials to enable incorporation of manufacturing process changes early in development. We believe that this will lower manufacturing risk for our programs as well as accelerate our timelines to regulatory approval. |
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Further optimizing our VLP platform technology. We intend to invest in process enhancements that we believe could enable a more rapid development of future vaccine candidates. As part of this plan, we intend to evaluate alternative manufacturing processes that we believe could reduce time from candidate selection to availability of clinical trial material. |
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Maximizing the value of our vaccine candidates through selective partnerships. As we continue to build and advance our vaccine candidate pipeline, we may explore on a candidate-by-candidate basis partnerships or strategic collaborations to accelerate development or commercialization in key regions with third parties who have complementary capabilities that allow us to enhance the value of our pipeline. |
Vaccine Market Overview
The global vaccine market was estimated to be over $50 billion in 2020 and was anticipated to grow to over $100 billion by 2027. Recombinant, conjugate and subunit vaccines, which include VLP-based vaccines, make up over 50% of this market. Prior to the COVID-19 pandemic, the global vaccine market was expected to grow rapidly at a compound annual growth rate of 10% between 2019 and 2027. The increased awareness of infectious diseases and importance of vaccines driven by the COVID-19 pandemic is likely to increase vaccine utilization further, particularly for respiratory viruses.
Pneumococcal and influenza vaccines are important vaccines in the current respiratory vaccine market. Both are recommended for immunization by healthcare policy makers in the United States and other major markets. The global pneumococcal market was estimated to be around $8 billion in 2020 and is projected to grow to around $13.5 billion in 2030. The influenza market size is challenging to estimate due to the number of marketed vaccines worldwide but was estimated to be around $4.5 billion in 2020 and is projected to grow to around $8 billion by 2027. Older adults make up a significant proportion of these sales. Uptake of both influenza and pneumococcal vaccines in adults over the age of 65 is about 70% in the United States, and it is estimated that approximately 20% of the flu doses administered in the United States are to people over the age of 65. Pneumovax23, a pneumococcal vaccine with uptake primarily in the older adult population, had 2020 sales of $1.1 billion. We believe that sales of vaccines for older adults will grow substantially in the future, as the world adult population over the age of 60 is expected to double by 2050.
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Vaccines are designed to prevent disease by providing a safe exposure to key components of pathogens capable of inducing protective immunity. Infants and young children have typically not been exposed to many pathogens and have limited immunity following the disappearance of maternal antibodies. As infants grow into adults the immune system becomes stronger and more capable of fighting off several pathogens that cause disease, owing to both vaccines and natural exposure to infections as children. However, as adults age their immune system becomes weaker and less capable of mounting an effective immune response. This phenomenon is called immunosenescence, and it leaves older adults more susceptible to disease than younger adults. Recently, several vaccines have been approved or recommended specifically for use in older adults and we believe that novel approaches to vaccine development will continue to drive the market for prevention of disease in this population.
Benefit of Combination Vaccines
We plan to utilize our innovative VLP platform technology to develop and deliver combination vaccine products, initially targeting respiratory pathogens in older adults. Combination vaccines have had commercial success in both pediatric and young adult populations with significant patient access and market penetration. This is because combination vaccines can be developed to protect against diverse pathogens or multiple strains or variants of the same pathogen with a single product while having the potential to reduce the number of injections and simplifying the immunization schedule.
We predict that as more vaccines targeting the older adult community are developed, combination vaccines will become the preferred approach for older adults, similar to what has occurred with pediatric and young adult vaccines. We believe an early focus on combination vaccine candidates against respiratory viruses in older adults will give us a competitive advantage over monovalent vaccine candidates in development.
Potential Benefits of VLP Vaccines
There are a number of highly effective vaccines on the market (e.g., Gardasil, Cervarix) and vaccines in development (e.g., TAK-214) that are based on VLPs. In these instances, the vaccines contain proteins from the target pathogen that naturally self-assemble into VLPs and are capable of inducing a protective immune response. Data from third-party preclinical studies and clinical trials suggest that VLPs are capable of inducing a robust and durable immune response, that, in some cases, was superior to soluble antigens.
The robust response to VLPs is due to their interaction with a number of aspects of both the innate and adaptive arms of the immune system, which are responsible for driving immediate and lasting immune responses, respectively. The innate immune system involves a diverse set of cells, including dendritic cells, mast cells, eosinophils, basophils, neutrophils and macrophages, all of which generate a rapid response to pathogens or other foreign bodies. The adaptive immune system is a second line of defense that is specific to a pathogen or antigen and is triggered when antigen presenting cells (APCs) from the innate immune system activate and recruit cells from the
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adaptive immune system. The adaptive immune system is composed of T cells and B cells which can form immunologic memory and therefore be activated upon reintroduction of the initial antigen or pathogen.
As illustrated in the figure below, VLPs induce robust immune responses through (1) improved uptake and presentation of VLP-based antigens by APCs that instruct T cells on pathogenic threats, (2) efficient trafficking of VLPs to the lymph nodes, a critical site for adaptive immune responses, (3) enhanced cellular crosstalk between APCs, T cells and B cells and (4) the potential of multivalent, VLP-based antigens to effectively cross-link and stimulate antigen receptors on B cells, which mature into short-lived plasma cells, long-lived plasma cells and memory B cells following exposure to antigens. Compared to soluble antigens, the observed strength of B cell receptor cross-linking by multivalent, VLP-based vaccines are thought to increase the induction of long-lived plasma cells, which provide a durable antibody response. As an example, marketed HPV vaccines have demonstrated high levels of immunogenicity and efficacy for 9-10 years following vaccination while 80% people vaccinated with the hepatitis B virus (HBV) VLP vaccine showed protective titers at least 10 years after their primary immunization.
We believe there are a number of other potential advantages to VLP-based vaccines. VLPs are non-replicating and non-infectious, which we believe has the potential to make them safer to use in all populations. Both approved VLPs as well as VLPs currently in development have shown low reactogenicity when tested without adjuvant (e.g., Gardasil and TAK-214). In addition, since they do not replicate, VLPs have the potential to stimulate immune responses even in the presence of pre-existing immunity (through previous infection or vaccination), which has limited the utility of some viral vector-based vaccine platforms. VLPs have also been observed to induce robust nAb levels in older adults, despite immunosenescence. VLPs have also been effective in the development of combination vaccines. For example, the Gardasil and Cervarix vaccines for use against HPV, among others, incorporate combinations of VLPs targeting different viral strains. For Gardasil, the initial formulation contained four VLPs, and serotype coverage was expanded through the inclusion of five additional HPV type VLPs in a second-generation product, showing the feasibility of expanding VLP formulations. Gardasil/Gardasil-9 generated $4 billion in 2020 worldwide sales. In addition, the Takeda norovirus VLP candidate TAK-214, a combination of two VLPs targeting different norovirus genotypes, has successfully completed Phase 2 clinical trials. Evaluation of nAb titers induced by TAK-214 showed no difference between the response seen in adults aged 22-48 and adults aged 60 and over.
VLP-based vaccines have also induced cross-protective immune responses against related virus strains not included in the vaccine. This result was believed to be due to antibody responses against subdominant epitopes that only provoke an immune response when presented to the immune system in a multivalent form. Cross-protective immune responses have been seen in clinical and post-marketing surveillance data from approved HPV vaccines, Phase 2 data from TAK-214, as well as nonclinical data with influenza vaccines using our two-component VLP platform.
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Limitations of Current VLP Technologies
The major drawback of naturally occurring VLPs is that they often cannot be engineered to display other complex antigen targets or manufactured at commercially relevant scale. Since not all pathogens have protective antigens that naturally form VLPs, this limits the specific pathogens that can be targeted with this approach. Several developers have, and are currently, utilizing various other approaches to develop and manufacture VLP-based vaccines. One approach is to use antigens from viruses that naturally form VLPs (e.g., tobacco mosaic virus and HBV) as scaffolds for viral antigens that fail to form VLPs on their own. There are also naturally occurring proteins that self-assemble into particles (e.g., bacterial protein ferritin or lumazine synthase) that can be used as scaffolds for presenting heterologous antigens. The main limitation of the natural scaffold-based approaches is that the structure is fixed resulting in limitations on the size and nature of the antigens that can be incorporated into these particles, as well as the valency and geometry of the antigens presented. Another approach is to use an enveloped VLP that buds from the host cell and contains cellular lipids that make up the lipoprotein envelope. Although this allows for incorporation of complex heterologous antigens, enveloped VLPs can be challenging to purify, with concerns about viral contamination as well as host-cell proteins being carried through to the enveloped VLP, particularly when mammalian expression systems are used. In addition, enveloped VLPs have historically had poor yields, scalability, and stability challenges. To date, none of these alternative VLP technologies have reached the market.
Our SolutionTwo-Component Computationally Designed VLP Technology
We believe that our two-component VLP platform technology, licensed from the UW, retains the benefits of the naturally occurring VLPs while potentially overcoming the constraints and limitations seen in other VLP technologies to date. Our platform stems from technology developed by researchers at the UW IPD, who pioneered a computationally designed VLP system with potential to address a wide range of vaccine targets. The UW IPD used computational design and empirical testing to develop hundreds of self-assembling two-component protein-based VLP scaffolds.
Our licensed VLP technology encompasses VLPs formed from two protein components that are separately produced using traditional recombinant protein manufacturing techniques. The antigenic Component A consists of a trimeric protein that is genetically fused to the target antigen of interest and produced in eukaryotic cells. The trimeric component A assembly domain is derived from a thermophilic bacteria and has shown stability at above 90 degrees Celsius, which we believe has the potential to confer stability to the assembled VLP. The second protein, Component B, is a pentameric structural protein that is produced by bacterial fermentation.
We are focusing our current development efforts on a single VLP scaffold, which allows for the same Component B to be shared across multiple vaccine candidates featuring different antigens presented on Component A, as illustrated in the graphic below.
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Component A and Component B are expressed and purified separately prior to assembly. Upon mixture, the two protein components self-assemble into an icosahedral VLP displaying 20 copies of a trimeric antigen, such as RSV or hMPV, or 60 copies of a monomeric antigen, such as the RBD antigen in the SARS-CoV-2 vaccine candidate, as illustrated below.
Using our VLP platform technology we engineer vaccine candidates comprised of self-assembling proteins that are designed to have the following potential benefits:
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Robust, durable, and broad immune responses. The icosahedral symmetry of our VLPs mimics viral geometry and is designed to allow for increased antigen density. In addition, we believe our VLPs are within the optimal size range (20-100 nm) that enables efficient trafficking to the lymph nodes as seen with natural VLPs. Both increased antigen density and lymph node trafficking are known to trigger robust B cell immune responses. We believe that preclinical data support the potential of our platform to generate VLPs that induce high nAb levels, durable immunogenicity and cross-protection against related viral strains. |
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Potential to display complex heterologous antigens. Our approach allows for the multivalent display of complex antigens that would not normally form into VLPs. |
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Highly scalable manufacturing and ease of purification. Our two-component technology facilitates the use of standard, scalable recombinant protein methods for vaccine manufacturing and purification with well-established cell line and fermentation technologies. |
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Increased antigen stability. Our VLPs are designed to confer increased stability to our vaccine candidates, which we believe will allow for improved storage and distribution. |
Our Programs
Our current development efforts are focused on addressing the unmet need for safe and effective vaccines against leading causes of lower respiratory infections (LRIs), including pneumonia, in older adults. LRIs are the fourth leading cause of death worldwide, with morbidity and mortality increasing with age and pre-existing conditions. LRIs lead to over one million deaths worldwide per year in people over 70 years of age and pneumonia is the most common LRI. Many of the viruses found to be associated with pneumonia and LRIs have no approved vaccines, including RSV and hMPV.
We have developed each of our vaccine candidates using a robust selection process to identify what we believe is the best antigen. Our selection process includes screening for expression, protein conformation, stability, VLP assembly competence, and evaluation of immunogenicity in multiple animal models, including those that have been previously infected with the pathogen (i.e., primed). We in-license antigens where we believe that others discoveries may be optimally suited for our technology. We also develop our own antigens in-house.
IVX-A12Our Combination RSV-hMPV VLP Vaccine Development Program
Our IVX-A12 development program combines two VLP vaccine candidates, IVX-121 and IVX-241, into a single combination vaccine. IVX-121 is an RSV vaccine candidate for which we have filed a CTA and plan to commence a Phase 1 clinical trial in Belgium in the second half of 2021. IVX-241 is an hMPV vaccine candidate in preclinical development, which we plan to combine with IVX-121 to form IVX-A12, for which we plan to submit an IND to the FDA and, thereafter, advance into a Phase 1 clinical trial.
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IVX-A12 Market Opportunity
Marketed vaccines for pneumococcus and influenza, two major causes of pneumonia, have an estimated combined annual 2020 global revenue of $13 billion. RSV and hMPV are also highly prevalent respiratory pathogens that occur seasonally. The largest epidemiological study assessing prevalence of RSV and hMPV that compared with influenza and pneumococcal in adults was the EPIC study published in 2015. Based on this study, the two most common pathogens causing pneumonia in adults after human rhinovirus, influenza pneumococcus and influenza were RSV and hMPV, which were found in 8% and 11%, respectively, of U.S. adults hospitalized for community acquired pneumonia where any pathogen was detected, as shown below.
Top 5 Pathogens Detected in Adults Hospitalized with Community-Acquired
Pneumonia (EPIC Study*)
* | EPIC study data from supplementary information published in Jain et al., 2015 |
In addition, recent data show that both morbidity and mortality in U.S. adults hospitalized with viral pneumonia is higher with both RSV (16.1% likelihood of ICU admission and 5.2% likelihood of death) and hMPV (16.5% likelihood of ICU admission and 3.9% likelihood of death) than with influenza (11.5% likelihood of ICU admission and 3.3% likelihood of death). Given these data, a combined RSV-hMPV vaccine could address a substantial unmet medical need.
We recently conducted a primary and quantitative research campaign including interviews with 35 U.S. and EU payors and policy makers and a quantitative survey with 140 U.S. vaccinators (physicians and pharmacists). Data from the study suggest that once launched, an effective RSV vaccine targeting the older adult population could be included in policy (e.g., ACIP) guidelines, which drive recommendations by the CDC and equivalent organizations outside the United States, and could be included on payor formularies. This applied to both monovalent (RSV only) and combination vaccines that incorporate an RSV component. The quantitative survey results suggested that policy recommendations were likely to drive immediate vaccine utilization of an RSV vaccine. In addition, survey results suggested that vaccinators were likely to have a strong (90%) preference for a combination RSV-hMPV vaccine over an RSV monovalent vaccine, assuming equivalent efficacy against RSV. Overall, we believe that the survey results supported continued development of a bivalent RSV/hMPV vaccine candidate.
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IVX-121RSV VLP Vaccine Candidate
Overview of RSV
RSV is an RNA virus that replicates in the nose and lungs and is a major viral cause of LRI worldwide. There are two major subtypes of RSV, A and B, which may co-circulate in a single RSV season. Re-infection is common, and all older adults are expected to have been exposed to RSV and have RSV-specific antibodies. The most common symptoms are cough, fatigue, dyspnea, congestion, wheezing, and fever.
High Neutralizing Antibody Titers Correlate with Reduced Risk of Infection and Disease
There is substantial data correlating high nAb titers with protection against RSV. Published preclinical data, natural history studies, human challenge studies, and clinical data all demonstrate reduced risk of infection and disease when higher nAb titers are present. Published natural history studies have demonstrated that once partial protection is achieved, every additional doubling in RSV nAb titer may be associated with an 22-25% decrease in RSV-associated hospitalization. Data from a Phase 2 clinical trial conducted by Sanofi that followed 1,180 subjects aged 65 or older with cardiopulmonary disease over two years at U.S. sites provided additional support that increasing titers correlate with a reduced risk of respiratory illness. As illustrated in the figure below, a doubling of RSV nAb titer was observed to be correlated with a reduced risk of acute respiratory infections (ARIs). Based on these and similar findings, we have designed IVX-121 to increase the magnitude, quality, and durability of the nAb response.
Graph | based on data published in Falsey et al., 2008 |
Prefusion RSV-F Protein-Based Vaccines May Generate Higher Neutralizing Antibody Titers than Postfusion Vaccines
RSV contains several glycoproteins that are important for different functions of the virus, including the surface fusion protein F (RSV-F). RSV-F is a highly conserved glycoprotein that contains the majority of the neutralizing epitopes, specific regions of antigens that bind protective antibodies. We believe RSV-F was validated as a target for protection by the clinical efficacy and approval of Synagis, a monoclonal antibody used to protect against serious lower respiratory tract disease caused by RSV in infants at high risk of RSV disease, and RSV-F is the focus of most RSV vaccine development efforts. RSV-F is critical for fusion of the virus with the host cell membrane and the conformation of RSV-F changes significantly between the prefusion or postfusion state. nAbs that bind to prefusion F can block viral entry into cells, thereby reducing viral replication and the severity of RSV-related disease.
The RSV-F protein naturally shifts to the postfusion state and vaccine developers initially focused on vaccines containing the postfusion conformation. These vaccine candidates induced approximately two- to four-fold increases in nAb titers, which was not a sufficient increase in nAb titers to protect a large enough portion of the trial participants to justify continued development.
Data now show that the majority of the nAbs against RSV-F in human sera are directed against the prefusion conformation, and that prefusion directed antibodies have greater neutralizing activity than antibodies directed
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against the postfusion protein. Researchers at the National Institutes of Health (NIH) developed an antigen called DS-Cav1, a prefusion stabilized form of RSV-F that has elicited high titers of nAbs against RSV in mice and nonhuman primates. The NIH conducted an initial Phase 1 trial of DS-Cav1 that showed the antigen induced high nAb titers in humans, much higher than had been seen with postfusion F antigens tested by other developers, as further described below. Although DS-Cav1 provided proof-of-concept for prefusion RSV F antigens, DS-Cav1 is not fully stabilized in the prefusion conformation and converts over time to a postfusion structure, which has limited its commercial viability.
We have in-licensed the prefusion RSV-F antigen DS-Cav1 and related technology from the NIH and have incorporated the DS-Cav1 antigen assessed in the NIH Phase 1 trial onto our VLP scaffold. IVX-121 has been designed to display 20 copies of DS-Cav1 as a novel two-component VLP, as shown on the right of the figure below.
We believe that multivalent, particle-based display of the DS-Cav1 antigen has the potential to improve antigen presentation and B cell receptor cross-linking as has been observed with other VLPs. In addition, we have observed that the fusion of DS-Cav1 to the assembly domain of Component A of the VLP further stabilizes the prefusion structure of RSV-F so that the prefusion conformation is maintained under normal storage conditions.
Clinical Proof-of-Concept of RSV Prefusion Vaccine from the NIH
The NIH conducted a Phase 1 proof-of-concept trial of DS-Cav1 in healthy volunteers to evaluate dose, safety, tolerability and immunogenicity of the stabilized RSV prefusion subunit protein vaccine alone or with aluminum hydroxide (alum), a commonly used aluminum salt adjuvant. Adjuvants can be used to induce a stronger immune response in people vaccinated. Aluminum salts are a widely used adjuvant in human vaccines and pose a low safety risk to humans based on hundreds of studies conducted to date with aluminum salt adjuvanted vaccines. In the NIH trial, 90 healthy adult subjects 18-50 years of age were vaccinated with formulations of DS-Cav1 with or without alum at dose levels of 50, 150, or 500 micrograms of prefusion antigen. Subjects received intramuscular vaccinations at day 0 and at week 12. Published interim results following dosing of the first 40 subjects with 50 or 150 micrograms with or without alum demonstrated that, as of a cutoff date of December 13, 2017, immunization resulted in a 7 to 15-fold increase in nAb titers from baseline against RSV/A, as illustrated in the figure on the right below. Although NIHs trial did not include a head-to-head comparison against other RSV vaccine candidates, the increase in nAb titers from baseline observed in this trial was higher than the ~1.5 to 4-fold rises observed with previous RSV-F protein-based vaccine candidates. As an example, in Novavaxs Phase 1 clinical trial of an RSV-F candidate in adults aged 18-49, a 1.5 to 2.4-fold rise across non-adjuvanted or aluminum salt (Adjuphos) adjuvanted groups was observed over a similar time period, as illustrated in the figure on the left below. We believe the NIH data supported the hypothesis that stabilizing the prefusion structure has the potential to improve the functional immune response against the RSV F antigen. Neutralizing titers against the important viral subtype RSV/B were also increased ~4 to 9-fold in the NIH trial, indicating comparative increases in breadth of the humoral response. The aluminum salt adjuvants showed limited effect in both the NIH and Novavax trials.
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Novavax data from Glenn et al., 2013; DS-Cav1 data from Crank et al., 2019
IVX-121 Prefusion F Protein Stability
In preclinical studies, we have observed that the fusion of DS-Cav1 to Component A further stabilized the prefusion conformation and the resultant assembled VLP was very stable at two to eight degrees Celsius, which is a typical temperature range for vaccine storage. In comparison, long-term storage of DS-Cav1 at four degrees Celsius resulted in a shift away from the prefusion stabilized structure as measured by reduction of prefusion specific antibody binding, including D25 binding, by 102 days.
IVX-121 Preclinical Results
We have completed multiple preclinical studies of IVX-121 and precursor candidates in animal models of RSV infection. As all adults are expected to have been exposed to RSV, we believe the most relevant animal models are those that use animals that are first infected with RSV prior to vaccination. In these models, animals immune systems are given prior exposure to the virus (i.e., primed), similar to what would be expected in human adults.
IVX-121 Preclinical Data in RSV-Primed Models. To evaluate the ability of IVX-121 to stimulate immune responses in animals with pre-existing immunity, BALB/c mice were infected with RSV and allowed to recover over a 3-month period. To reduce experimental variability, animals were randomized into groups based on their Day 28 RSV/A neutralizing titers. Animals were evaluated for pre-boost baseline titers on Day 91 and then immunized with either IVX-121 or soluble DS-Cav1 vaccine formulations, with or without Alhydrogel, a commonly used aluminum-based adjuvant. Ten days after the immunization blood was collected for assessment of nAb titers.
To account for variability in the immune response of individual animals to RSV infection, it is necessary to evaluate the relative rise in nAb titers over baseline in each animal. Dose levels of IVX-121 were matched with dose levels of DS-Cav1 meaning a 0.1 microgram dose of IVX-121 would have 0.1 micrograms of DS-Cav1 in the VLP preparation.
As shown in the figure below, IVX-121 induced strong nAb responses that were statistically superior to DS-Cav1 at the 0.1 microgram dose (p<0.05) using both parametric (t-test) and non-parametric tests (Wilcoxon test). The maximum increase in nAb titers (>15x) for the aqueous IVX-121 formulation was seen at the 0.3 microgram dose level, which was higher than the increase observed with the equivalent dose of DS-Cav1, although the results were not statistically significant. At the 1 microgram dose IVX-121 and soluble DS-Cav1 induced similar increases in nAb titers. Use of Alhydrogel did not significantly increase the immune response to IVX-121 in RSV-primed mice (not shown).
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Neutralizing Antibodies Generated by IVX-121 vs. Soluble DS-Cav1 in RSV-primed Mice
^SEM = standard error of log2 transformed fold rise in nAb titers
*p = 0.011 (t-test); p = 0.024 (Wilcoxon test)
A p-value is the probability that the reported result was achieved purely by chance, such that a p-value of less than or equal to 0.05 means that there is a less than or equal to 5% probability that the difference between the control group and the treatment group is purely due to chance. A p-value of 0.05 or less typically represents a statistically significant result. The FDAs evidentiary standard of efficacy when evaluating the results of a clinical trial generally relies on a p-value of less than or equal to 0.05.
In addition, to assess the cellular immune response to IVX-121 splenocytes from individual mice were collected and analyzed in an IFN-gamma ELISpot assay following stimulation with F-specific peptide. As compared to a saline control group, IVX-121 treated mice showed an increase in IFN-gamma positive CD4+ T cells, which suggests a boosted cellular immune response induced by IVX-121.
Preclinical Data in RSV-naïve Animals. Studies performed at the UW IPD on a precursor VLP-based antigen to IVX-121, DS-Cav1-I53-50, showed superiority of the multivalent, VLP presentation of DS-Cav1 over the soluble antigen. The preclinical studies with DS-Cav1-I53-50 in both naïve (non-primed) mice and naïve non-human primates, demonstrated a ~10-fold increase in neutralizing titers over the soluble DS-Cav1 antigen. In the mouse study, DS-Cav1 and DS-Cav1-I53-50 were formulated with the oil-in-water adjuvant Addavax and a 5 mcg DS-Cav1 dose equivalent was utilized for all groups. A statistically significant difference in nAbs titers induced by DS-Cav1-I53-50 and DS-Cav1 was observed (p<0.01). In the primate study, DS-Cav1 and DS-Cav1-I53-50 were formulated with the oil-in-water adjuvant SWE and a 50 mcg DS-Cav1 equivalent dose was given to both groups. A statistically significant difference in nAbs titers induced by DS-Cav1-I53-50 and DS-Cav1 was observed (p<0.05). In a subset of the primates, bone marrow was collected to assess level of induction of antigen-specific long-lived plasma cells (LLPCs), an early marker of a potential durable immune response. Primates immunized with the DS-Cav1-I53-50 VLPs showed a non-significant, but numerical increase in antigen-specific LLPC induction in bone marrow and spleen compared with animals immunized with soluble DS-Cav1. A separate non-human primate study evaluated the potential impact of Adjuphos, an aluminum salt adjuvant different from the one we plan to use in the clinic, on the IVX-121 formulation. The formulation of IVX-121 using Adjuphos induced similar levels of nAb titers to DS-Cav1 formulated with Adjuphos. The specific aluminum salt adjuvant we plan to utilize in clinical testing is Alhydrogel. Preclinical data in naïve mice suggest this adjuvant could yield improved nAb titers in naive animals.
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IVX-121 Preclinical Safety Studies. We have completed a toxicology study to support regulatory submissions and entry into Phase 1 trials in Europe. The toxicology study evaluated both injection site and systemic reactions to the vaccine candidate. No adverse effects were seen following administration of the anticipated maximum human dose of IVX-121 (250ug +/- Alhydrogel), with minor injection site reactivity comparable to animals receiving saline control. The only histological finding that differed from the saline control was a modest increase in the spleens of animals receiving IVX-121, consistent with the induction of a robust immune response.
IVX-241 hMPV VLP Vaccine Candidate
Overview of hMPV
hMPV is an RNA virus that is related to the RSV virus. hMPV was first identified in 2001, though it was likely in circulation for at least 50 years prior to discovery. Infection with hMPV brings a similar symptomatic profile as RSV with the most common symptoms being cough, wheezing, dyspnea, congestion and fatigue. Similar to RSV, there are two genetic lineages of hMPV, hMPV/A and hMPV/B, which show a high degree of sequence homology and co-circulate with varying annual prevalence of each strain. The hMPV virus has several highly conserved viral proteins including a fusion protein (F). Preclinical studies have demonstrated that immunization with the F protein is capable of inducing nAbs and protecting against viral challenge in animal models. Vaccination with an F protein from one lineage has been shown to result in nAb titers capable of protection against both hMPV strains, though titers against the heterologous strain are often lower. Similar to RSV, the F protein of hMPV undergoes a conformational change from the prefusion to the postfusion structure to enable entry into the host cell. Although the data are less definitive than with RSV F, we believe the prefusion structure of hMPV F is likely needed to maintain the full complement of neutralizing epitopes in order to generate the strongest immune response.
RSV, hMPV, and influenza seasons show high seasonal overlap and hMPV is underdiagnosed and often mistaken for RSV or influenza given the similarity in clinical presentation. As diagnostic tools improve, hMPV is being increasingly recognized as a major contributor to ARI and LRI. Similar to RSV, prospective cohorts from third-party clinical trials have shown that higher baseline hMPV nAbs were associated with reduced risk of hMPV symptomatic virus infection, so the goal of vaccination is to increase hMPV nAbs. There are currently no FDA-approved antivirals or vaccines to treat or prevent hMPV.
hMPV Antigen Selection and Immunogenicity Results
Expression of the hMPV F protein has been shown to be challenging and efforts have been made to introduce modifications within the protein to improve expression and stabilize the prefusion structure. We evaluated a number of potential candidate antigens for compatibility with our two-component VLP platform and selected IVX-241 with another candidate, IVX-231, that continues to be evaluated as an alternative. IVX-241 incorporates an F antigen from hMPV/A and IVX-231 incorporates a prefusion F antigen from hMPV/B. Both were selected based on key criteria, including: high expression, prefusion conformation, monodispersity, VLP stability, and high nAb titers following VLP administration in rodent studies.
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We performed head-to-head testing of the immunogenicity of IVX-231 and IVX-241, formulated with the oil-in-water adjuvant Addavax, in naïve mice to evaluate the quality of the antigens based on nAb titers induced by each antigen against hMPV/A. While both IVX-231 and IVX-241 induced high nAb titers against hMPV/A, IVX-241 nAb titers against the hMPV/A strain were statistically superior to those generated by IVX-231 (p<0.01) and appeared to be higher than the single human control sera included as a positive control, as shown below.
hMPV VLP Candidates hMPV nAb Titers
35 days Post Immunization
(A strain)
** | p<0.01 |
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We selected IVX-241 as the lead candidate for inclusion in IVX-A12 based on its ability to induce high nAb titers as well as its improved thermostability and monodispersity compared to IVX-231, physical characteristics we believe are important for further development.
Preclinical Bivalent Proof of Concept Study with IVX-121 and IVX-231 in Mice
To evaluate the ability of IVX-121 and IVX-231 to stimulate immune responses in naive animals, BALB/c mice were administered IVX-121 and IVX-231 in monovalent or bivalent formulations, all adjuvanted with Addavax. The bivalent formulation had an equivalent concentration of IVX-121 and IVX-231 VLPs. All animals were administered two doses three weeks apart with vaccine formulations that included Addavax as the adjuvant. Blood was collected two weeks following the second dose and RSV/A and hMPV/A neutralizing titers were measured.
As shown in the figure below, IVX-121 induced strong RSV/A nAb responses in both the monovalent and bivalent formulations that were not meaningfully different. IVX-231 induced strong hMPV/A nAb responses in both the monovalent and bivalent formulations though the hMPV/A titers in the bivalent formulation were approximately 2 log2 lower than titers in the monovalent formulation. The bivalent formulation induced nAb titers that were on average in excess of human convalescent sera against either RSV/A or hMPV/A. Additional studies are ongoing to assess the bivalent IVX-121/IVX-241 combination.
IVX-A12 RSV-hMPV Combination VLP Vaccine Candidate Preclinical Development Plan
We plan to conduct additional preclinical studies to evaluate a range of VLP antigen concentrations and ratios to further assess neutralizing titers from our final candidates and evaluate the optimal ratio of IVX-121 to IVX-241 for IVX-A12. We also intend to evaluate multiple adjuvant-formulations as well as non-adjuvanted formulations in preclinical studies to define the optimal formulations to move into the clinic. We have initiated preclinical studies with the IVX-A12 bivalent candidate incorporating IVX-121 and IVX-241 to evaluate immunogenicity and protection afforded by bivalent formulations against both RSV and hMPV in cotton rats. We also plan to evaluate IVX-A12 in a GLP toxicology study following receipt of pre-IND feedback from the FDA.
IVX-A12 RSV-hMPV Combination Vaccine Candidate Clinical Development Plan
We intend to pursue regulatory approval of our RSV/hMPV combination VLP candidate IVX-A12 in the older adult population. As is standard for vaccine development where correlates of protection do not exist, we plan to first evaluate the immunogenicity of our vaccine candidate in a Phase 1 first-in-human trial in healthy older adults by measuring the change in RSV and hMPV nAb levels compared to baseline antibody levels. We also plan to assess different combinations of RSV and hMPV for potential immune interference caused by the addition of hMPV VLPs to
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the RSV VLP vaccine candidate. If we are able to generate positive safety results, show immunogenicity and determine the optimal RSV-hMPV combination, we plan to assess the efficacy of our combination vaccine candidate. We expect that the efficacy will be assessed by measuring incidence of acute respiratory infection caused by RSV or hMPV in patients receiving IVX-A12 compared to those receiving placebo.
We plan to evaluate both unadjuvanted and Alhydrogel-adjuvanted IVX-121 formulations in our Phase 1 first-in-human trial. However, based on the NIH and our own preclinical studies, we may not see a significant enhancement in the nAb titers induced by Alhydrogel. For this reason, in parallel with the clinical assessment of IVX-121, we also plan to assess an oil-in-water adjuvant in our planned clinical trial of IVX-411 and in preclinical studies with our combination candidate IVX-A12. Based on the IVX-121 and IVX-411 clinical data as well as preclinical data to be generated with respect to IVX-121, IVX-241 and related candidates, and different formulations of IVX-A12, we will determine whether to investigate an Alhydrogel-adjuvanted formulation or an oil-in-water adjuvanted formulation, in addition to a non-adjuvanted formulation for the planned Phase 1 clinical trial of IVX-A12.
IVX-121 Phase 1/1b and IVX-121 Phase 1b Revaccination Trial
Our plan for the clinical development of IVX-A12 is to first assess safety and immunogenicity of the RSV monovalent VLP candidate IVX-121 in an initial Phase 1/1b trial, to be conducted in Belgium. We have filed a CTA with the FAMPH in Belgium and plan to initiate our Phase 1/1b clinical trial in the second half of 2021.
This first-in-human trial with IVX-121 will be a randomized, observer-blind, placebo-controlled multi-center Phase 1/1b trial designed to evaluate the safety and immunogenicity of three dose levels of non-adjuvanted and Alhydrogel-adjuvanted IVX-121 in two adult cohorts: 18-45 years of age (Phase 1 first-in-human) and 60-75 years of age (Phase 1b). The maximum total number of subjects to be enrolled across the Phase 1 and Phase 1b parts of the trial is 90 adults 18-45 years of age and 217 older adults 60-75 years of age, respectively. Subjects will be evaluated for safety and persistence of antibody response for six months following a single intramuscular administration of either IVX-121 or placebo.
A schema of the planned Phase 1/1b trial is given in the table below:
PHASE 1/1B |
||||||||
STUDY ARM |
VLP DOSE | ALHYDROGEL |
PHASE 1:
ADULTS AGED 18-45 N=90 |
PHASE 1B:
ADULTS AGED 60-75 N=217 |
||||
A |
N/A (placebo) | - | 0 | 31 | ||||
B |
Low | - | 15 | 31 | ||||
C |
Low | + | 15 | 31 | ||||
D |
Medium | - | 15 | 31 | ||||
E |
Medium | + | 15 | 31 | ||||
F |
High | - | 15 | 31 | ||||
G |
High | + | 15 | 31 |
We plan for subjects who complete the Phase 1b part of the trial to be eligible to enroll into a Phase 1b revaccination trial, which we expect will start more than six months after first dosing. We plan to follow approximately 70 eligible subjects for an additional six months to monitor serious adverse events (SAEs) and evaluate persistence of antibodies. At the end of the six-month observation period (approximately 12 months after first dosing), we plan to re-administer subjects with a single dose of IVX-121 and follow those subjects for an additional six months to evaluate safety and immune responses to the booster dose. We plan to monitor subjects for solicited adverse events, unsolicited adverse events, and SAEs throughout the 28-day treatment period following revaccination.
We expect to conduct an interim analysis of the data obtained in older adults from the Phase 1b part of the trial to inform the IVX-121 dose level and formulation to be assessed in the initial IVX-A12 combination Phase 1 trial. If
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there is no clear immunologic benefit of the Alhydrogel formulation over the non-adjuvanted formulation, we will not continue to develop an Alhydrogel formulation in the combination IVX-A12 program. We are also currently evaluating alternative adjuvant formulations in preclinical studies and may assess an alternative adjuvant in the initial IVX-A12 clinical trial(s) pending outcome of the IVX-121 clinical trial, our planned clinical trial of IVX-411 and preclinical evaluation of IVX-121, IVX-241 and related candidates and different formulations of IVX-A12.
IVX-A12 Phase 1 Trial
We plan to include data from the interim analysis of the IVX-121 Phase 1/1b clinical trial in an eventual IND submission to the FDA for the IVX-A12 program. This IND submission is planned for the first half of 2022.
The planned goal of the planned Phase 1 trial of IVX-A12 will be to assess safety and immunogenicity of varying doses of IVX-A12, with and without adjuvant, in approximately 100 healthy adults aged 18-45 and 60-85 years of age. The adjuvant to be assessed will depend on preclinical data on IVX-A12 as well as clinical data on IVX-121 and IVX-411. In the planned trial, IVX-A12 will be given with a fixed IVX-121 dose and one of three dose levels of IVX-241 VLP formulated with constant adjuvant content. We expect this design will enable evaluation of the immune responses to both individual components of IVX-A12 to see if the combination of VLPs increases the reactogenicity or leads to immune interference (i.e., imbalanced immune responses to component VLPs). Our plan is to proceed dosing with cohorts receiving one- and two-dose regimens as well as formulations with or without adjuvant. We expect to follow subjects for seven months from initial dosing. Our plan is to only evaluate the combination candidate IVX-A12 in this trial, with no evaluation of IVX-241 as a monovalent candidate. We plan to confirm if the FDA agrees with the acceptability of this approach through pre-IND feedback.
IVX-A12 Phase 2 Factorial and Dose-Confirmation Trial
Following completion of the IVX-A12 Phase 1 clinical trial, we plan to initiate a Phase 2 factorial and dose-confirmation clinical trial in healthy adults 60 years of age or older. We plan to select a one- or two-dose regimen for evaluation in the Phase 2 clinical trial based on data from the IVX-A12 Phase 1 trial. Our planned Phase 2 clinical trial will be a two-part trial. We expect that the planned Part 1 will evaluate different combinations of varying concentrations of hMPV and RSV VLPs in approximately 300 older adults to assess for immunologic interference between the VLPs in IVX-A12. We expect that the planned Part 2 will evaluate a subset of formulations in approximately 250 older adults pending an interim readout from Part 1, to guide final dose selection for a subsequent Phase 2b trial. In both parts of the trial, we plan to assess safety and immunogenicity for different combinations of varying concentrations of hMPV and RSV VLPs in older adults to identify a formulation to move forward into the planned Phase 2b clinical trial. In the dose-confirmation part of the trial, we plan to also evaluate concomitant administration of commercially available quadrivalent influenza vaccine.
IVX-A12 Phase 2 Long-Term Extension Trial
We plan to monitor up to approximately 250 subjects from the Phase 2 dose-finding trial for 3-5 years following completion of the trial to assess duration of antibody persistence and long term safety.
IVX-A12 Phase 2b Proof of Concept Efficacy Trial
We intend to conduct a Phase 2b randomized observer-blind placebo-controlled global proof of concept efficacy trial in sites in both the southern hemisphere and northern hemisphere to allow for inclusion of two RSV and hMPV seasons over the course of the clinical trial. We expect that the trial will evaluate the formulation of IVX-A12 selected from the Phase 2 factorial and dose-finding trial. We expect that subjects will be randomized 1:1 to receive IVX-A12 or placebo.
Our planned trial objectives for the Phase 2b trial will include assessment of safety, immunogenicity, and efficacy against acute respiratory illness caused by either RSV or hMPV. We expect that the trial population will include adults aged 60 years or older and frail and at-risk elderly, including a subset of subjects over 85 years of age.
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IVX-411Our SARS-CoV-2 Vaccine Candidate
Overview of SARS-CoV-2
SARS-CoV-2 is a viral pathogen responsible for the coronavirus disease 2019 (COVID-19) global pandemic. As of June 2021, there were over 180 million cases and over 3.9 million deaths from COVID-19 worldwide with over 600,000 deaths in the United States alone. Rates of serious morbidity and mortality from COVID-19 are disproportionately higher in older adults as compared to other age groups, likely due to age-induced immunosenescence. Although adults aged 65 or older constitute about 17% of the United States population, over 80% of the deaths in the United States due to COVID-19 have been in this age group, as illustrated in the graph below.
U.S. COVID-19 Deaths by Age (as of June 2021)
Source: CDC, U.S. Census Bureau
Vaccines have been developed to combat this pandemic at an unprecedented pace and there are several mRNA and adenoviral vector-based SARS-CoV-2 vaccines that have been approved under emergency use authorization in the United States and several other countries. Data have been publicly released regarding different SARS-CoV-2 vaccine candidates, including protein-based vaccines, including the VLP vaccine candidate being developed by Medicago, that have shown high nAb induction with a ratio of nAb vs. human convalescent sera that was higher than those observed in independent studies of mRNA vaccine candidates (e.g., Moderna, BioNTech / Pfizer) and adenoviral vector candidates (e.g., AstraZeneca). We believe these data support continued development of VLP-based vaccines such as IVX-411 and IVX-421. In addition, rollout of vaccines has mostly been seen in developed countries with limited access to vaccines in low- and middle-income countries. As of June 2021, only 12% of the global population had received at least one dose of a SARS-CoV-2 vaccine and only 6% had been fully vaccinated. Further, development of the first wave of vaccines to fight the pandemic focused on speed rather than other critical attributes that are now important considerations for second wave vaccine candidates such as durability, potential to boost response, potential to address variant strains, ease of manufacturing and distribution, stability, and reactogenicity profile.
Coronaviruses are prone to mutation but the pace at which the SARS-CoV-2 virus has mutated is faster than many were anticipating. Some of these emerging strains appear to enhance transmission and pathogenicity, with complete replacement of the original pathogen by the emerging strains in some countries. Data has shown that some vaccines against the original SARS-CoV-2 virus strain are less immunogenic against some of the emerging variants, particularly the beta variant first identified in South Africa. Decreases in neutralizing titers against the beta strain appear to translate to lower efficacy in people who are infected with the beta variant virus. Several companies have initiated efforts to make either booster shots to supplement existing vaccines to address emerging variants or new vaccines incorporating key mutations found in variant strains. However, it remains to be seen if initial exposure to the original strain through natural infection or vaccination has resulted in a focusing of the immune system on the original strain in such a way as to interfere with the development of an immune response against the new strain, a phenomenon called original antigenic sin.
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We believe that there are still gaps in the SARS-CoV-2 vaccine landscape that need to be filled by new vaccine candidates. We believe that our vaccine technology and SARS-CoV-2 vaccine candidates have the potential to address these gaps:
∎ |
Global access to effective vaccines against variant strains: We believe that highly scalable vaccines will be needed in order to address the ongoing demand for billions of doses worldwide. We aim to rapidly develop vaccines targeting the prevalent strains to induce high nAb levels, which we believe will be able to more effectively protect against emerging variants than the first wave vaccines. |
∎ |
Reduced reactogenicity with repeat immunizations: Reactogenicity of the mRNA vaccines appears to increase with subsequent doses; we believe that in the long-term less reactogenic vaccines will be preferred, particularly if repetitive boosters are needed. |
∎ |
Ability to overcome original antigenic sin: We believe that new vaccines targeting specific key mutations in the variant SARS-CoV-2 virus strains may be less effective in individuals already exposed to the original SARS-CoV-2 strain through infection or vaccination. We further believe that variant vaccines developed using differentiated technologies, expressed viral proteins, or formulations with different adjuvants may be more successful in overcoming the original-strain immune-focused memory response present in these individuals, particularly if they are able to induce high nAb titers. |
∎ |
Ability to confer long-lasting protection: The durability of currently marketed vaccines against SARS-CoV-2 is currently unknown, with developers suggesting a potential need for annual vaccinations. We believe this drives a need for vaccines with longer duration of response and the ability to be given as repetitive boosters over time. |
IVX-411 and IVX-421 SARS-CoV-2 Vaccine Candidates
IVX-411 is our lead SARS-CoV-2 vaccine candidate that incorporates the ACE2 RBD from the SARS-CoV-2 spike (S) protein of the original virus. The RBD is a fragment of the S protein that contains several known nAb epitopes, including those that prevent viral entry, and is responsible for ~90% of the nAb titers induced following SARS-CoV-2 infection. The RBD protein in IVX-411 is genetically fused to Component A and manufactured in mammalian cells. Component A-RBD is then combined with the same Component B used for our other programs to make the fully assembled VLPs, each of which incorporates 60 copies of the monomeric RBD antigen. We have initiated our assessment of IVX-411 in the clinic in both aqueous (non-adjuvanted) and adjuvanted formulations. We have chosen to move into clinical development with Seqirus Inc.s proprietary oil-in-water adjuvant MF59 based on preclinical data supporting a robust nAb induction with oil-in-water adjuvants compared to other adjuvant types in mice and nonhuman primates.
We have also initiated development of IVX-421, an additional SARS-CoV-2 vaccine candidate that incorporates an RBD protein with critical mutations found in the beta SARS-CoV-2 virus strain. We plan to assess in preclinical studies whether IVX-421 is able to induce stronger immunogenicity against both the original and beta strains than seen with IVX-411. Pending clinical data on IVX-411 and preclinical data on IVX-421, we may incorporate IVX-421 into our clinical evaluation plan.
Our SARS-CoV-2 vaccine candidates IVX-411 and IVX-421 were designed to utilize the same VLP backbone as other candidates in our pipeline and to have the following advantages:
∎ |
Robust immunogenicity and durability: IVX-411 and IVX-421 incorporate the RBD of SARS-CoV-2 on the VLP and we believe this design has the potential to improve the functional antibody response to IVX-411 and IVX-421 as compared to many spike soluble antibody approaches. Preclinical data in mice and primates showed a robust nAb response to IVX-411 and precursor candidates. |
∎ |
Scalability and stability: Our vaccine development process leverages highly scalable recombinant protein production with well-established cell line and fermentation technologies. In addition, our VLP vaccine candidates are highly thermostable and we have designed the final drug product to be stable at two to eight degrees Celsius. We believe the potential scalability and stability of our vaccine candidates will allow for a lower cost of goods, as well as ease of scaled-up manufacturing and distribution, compared to other vaccine approaches such as mRNA vaccines. We believe both scalability and thermostability are especially important for addressing the large-scale need for billions of doses worldwide. |
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∎ |
Ability to boost: As SARS-CoV-2 vaccines generated by other technologies continue to be administered prior to rollout of our vaccine, we believe the ability to boost and sustain immune response against the prevalent strains will become increasingly important. |
∎ |
Potential to boost multiple times with same vaccine candidate (homologous boosting): our candidates are protein-based VLPs, and we have not observed interference after multiple doses in several species. We believe that IVX-411 and IVX-421 have the potential to be administered multiple times without risk of interference that has historically been seen in other approaches, such as vector-based approaches. |
∎ |
Potential to boost response from alternative vaccine technologies (heterologous boosting): We believe that protein-based vaccines, which strongly enhance nAb levels, are ideal booster vaccines for other vaccine technologies such as adenoviral vector vaccines. In addition, we believe that to overcome original antigenic sin, the heterologous vaccine regimen used for boosting will need to be distinct from the initial vaccine regimen, particularly when attempting to boost a response to a variant virus strain. As our VLP vaccine candidates presenting the RBD subunit will be combined with an oil-in-water adjuvant, we believe they are distinct from most of the other vaccines on market and may be capable of boosting response from marketed heterologous vaccine regimens. |
We have initiated a Phase 1/2 clinical trial designed to assess whether IVX-411 will be able to address what we believe are the remaining gaps in the SARS-CoV-2 vaccine landscape. The data from third-party vaccine efficacy studies conducted to date have shown a clear correlation between nAb levels and efficacy against severe disease. As such, we believe immunogenicity endpoints in early clinical trials are likely to be a good predictor of efficacy against severe disease. We believe our Phase 1/2 data will provide clear evidence regarding the immunogenicity and potential efficacy of IVX-411 in adults using a two-dose regimen.
BMGF supported work by the UW IPD to design and evaluate SARS-CoV-2 vaccine candidates. We also received a grant from BMGF to enable development of our SARS-CoV-2 program through Phase 1 clinical testing and in return for our grant funds, we have agreed to access and price commitments specific for low- and middle-income countries. As a grantee and through our participation in COVAX, we get access to certain reagents, assays, and know-how that have helped accelerate our preclinical development. To enable broad access of the SARS-CoV-2 candidate(s) in low- and middle-income countries, BMGF has also provided funding to SK Bioscience to further develop SARS-CoV-2 candidates from UW IPD through initial clinical trials. Although data from the SK Bioscience Phase 1/2 clinical trial has not yet been publicly announced, we believe that SK Biosciences recent receipt of a $173 million grant from the Coalition for Epidemic Preparedness Innovations to continue manufacturing and development of their SARS-CoV-2 candidates incorporating UW IPD VLP technology and recent IND filing to the South Korea MFDA for a Phase 3 clinical trial further validates the utility of this technology in the global vaccine effort against SARS-CoV-2.
We have a worldwide non-exclusive license to our SARS-CoV-2 candidates from the UW, with the exception of South Korea, where we have no license. This license will become exclusive in the United States, Canada, Mexico and Europe (including Switzerland and United Kingdom) starting in 2025 with maintenance of our non-exclusive rights elsewhere. SK Bioscience also has a non-exclusive license to develop SARS-CoV-2 candidates based on the UW technology. We plan to broadly distribute our vaccine to provide equitable access globally, if successful in the clinic. However, we will not move forward with a monovalent vaccine candidate that we do not believe is likely to fill a gap in the rapidly evolving landscape. We are monitoring the landscape closely, and, pending the outcome of our planned Phase 1 and 2 clinical trials we will determine whether to seek partnerships or non-dilutive financing to move one or more of our SARS-CoV-2 vaccine candidate(s) forward, combine one or more of our SARS-CoV-2 vaccine candidates with another candidate from our pipeline for a combination vaccine, or cease development of our SARS-CoV-2 vaccine candidates.
IVX-411 Preclinical Results
Summary
To date, IVX-411 and closely related precursor molecules have been tested in mice, rats, and nonhuman primates.
The immunogenicity generated in mice after vaccination with closely related precursor VLPs formulated with an oil-in-water adjuvant was durable, with nAb titers remaining as high 20-24 weeks following the boosting dose as they were two weeks post-boost. In addition, preclinical nonhuman primate data from assessment of a closely related precursor candidate with several different adjuvant formulations showed induction of robust nAb titers well in excess of titers seen in human convalescent sera, as well as protection from viral challenge.
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IVX-411 Preclinical Data in Nalve Mice
To evaluate the potential of IVX-411 to stimulate an immune response to the original and beta variant SARS-CoV-2 strains, BALB/c mice were administered IVX-411 with and without MF59. All animals were administered two doses three weeks apart and blood was collected two weeks following the second dose for measurement of neutralizing titers against the original and beta strains.
As shown in the figure below, IVX-411 adjuvanted with MF59 induced robust nAb responses that were higher than those observed for IVX-411 alone, although the results were not statistically significant, and induced nAb titers (mean nAb titer of 26,979 across all animals) that were higher than those observed in human convalescent serum (mean nAb titer of 3,492 across all runs of a single HCS sample). In addition, the nAb titers induced by IVX-411 adjuvanted with MF59 against the beta variant (mean nAb titer of 25,699 across all animals) were similar to nAb titers against the original strain (mean nAb titer of 26,979 across all animals), which was in contrast to human convalescent sera, which showed a significant drop in nAb titers between the original strain (mean nAb titer of 3,492 across all runs of a single HCS sample) and the beta strain (mean nAb titer of 154 across all runs of a single HCS sample).
IVX-411 Safety Data
We have completed a GLP toxicology repeat intramuscular dose study in rats to support regulatory submissions and initiation of our ongoing and planned Phase 1/2 clinical trials in Australia, United States, and Europe. The study evaluated both injection site and systemic reactions to IVX-411, including non-adjuvanted and adjuvanted formulations. No test article-related effects were seen following administration of IVX-411 on mortality, clinical observations, ophthalmic observations, body weights, food consumption, or body temperature. No observed effects were considered adverse.
IVX-411 Stability
We have observed IVX-411 to be highly thermostable in studies conducted to date. As shown in the figure below, IVX-411 stored at five degrees Celsius was observed to be very stable for up to four months, the longest timepoint tested to date, as measured by its relative potency assessed against a fresh reference standard.
CONDITION |
TIME |
RELATIVE POTENCY
(ACE2 BINDING) |
||
n/a |
T=0 | 103.8% | ||
5°C |
2 Months | 94.7% | ||
3 Months | 81.4% | |||
4 Months | 97.0% |
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SARS-CoV-2 Vaccine Candidates Clinical Development Plan
We initiated a Phase 1/2 clinical trial in Australia in June 2021. The trial is designed to evaluate the safety and immunogenicity of IVX-411 as primary and booster vaccines. There are two parts to the trial. Part 1 is a Phase 1 assessment of primary vaccination with IVX-411 in adults 18-69 years of age who have not been previously exposed to SARS-CoV-2 (seronegative), and Part 2 will be a Phase 2 evaluation of IVX-411 booster vaccination in adults previously exposed through SARS-CoV-2 vaccination (seropositive). IVX-411 will be administered as one or two doses, either unadjuvanted or formulated with MF59 adjuvant. For groups receiving two doses, administration of doses will be 28 days apart.
Phase 1/2 Clinical Trial Design:
The Phase 1/2 clinical trial is a randomized, placebo-controlled observer-blind dose-escalation study for safety and immunogenicity of two intramuscular doses of IVX-411. In Parts 1 and 2, six formulations of IVX-411 will be tested, including three dose levels each to be tested with and without MF59 adjuvant. The trial is being conducted in Australia and the regulatory package required for the commencement of the Phase 1 part of the trial was submitted through the Australian Clinical Trial Notification procedure. The first subject was dosed in June 2021. Interim data from subjects dosed with IVX-411 in Parts 1 and 2 are expected to be available in the first half of 2022. Based on interim results from this trial we plan to select a more limited number of formulations to advance in clinical development and to dose an additional approximately 150 subjects with IVX-411, either aqueous or MF59-adjuvanted.
We are also planning a Phase 2 clinical trial in previously infected subjects. We plan to assess aqueous and MF59 adjuvanted formulations using the optimal dose levels identified in our Phase 1/2 clinical trial. We plan to recruit approximately 150 subjects aged 18-75 who have previously been infected with SARS-CoV-2 (either original or variant strains). In this planned study, subjects will be expected to receive a single dose of IVX-411.
We expect that analysis of interim data from the Phase 1/2 and Phase 2 clinical trials, our preclinical data on IVX-421, the state of the vaccine landscape for SARS-CoV-2, and the regulatory guidelines on clinical development of SARS-CoV-2 vaccines will guide our future development efforts for IVX-411 and IVX-421.
Our Early-Stage Programs
We are exploring several other viral pathogens and their respective market needs to potentially incorporate into VLP vaccine candidates that may be added to our pipeline. We review technical feasibility, demonstrated market need and potential and clinical program design and timelines with our outside scientific and commercial advisors and board of directors before selecting new vaccine programs for development.
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Competition
Overview
Our industry is highly competitive and subject to rapid and significant regulatory and technological change. The current vaccine market is concentrated among a few key global biopharmaceutical companies including GlaxoSmithKline, Merck, Sanofi, Pfizer, and CSL Bering, which together account for the majority of vaccine sales globally. Other pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions are also active in the vaccine market given the continuing global need for both existing and new vaccines. The large markets for respiratory virus vaccines make them attractive targets for new vaccines and we face competition from numerous vaccine developers. While we believe that our technology, strategy, and our employee and consultant knowledge and experience can provide us with competitive advantages, many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do.
The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, reactogenicity, safety, durability, convenience, and price, the number of other vaccines on the market in the specific target indications, the recommendation of vaccines by policy makers, the inclusion of vaccines on the national immunization schedules, and the availability of reimbursement from government and other third-party payors.
VLP-Based Vaccines
A number of pharmaceutical and biotechnology companies are developing VLP vaccine candidates. Many of these candidates are enveloped vaccines that require budding from the host cell membrane which can result in inclusion of host cell protein components leading to manufacturing complexities, such as additional purification needs. This includes, but is not limited to, VBI Vaccines, Medicago, and Artes Biotechnology. Other technologies incorporate the antigen to naturally occurring viral VLP scaffolds which may be less flexible and suitable for presentation of complex antigens; this includes, but is not limited to, SpyBiotech and VLP Therapeutics. We believe that our VLP technology allows for incorporation of a broad and complex array of viral antigens and targets as well as ease of manufacturing and scale-up, which may allow us to compete with other VLP vaccine candidates in development.
RSV and hMPV Vaccines for Older Adults
There is no vaccine approved for prevention of disease due to RSV infections or for prevention of disease due to hMPV infections in any population, including older adults. We are aware of companies currently developing vaccines against RSV for use in older adults, including GlaxoSmithKline, Pfizer, Bavarian Nordic, Janssen, Moderna, Codagenix, and Meissa. As far as we are aware, no company has a VLP-based RSV vaccine in clinical trials. In addition, as far as we are aware, there are no companies with a vaccine in clinical development against hMPV for use in older adults, nor are there any companies with a vaccine in clinical development against the combination of RSV and hMPV for use in older adults. However, Moderna is currently conducting an early-stage pediatric trial of an hMPV/parainfluenza combination mRNA vaccine candidate and may combine this with their RSV vaccine candidate and expand into the older adult population. We believe the induction of nAbs is key for both RSV and hMPV vaccine efficacy in older adults and that multivalent VLP display of the prefusion RSV and hMPV antigens on our VLP candidates will induce a stronger nAb response than other vaccine technologies.
SARS-CoV-2 Vaccines
We expect that, if approved, IVX-411 and IVX-421 will compete with any currently approved vaccines against SARS-CoV-2. There are numerous SARS-CoV-2 vaccines marketed under emergency use authorization, including, but not limited to, those manufactured by Moderna, Pfizer/BioNTech, AstraZeneca, and Janssen. In addition to the marketed vaccines, we are aware of numerous SARS-CoV-2 vaccines in clinical development, including VLP approaches. We believe that our vaccine candidates have the potential to be differentiated and we plan to monitor the market closely and evaluate our Phase 1 and 2 clinical trial data to determine positioning of any future candidate of ours SARS-CoV-2 candidate in the rapidly evolving vaccine landscape.
Manufacturing
We do not own or operate, and currently have no plans to establish, any large-scale or current Good Manufacture Practices (cGMP) manufacturing facilities. To date, we have successfully worked in conjunction with our third-party manufacturers to complete development and cGMP manufacturing campaigns for key components, VLP drug substance, and formulated drug product for all of our vaccine candidates. We are working with our existing manufacturers to scale up our manufacturing capabilities to support our clinical plans.
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To date, we do not own or manufacture adjuvants and for vaccine candidates that we move forward as adjuvanted vaccines, we must rely on non-proprietary commercially available adjuvants or access to proprietary adjuvants through license or supply agreements with adjuvant manufacturers.
We believe our outsourced manufacturing strategy allows us to maintain a more efficient infrastructure by eliminating the need to for us to invest in our own manufacturing facilities, equipment, or personnel. This enables us to focus our time, expertise, and resources on the development of our vaccine candidates.
Commercialization Plan
Our current development plans focus on development and regulatory submissions in the United States and Europe. We currently have no sales, marketing, or commercial product distribution capabilities and have no experience as a company commercializing products. We intend to build the necessary infrastructure and capabilities over time for the United States and Europe, and potentially other regions, following further advancement of our product candidates. We may work in partnership with one or more pharmaceutical partners for certain vaccine candidates, for certain patient populations, or for certain geographies where we believe that others capabilities and resources may be ideally suited for development, commercialization, or distribution of our vaccine candidates.
Intellectual Property
We strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining rights in patents intended to cover our future vaccine candidates 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. We seek to protect our proprietary position by, among other methods, filing or in-licensing U.S. and foreign patents and patent applications related to technology, inventions and improvements that are important to the development and implementation of our business. We also rely on our agreements with UW for intellectual property rights that are important or necessary for the development of our vaccine candidates. We also rely, in some circumstances, on trade secrets and know-how to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.
For each vaccine candidate we develop and plan to commercialize, as a normal course of business, we intend to pursue composition and preventative use patents. We also seek patent protection with respect to novel methods of manufacture, formulations, or antigen combinations. We have sought and plan to continue to seek patent protection, either alone or jointly with our collaborators, as our license agreements may dictate.
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.
In summary, our patent estate includes issued patents and patent applications with claims directed to our VLP platform and our vaccine candidates. On a worldwide basis, our patent estate for our VLP platforms includes three U.S. patents, with pending continuation applications, and two pending international patent applications; more than 15 patent applications jointly covering our RSV and hMPV products specifically; more than 10 patent applications covering other infectious disease targets; a non-exclusive license from UW to a Patent Cooperation Treaty (PCT) application covering coronavirus, that will become exclusive in the United States, Canada, Mexico and Europe (including Switzerland and United Kingdom) starting in 2025; and an option that expires in 2022 to license an international patent application directed to influenza.
More specifically, we have exclusively licensed our main VLP icosahedral platform (as well as several alternative platforms) from UW. Two issued U.S. patents that will expire in 2035 and 2036 cover our platform as compositions of matter: polypeptides and the nucleic acids encoding them, respectively.
Further, a pending U.S. patent with an expected expiry of 2034, also licensed from UW, has claims directed to the computational methods used to develop these and other two-component, symmetrical nanoparticles / VLPs. A parent
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application has already issued as a U.S. patent with an adjusted expiration date in 2036; it claims several tetrahedral nanoparticle / VLP platforms as compositions of matter. These blocking patent rights are joined by an issued U.S. patent and its continuation application, having actual or expected expirations in 2038, that cover various alternative icosahedral nanoparticles. We intend to continue to work with UW on development of further nanoparticle platforms and may have the opportunity to license them as appropriate.
For our RSV product, composition-of-matter and method-of-use patent rights are provided by a patent family being prosecuted in the United States and Europe, as well as various jurisdictions in Australia, Brazil, Canada, China, Hong Kong, Indonesia, Israel, India, Japan, South Korea, Mexico, Malaysia, Philippines, Russia, Singapore, Thailand, Vietnam and South Africa. Any patents that ultimately issue from this patent family are expected to expire in 2038. UWs inter-institutional agreements (IIA) with the Institute for Research in Biomedicine in Bellinzona, Switzerland conferred on UW the right to license this patent family to us.
The antigenic portion of our RSV product is protected by patent rights to stabilization of the antigen in a prefusion conformation, which are assigned to the U.S. Department of Health and Human Services (HHS), based on inventions made at the Vaccine Research Center of the National Institute for Allergy and Infectious Diseases (NIAID). We have non-exclusively licensed two issued U.S. patents directed to the compositions of matter, which will expire in 2034. The same license covers one issued U.S. patent directed to compositions of matter covering the antigenic portion of our hMPV candidate, this patent will expire in 2035. The specific mutations found in our hMPV product are also protected by patent rights based on inventions made at the University of Texas. We have exclusively (for all vaccine fields other than mRNA) licensed one pending patent application directed to composition of matter, which if issued will expire in 2041. We further intend to pursue company-owned patent rights on improvements underlying our hMPV product, with such patent rights potentially extending the term of exclusivity until at least 2041.
HHS and the Institute for Research in Biomedicine in Bellinzona, Switzerland jointly own a U.S. patent on conformationally stabilized hMPV antigens, which we have non-exclusively licensed, subject to an IIA between HHS and the Institute for Research in Biomedicine. This patent expires in 2035. A continuation application and corresponding European patent application are currently pending.
Our coronavirus product is protected by patent rights from UW, including a pending PCT application, for which we have a non-exclusive license that will become exclusive in the United States, Canada, Mexico and Europe (including Switzerland and United Kingdom) starting in 2025.
We may choose to pursue vaccine products directed to influenza and have, therefore, obtained an option to non-exclusive patent licenses from UW and HHS.
Further patent protected related to other indications is provided by a family of more than 10 patent applications filed in the United States and foreign jurisdictions, which is also exclusively licensed in relevant fields from UW. Any patents that ultimately issue from this patent family are expected to expire in 2039. Foreign jurisdictions where patent applications are pending include Australia, Canada, China, Columbia, Europe including the United Kingdom, Indonesia, India, South Korea, Russia, Vietnam and South Africa.
We continue to prepare and file provisional patent applications directed to vaccine composition improvements, manufacturing methods, and formulations, as appropriate.
For more information regarding our license agreements with UW and the U.S. Department of Health and Human Services, please see Material Agreements.
Generally, we submit patent applications directly with the USPTO as provisional patent applications. Provisional applications for patents were designed to provide a lower-cost first patent filing in the United States. Corresponding non-provisional patent applications must be filed not later than 12 months after the provisional application filing date. The corresponding non-provisional application benefits in that the priority date(s) of the patent application is/are the earlier provisional application filing date(s), and the patent term of the finally issued patent is calculated from the later non-provisional application filing date. This system allows us to obtain an early priority date, add material to the patent application(s) during the priority year, obtain a later start to the patent term and to delay prosecution costs, which may be useful in the event that we decide not to pursue examination in an application. 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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We file U.S. non-provisional applications and PCT applications that claim the benefit of the priority date of earlier filed provisional applications, when applicable. The PCT system allows a single application to be filed within 12 months of the original priority date of the patent application and to designate all of the 153 PCT member states in which national patent applications can later be pursued based on the international patent application filed under the PCT. The PCT searching authority performs a patentability search and issues a non-binding patentability opinion which can be used to evaluate the chances of success for the national applications in foreign countries prior to having to incur the filing fees. Although a PCT application does not issue as a patent, it allows the applicant to seek protection in any of the member states through national-phase applications.
At the end of the period of two and a half years from the first priority date of the patent application, separate patent applications can be pursued in any of the PCT member states either by direct national filing or, in some cases by filing through a regional patent organization, such as the European Patent Organization. The PCT system delays expenses, allows a limited evaluation of the chances of success for national/regional patent applications and enables substantial savings where applications are abandoned within the first two and a half years of filing.
For all patent applications, we determine claiming strategy on a case-by-case basis. Advice of counsel and our business model and needs are always considered. We file patents containing claims for protection of all useful applications of our proprietary technologies and any products, as well as all new applications and/or uses we discover for existing technologies and products, assuming these are strategically valuable. We continuously reassess the number and type of patent applications, as well as the pending patent claims to ensure that maximum coverage and value are obtained for our processes and compositions, given existing patent office rules and regulations. Further, claims may be modified during patent prosecution to meet our intellectual property and business needs.
We recognize that the ability to obtain patent protection and the degree of such protection depends on a number of factors, including the extent of the prior art, the novelty and non-obviousness of the invention and the ability to satisfy the enablement requirement of the patent laws. The patent positions of therapeutic companies like ours are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted or further altered even after patent issuance. Consequently, we may not obtain or maintain adequate patent protection for any of our future product candidates or for our platform technology. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
In addition to patents, we have filed for trademark registration at the USPTO for Icosavax and our company logo. Furthermore, we rely upon trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators, employees and consultants and invention assignment agreements with our employees. We also have confidentiality agreements or invention assignment agreements with our commercial partners and selected consultants. 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. 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 the proprietary rights of third parties. In addition, we have licensed, or expect to be able to license on commercially reasonable terms, rights under proprietary technologies of third parties to develop, manufacture and commercialize specific aspects of our future products and services. It is uncertain whether the issuance of any third party patent would require us to alter our development or commercial strategies, alter our processes, obtain licenses or cease certain activities. The expiration of patents or patent applications licensed from third parties or 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 technology may have a material adverse impact on us. If third parties prepare and file patent applications in the United States that also claim
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technology to which we have rights, we may have to participate in interference proceedings in the USPTO to determine priority of invention.
For a more comprehensive discussion of the risks related to our intellectual property, please see Risk FactorsRisks Related to Our Intellectual Property.
Material Agreements
Agreements with University of Washington
License Agreement with respect to RSV and Other Pathogens
In June 2018, we entered into a license agreement with UW as amended in July 2019 and November 2020 (UW License Agreement). Pursuant to the UW License Agreement, UW granted to us an exclusive, worldwide, royalty-bearing, sublicensable license under certain UW patents to make, use, sell, offer to sell, import, and otherwise exploit any product covered by the licensed patents, or licensed products, for the prophylactic and/or therapeutic treatment of RSV infection and five other infectious diseases. UW also granted us a non-exclusive license to use certain know-how related to the licensed patents. The licensed patents and know-how generally relate to computationally designed nanoparticles and vaccines based upon such designs, and relate to our proprietary two-component virus-like-particle technology. As of June 2021, the UW License Agreement is applicable to our IVX-121, IVX-241, and IVX-A12 programs.
The rights granted to us by UW are subject to certain rights of UW, the United States federal government, and the Howard Hughes Medical Institute (HHMI). UW retained rights under the licensed patents for research and educational purposes and for UW to comply with its obligations under applicable laws for federally funded inventions. The federal government has (i) a worldwide, nonexclusive, nontransferable, irrevocable, paid-up license to the licensed patents, (ii) march-in rights exercisable if public health crises so demand, and (iii) to the extent required by Title 35, Section 204 of the United States Code, a requirement that for any products licensed for use in the United States, that these products be substantially manufactured in the United States, because the inventions covered by the licensed patents arose in whole or in part from federal funding. HHMI has a paid-up, non-exclusive, sublicensable, irrevocable license for research use owing to the involvement of HHMI employees in developing the inventions of the licensed patents. HHMIs right to sublicense is limited to non-profit and governmental entities.
Owing to grant funding provided to UW by BMGF in connection with the licensed patents and know-how, UW granted a humanitarian license and made certain global access commitments with respect to the funded developments for three of the six pathogens (excluding RSV and two others) for humanitarian purposes. UW may require us to grant sublicenses to third parties to make such licensed developments available at an affordable price in developing countries, or if we do not offer such sublicenses on reasonable terms, UW may grant such licenses directly to third parties to enable affordable access in developing countries. Currently, our hMPV vaccine program is the only active program subject to this UW humanitarian license to BMGF.
We are obligated to use commercially reasonable efforts to diligently develop, manufacture, and commercialize vaccines incorporating the licensed products, and to achieve specified development and regulatory milestone events, including, with respect to IVX-121, initiating clinical trials of specified phases by certain dates between 2022 and 2026 and making first commercial sale by a specified date thereafter, and with respect to IVX-241 and IVX-A12, conducting activities necessary to enable clinical trials and initiating clinical trials of specified phases, in each case, by certain specified dates between 2022 and 2028, and making first commercial sale by a specified date thereafter. If we are unable to meet our diligence obligations and cannot agree with UW to modify such obligations or do not cure by meeting such obligations, then UW may terminate the UW License Agreement in whole, or in part on a pathogen by pathogen basis.
In connection with the execution of the UW License Agreement, we issued 192,276 shares of our common stock to UW in August 2018. We are required to pay an annual license maintenance fee in the mid four figures. We are required to pay UW development and regulatory milestone payments up to an aggregate amount of three hundred and fifty thousand dollars for each of the six licensed product candidates. We are also required to pay UW commercial milestone payments of one million dollars for each of the six licensed product candidates upon reaching a certain net sales threshold. We are also required to pay UW a fixed low single digit percentage royalty on net sales
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of licensed products, subject to certain reductions if we are required to pay for third-party intellectual property rights in order to commercialize the licensed products, and after first commercial sale of a licensed product, we must meet a certain minimum royalty requirement in the low to mid five figures range on an annual basis. If we sublicense our rights under the UW License Agreement, we are obligated to pay UW a mid-single digit to mid-double digit percentage of all sublicensing revenue received, depending on when we grant such sublicenses in relation to the development stage of the licensed product, and adjusted for any development expenses and development or regulatory milestone payments already made. As of June 15, 2021, we have paid UW approximately $290,000 in aggregate under the UW License Agreement.
The UW License Agreement will remain in effect until all licensed patent rights have terminated and all obligations due to UW have been fulfilled. The last-to-expire licensed patents, if issued, is expected to expire in 2041, subject to any adjustment or extension of patent term that may be available. UW can terminate the UW License Agreement if we breach or fail to perform one of our material duties under the UW License Agreement and our unable to remedy the default within an agreed upon time period that can be extended by UW. We can terminate the UW License Agreement at will with prior written notice to UW. We can also terminate certain of our licensed rights through an amendment to the UW License Agreement.
Option and License Agreement with Respect to SARS-CoV-2
In July 2020, we entered into an option and license agreement with UW, as amended in August 2020 and May 2021 (UW Option and License Agreement). Pursuant to the UW Option and License Agreement, UW granted to us a non-exclusive, worldwide (excluding South Korea), sublicensable license under certain UW patents to make, use, sell, offer to sell, import, or otherwise exploit any product covered under the licensed patents for the prophylactic and/or therapeutic treatments of SARS-CoV-2 infection. UW also granted us a non-exclusive, worldwide license to use certain know-how related to the licensed patents. The licensed patents and know-how generally relate to computationally designed nanoparticles and vaccines based upon such designs, and used in our proprietary two-component virus-like-particle technology. As of June 2021, the UW Option and License Agreement is applicable to our IVX-411 and IVX-421 programs.
The license included, and we have since exercised, an option to obtain an exclusive license under the UW Option and License Agreement for the United States, Canada, Mexico, and the countries of the European Patent Organization (including Switzerland and the United Kingdom) starting in 2025. There was no option exercise fee. However, the option right is subject to certain rights of the United States federal government, UW, BMGF, and HHMI, as described above in connection with the UW License Agreement.
We are required to pay UW a low single digit percentage royalty on net sales of licensed products, subject to certain reductions if we are required to pay for third party intellectual property rights in order to commercialize the licensed products. However, we are not required to pay royalties on net sales of any licensed products under the UW Option and License Agreement if we are already required to pay royalties on such net sales under the UW License Agreement on, for example, a combination product. As of June 15, 2021, we have paid UW approximately $20,000 in aggregate under the UW Option and License Agreement.
Our diligence obligations under the UW Option and License Agreement and the parties rights to terminate the UW Option and License Agreement are substantially the same as the analogous obligations and rights under the UW License Agreement. Specifically, with respect to IVX-411, our obligations include initiating clinical trials of specified phases by certain dates between 2022 and 2025 and obtaining regulatory approval by a specified date thereafter. We incorporate the descriptions above regarding termination rights by reference. The last-to-expire relevant patents under the UW Option and License Agreement, if issued, are expected to expire in 2041, subject to any adjustment or extension of patent term that may be available.
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NIH Patent License Agreement
On June 28, 2018, we and the NIAID of the NIH entered into a non-exclusive license agreement for certain intellectual property rights and biological materials, as amended on September 10, 2018 and September 9, 2020 (NIH Agreement). Pursuant to the NIH Agreement, NIAID granted us a worldwide, nonexclusive, sublicensable license to certain patent rights, data, information, and materials directed to immunogens and antibodies and components and processes thereof relating to RSV and hMPV to allow us to make, use, sell, offer to sell, and import adjuvanted or non-adjuvanted vaccines that combine technology covered by the licensed patent rights with our proprietary protein-based nanoparticle technology, for the prevention, cure, amelioration or treatment of RSV and hMPV infections in humans, for administration alone or in combination with one or more other vaccines, and specifically excluding nucleic acid-based vaccines. NIAID also transferred to us certain biological materials relating to the foregoing for our development purposes. As of June 2021, the NIH Agreement is applicable to our IVX-121, IVX-241, and IVX-A12 programs.
Pursuant to the NIH agreement, we are required to use commercially reasonable efforts to develop the licensed products using the licensed processes to make the licensed products available to the United States public on reasonable terms, including by adhering to a commercial development plan and meeting specified benchmarks with regards to specified deadlines for regulatory filings, initiation of clinical trials, and gaining regulatory approval for the licensed products, in each case by certain specified dates between 2022 and 2032. To the extent required by Title 35, Section 204 of the United States Code, we agreed to manufacture substantially in the United States all licensed products that are to be used or sold in the United States, to make reasonable quantities of the licensed product, if commercialized, available to patient assistance programs in the United States, to develop educational materials relating to the licensed product, and to supply reasonable quantities of the licensed products made by the licensed processes to NIAID for research, education and display purposes.
In consideration of the rights granted under the NIH Agreement, we paid NIAID a one-time upfront payment in the low six figures and amendment issue fees in the high five figures. We are required to make tiered, low single-digit percentage royalty payments on specified portions of annual net sales of licensed products outside of least developed countries, subject to certain specified reductions if we are required to pay royalties to third parties in order to commercialize the license products. We are required to make aggregate development and regulatory milestone payments of up to $1.15 million for the approval of the first indication for a licensed product, up to $650,000 for the approval of the second indication for a licensed product, up to $375,000 for the approval of the third indication for a licensed product, and $50,000 for each subsequent indication. We are further required to make sales milestone payments upon achieving certain aggregate net sales thresholds for all licensed products of up to $6.5 million in aggregate. We are also required to pay NIAID a mid-single to low double-digit percentage of any sublicensing revenue we receive, depending on when we grant such sublicense in relation to the development stage of the licensed product and the number of indications that we sublicense. Additionally, our payment obligations to NIAID are subject to annual minimums ranging from low-mid five figures to low six figures depending on the year and commercialization stage. As of June 15, 2021, we have paid NIAID approximately $325,000 in aggregate under the NIH Agreement.
The NIH Agreement will expire upon the expiration of the last-to-expire licensed patent. NIAID may terminate the agreement for our uncured material breach, our insolvency or bankruptcy. Further, NIAID has the right to terminate or modify the NIH Agreement if (i) we do not execute the commercial development plan, (ii) we do not take effective steps to develop the licensed products to make them available for the public on reasonable terms, (iii) we do not achieve specified benchmarks, (iv) we do not keep at least one licensed product or process available to the public after commercial use commences, (v) to the extent required to do so under Title 35, Section 204 of the United States Code, (vi) we do not receive a U.S. manufacturing waiver from NIAID, NIH and do not justify a failure to manufacture the licensed products substantially in the United States, if intending to use in the United States (vii) we do not reasonably satisfy the public use requirements specified under federal regulations, or (viii) we willfully make a false statement to or omit a material fact from NIAID in connection with the license application and progress reports. We have the unilateral right to terminate the NIH Agreement in its entirety or in any country with prior written notice to NIAID.
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Patent License Agreement with the University of Texas at Austin
In June 2021, we entered into a patent license agreement (the UT License Agreement) with the University of Texas at Austin (UT). Pursuant to the UT License Agreement, we received an exclusive, worldwide, sublicensable license, under certain UT patent rights and know-how relating to human metapneumovirus (hMPV) antigen to manufacture, develop, use, sell, import, and otherwise exploit all vaccines covered by such patents or incorporating such know-how, except for mRNA-based vaccines. Our rights and obligations under the UT License Agreement, are subject to certain U.S. government rights and UTs retained rights under the licensed patent rights for academic or non-commercial publication, manufacture, and use, including sublicensable rights to academic and non-profit institutions. As of June 2021, the UT License Agreement is applicable to our IVX-241 and IVX-A12 programs.
Under the UT License Agreement, we are required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products, including maintaining a reasonably funded active research, development, manufacturing, regulatory, marketing or sales program, as applicable and necessary to commercialize the licensed products, and in each case by certain specified dates between 2021 and 2030. In consideration for the rights granted to us under the UT License Agreement, we are required to pay UT an annual license fee, escalating from low to mid five figures dollars, until the first sale of a licensed product. There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for a licensed product in the future, with potential payments for such future development, regulatory, and sales-based milestones in the aggregate in the mid-single figure million dollars. Additionally, we have agreed to pay UT low single-digit percentage royalties on net sales of all licensed products, with a reduced royalty rate if the licensed product expresses more than one unique antigen or if we are required to pay royalties to a third party for rights to such third partys intellectual property in order to commercialize the licensed product. Our royalty payment obligations are subject to specified minimums in the mid-five to low-six figure dollars that are creditable to royalties owed. If we sublicense our rights under the UT License Agreement, we are obligated to pay UT a mid-single digit to low-mid-double digit percentage of all non-royalty sublicensing revenue received, depending on when we grant such sublicenses in relation to the development stage of the licensed product. We are also required to pay UT low six figure dollars if we assign the UT License Agreement to a third party. As of June 15, 2021, we have paid UT approximately $30,000 in aggregate under the UT License Agreement.
The UT License Agreement will continue until the expiration of the last-to-expire licensed patent. We have the right to terminate the UT License Agreement by providing UT with prior written notice. UT may terminate the UT License Agreement in its entirety, or partially terminate the licensed patent rights, narrow the vaccine field, reduce the territory, or convert the license from exclusive to non-exclusive if we: (i) fail to meet our payment obligations, (ii) commit an uncured breach, (iii) commit three or more cured breaches within a specified time period, (iv) challenge the validity, enforceability, or scope of the licensed patent rights, or (v) undergo certain insolvency-related events.
Agreements with the Bill & Melinda Gates Foundation
On September 24, 2020, we entered into a grant agreement (the Grant Agreement) with BMGF relating to our development of a COVID-19 vaccine. Under the Grant Agreement, BMGF provided funding to us to (i) assemble select components into a COVID-19 vaccine and perform related product fill and finish, (ii) develop regulatory submission-enabling data regarding the COVID-19 vaccine, and (iii) conduct a Phase 1 clinical trial to assess safety and immunogenicity of the COVID-19 vaccine in healthy adults and older adults, which we refer to collectively as the Funded Developments. Pursuant to the Grant Agreement, we granted BMGF a nonexclusive, perpetual, royalty-free, fully paid up, sublicensable humanitarian license to make, use, sell, offer to sell, import, distribute, or otherwise exploit the Funded Developments to provide people most in need within developing countries with access at an affordable price to the Funded Developments and to support the U.S. educational system and public libraries. We and BMGF may agree to modify or terminate the humanitarian license if we can demonstrate to BMGFs satisfaction that global access can be best achieved with modifications or termination of the humanitarian license. As of June 2021, the Grant Agreement is applicable to our IVX-411 program.
In connection with the Grant Agreement, we entered into a Global Access and Price Commitment Agreement (the GACA) with BMGF on February 17, 2021, which is incorporated into the Grant Agreement. Under the GACA, we agreed to certain global access and price commitments regarding the COVID-19 vaccine we develop with the funding under the Grant Agreement. In addition, we are required to use reasonable and diligent steps to publish results of the project in one or more peer reviewed journals or in a form available to the interested public. In the event we
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successfully complete any Phase 1 clinical trials, we are obligated to take reasonable steps to continue further development, manufacture, and/or distribution of such COVID-19 vaccine. If development and commercialization continue beyond the Phase 1 trials, we will be required to pursue regulatory approvals and WHO prequalification of such COVID-19 vaccine. We also committed to price such COVID-19 vaccine no higher than a certain percentage rate above the cost of goods sold when selling such COVID-19 vaccine to public sector purchasers for use in select Global Alliance for Vaccines and Immunization (GAVI)-eligible and low to low-middle income countries. For a period commencing with the first supply of such COVID-19 vaccine to a public sector purchaser, we will also ensure annual volume commitments of such COVID-19 vaccine to these countries at a mutually agreed upon percentage of our total annual doses.
In the event we fulfill all the global access commitments and if through no fault of ours or our manufacturing or commercial partner(s) there is insufficient demand to sell an agreed upon percentage of our total doses of such COVID-19 vaccine, then the price and volume commitments will terminate beginning with the next annual period and we will be required to meet with BMGF for good faith discussions regarding the remaining annual periods. Conversely, if demand outstrips our supply capacities, then we will be required to have good faith discussions with BMGF about increased funding to meet the demand. If no agreement is reached, we will be required to provide adequate technology transfer and a non-exclusive license to BMGF to the Funded Developments and our background technology to allow for continued use of such COVID-19 vaccine in such eligible countries for charitable purposes.
If we are unable to continue development past Phase 1 trials, if requested by BMGF, we will be required to cooperate in good faith in making such Funded Developments and our background technology available to BMGF, assign an accompanying supply agreement to BMGF, and provide adequate technology transfer to continue development of such COVID-19 vaccine and enable its use in such eligible countries for charitable purposes.
The Grant Agreement will expire in March 2022 unless terminated earlier by BMGF. BMGF can terminate the Grant Agreement, or suspend, discontinue, or modify the grant payments if (i) BMGF is not reasonably satisfied with our progress on the funded project, (ii) there are significant changes to our leadership or other factors that BMGF believes may threaten the funded projects success, (iii) we undergo a change of control, (vi) there is a change to our tax status, or (v) we fail to comply with the terms of the Grant Agreement.
Government Regulation and Product Approval
The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
U.S. Biologics Regulation
In the United States, biological products, or biologics, such as vaccines are subject to regulation under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, and other federal, state, local and foreign statutes and regulations. The process required by the FDA before biologics may be marketed in the United States generally involves the following:
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completion of preclinical laboratory tests and animal studies performed in accordance with the FDAs Good Laboratory Practice requirements (GLPs); |
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submission to the FDA of an IND, which must become effective before clinical trials may begin; |
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approval by an institutional review board (IRB) or ethics committee at each clinical site before the trial is commenced; |
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performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic product candidate for its intended use; |
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preparation of and submission to the FDA of a biologics license application (BLA), after completion of all pivotal clinical trials and other necessary studies; |
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satisfactory completion of an FDA Advisory Committee review, if applicable; |
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a determination by the FDA within 60 days of its receipt of a BLA to file the application for review; |
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satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP, and to assure that the facilities, methods and controls are adequate to preserve the biological products continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices (GCPs); and |
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FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States. |
Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical trials. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical trials and clinical study results to public registries, including clinicaltrials.gov.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. |
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Phase 2The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. |
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Phase 3The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at |
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multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. |
In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may also be made a condition to approval of the BLA. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
BLA Submission and Review by the FDA
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, preclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the products chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by independent investigators. The submission of a BLA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies.
Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the FDA accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. Once a BLA has been accepted for filing, the FDAs goal is to review standard applications within ten months after the filing date, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review process may also be extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the products continued safety, purity and potency. The FDA may also convene an advisory committee to provide clinical insight on application review questions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter (CRL). An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A CRL will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
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If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy (REMS) to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy implemented to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-market studies and surveillance to further assess and monitor the products safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates. For example, the fast track program is intended to expedite or facilitate the process for reviewing product candidates that are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product candidate and the specific indication for which it is being studied. The sponsor of a fast track product candidate has opportunities for more frequent interactions with the applicable FDA review team during product development and, once a BLA is submitted, the product candidate may be eligible for priority review. A fast track product candidate may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.
A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product candidate can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.
Any marketing application for a drug or biologic submitted to the FDA for approval, including a product candidate with a fast track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval. A BLA is eligible for priority review if the product candidate is designed to treat a serious or life-threatening disease or condition, and if approved, would provide a significant improvement in safety or effectiveness compared to available alternatives for such disease or condition. For original BLAs, priority review designation means the FDAs goal is to take action on the marketing application within six months of the 60-day filing date (as compared to ten months under standard review).
Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical trials to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing studies or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.
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Fast track designation, breakthrough therapy designation, priority review, and accelerated approval do not change the standards for approval but may expedite the development or approval process. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
Emergency Use Authorization
The Commissioner of the FDA, under delegated authority from the Secretary of HHS may, under certain circumstances in connection with a declared public health emergency, allow for the marketing of a product that does not otherwise comply with FDA regulations by issuing an EUA for such product. Before an EUA may be issued by HHS, the Secretary must declare an emergency based a determination that public health emergency exists that effects or has the significant potential to affect, national security, and that involves a specified biological, chemical, radiological, or nuclear agent or agents, or a specified disease or condition that may be attributable to such agent or agents. On February 4, 2020, the HHS Secretary determined that the novel coronavirus presented a public health emergency that has a significant potential to affect national security or the health and security of U.S. citizens living abroad and declared that circumstances existed justifying the authorization of emergency use biological products during the COVID-19 pandemic.
In order to be the subject of an EUA, the FDA Commissioner must conclude that, based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating, or preventing a disease attributable to the agents described above, that the products potential benefits outweigh its potential risks and that there is no adequate, approved alternative to the product. Products subject to an EUA must still comply with the conditions of the EUA, including labeling and marketing requirements. Moreover, the authorization to market products under an EUA is limited to the period of time the public health emergency declaration is in effect.
U.S. Post-Approval Requirements
Biologics are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements up. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; |
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fines, warning letters, or untitled letters; |
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clinical holds on clinical trials; |
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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; |
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product seizure or detention, or refusal to permit the import or export of products; |
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consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; |
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mandated modification of promotional materials and labeling and the issuance of corrective information; |
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the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or |
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injunctions or the imposition of civil or criminal penalties. |
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the products labeling and that differ from those tested and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers communications on the subject of off-label use of their products.
Biosimilars and Reference Product Exclusivity
The Affordable Care Act, signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act (BPCIA) which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars.
Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the licensure of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicants own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed interchangeable by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued Written Request for such a study.
Other U.S. Regulatory Requirements
In addition to FDA regulation of pharmaceutical products, pharmaceutical companies are also subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business and may constrain the financial arrangements and relationships through which we research, as well as sell, market and distribute any products for which we obtain marketing authorization. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, data privacy and security, and transparency laws and regulations related to drug pricing and payments and other
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transfers of value made to physicians and other healthcare providers. If their operations are found to be in violation of any of such laws or any other governmental regulations that apply, they may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and imprisonment.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidate for which we may seek regulatory approval. Sales in the United States will depend, in part, on the availability of sufficient coverage and adequate reimbursement from third-party payors, which include government health programs such as Medicare, Medicaid, TRICARE and the Veterans Administration, as well as managed care organizations and private health insurers. Prices at which we or our customers seek reimbursement for our product candidates can be subject to challenge, reduction or denial by third-party payors.
Certain ACA marketplace and other private payor plans are required to include coverage for certain preventative services, including vaccinations recommended by the ACIP without cost share obligations (i.e., co-payments, deductibles or co-insurance) for plan members. Children through 18 years of age without other health insurance coverage may be eligible to receive such vaccinations free-of-charge through the CDCs Vaccines for Children program. For Medicare beneficiaries, vaccines may be covered under either the Part B program or Part D depending on several criteria, including the type of vaccine and the beneficiarys coverage eligibility. If our vaccine candidates, once approved, are covered only under the Part D program, physicians may be less willing to use our products because of the claims adjudication costs and time related to the claims adjudication process and collection of co-payments associated with the Part D program.
The process for determining whether a third-party payor will provide coverage for a product is typically separate from the process for setting the reimbursement rate that the payor will pay for the product. In the United States, there is no uniform policy among payors for coverage or reimbursement. Decisions regarding whether to cover any of a product, the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies, but also have their own methods and approval processes. 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 can require manufacturers to provide scientific and clinical support for the use of a product to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. Third-party payors may not consider our product candidates to be medically necessary or cost-effective compared to other available therapies. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product that receives approval.
In some foreign countries, the proposed pricing for a product candidate must be approved before it may be lawfully marketed. The requirements governing product pricing vary widely from country to country. For example, in the European Union (EU) pricing and reimbursement of pharmaceutical products are regulated at a national level under the individual EU member states social security systems. Some foreign countries provide options to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and can control the prices and reimbursement levels of medicinal products for human use. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies. A country may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for products will allow favorable reimbursement and pricing arrangements for any of our product candidates. Even if approved for reimbursement, historically, product
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candidates launched in some foreign countries, such as some countries in the EU, do not follow price structures of the United States and prices generally tend to be significantly lower.
Healthcare Reform
In the United States, there have been, and continue to be, legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the profitable sale of product candidates, and similar healthcare laws and regulations exist in the EU and other jurisdictions. Among policy makers and payors in the United States, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
By way of example, in March 2010, the Patient Protection and Affordable Care Act (the ACA) was passed, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affected the pharmaceutical industry. The ACA, among other things, increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1% of the average manufacturer price; required collection of rebates for drugs paid by Medicaid managed care organizations; required manufacturers to participate in a coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers outpatient drugs to be covered under Medicare Part D; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain branded prescription drugs to specified federal government programs; implemented a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; expanded eligibility criteria for Medicaid programs; creates a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment, there have been judicial, executive and political challenges to certain aspects of the ACA, and on June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Courts decision, President Biden had issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the healthcare reform measures of the Biden administration or other efforts to challenge the ACA, if any, will impact the ACA.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through December 31, 2021, unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. The likelihood of success of these and other reforms initiated by the former Trump administration is unclear, particularly in light of the new Biden administration.
Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions
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on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine which drugs and suppliers will be included in their healthcare programs Furthermore, there has been increased interest by third party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.
Foreign Regulation
In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our product candidates. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries.
Whether or not we obtain FDA approval for a product candidate, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product candidates in those countries. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. Failure to comply with applicable foreign regulatory requirements, may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Preclinical Studies and Clinical Trials
Similar to the United States, the various phases of preclinical and clinical research in the EU are subject to significant regulatory controls.
Preclinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances. Preclinical studies must be conducted in compliance with the principles of good laboratory practice (GLP) as set forth in EU Directive 2004/10/EC. In particular, preclinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for preclinical studies. These GLP standards reflect the Organization for Economic Co-operation and Development requirements.
Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Conference on Harmonization (ICH), guidelines on good clinical practices (GCP) as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint an EU entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU countries, the sponsor is liable to provide no fault compensation to any study subject injured in the clinical trial.
Certain countries and jurisdictions outside of the United States, including the EU, have a similar process that requires the submission of a clinical study application much like the IND prior to the commencement of human clinical trials. A CTA must be submitted to each countrys national health authority and an independent ethics committee, much like the FDA and the IRB, respectively. Once the CTA is approved by the national health authority and the ethics committee has granted a positive opinion in relation to the conduct of the trial in the relevant member state(s), in accordance with a countrys requirements, clinical study development may proceed.
The CTA must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. Currently, CTAs must be submitted to the competent authority in each EU member state in which the trial will be conducted. Under the new Regulation on Clinical Trials, which is currently expected to become applicable by early 2022, there will be a centralized application procedure where one national authority takes the lead in reviewing the application and the other national authorities have only limited involvement. Any substantial changes to the trial protocol or other information submitted with the CTA must be notified to or approved by the relevant competent authorities and ethics committees. Medicines used in clinical trials must be manufactured in accordance with good manufacturing practice (GMP). Other national and EU-wide regulatory requirements may also apply.
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Marketing Authorizations
In the EU, medicinal products can only be placed on the market after obtaining a marketing authorization (MA). To obtain regulatory approval of an investigational biological product under EU regulatory systems, we must submit a marketing authorization application (MAA). The application used to file the BLA in the United States is similar to that required in the EU, with the exception of, among other things, country specific document requirements. The process for doing this depends, among other things, on the nature of the medicinal product.
The centralized procedure results in a single MA, issued by the European Commission, based on the opinion of the European Medicines Agencys (EMA) Committee for Human Medicinal Products (CHMP) which is valid across the entire territory of the EU. The centralized procedure is compulsory for human medicines that are: (i) derived from biotechnology processes, such as genetic engineering, (ii) contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune dysfunctions and viral diseases, (iii) designated orphan medicines and (iv) ATMPs, such as gene therapy, somatic cell therapy or tissue-engineered medicines. The centralized procedure may at the request of the applicant also be used in certain other cases.
National MAs, which are issued by the competent authorities of the EU member states and only cover their respective territory, are available for products not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized for marketing in an EU member state, this national MA can be recognized in another member state through the mutual recognition procedure. If the product has not received a national MA in any member state at the time of application, it can be approved simultaneously in various member states through the decentralized procedure. Under the decentralized procedure an identical dossier is submitted to the national competent authority of each of the member states in which the MA is sought, one of which is selected by the applicant as the Reference member state.
Under the centralized procedure, the maximum timeframe for the evaluation of a MAA by the EMA is 210 days. In exceptional cases, the CHMP might perform an accelerated review of a MAA in no more than 150 days (not including clock stops). Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the PRIME scheme, which provides incentives similar to the breakthrough therapy designation in the U.S. PRIME is a voluntary scheme aimed at enhancing the EMAs support for the development of medicines that target unmet medical needs. It is based on increased interaction and early dialogue with companies developing promising medicines, to optimize their product development plans and speed up their evaluation to help them reach patients earlier. Product developers that benefit from PRIME designation can expect to be eligible for accelerated assessment but this is not guaranteed. The benefits of a PRIME designation include the appointment of a CHMP rapporteur before submission of a MAA, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review earlier in the application process. Innovative medicines fulfilling a medical need may also benefit from different types of fast track approvals, such as a conditional MA or a MA under exceptional circumstances granted on the basis of less comprehensive clinical data than normally required (respectively in the likelihood that the sponsor will provide such data within an agreed timeframe or when comprehensive data cannot be obtained even after authorization).
Classical MAs have an initial duration of five years. After these five years, the authorization may be renewed for an unlimited period on the basis of a reevaluation of the risk-benefit balance.
Data and Marketing Exclusivity
The EU also provides opportunities for market exclusivity. For example, in the EU, upon receiving MA, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the EU from referencing the innovators data to assess a generic or biosimilar application. During the additional two year period of market exclusivity, a generic/biosimilar MA can be submitted, and the innovators data may be referenced, but no generic/biosimilar product can be marketed until the expiration of the market exclusivity. The overall ten-year market exclusivity period may be extended to a maximum of eleven years if, during the first eight years a new therapeutic indication with significant clinical benefit over existing therapies is approved. However, there is no guarantee that a product will be considered by the EUs regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity.
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There is a special regime for biosimilars, or biological medicinal products that are similar to a reference medicinal product but that do not meet the definition of a generic medicinal product, for example, because of differences in raw materials or manufacturing processes. For such products, the results of appropriate preclinical or clinical trials must be provided, and guidelines from the EMA detail the type of quantity of supplementary data to be provided for different types of biological product. There are no such guidelines for complex biological products, such as gene or cell therapy medicinal products, and so it is unlikely that biosimilars of those products will currently be approved in the EU. However, guidance from the EMA states that they will be considered in the future in light of the scientific knowledge and regulatory experience gained at the time.
Foreign Post-Approval Requirements
Similar to the United States, both MA holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA, the European Commission and/or the competent regulatory authorities of the member states. The holder of a MA must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update reports (PSURs).
All new MAA must include a risk management plan (RMP) describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the MA. Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies.
The advertising and promotion of medicinal products is also subject to laws concerning promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. All advertising and promotional activities for the product must be consistent with the approved summary of product characteristics, and therefore all off-label promotion is prohibited. Direct-to-consumer advertising of prescription medicines is also prohibited in the EU. Although general requirements for advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations in each member state and can differ from one country to another.
The aforementioned EU rules are generally applicable in the European Economic Area (EEA) which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland.
Failure to comply with EU and member state laws that apply to the conduct of clinical trials, manufacturing approval, MA of medicinal products and marketing of such products, both before and after grant of the MA, manufacturing of pharmaceutical products, statutory health insurance, bribery and anti-corruption or with other applicable regulatory requirements may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.
Privacy and Data Protection Laws
We are also subject to laws and regulations in non-U.S. countries covering data privacy and the protection of health-related and other personal information. EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, processing and security of personal information that identifies or may be used to identify an individual, such as names, contact information, and sensitive personal data such as health data. These laws and regulations are subject to frequent revisions and differing interpretations, and have generally become more stringent over time.
As of May 25, 2018, Regulation 2016/676, known as the General Data Protection Regulation (GDPR) replaced the Data Protection Directive with respect to the processing of personal data of individuals within the EEA. The GDPR imposes many requirements for controllers and processors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a
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strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention and secondary use of information, increased requirements pertaining to health data and pseudonymised (i.e., key-coded) data (including data from clinical trials) and additional obligations when we contract third-party processors in connection with the processing of the personal data. The GDPR is directly applicable in each member state and is extended to the EEA. However the GDPR allows EEA countries to make additional laws and regulations further limiting notably the processing of genetic, biometric or health data. Failure to comply with the requirements of GDPR may result in fines of up to 20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties. 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 (CJEU). While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain. The European Commission issued revised standard contractual clauses on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board. The revised standard contractual clauses must be used for relevant new data transfers from September 27, 2021; existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022. There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any material proceedings. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.
Facilities
We lease space for our principal offices and laboratory in Seattle, Washington, on an annual basis. We believe that our existing facilities will be sufficient for our needs for the foreseeable future.
Employees
As of June 30, 2021, we had 22 full-time employees and no part-time employees. Of these employees, nine hold Ph.D. or M.D. degrees and 15 are engaged in research and development. Twelve of our employees are located in Seattle, Washington and the remainder are located in the United States and work remotely. Our employees are not represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.
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Executive Officers and Directors
The following table sets forth the name, age and position of each of our executive officers and directors as of June 30, 2021.
NAME |
AGE |
POSITION |
||||
Executive Officers |
||||||
Adam Simpson |
46 | Chief Executive Officer and Director | ||||
Thomas Russo, CFA |
50 | Chief Financial Officer | ||||
Douglas Holtzman, Ph.D. |
57 | Chief Scientific Officer | ||||
Niranjan Kanesa-thasan, M.D., M.T.M.H. |
61 | Chief Medical Officer | ||||
Cassia Cearley, Ph.D. |
39 | Chief Business Officer | ||||
Charles Richardson, Ph.D. |
69 | Senior Vice President, Technical Operations | ||||
Non-Employee Directors |
||||||
Tadataka Yamada, M.D. (1)(3) |
76 |
Chairman |
||||
Elisha P. Gould III (2)(3) |
64 | Director | ||||
Jason Hafler, Ph.D. (4) |
39 | Director | ||||
Peter Kolchinsky, Ph.D. (3) |
45 | Director | ||||
Heidi Kunz (1)(2) |
66 | Director | ||||
Mark McDade (1)(2) |
66 | Director | ||||
Ann M. Veneman |
72 | Director |
(1) | Member of the compensation and talent committee |
(2) | Member of the audit committee |
(3) | Member of the nominating and corporate governance committee |
(4) | Dr. Hafler will resign from our board of directors immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. |
Executive Officers
Adam Simpson has served as our President and Chief Executive Officer and on our board of directors since our inception in December 2017. Since 2012, Mr. Simpson has also served as the President of Dorado Ventures, LLC, a consulting entity, where he has provided business development and company formation services for a variety of entities in the life science industry. Prior to joining Icosavax, Mr. Simpson served as President and Chief Executive Officer and on the board of directors of PvP Biologics, Inc., a private company developing therapeutics for the treatment of celiac disease, from October 2016 until its acquisition by Takeda Pharmaceuticals U.S.A., Inc. in February 2020, having previously served as President and Chief Operating Officer from commencement of the companys operations in May 2016. Prior to PvP Biologics, Mr. Simpson provided consulting services to Cypher Genomics, Inc., a private company focused on biomarker development to facilitate drug development, commencing in 2013, and ultimately served as President and Chief Operating Officer commencing in 2015 until its acquisition by Human Longevity, Inc. later in 2015. Prior to Cypher Genomics, Mr. Simpson was a cofounder and served as Chief Business Officer of Meritage Pharma, Inc., a private company developing treatments for upper gastrointestinal disorders, from its inception in 2008 until its stage sale to Shire Pharmaceuticals LLC in 2012. Prior to Meritage Pharma, Mr. Simpson served as General Counsel at Verus Pharmaceuticals, Inc., a private company focused on treatments for asthma and anaphylaxis, from 2005 until the sale of its assets to AstraZeneca and Shionogi in 2008. Mr. Simpson began his career as an attorney for the law firm Latham & Watkins LLP focusing on the life sciences industry, where he worked from 1999 to 2005. Mr. Simpson holds a B.S. in biochemistry from the University of California, San Diego and a J.D. from the University of Minnesota Law School. Mr. Simpsons extensive operational and financial experience in the biopharmaceutical industry contributed to our board of directors conclusion that he should serve as a director of our company.
Thomas Russo, CFA has served as our Chief Financial Officer since June 2021. Prior to Icosavax, Mr. Russo was Chief Financial Officer of Assembly Biosciences, a clinical-stage, public biotechnology company focused on Hepatitis B, from October 2019 to June 2021. Prior to Assembly Bio, from October 2012 to October 2019, Mr. Russo held roles across finance and commercial operations at Gilead Sciences, including serving as Vice President, Head of Commercial Finance. Prior to Gilead, Mr. Russo was at Robert W. Baird & Co. from July 2004 to
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September 2012, serving for most of that time as an Equity Research Senior Analyst covering biotechnology. Before that, from June 1993 to July 2002, Mr. Russo held roles in the manufacturing division of Merck & Co., with a particular focus on vaccines. Mr. Russo holds a B.S. in biological sciences from the University of Notre Dame and an MBA from the University of Chicago Booth School of Business, and he is a CFA charterholder.
Douglas Holtzman, Ph.D. has served as our Chief Scientific Officer since August 2019. In July 2016, Dr. Holtzman founded Palindrome Bioconsulting, through which he provided consulting services to clients including Icosavax until August 2019. Prior to Palindrome, Dr. Holtzman served as Vice President, Discovery at Takeda Pharmaceuticals U.S.A., Inc. from 2012 to July 2016, where he focused on dengue and norovirus vaccine candidates and was a member of the management committee that globalized Takeda Pharmaceuticals Japan-based vaccines business. Prior to Takeda Pharmaceuticals, Dr. Holtzman served as Deputy Director, Childhood Pneumonia at the Bill & Melinda Gates Foundation, a non-profit focused on public health initiatives, from 2004 to 2012. Dr. Holtzman holds a Ph.D. in molecular and cell biology from the University of California, Berkeley, an MPH from Harvard Universitys T.H. Chan School of Public Health, and a B.S. in Biology from Tufts University.
Niranjan Kanesa-thasan, M.D., M.T.M.H has served as our Chief Medical Officer since September 2018. Prior to Icosavax, in November 2017, Dr. Kanesa-thasan founded Kanesa, LLC, through which he provides clinical consulting to clients, including Icosavax from November 2017 to August 2019. Prior to founding Kanesa, Dr. Kanesa-thasan served as Vice President, Clinical Research & Development, for GlaxoSmithKline Vaccines U.S. Research & Development Center from 2015 to August 2017. Prior to GlaxoSmithKline Vaccines, from 2007 to 2015 Dr. Kanesa-thasan served in several roles at Novartis Vaccines and Diagnostics, including Chief Medical Officer North America (VP). Prior to Novartis, Dr. Kanesa-thasan served as a research physician in the U.S. Army Medical Corps from 1991 to 2003, ending his service as a Lieutenant Colonel. Dr. Kanesa-thasan holds an M.D. from the Johns Hopkins School of Medicine, a M.T.M.H. from the Uniformed Services University of the Health Sciences, and a B.A. in human biology from Johns Hopkins University. Dr. Kanesa-thasan completed his residency and chief residency in pediatrics at Case Western Reserve University, and a fellowship in pediatric infectious disease and geographic medicine at University Hospitals of Cleveland. Dr. Kanesa-thasan is a Fellow of the Infectious Diseases Society of America and of the American Society of Tropical Medicine and Hygiene.
Cassia Cearley, Ph.D. has served as our Chief Business Officer since February 2021, and previously served as our Senior Vice President, Operations from December 2019 to February 2021. Prior to Icosavax, Dr. Cearley served in roles including Vice President of Research and Senior Director Corporate Strategy and Alliance Management for Aptinyx Inc., a public therapeutics company, from 2015 to 2019. Prior to Aptinyx, Dr. Cearley served as Senior Director, Corporate Development at Naurex, Inc., a private therapeutics company from 2014 until its acquisition by Allergan plc in 2015. Prior to Naurex, Dr. Cearley served as Director of Portfolio Management at Takeda Pharmaceuticals U.S.A. from 2013 to 2014, and before that as an engagement manager at L.E.K. Consulting from 2007 to 2013. Dr. Cearley holds a Ph.D. in neuroscience from the University of Pennsylvania and a B.S. in neuroscience from the Washington State University Honors College.
Charles Richardson, Ph.D. has served as our Senior Vice President, Technical Operations since August 2019. Since 2015, Dr. Richardson has served as a private consultant with PharmorosConsulting, LLC with global clients including Takeda vaccines and Icosavax. Dr. Richardson served as Vice President, Head of Global Chemistry, Manufacturing, and Controls (CMC) for Takeda Vaccines, with responsibility for CMC development and clinical manufacture of Takeda vaccines globally, from 2012 to 2015. Prior to Takeda, Dr. Richardson served as Executive Vice President, Research and Development for LigoCyte Pharmaceuticals, Inc., a private biopharmaceutical company focused on vaccines, where he focused on VLP vaccines against infectious diseases, from 2003 until its acquisition by Takeda in 2015. Prior to LigoCyte, Dr. Richardson served as Vice President and Site Manager for Corixa Corporation, a private immunotherapeutics company acquired by GlaxoSmithKline plc, with responsibilities for adjuvant discovery and development, corporate manufacturing, and quality systems, from 1999 to 2003. Dr. Richardson holds a B.S. in chemistry from Carnegie Mellon University and a Ph.D. in biological chemistry from the University of Cincinnati College of Medicine.
Non-Employee Directors
Tadataka Yamada, M.D. has served as the Chairman of our board of directors since August 2019. Dr. Yamada has served as a Venture Partner at Frazier since June 2015. From June 2011 to June 2015, Dr. Yamada served as the Chief Medical and Scientific Officer and as a member of the board of directors of Takeda. From 2011 to March
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2021, Dr. Yamada served as a member of the board of directors of Agilent Technologies, a global scientific instrument manufacturing and clinical diagnostics company listed on the New York Stock Exchange. From June 2016 to October 2019, Dr. Yamada served on the board of directors of CSL Limited, a biotechnology company that is publicly traded on the Australian Securities Exchange, and since June 2017, he has served as Chairman of the board of directors of Passage Bio, a public genetic medicines company. Since March 2019, Dr. Yamada has served as Chairman of the board of directors of Phathom Pharmaceuticals, Inc., a public biopharmaceutical company. Since June 2019, he has served as a member of the board of directors of Athira Pharma, a public neurologic disease company, and he has served as Athiras chair since January 2020. Since June 2018, Dr. Yamada has served as Chairman of the board of directors of Prometheus Biosciences, Inc., a public biotechnology company. Dr. Yamada previously served as President of the Global Health Program of the Bill & Melinda Gates Foundation from June 2006 to June 2011. From 2000 to 2006, Dr. Yamada was Chairman of Research and Development and a member of the board of directors of GlaxoSmithKline Inc. and prior to that, he held research and development positions at SmithKline Beecham. Prior to joining SmithKline Beecham, Dr. Yamada was Chairman of the Department of Internal Medicine at the University of Michigan Medical School and Physician-in-Chief of the University of Michigan Medical Center. Dr. Yamada serves as chair of the board of directors at the Clinton Health Access Initiative and a member of the National Academy of Medicine. He is also a Fellow of the Imperial College of Medicine, a Master of the American College of Physicians, a Fellow of the Royal College of Physicians, a Member of the American Academy of Arts and Sciences and a past-President of the American Gastroenterological Association and the Association of American Physicians. Dr. Yamada received his M.D. from New York University School of Medicine and a B.A. in history from Stanford University. Dr. Yamadas extensive experience in vaccine development as well as his service as a director or officer of various biotechnology and biopharmaceutical companies contributed to our board of directors conclusion that he should serve as the chair of our board of directors.
Elisha P. Gould III has served on our board of directors since August 2019. Mr. Gould is currently a partner at Adams Street Partners, LLC, a global private equity firm, and has been employed by Adams Street Partners or its predecessor organizations since 1994. Mr. Gould has served on the boards of directors of Aptinyx, Inc., a public biopharmaceutical company, since 2015, and Corvus Pharmaceuticals, Inc., a public biopharmaceutical company, since 2014, and currently serves on the boards of directors of several private biopharmaceutical and/or healthcare companies. Mr. Gould received an A.B. in engineering science from Dartmouth College and an M.B.A. from the Stanford University Graduate School of Business. Mr. Goulds extensive financial experience in the biopharmaceutical industry contributed to our board of directors conclusion that he should serve as a director of our company.
Jason Hafler, Ph.D. has served on our board of directors since August 2019. Since November 2019, Dr. Hafler has served as Managing Director of Sanofi Ventures, the corporate venture capital arm of Sanofi S.A., after serving in other roles at Sanofi Ventures beginning in 2014. Prior to Sanofi, from 2012 to 2014, Dr. Hafler served as Director of Corporate Development at RaNA Therapeutics LLC, which was cofounded by his previous firm, Atlas Venture. At Atlas, Dr. Hafler served as an associate in its Life Sciences Group from 2010 to 2012. Prior to Atlas, Dr. Hafler was an Entrepreneurial Fellow at Flagship Ventures in 2010, and consulted for the University of Cambridges technology transfer office while performing his doctoral research. Prior to that, Dr. Hafler served as an analyst at JSB Partners LP. Dr. Hafler also serves on the board of trustees at the Buckingham Browne and Nichols School and the boards of directors of the Magdalene College Foundation and Beacon Hill Nursery School. Dr. Hafler holds a B.A. with honors from Bowdoin College and a Ph.D. from the University of Cambridge. Dr. Haflers extensive experience in investing in the biopharmaceutical industry contributed to our board of directors conclusion that he should serve as a director of our company.
Peter Kolchinsky, Ph.D. has served on our board of directors since March 2021. Dr. Kolchinsky is a founder and Managing Partner at RA Capital Management, L.P., a multi-stage investment manager dedicated to evidence-based investing in healthcare and life science companies that are developing drugs, medical devices, and diagnostics, where he has worked since 2001. Dr. Kolchinsky also serves as the Chairman and Chief Executive Officer of Research Alliance Corp. II. Dr. Kolchinsky serves on the boards of directors of WAVE Life Sciences, Ltd., Forma Therapeutics Holdings, Inc., and Research Alliance Corp. II, in addition to a number of private companies. Dr. Kolchinksy also leads RA Capitals engagement and publishing efforts, which aim to make a positive social impact and spark collaboration among healthcare stakeholders, including patients, physicians, researchers, policymakers, and industry. He served on the Board of Global Science and Technology for the National Academy of
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Sciences from 2009 to 2012, is the author of The Great American Drug Deal and The Entrepreneurs Guide to a Biotech Startup, and frequently writes and speaks on the future of biotechnology innovation. Dr. Kolchinsky holds a Ph.D. in virology from Harvard University and a B.S. degree in biology from Cornell University. Dr. Kolchinskys extensive experience as an investor in the life sciences sector and as a director of a number of healthcare and life science companies, as well as his virology training, contributed to our board of directors conclusion that he should serve as a director of our company.
Heidi Kunz has served on our board of directors since May 2021. Ms. Kunz served as Executive Vice President and Chief Financial Officer of Blue Shield of California from September 2003 until her retirement in December 2012. Prior to joining Blue Shield of California, she served as Executive Vice President and Chief Financial Officer of Gap, Inc. from 1999 to January 2003. From 1995 to 1999, Ms. Kunz served as the Chief Financial Officer of ITT Industries, Inc. She has also held senior financial management positions at General Motors Corporation, including Vice President and Treasurer during her 16-year tenure from 1979 to 1995. Ms. Kunz currently serves as a director of Agilent Technologies Inc., a global scientific instrument manufacturing and clinical diagnostics company, Avanos Medical, Inc., a public medical device company, and Phathom Pharmaceuticals, Inc., a public biopharmaceutical company, and previously served as a director of Financial Engines, Inc., an investment advisement company. Ms. Kunz received an MBA in finance and accounting from Columbia Business School and a bachelors degree in Russian language from Georgetown University. Ms. Kunzs extensive experience as a chief financial officer and service as a director of other public companies contributed to our board of directors conclusion that she should serve as a director of our company.
Mark McDade has served on our board of directors since August 2019. Since January 2017, Mr. McDade has served as Managing Partner of the Qiming US Healthcare Fund, a venture capital firm. Mr. McDade previously served as Executive Vice President and Chief Operating Officer of UCB S.A., a Belgian biopharmaceutical company, from 2009 until his retirement in October 2016, after serving as Executive Vice President, Corporate Development since 2008. From 2002 to 2007, Mr. McDade served as Chief Executive Officer and as a member of the board of directors of PDL BioPharma, Inc., a biotechnology company. From 2000 to 2002, Mr. McDade was Chief Executive Officer of Signature BioScience, Inc., a drug discovery company. From 1994 to 2000, Mr. McDade served as Chief Operating Officer and as a director of Corixa Corporation, a biopharmaceutical company he co-founded. At Corixa, Mr. McDade also served as President from 1998 to 2000. Mr. McDade has served on the board of directors of Lupin Ltd., a publicly-traded multinational pharmaceutical company, since February 2021. He served on the board of directors of Dermira, Inc., a biopharmaceutical company from August 2014 until its acquisition by Eli Lilly in February 2020, and served as chairman of the board of directors of Aimmune Therapeutics from May 2014 until its acquisition by Nestle SA in October 2020. Mr. McDade also served on the board of directors of Five Prime Therapeutics, Inc., a biotechnology company, from 2006 to November 2018. Mr. McDade served as a member of the board of directors and as a member of the audit and conflicts committees for Phillips Edison Grocery Center REIT II, Inc., a non-traded real estate investment company, until November 2018 and served as an Independent Director at Phillips Edison Grocery Center REIT III, Inc. from November 2018 until November 2019, when it was acquired by Phillips Edison & Company, Inc. Additionally, Mr. McDade is on the board of several privately-held companies. Mr. McDade received a B.A. in history from Dartmouth College and an M.B.A. from Harvard Business School. Mr. McDades executive leadership experience in the life science industry and extensive experience as a public company director contributed to our board of directors conclusion that he should serve as a director of our company.
Ann M. Veneman has served on our board of directors since July 2021. Ms. Veneman has a distinguished career in public service, serving as the Executive Director of the United Nations Childrens Fund (UNICEF) from 2005 to 2010 and as the United States Secretary of Agriculture from 2001 to 2005. She also served as Secretary of the California Department of Food and Agriculture from 1995 to 1999, overseeing the state agency responsible for nations largest agricultural producing region. From 1986 to 1993, she served in various positions in the United States Department of Agriculture (USDA), including Deputy Secretary, Deputy Undersecretary for International Affairs, and Associate Administrator of the Foreign Agricultural Service. Ms. Veneman currently serves on the boards of directors for Nestlé S.A., Full Harvest, the Global Health Innovative Technology Fund, the Clinton Health Access Initiative (CHAI), and the Washington Institute for Business, Government and Society. She is a member of the Hilton Humanitarian Prize Jury and the Council on Foreign Relations. She is a frequent speaker on a range of topics including poverty alleviation, empowering women and girls, food security and nutrition, and global health. Ms. Veneman has served as a fellow at
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the Harvard School of Public Health and the U.C. Berkeley Goldman School of Public Policy. She has also practiced law in Washington, DC and California in both the private and public sectors. Ms. Veneman holds a B.A. in Political Science from the University of California, Davis; a Masters degree in Public Policy from the University of California, Berkeley; and a J.D. from the University of California, Hastings College of the Law. Ms. Venemans extensive experience in public service and global health contributed to our board of directors conclusion that she should serve as a member of our board of directors.
Board Composition and Election of Directors
Director Independence
Our board of directors currently consists of eight members. Our board of directors has determined that all of our directors, other than Mr. Simpson, are independent directors in accordance with the listing requirements of Nasdaq. The Nasdaq independence definition includes a series of objective tests, including that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our board of directors has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of the director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each directors business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.
Classified Board of Directors
In accordance with the terms of our amended and restated certificate of incorporation that will go into effect immediately prior to the closing of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the directors whose terms then expire will be eligible for reelection until the third annual meeting following reelection. Effective upon the closing of this offering, our directors will be divided among the three classes as follows:
∎ |
the Class I directors will be Elisha P. Gould III, Mark McDade and Ann M. Veneman, and their terms will expire at our first annual meeting of stockholders following this offering; |
∎ |
the Class II directors will be Heidi Kunz and Adam Simpson, and their terms will expire at our second annual meeting of stockholders following this offering; and |
∎ |
the Class III directors will be Tadataka Yamada, M.D. and Peter Kolchinsky, Ph.D., and their terms will expire at our third annual meeting of stockholders following this offering. |
Our amended and restated certificate of incorporation that will go into effect immediately prior to the closing of this offering will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our board of directors or a change in control of our company. Our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock then entitled to vote in an election of directors.
Board Leadership Structure
Our board of directors is currently chaired by Dr. Yamada. Our board of directors recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as the company continues to grow. We separate the roles of chief executive officer and chairman of the board of directors in recognition of the differences between the two roles. The chief executive officer is responsible for setting the strategic direction for our company and the day-to-day leadership and performance of our company, while the chairman of the board of directors provides guidance to the chief executive officer and presides over meetings of the full board of directors. We believe that this separation of responsibilities provides a balanced approach to managing the board of directors and overseeing our company.
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Our board of directors has concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.
Role of Board in Risk Oversight Process
Our board of directors has responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our board of directors to understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk.
The audit committee reviews information regarding liquidity and operations, and oversees our management of financial risks. Periodically, the audit committee reviews our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the audit committee includes direct communication with our external auditors, and discussions with management regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures. The compensation and talent committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive risk-taking. The nominating and corporate governance committee manages risks associated with the independence of the board of directors, corporate disclosure practices and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board of directors is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered by our board of directors as a whole.
Board Committees and Independence
Our board of directors has established three standing committeesaudit, compensation and talent and nominating and corporate governanceeach of which operates under a charter that has been approved by our board of directors.
Audit Committee
The audit committees main function is to oversee our accounting and financial reporting processes and the audits of our financial statements. This committees responsibilities include, among other things:
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appointing our independent registered public accounting firm; |
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evaluating the qualifications, independence and performance of our independent registered public accounting firm; |
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approving the audit and non-audit services to be performed by our independent registered public accounting firm; |
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reviewing the design, implementation, adequacy and effectiveness of our internal accounting controls and our critical accounting policies; |
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discussing with management and the independent registered public accounting firm the results of our annual audit and the review of our quarterly unaudited financial statements; |
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reviewing, overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; |
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reviewing on a periodic basis, or as appropriate, any investment policy and recommending to our board of directors any changes to such investment policy; |
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reviewing with management and our auditors any earnings announcements and other public announcements regarding our results of operations; |
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preparing the report that the SEC requires in our annual proxy statement; |
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reviewing and approving any related party transactions and reviewing and monitoring compliance with our code of conduct and ethics; and |
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reviewing and evaluating, at least annually, the performance of the audit committee and its members including compliance of the audit committee with its charter. |
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The members of our audit committee are Mr. Gould, Ms. Kunz and Mr. McDade. Ms. Kunz serves as the chairperson of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq . Our board of directors has determined that Ms. Kunz is an audit committee financial expert as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq listing standards. Our board of directors has determined each of Mr. Gould, Ms. Kunz and Mr. McDade is independent under the applicable rules of the SEC and Nasdaq. Upon the listing of our common stock on Nasdaq, the audit committee will operate under a written charter that satisfies the applicable standards of the SEC and Nasdaq.
Compensation and Talent Committee
Our compensation and talent committee approves policies relating to compensation and benefits of our officers and employees. The compensation and talent committee approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives and approves the compensation of these officers based on such evaluations. The compensation and talent committee also approves the issuance of stock options and other awards under our equity plans. The compensation and talent committee will review and evaluate, at least annually, the performance of the compensation and talent committee and its members, including compliance by the compensation and talent committee with its charter. The compensation and talent committee will also have the authority to review and monitor our policies and practices related to talent acquisition, engagement, retention and development, including with respect to diversity, equity and inclusion initiatives and programs, workplace safety, corporate culture and succession planning beyond the executive level.
The members of our compensation and talent committee are Ms. Kunz, Mr. McDade and Dr. Yamada. Mr. McDade serves as the chairperson of the committee. Our board of directors has determined that each of Ms. Kunz, Mr. McDade and Dr. Yamada is independent under the applicable Nasdaq listing standards and is a non-employee director as defined in Rule 16b-3 promulgated under the Exchange Act. Upon the listing of our common stock on Nasdaq, the compensation and talent committee will operate under a written charter, which the compensation and talent committee will review and evaluate at least annually.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee is responsible for assisting our board of directors in discharging the board of directors responsibilities regarding the identification of qualified candidates to become board members, the selection of nominees for election as directors at our annual meetings of stockholders (or special meetings of stockholders at which directors are to be elected), and the selection of candidates to fill any vacancies on our board of directors and any committees thereof. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies, reporting and making recommendations to our board of directors concerning governance matters and oversight of the evaluation of our board of directors.
The members of our nominating and corporate governance committee are Mr. Gould, Dr. Kolchinsky and Dr. Yamada. Dr. Kolchinsky serves as the chairperson of the committee. Our board of directors has determined that each of Mr. Gould, Dr. Kolchinsky and Dr. Yamada is independent under the applicable Nasdaq listing standards. Upon the listing of our common stock on Nasdaq, the nominating and corporate governance committee will operate under a written charter, which the nominating and corporate governance committee will review and evaluate at least annually.
Compensation and Talent Committee Interlocks and Insider Participation
None of the members of our compensation and talent committee has ever been one of our officers or employees. None of our executive officers currently serves, or has served, as a member of the board of directors or compensation and talent committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation and talent committee.
Board Diversity
Upon the closing of this offering, our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual
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candidates (both new candidates and current members) for election or appointment, the nominating and corporate governance committee and the board of directors will take into account many factors, including the following:
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personal and professional integrity, ethics and values; |
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experience in corporate management, such as serving as an officer or former officer of a publicly-held company; |
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experience as a board member or executive officer of another publicly-held company; |
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strong finance experience; |
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diversity of expertise and experience in substantive matters pertaining to our business relative to other board members; |
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diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience; |
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experience relevant to our business industry and with relevant social policy concerns; and |
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relevant academic expertise or other proficiency in an area of our business operations. |
Currently, our board of directors evaluates, and following the closing of this offering will evaluate, each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.
Code of Business Conduct and Ethics
We adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, which will be effective upon the closing of this offering. Upon the closing of this offering, our code of business conduct and ethics will be available under the Corporate Governance section of our website at www.Icosavax.com. In addition, we intend to post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.
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EXECUTIVE AND DIRECTOR COMPENSATION
This section discusses the material components of the executive compensation program for our executive officers who are named in the Summary Compensation Table below, whom we refer to as our NEOs.
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt following the closing of this offering may differ materially from the currently planned programs summarized in this discussion.
Summary Compensation Table
The following table presents summary information regarding the total compensation that was awarded to, earned by or paid to our NEOs for services rendered during the year ended December 31, 2020.
NAME AND PRINCIPAL POSITION |
YEAR |
SALARY
($) |
BONUS
($) |
STOCK
AWARDS ($) |
OPTION
AWARDS ($) (1) |
NON-EQUITY
INCENTIVE PLAN COMPENSATION ($) |
ALL OTHER
COMPENSATION ($) (2) |
TOTAL
($) |
||||||||||||||||||||||||
Adam Simpson |
2020 | 357,291 | | | 121,293 | 144,703 | | 623,287 | ||||||||||||||||||||||||
Chief Executive Officer and Director |
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Douglas Holtzman, Ph.D. |
2020 | 275,000 | | | | 74,250 | | 349,250 | ||||||||||||||||||||||||
Chief Scientific Officer |
||||||||||||||||||||||||||||||||
Niranjan Kanesa-thasan, M.D. |
2020 | 342,980 | | | 32,093 | 90,225 | | 465,298 | ||||||||||||||||||||||||
Chief Medical Officer |
||||||||||||||||||||||||||||||||
Cassia Cearley, Ph.D. |
2020 | 275,000 | | | | 74,250 | | 349,250 | ||||||||||||||||||||||||
Chief Business Officer |
(1) | Represents the grant date fair value of stock options to purchase shares of our common stock during fiscal year 2020 computed in accordance with FASB ASC 718. See Note 8 to the financial statements for the fiscal year ended December 31, 2020 included with this prospectus for a description of the assumptions used in valuing our stock options. |
(2) | None of our NEOs received any perquisites or other personal benefits that in the aggregate exceeded $10,000 during 2020. |
Narrative Disclosure to Compensation Tables
The primary elements of compensation for our NEOs are base salary, annual bonuses and long-term incentive awards in the form of equity awards. The NEOs also participate in employee benefit plans and programs that we offer to our other employees, as described below.
Annual Base Salary
We pay our NEOs a base salary to compensate them for the satisfactory performance of services rendered to us. The base salary payable to each NEO is intended to provide a fixed component of compensation reflecting the executives skill set, experience, role and responsibilities. Base salaries for our NEOs have generally been set at levels deemed necessary to attract and retain individuals with superior talent.
Our NEOs base salaries in effect at the end of 2020 were as follows: Mr. Simpson, $375,000; Dr. Holtzman, $275,000; Dr. Kanesa-thasan, $362,500, and Dr. Cearley, $275,000. Effective January 1, 2021, the base salaries for each of Mr. Simpson, Dr. Holtzman, Dr. Kanesa-thasan, and Dr. Cearley were increased to $475,000, $315,000, $400,000, and $300,000, respectively.
In connection with this offering, the base salaries for each of Mr. Simpson, Dr. Holtzman, Dr. Kanesa-thasan and Dr. Cearley will be increased to $550,000, $400,000, $440,000 and $390,000, respectively.
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Bonus Compensation
From time to time our board of directors or compensation and talent committee may approve bonuses for our NEOs based on achievement of certain clinical trial milestones and enhancement of operational capabilities. Pursuant to their respective employment letter agreements, each NEO has an established target annual bonus amount. For 2020, our NEOs target bonuses, expressed as a percentage of annual base salary, were for each of Mr. Simpson, Dr. Holtzman, Dr. Kanesa-thasan, and Dr. Cearley, 45%, 30%, 30%, and 30%, respectively.
For 2020, the annual bonuses paid were based on such factors as the board and the compensation and talent committee deemed appropriate, including initial manufacturing scale-up of IVX-121 to support toxicology studies and preparation for regulatory interactions, preparation for the IVX-121 Phase 1/1b clinical trial, selection of our hMVP candidate for future development, advancement of IVX-411 as a result of the COVID-19 pandemic (and related Bill & Melinda Gates Foundation grant) and general increase in operational abilities since our Series A financing in August 2019, and each individual NEOs performance as it relates to his or her area of responsibility. The annual bonuses paid to our NEOs for 2020 are reflected in the Summary Compensation Table above.
The 2021 target annual bonus amounts for each NEO, expressed as a percentage of annual base salary, are as follows: Mr. Simpson, 50%; Dr. Holtzman, 35%; Dr. Kanesa-thasan 35%, and Dr. Cearley 35%.
In connection with this offering, the target annual bonus amounts for each of Dr. Holtzman, Dr. Kanesa-thasan and Dr. Cearley will be increased to 40%.
Equity-Based Incentive Awards
Our equity-based incentive awards are designed to align our interests and the interests of our stockholders with those of our employees and consultants, including our NEOs. Our board of directors and compensation and talent committee are responsible for approving equity grants. We typically grant equity awards to new hires upon their commencing employment with us. Generally, our equity awards vest over four years, subject to the employees continued service with us on each vesting date.
On May 11, 2020, we granted Mr. Simpson an option to purchase 114,952 shares of our common stock. This option vests as to 25% of the underlying shares on the one year anniversary of the grant date, and the remainder vest in equal monthly installments over the three year period thereafter, subject to Mr. Simpsons continued service. The option was granted at an exercise price of $0.83 per share, which was the fair market value of a share of our common stock on the grant date.
On August 7, 2020, we granted Dr. Kanesa-thasan an option to purchase 30,122 shares of our common stock. This option vests as to 25% of the underlying shares on the one year anniversary of the grant date, and the remainder vest in equal monthly installments over the three year period thereafter, subject to Dr. Kanesa-thasans continued service. The option was granted at an exercise price of $0.83 per share, which was the fair market value of a share of our common stock on the grant date.
On January 29, 2021, we granted each NEO an option to purchase shares of our common stock. These options vest as to 25% of the underlying shares on the one year anniversary of the grant date, and the remainder vest in equal monthly installments over the three year period thereafter, subject to each NEOs continued service. The options were granted at an exercise price of $1.04 per share, which was the fair market value of a share of our common stock on the grant date. The number of shares of our common stock subject to options granted to our NEOs on such date are as follows: Mr. Simpson, 512,534; Dr. Holtzman, 65,420; Dr. Kanesa-thasan 155,788, and Dr. Cearley 104,204.
On April 12, 2021, we granted each NEO an option to purchase shares of our common stock. These options vest as to 25% of the underlying shares on the one year anniversary of the grant date, and the remainder vest in equal monthly installments over the three year period thereafter, subject to each NEOs continued service. The options were granted at an exercise price of $5.90 per share, which was the fair market value of a share of our common stock on the grant date. The number of shares of our common stock subject to the options granted to our NEOs on such date are as follows: Mr. Simpson, 1,347,546; Dr. Holtzman, 168,443; Dr. Kanesa-thasan 120,316, and Dr. Cearley 180,475.
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In connection with this offering, our board of directors has approved the grant of stock option and restricted stock unit awards pursuant to the 2021 Plan to our executive officers. The number of shares of our common stock subject to the options and the restricted stock units, respectively, that we will grant to our executive officers are as follows: Mr. Simpson, 375,000 and 125,000; Dr. Kanesa-Thasan, 124,500 and 41,500; Dr. Holtzman, 124,500 and 41,500; Dr. Cearley, 83,250 and 27,750; Mr. Richardson, 83,250 and 27,750; and Mr. Russo, 97,500 and 32,500. The options will be granted with an exercise price per share equal to the initial price to the public of our common stock in this offering. The options will vest pursuant to our standard four-year vesting schedule described above. The restricted stock units will vest in four equal annual installments on the first four anniversaries of the date of grant subject to continued service.
The equity awards granted to our executive officers are eligible to vest on an accelerated basis in accordance with our executive officers employment agreements, as described below.
Employment Letter Agreements with Our Executive Officers
We have entered into employment letter agreements with each of our executive officers.
Employment Letter with Adam Simpson
We have entered into an employment letter with Mr. Simpson, pursuant to which Mr. Simpson serves as a member of our board of directors and our Chief Executive Officer (the Simpson Agreement).
The Simpson Agreement provides for Mr. Simpsons annual base salary and target annual bonus. Additionally, under the Simpson Agreement, Mr. Simpson is eligible to participate in all employee benefit plans and programs available to similarly situated employees of our company and is entitled to vacation benefits in accordance with our policies.
The Simpson Agreement provides that Mr. Simpson shall at all times faithfully, industriously and to the best of his ability, experience and talent perform to the satisfaction of our board of directors all of the duties that may be assigned to him. However, subject to the terms of our standard confidential information and invention assignment agreement, the Simpson Agreement does not preclude Mr. Simpson from devoting time to personal and family investments or serving on community and civic boards, participating in industry associations, or engaging in other business or public activities (including providing consulting services to other entities, being employed by other entities and/or serving on the board of other entities), provided such activities do not interfere with the duties that Mr. Simpson owes us, as determined in good faith by our board of directors.
Regardless of the manner in which Mr. Simpsons employment terminates, he will be entitled to receive amounts previously earned during his term of employment, including unpaid salary and accrued but unused vacation. In addition, Mr. Simpson will be entitled to certain severance benefits under the Simpson Agreement, subject to his execution of a release of claims, returning all company property, compliance with post-termination obligations and resignation from positions with us.
Upon a termination without cause or resignation for good reason (each, a qualifying termination), Mr. Simpson will be entitled to: (1) severance in an amount equal to his base salary for 12 months (such applicable period, the severance period), (2) to the extent his qualifying termination occurs within eighteen months following a change in control, an amount equal to his target annual bonus for the year of termination, (3) payment of the cost of his health care coverage in effect at the time of his termination for the severance period, (4) accelerated vesting of his then unvested stock awards granted prior to August 15, 2019, and (5) accelerated vesting of such portion of his then unvested stock awards granted on or after August 15, 2019 that would have vested during the 12 months following his date of termination had Mr. Simpson remained in service with us during such period; provided that, for purposes of Mr. Simpsons accelerated vesting, Mr. Simpsons services shall not be considered to have been terminated pursuant to a qualifying termination if Mr. Simpson ceases to serve as Chief Executive Officer of the Company, but continues to serve as a member of our board of directors, in which case, the foregoing acceleration provisions will be triggered upon a qualifying termination of Mr. Simpsons service on our board of directors.
Additionally, the Simpson Agreement provides that in the event of a change in control or Mr. Simpsons termination due to death or disability, 50% of Mr. Simpsons stock awards granted prior to August 15, 2019 (or 100% in the case of a termination due to death or disability) shall vest immediately prior to such change in control or termination, as applicable. In addition, in the event of Mr. Simpsons qualifying termination within 18 months
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following a change in control, all of his then unvested stock awards granted on or after August 15, 2019 will vest upon such termination.
In connection with Mr. Simpsons commencement of employment with us, Mr. Simpson also entered into our standard confidential information and invention assignment agreement, which includes one-year post-termination non-solicitation restrictions and customary confidentiality provisions.
For purposes of the Simpson Agreement:
∎ |
cause means a (1) conviction of, or plea of guilty or no contest to, any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (2) commission of, or participation in, a fraud or act of dishonesty or other illegal act against us; (3) intentional, material violation of any contract or agreement between Mr. Simpson and us or of any statutory duty owed to us; (4) unauthorized use or disclosure of our confidential information or trade secrets; or (5) gross misconduct; provided, that, with respect to clauses (3) and (4) above, cause will be triggered after Mr. Simpson has received written notification of such failure from our board of directors, which, if curable, remains uncured after thirty days. |
∎ |
change in control generally means (1) a merger or consolidation of our company with or into any other corporation or other entity or person, (2) a sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of our assets, or (3) any other transaction, including the sale by us of new shares of its capital stock or a transfer of existing shares of our capital stock, the result of which is that a third party that is not our affiliate immediately prior to such transaction acquires or holds our capital stock representing a majority of our outstanding voting power immediately following such transaction; provided that the following events shall not constitute a change in control: (a) a transaction (other than a sale of all or substantially all of our assets) in which the holders of our voting securities immediately prior to the merger or consolidation hold, directly or indirectly, at least a majority of the voting securities in the successor corporation or its parent immediately after the merger or consolidation; (b) a sale, lease, exchange or other transaction in one transaction or a series of related transactions of all or substantially all of our assets to an affiliate of ours; (b) an initial public offering of our securities or any other transaction or series of related transactions principally for bona fide equity financing purposes; (d) a reincorporation of our company solely to change its jurisdiction; or (e) a transaction undertaken for the primary purpose of creating a holding company that will be owned in substantially the same proportion by the persons who held our securities immediately before such transaction. |
∎ |
good reason generally means any of the following actions taken by us without Mr. Simpsons consent: (1) material reduction of base compensation, other than to the extent the base compensation of all of the executive officers are concurrently reduced by the same or greater percentage; (2) material reduction in authority, duties or responsibilities, provided, however, that a change in job position (including a change in title) shall not be deemed a material reduction unless the new authority, duties or responsibilities are materially reduced from the prior authority, duties or responsibilities; or (3) relocation of the principal place at which Mr. Simpson is required to provide services or his principal place of employment that results in an increase in the one-way driving distance by more than fifty miles from the then current principal place of business or residence, as applicable. |
Amended Employment Letter with Adam Simpson
In connection with this offering, we will enter into an amended and restated employment agreement with Mr. Simpson (the Amended Simpson Agreement), which will supersede the Simpson Agreement in effect prior to this offering and described above.
Under the Amended Simpson Agreement, upon a qualifying termination that occurs more than 60 days prior to a change in control or more than 18 months following a change in control, Mr. Simpson will be entitled to: (1) severance in an amount equal to his base salary for 12 months, (2) an amount equal to his target annual bonus for the year of termination, prorated to reflect the portion of the year that has elapsed prior to the date of his separation from service date, and (3) payment of the cost of his health care coverage in effect at the time of his termination for 12 months.
Under the Amended Simpson Agreement, upon a qualifying termination that occurs within 60 days prior to a change in control or within 18 months following a change in control (the change in control period), Mr. Simpson will be
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entitled to: (1) severance in an amount equal to his base salary for 18 months, (2) an amount equal to one hundred and fifty percent multiplied by his target annual bonus for the year of termination, and (3) payment of the cost of his health care coverage in effect at the time of his termination for 18 months.
Under the Amended Simpson Agreement, upon a qualifying termination that occurs outside of the change in control period, Mr. Simpson will be entitled to: (1) accelerated vesting in full of all of his then unvested equity awards granted prior to August 15, 2019, and (2) accelerated vesting of his then unvested equity awards granted on or after August 15, 2019 as would have vested by their terms during the 12 months following his date of termination had he remained in the service of or employed by us during such period.
Under the Amended Simpson Agreement, upon a qualifying termination that occurs during the change in control period, Mr. Simpson will be entitled to accelerated vesting in full of his then unvested equity awards (provided that the 60 day look back protection period will only apply to awards granted on or after the date of the Amended Simpson Agreement).
Additionally, the Amended Simpson Agreement provides that in the event of a change in control or Mr. Simpsons termination due to death or disability, 50% of Mr. Simpsons equity awards granted prior to August 15, 2019 (or 100% in the case of a termination due to death or disability) shall vest immediately prior to such change in control or termination, as applicable.
For purposes of the Amended Simpson Agreement:
∎ |
cause means a (1) conviction of, or plea of guilty or no contest to, any non-vehicular felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (2) commission of, or participation in, a fraud or act of dishonesty or other illegal act against us that has a demonstrable adverse impact on us or any successor of affiliate of us; (3) intentional material violation of any contract or agreement between Mr. Simpson and us or of any material policy of ours or of any statutory duty owed to us; (4) intentional unauthorized use or disclosure of our confidential information or trade secrets; (5) gross misconduct; or (6) ongoing and repeated failure or refusal to perform or neglect of his duties as required by the Amended Simpson Agreement or his ongoing and repeated failure to comply with lawful instructions given to Mr. Simpson by our board of directors, which failure, refusal or neglect continues for thirty days following Mr. Simpsons receipt of written notice from our board of directors stating with specificity the nature of such failure, refusal or neglect; provide that, clause (6) above shall not permit us to terminate Mr. Simpsons employment for cause solely because of his failure to meet specified performance objectives or achieve a specific result or outcome or our dissatisfaction with the quality of services provided by him in the good faith performance of his duties to us; further provided, that, with respect to clauses (3), (4) and (6) above, cause will be triggered after Mr. Simpson has received written notification of such failure from our board of directors, which, if curable, remains uncured after thirty days. Further, Mr. Simpson shall be provided an opportunity to be heard prior to the final decision to terminate his employment for such cause and any determination of cause by our board of directors or by us will be made in good faith. |
∎ |
change in control has the meaning given to such term in the 2021 Plan. |
∎ |
good reason generally means any of the following actions taken by us without Mr. Simpsons consent: (1) material reduction of base compensation (any diminution of 10% or more shall be considered material for this purpose, regardless of whether such diminution occurs due to a single reduction or a series of reductions in Mr. Simpsons base compensation), other than to the extent the base compensation of all of the executive officers are concurrently reduced by the same or greater percentage; (2) material reduction in authority, duties or responsibilities, including a requirement that Mr. Simpson report to a corporate officer instead of our board of directors (or, following a change in control, the board of directors (or similar governing body) of the ultimate parent company of the surviving entity in such change in control that has at least one class of publicly traded securities listed on a national stock exchange); (3) relocation of the principal place at which Mr. Simpson is required to provide services or his principal place of employment that results in an increase in the one-way driving distance by more than 50 miles from the then current principal place of business or residence, as applicable; or (4) any other action or inaction that constitutes a material breach by us or any successor or affiliate of our obligations under the Amended Simpson Agreement. |
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All other terms of the Amended Simpson Agreement are consistent in all material respects with the Simpson Agreement.
Employment Letters with each of Douglas Holtzman, Niranjan Kanesa-thasan, Cassia Cearley, Charles Richardson and Thomas Russo
We have entered into employment letters with each of Dr. Holtzman, Kanesa-thasan, Cearley, Mr. Richardson and Mr. Russo (the Other NEO Agreements).
The Other NEO Agreements provide for each executives annual base salary and target annual bonus. Additionally, under the Other NEO Agreements, each executive is eligible to participate in all employee benefit plans and programs available to similarly situated employees of our company and is entitled to vacation benefits in accordance with our policies. The Other NEO Agreements provide that each executive is employed on a full-time basis.
Regardless of the manner in which an executives employment terminates, he or she will be entitled to receive amounts previously earned during his or her term of employment, including unpaid salary and accrued but unused vacation. In addition, each executive will be entitled to certain severance benefits under his or her Other NEO Agreement, subject to execution of a release of claims, returning all company property, compliance with post-termination obligations and resignation from all positions with us.
Upon a termination without cause or resignation for good reason (each, a qualifying termination), each of Drs. Holtzman, Kanesa-thasan, Cearley, Mr. Richardson and Mr. Russo will be entitled to: (1) severance in an amount equal to his or her base salary for 6 months (such applicable period, the severance period) (however, upon a qualifying termination that occurs within eighteen months following a change in control, each executive will instead be entitled to his or her base salary for 12 months plus an amount equal to a pro rata portion of his or target annual bonus for the year of termination), (2) payment of the cost of his or health care coverage in effect at the time of his or her termination for the severance period, and (3) accelerated vesting of such portion of his or her then unvested stock awards that would have vested during the 6 months following his or her date of termination had he or she remained in service with us during such period. In addition, in the event of a qualifying termination within 18 months following a change in control, all of an executives stock awards granted on or after August 15, 2019 will vest upon such termination.
In connection with their commencement of employment with us, each or Drs. Holtzman, Kanesa-thasan, Cearley, Mr. Richardson and Mr. Russo also entered into our standard confidential information and invention assignment agreement, which includes one-year post-termination non-solicitation restrictions and customary confidentiality provisions.
For purposes of the Other NEO Agreements, the terms cause, change in control and good reason are generally defined in the same manner as described above in connection with Mr. Simpsons agreement.
Amended Employment Letters with each of Douglas Holtzman, Niranjan Kanesa-thasan, Cassia Cearley, Charles Richardson and Thomas Russo
In connection with this offering, we will enter into an amended and restated employment agreement with each of Dr. Holtzman, Dr. Kanesa-thasan, Dr. Cearley, Dr. Richardson and Mr. Russo (the Amended Other NEO Agreements), which will supersede the Other NEO Agreements in effect prior to this offering and described above.
Under the Amended Other NEO Agreements, upon a qualifying termination that occurs more than 60 days prior to a change in control or more than 18 months following a change in control, an executive will be entitled to: (1) severance in an amount equal to his or her base salary for 9 months, (2) an amount equal to his or her target annual bonus for the year of termination, prorated to reflect the portion of the year that has elapsed prior to the date of his separation from service date, and (3) payment of the cost of his or her health care coverage in effect at the time of his termination for 9 months.
Under the Amended Other NEO Agreements, upon a qualifying termination that occurs within 60 days prior to a change in control or within 18 months following a change in control (the change in control period), an executive will be entitled to: (1) severance in an amount equal to his or her base salary for 12 months, (2) an amount equal to his or her target annual bonus for the year of termination, and (3) payment of the cost of his or her health care coverage in effect at the time of his or her termination for 12 months.
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Under the Amended Other NEO Agreements, upon a qualifying termination that occurs outside of the change in control period, an executive will be entitled to accelerated vesting of such number of his or her then unvested equity awards as would have vested by their terms during the nine months following his or her date of termination had he or she remained in the service or employed by us during such period.
Under the Amended Other NEO Agreements, upon a qualifying termination that occurs during the change in control period, an executive will be entitled to accelerated vesting in full of his or her then unvested equity awards (provided that the 60 day look back protection period will only apply to awards granted on or after the date of the applicable Amended Other NEO Agreements).
For purposes of the Amended Other NEO Agreements, the terms cause, change in control and good reason are generally defined in the same manner as described above in connection with the Amended Simpson Agreement.
All other terms of the Amended Other NEO Agreements are consistent in all material respects with the Other NEO Agreements.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information with respect to outstanding equity awards for each of our NEOs as of December 31, 2020.
OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||
GRANT
DATE |
NUMBER OF
SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE (1) |
NUMBER OF
SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE (1) |
OPTION
EXERCISE PRICE ($) |
OPTION
EXPIRATION DATE |
NUMBER OF
SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) |
MARKET
VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($) (2) |
||||||||||||||||||||||
Adam Simpson |
12/11/2017 | | | | | 35,841 | (3) | 537, 615 | ||||||||||||||||||||
5/21/2018 | | | | | 102,664 | (4) | 1,539,960 | |||||||||||||||||||||
9/13/2019 | 109,588 | (5) | | $ | 0.83 | 9/12/2029 | | | ||||||||||||||||||||
9/13/2019 | | | | | 80,211 | (6) | 1,203,165 | |||||||||||||||||||||
5/11/2020 | | 114,952 | $ | 0.83 | 5/10/2030 | | | |||||||||||||||||||||
Douglas Holtzman, Ph.D. |
12/14/2017 | | | | | 17,920 | (3) | 268,800 | ||||||||||||||||||||
9/13/2019 | | | | | 100,919 | (7) | 1,513,785 | |||||||||||||||||||||
Niranjan Kanesa-thasan, M.D. |
11/19/2018 | | | | | 17,879 | (8) | 268,185 | ||||||||||||||||||||
9/13/2019 | | | | | 53,055 | (7) | 795,825 | |||||||||||||||||||||
8/7/2020 | | 30,122 | $ | 0.83 | 8/6/2030 | | | |||||||||||||||||||||
Cassia Cearley, Ph.D. |
12/2/2019 | 30,122 | 90,369 | $ | 0.83 | 12/1/2029 | | |
(1) | Stock options granted to our NEOs vest over a period of four years with 25% of the shares underlying the option vesting on the one year anniversary of the vesting commencement date (August 16, 2019 for Mr. Simpsons September 2019 grant, December 2, 2019 for Dr. Cearleys December 2019 grant, February 21, 2020 for Mr. Simpsons May 2020 grant and April 1, 2020 for Dr. Kanesa-thasans August 2020 grant) and 1/48th of the shares underlying the option vesting on a monthly basis thereafter, subject to continued service through each vesting date, and subject to accelerated vesting in certain circumstances as described above under Employment Letter Agreements with Our Executive Officers. |
(2) | Since we have not yet completed our initial public offering, the market value was computed using $15.00, which is the midpoint of the price range set forth on the cover of this prospectus. |
(3) | Represents unvested restricted shares issued in December 2017. 179,208 restricted shares were originally issued to Mr. Simpson and 89,604 restricted shares were originally issued to Dr. Holtzman in December 2017, of which 20% were vested upon issuance, with the remaining 80% vesting in equal monthly installments over a period of four years commencing on the issuance date, subject to continued service through each vesting date. 50% of the then-unvested restricted shares will vest upon a change in control and all of the then-unvested restricted shares will vest in the event of the executives death or disability. In addition, all of the then-unvested restricted shares will vest in the event of the executives termination without cause or resignation for good reason (provided such termination occurs following a change in control with respect to Dr. Holtzman). |
(4) |
Represents unvested restricted shares issued upon early exercise of a stock option originally granted on May 21, 2018 at an exercise price of $0.004 per share. 342,213 shares were issued to Mr. Simpson upon early exercise in full of the stock option, of which |
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20% were vested upon issuance and a further 20% vested on June 30, 2019, with 1/36th of the remaining shares vesting on a monthly basis over three years thereafter, subject to continued service through each vesting date, and subject to accelerated vesting in certain circumstances as described above under Employment Letter Agreements with Our Executive Officers. |
(5) | Consists of shares underlying a stock option granted to Mr. Simpson on September 13, 2019 at an exercise price of $0.83 per share. The stock option is subject to the standard vesting schedule described in footnote (1) above, with vesting commencing on August 16, 2019, and is eligible for early exercise. The option is subject to accelerated vesting in certain circumstances as described above under Employment Letter Agreements with Our Executive Officers. |
(6) | Represents unvested restricted shares issued upon early exercise of the stock option originally granted on September 13, 2019 at an exercise price of $0.83 per share and described in footnote (5) above. 120,316 shares were issued to Mr. Simpson upon early exercise of a portion of the option, with such shares subject to the standard vesting schedule described in footnote (1) above, with vesting commencing on August 16, 2019, subject to accelerated vesting in certain circumstances as described above under Employment Letter Agreements with Our Executive Officers. |
(7) | Represents unvested restricted shares issued upon early exercise of stock options originally granted on September 13, 2019 at an exercise price of $0.83 per share. 151,378 shares of restricted stock were issued to Dr. Holtzman and 79,583 shares of restricted stock were issued to Dr. Kanesa-thasan upon early exercise in full of the stock options, with such shares subject to the standard vesting schedule described in footnote (1) above with vesting commencing on August 16, 2019, subject to accelerated vesting in certain circumstances as described above under Employment Letter Agreements with Our Executive Officers. |
(8) | Represents unvested restricted shares issued upon early exercise of a stock option originally granted on November 19, 2018 at an exercise price of $0.04 per share. 40,907 shares of restricted stock were issued to Dr. Kanesa-thasan upon early exercise in full of the stock option, with such shares subject to the standard vesting schedule described in footnote (1) above with vesting commencing on September 1, 2018, subject to accelerated vesting in certain circumstances as described above under Employment Letter Agreements with Our Executive Officers. |
Other Elements of Compensation
Perquisites, Health, Welfare and Retirement Benefits
Our NEOs are eligible to participate in our employee benefit plans, including our medical, dental, vision, group life, disability and accidental death and dismemberment insurance plans, in each case on the generally on same basis as all of our other employees.
We generally do not provide perquisites or personal benefits to our named executive officers, except in limited circumstances. Our board of directors may elect to adopt qualified or non-qualified benefit plans in the future if it determines that doing so is in our best interests.
401(k) Plan
Our employees who satisfy certain eligibility requirements are eligible to participate in a defined contribution employee retirement plan (the 401(k) Plan) maintained by TriNet, a professional employer organization that is the legal employer of our employees. Our named executive officers are eligible to participate in the 401(k) Plan on the same basis as our other employees. The 401(k) Plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the Code). The 401(k) Plan provides that each participant may make pre-tax deferrals from his or her compensation up to the statutory limit, which is $19,500 for calendar year 2021, and other testing limits. Participants that are 50 years or older can also make catch-up contributions, which in calendar year 2021 may be up to an additional $6,500 above the statutory limit. Commencing in 2021, we will make a 3% safe-harbor non-elective employer contribution. Participant contributions are held and invested, pursuant to the participants instructions, by the plans trustee.
Nonqualified Deferred Compensation
We do not maintain nonqualified defined contribution plans or other nonqualified deferred compensation plans. Our board of directors or compensation and talent committee may elect to provide our officers and other employees with non-qualified defined contribution or other nonqualified deferred compensation benefits in the future if it determines that doing so is in our best interests.
Termination or Change in Control Benefits
Our NEOs may become entitled to certain benefits or enhanced benefits in connection with a change in control of our company and/or certain terminations. Each of our NEOs employment letter agreement entitles him or her to certain benefits upon a qualifying termination and in connection with a change in control of our company. In addition, the award agreements evidencing the equity awards granted to our executive officers provide for accelerated vesting under certain circumstances. For additional discussion, please see Employment Letter Agreements with Our Executive Officers and Outstanding Equity Awards at Fiscal Year-End.
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Incentive Award Plans
2021 Incentive Award Plan
Our board of directors and our stockholders have approved the 2021 Plan under which we may grant cash and equity-based incentive awards to eligible service providers in order to attract, retain and motivate the persons who make important contributions to the company. The material terms of the 2021 Plan are summarized below. The 2021 Plan will become effective on the day prior to the first public trading date of our common stock.
Eligibility and Administration
Our employees, consultants and directors, and employees and consultants of our subsidiaries will be eligible to receive awards under the 2021 Plan. The 2021 Plan will be administered by our board of directors with respect to awards to non-employee directors and by our compensation and talent committee with respect to other participants, each of which may delegate its duties and responsibilities to committees of our directors and/or officers (referred to collectively as the plan administrator below), subject to the limitations that may be imposed under the 2021 Plan, Section 16 of the Exchange Act, stock exchange rules and other applicable laws. The plan administrator will have the authority to take all actions and make all determinations under the 2021 Plan, to interpret the 2021 Plan and award agreements and to adopt, amend and repeal rules for the administration of the 2021 Plan as it deems advisable. The plan administrator will also have the authority to determine which eligible service providers receive awards, grant awards and set the terms and conditions of all awards under the 2021 Plan, including any vesting and vesting acceleration provisions, subject to the conditions and limitations in the 2021 Plan.
Shares Available
The number of shares initially available for issuance under awards granted pursuant to the 2021 Plan will be the sum of (1) 4,600,000 shares of our common stock, plus (2) any shares available under our 2017 Equity Incentive Plan (2017 Plan) as of the effective date of the 2021 Plan, plus (3) any shares subject to outstanding awards under our 2017 Plan as of the effective date of the 2021 Plan that become available for issuance under the 2021 Plan thereafter in accordance with its terms. The number of shares initially available for issuance will be increased by an annual increase on January 1 of each calendar year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 5% of the shares outstanding on the final day of the immediately preceding calendar year and (B) a smaller number of shares as determined by our board of directors. No more than 50,000,000 shares of common stock may be issued under the 2021 Plan upon the exercise of incentive stock options. Shares available under the 2021 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares. In connection with this offering, our board of directors has approved the grant under the 2021 Plan of (i) stock options to purchase an aggregate of 1,051,500 shares of our common stock to certain of our executive officers, directors, employees and consultants, at an exercise price equal to the initial public offering price in this offering and (ii) restricted stock units with respect to 355,750 shares of our common stock to certain of our executive officers, directors, employees and consultants.
If an award under the 2021 Plan expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2021 Plan. Awards granted under the 2021 Plan in substitution for any options or other stock or stock-based awards granted by an entity before the entitys merger or consolidation with us or our acquisition of the entitys property or stock will not reduce the shares available for grant under the 2021 Plan, but will count against the maximum number of shares that may be issued upon the exercise of incentive stock options.
Awards
The 2021 Plan provides for the grant of stock options, including incentive stock options (ISOs) and nonqualified stock options (NSOs), stock appreciation rights (SARs), restricted stock, dividend equivalents, restricted stock units (RSUs), and other stock or cash-based awards. Certain awards under the 2021 Plan may constitute or provide for payment of nonqualified deferred compensation under Section 409A of the Code. All awards under the 2021 Plan
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will be set forth in award agreements, which will detail the terms and conditions of awards, including any applicable vesting and payment terms and post-termination exercise limitations. A brief description of each award type follows.
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Stock Options and SARs. Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The plan administrator will determine the number of shares covered by each option and SAR, the exercise price of each option and SAR and the conditions and limitations applicable to the exercise of each option and SAR. The exercise price of a stock option or SAR will not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). |
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Restricted Stock and RSUs. Restricted stock is an award of nontransferable shares of our common stock that remain forfeitable unless and until specified conditions are met and which may be subject to a purchase price. RSUs are contractual promises to deliver shares of our common stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of our common stock prior to the delivery of the underlying shares. The plan administrator may provide that the delivery of the shares underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to restricted stock and RSUs will be determined by the plan administrator, subject to the conditions and limitations contained in the 2021 Plan. |
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Other Stock or Cash-Based Awards. Other stock or cash-based awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock or other property. Other stock or cash-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled. The plan administrator will determine the terms and conditions of other stock or cash-based awards, which may include any purchase price, performance goal, transfer restrictions and vesting conditions. |
Performance Criteria
The plan administrator may select performance criteria for an award to establish performance goals for a performance period. Performance criteria under the 2021 Plan may include, but are not limited to, the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the companys performance or the performance of
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a subsidiary, division, business segment or business unit of the company or a subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. When determining performance goals, the plan administrator may provide for exclusion of the impact of an event or occurrence which the plan administrator determines should appropriately be excluded, including, without limitation, non-recurring charges or events, acquisitions or divestitures, changes in the corporate or capital structure, events unrelated to the business or outside of the control of management, foreign exchange considerations, and legal, regulatory, tax or accounting changes.
Certain Transactions
In connection with certain corporate transactions and events affecting our common stock, including a change in control, or change in any applicable laws or accounting principles, the plan administrator has broad discretion to take action under the 2021 Plan to prevent the dilution or enlargement of intended benefits, facilitate the transaction or event or give effect to the change in applicable laws or accounting principles. This includes canceling awards for cash or property, accelerating the vesting of awards, providing for the assumption or substitution of awards by a successor entity, adjusting the number and type of shares subject to outstanding awards and/or with respect to which awards may be granted under the 2021 Plan and replacing or terminating awards under the 2021 Plan. In addition, in the event of certain non-reciprocal transactions with our stockholders, the plan administrator will make equitable adjustments to the 2021 Plan and outstanding awards as it deems appropriate to reflect the transaction. In the event of a change in control of the company (as defined in the 2021 Plan), to the extent that the surviving entity declines to continue, convert, assume or replace outstanding awards, then all such awards may become fully vested and exercisable in connection with the transaction. Individual award agreements may provide for additional accelerated vesting and payment provisions.
Provisions of the 2021 Plan Relating to Director Compensation
The 2021 Plan provides that the plan administrator may establish compensation for non-employee directors from time to time subject to the 2021 Plans limitations. Prior to commencing this offering, we intend to approve and implement a compensation program for our non-employee directors. Our board of directors or its authorized committee may modify the non-employee director compensation program from time to time in the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation or other compensation and the grant date fair value of any equity awards granted under the 2021 Plan as compensation for services as a non-employee director during any fiscal year may not exceed $1,000,000 (increased to $1,500,000 in the calendar year of a non-employee directors initial service as a non-employee director or any calendar year in which a non-employee director serves as chairman of the board or lead independent director for any portion of such year), which limits shall not apply to the compensation for any non-employee director who serves in any capacity in addition to that of a non-employee director for which he or she receives additional compensation or any compensation paid to any non-employee director prior to the first calendar year following the completion of this offering. The plan administrator may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the plan administrator may determine in its discretion, subject to the limitations in the 2021 Plan.
Foreign Participants, Claw-Back Provisions, Transferability, and Participant Payments
The plan administrator may modify awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures to address differences in laws, rules, regulations or customs of such foreign jurisdictions. All awards will be subject to any company claw-back policy as set forth in such claw-back policy or the applicable award agreement. Except as the plan administrator may determine or provide in an award agreement, awards under the 2021 Plan are generally non-transferrable, except by will or the laws of descent and distribution, or, subject to the plan administrators consent, pursuant to a domestic relations order and are generally exercisable only by the participant. With regard to tax withholding obligations arising in connection with awards under the 2021 Plan and exercise price obligations arising in connection with the exercise of stock options under the 2021 Plan, the plan administrator may, in its discretion, accept cash, wire transfer or check, shares of our common stock that meet specified conditions, a promissory note, a market sell order, such other consideration as the plan administrator deems suitable or any combination of the foregoing.
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Plan Amendment and Termination
Our board of directors may amend or terminate the 2021 Plan at any time; however, no amendment, other than an amendment that increases the number of shares available under the 2021 Plan, may materially and adversely affect an award outstanding under the 2021 Plan without the consent of the affected participant and stockholder approval will be obtained for any amendment to the extent necessary to comply with applicable laws. Further, the plan administrator may, without the approval of our stockholders, amend any outstanding stock option or SAR to reduce its price per share, other than in the context of corporate transactions or equity restructurings, as described above. The 2021 Plan will remain in effect until the tenth anniversary of the date it was first adopted by our board of directors, unless earlier terminated by our board of directors. No awards may be granted under the 2021 Plan after its termination.
Securities Laws
The 2021 Plan is intended to conform to all provisions of the Securities Act, the Exchange Act and any and all regulations and rules promulgated by the SEC thereunder, including, without limitation, Exchange Act Rule 16b-3. The 2021 Plan will be administered, and awards will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.
Federal Income Tax Consequences
The material federal income tax consequences of the 2021 Plan under current federal income tax law are summarized in the following discussion, which deals with the general U.S. federal income tax principles applicable to the 2021 Plan. The following discussion is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. Foreign, state and local tax laws, and employment, estate and gift tax considerations are not discussed due to the fact that they may vary depending on individual circumstances and from locality to locality.
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Stock Options and SARs. A 2021 Plan participant generally will not recognize taxable income and we generally will not be entitled to a tax deduction upon the grant of a stock option or SAR. The tax consequences of exercising a stock option and the subsequent disposition of the shares received upon exercise will depend upon whether the option qualifies as an ISO or an NSO. Upon exercising an NSO when the fair market value of our stock is higher than the exercise price of the option, a 2021 Plan participant generally will recognize taxable income at ordinary income tax rates equal to the excess of the fair market value of the stock on the date of exercise over the purchase price, and we (or our subsidiaries, if any) generally will be entitled to a corresponding tax deduction for compensation expense, in the amount equal to the amount by which the fair market value of the shares purchased exceeds the purchase price for the shares. Upon a subsequent sale or other disposition of the option shares, the participant will recognize a short-term or long-term capital gain or loss in the amount of the difference between the sales price of the shares and the participants tax basis in the shares. |
Upon exercising an ISO, a 2021 Plan participant generally will not recognize taxable income, and we will not be entitled to a tax deduction for compensation expense. However, upon exercise, the amount by which the fair market value of the shares purchased exceeds the purchase price will be an item of adjustment for alternative minimum tax purposes. The participant will recognize taxable income upon a sale or other taxable disposition of the option shares. For federal income tax purposes, dispositions are divided into two categories: qualifying and disqualifying. A qualifying disposition generally occurs if the sale or other disposition is made more than two years after the date the option was granted and more than one year after the date the shares are transferred upon exercise. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition generally will result.
Upon a qualifying disposition of ISO shares, the participant will recognize long-term capital gain in an amount equal to the excess of the amount realized upon the sale or other disposition of the shares over their purchase price. If there is a disqualifying disposition of the shares, then the excess of the fair market value of the shares on the exercise date (or, if less, the price at which the shares are sold) over their purchase price will be taxable as ordinary income to the participant. If there is a disqualifying disposition in the same year of exercise, it eliminates the item of adjustment for alternative minimum tax purposes. Any additional gain or loss recognized upon the disposition will be recognized as a capital gain or loss by the participant.
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We will not be entitled to any tax deduction if the participant makes a qualifying disposition of ISO shares. If the participant makes a disqualifying disposition of the shares, we should be entitled to a tax deduction for compensation expense in the amount of the ordinary income recognized by the participant.
Upon exercising or settling a SAR, a 2021 Plan participant will recognize taxable income at ordinary income tax rates, and we should be entitled to a corresponding tax deduction for compensation expense, in the amount paid or value of the shares issued upon exercise or settlement. Payments in shares will be valued at the fair market value of the shares at the time of the payment, and upon the subsequent disposition of the shares the participant will recognize a short-term or long-term capital gain or loss in the amount of the difference between the sales price of the shares and the participants tax basis in the shares.
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Restricted Stock and RSUs. A 2021 Plan participant generally will not recognize taxable income at ordinary income tax rates and we generally will not be entitled to a tax deduction upon the grant of restricted stock or RSUs. Upon the termination of restrictions on restricted stock or the settlement of RSUs, the participant will recognize taxable income at ordinary income tax rates, and we should be entitled to a corresponding tax deduction for compensation expense, in the amount paid to the participant or the amount by which the then fair market value of the shares received by the participant exceeds the amount, if any, paid for them. Upon the subsequent disposition of any shares, the participant will recognize a short-term or long-term capital gain or loss in the amount of the difference between the sales price of the shares and the participants tax basis in the shares. However, a 2021 Plan participant granted restricted stock that is subject to forfeiture or repurchase through a vesting schedule such that it is subject to a substantial risk of forfeiture (as defined in Section 83 of the Internal Revenue Code) may make an election under Section 83(b) of the Internal Revenue Code to recognize taxable income at ordinary income tax rates, at the time of the grant, in an amount equal to the fair market value of the shares of common stock on the date of grant, less the amount paid, if any, for the shares. We will be entitled to a corresponding tax deduction for compensation, in the amount recognized as taxable income by the participant. If a timely Section 83(b) election is made, the participant will not recognize any additional ordinary income on the termination of restrictions on restricted stock, and we will not be entitled to any additional tax deduction. |
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Other Stock or Cash-Based Awards. A 2021 Plan participant will not recognize taxable income and we will not be entitled to a tax deduction upon the grant of other stock or cash-based awards unless or until cash or shares are paid or distributed to the participant. At that time, any cash payments or the fair market value of shares that the participant receives will be taxable to the participant at ordinary income tax rates and we should be entitled to a corresponding tax deduction for compensation expense. Payments in shares will be valued at the fair market value of the shares at the time of the payment. Upon the subsequent disposition of the shares, the participant will recognize a short-term or long-term capital gain or loss in the amount of the difference between the sales price of the shares and the participants tax basis in the shares. |
2017 Equity Incentive Plan
We currently maintain the 2017 Plan, which has been approved by our board of directors and our stockholders.
Shares Available
A total of 7,130,414 shares of our common stock are reserved for issuance under the 2017 Plan. As of March 31, 2021, 1,717,446 shares of our common stock were subject to outstanding stock options under the 2017 Plan and 4,288,604 shares of our common stock remained available for future issuance under the 2017 Plan.
After the effective date of the 2021 Plan, no additional awards will be granted under the 2017 Plan. However, the 2017 Plan will continue to govern the terms and conditions of the outstanding awards granted under it. Shares of our common stock subject to awards granted under the 2017 Plan that expire, lapse or are terminated, exchanged for cash, surrendered, repurchased or forfeited following the effective date of the 2017 Plan will be available for issuance under the 2017 Plan in accordance with its terms.
Eligibility and Administration
Awards under the 2017 Plan may be granted to individuals who are then our employees, consultants and members of our board of directors and our subsidiaries. Only employees may be granted ISOs. Our board of directors administers the 2017 Plan, unless it delegates authority for administration of the plan. Subject to the terms and
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conditions of the 2017 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the type or types of awards to be granted to each person, determine the number of awards to grant, determine the number of shares to be subject to such awards, and the terms and conditions of such awards, and make all other determinations and decisions and to take all other actions necessary or advisable for the administration of the 2017 Plan. The plan administrator is also authorized to establish, adopt, amend or revise rules relating to administration of the 2017 Plan, subject to certain restrictions.
Awards
The 2017 Plan provides that our administrator may grant or issue stock options (including NSOs and ISOs), restricted stock, RSUs, other stock-based awards, or any combination thereof. The administrator considers each award grant subjectively, considering factors such as the individual performance of the recipient and the anticipated contribution of the recipient to the attainment of our long-term goals. Each award is set forth in a separate agreement with the person receiving the award and indicates the type, terms and conditions of the award.
Certain Transactions
The plan administrator has broad discretion to equitably adjust the provisions of the 2017 Plan and the terms and conditions of existing and future awards, including with respect to aggregate number and type of shares subject to the 2017 Plan and awards granted pursuant to the 2017 Plan, to prevent the dilution or enlargement of intended benefits and/or facilitate necessary or desirable changes in the event of certain transactions and events affecting our common stock, such as stock dividends, stock splits, mergers, acquisitions, consolidations and other corporate transactions. The plan administrator may also provide for the acceleration, cash-out, termination, assumption, substitution or conversion of awards in the event of a change in control or certain other unusual or nonrecurring events or transactions. In addition, in the event of certain non-reciprocal transactions with our stockholders, or an equity restructuring, the plan administrator will make equitable adjustments to the 2017 Plan and outstanding awards as it deems appropriate to reflect the equity restructuring.
In the event of a change of control where the acquirer does not assume awards granted under the 2017 Plan, awards issued under the 2017 Plan held by persons who have not experienced a termination of service will be subject to accelerated vesting such that all of the awards will become vested and exercisable or payable, as applicable, immediately prior to the change in control.
Plan Amendment and Termination
Our board of directors may terminate, amend or modify the 2017 Plan. However, stockholder approval of any amendment to the 2017 Plan must be obtained to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, or for any amendment to the 2017 Plan that increases the number of shares available under the 2017 Plan. If not terminated earlier by the compensation and talent committee or the board of directors, the 2017 Plan will terminate on May 6, 2029.
Securities Laws and Federal Income Tax Consequences
The 2017 Plan is designed to comply with applicable securities laws in the same manner as described above in the description of the 2021 Plan under the heading 2021 Incentive Award PlanSecurities Laws. The general federal tax consequences of awards under the 2017 Plan are the same as those described above in the description of the 2021 Plan under the heading 2021 Incentive Award PlanFederal Income Tax Consequences.
2021 Employee Stock Purchase Plan
Our board of directors and our stockholders have approved the 2021 ESPP. The material terms of the 2021 ESPP, are summarized below. The 2021 ESPP will become effective on the day prior to the first public trading date of our common stock.
The 2021 ESPP is comprised of two distinct components in order to provide increased flexibility to grant options to purchase shares under the 2021 ESPP to U.S. and to non-U.S. employees. Specifically, the 2021 ESPP authorizes (1) the grant of options to U.S. employees that are intended to qualify for favorable U.S. federal tax treatment under Section 423 of the Code, (the Section 423 Component), and (2) the grant of options that are not intended to be tax-qualified under Section 423 of the Code to facilitate participation for employees located outside of the U.S. who do not benefit from favorable U.S. federal tax treatment and to provide flexibility to comply with non-U.S. law and other considerations (the Non-Section 423 Component). Where permitted under local law and custom, we expect that the Non-Section 423 Component will generally be operated and administered on terms and conditions similar to the Section 423 Component.
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Shares Available for Awards; Administration
A total of 400,000 shares of our common stock will initially be reserved for issuance under the 2021 ESPP. In addition, the number of shares available for issuance under the 2021 ESPP will be annually increased on January 1 of each calendar year beginning in 2022 and ending in and including 2031, by an amount equal to the lesser of (A) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares as is determined by our board of directors, provided that no more than 15,000,000 shares of our common stock may be issued under the 2021 ESPP. Our board of directors or a committee of our board of directors will administer and will have authority to interpret the terms of the 2021 ESPP and determine eligibility of participants. We expect that the compensation and talent committee will be the initial administrator of the 2021 ESPP.
Eligibility
We expect that all of our employees will be eligible to participate in the 2021 ESPP. However, an employee may not be granted rights to purchase stock under our 2021 ESPP if the employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of our stock.
Grant of Rights
Stock will be offered under the 2021 ESPP during offering periods. The length of the offering periods under the 2021 ESPP will be determined by the plan administrator and may be up to twenty-seven months long. Employee payroll deductions will be used to purchase shares on each purchase date during an offering period. The purchase dates for each offering period will be the final trading day in the offering period. Offering periods under the 2021 ESPP will commence when determined by the plan administrator. The plan administrator may, in its discretion, modify the terms of future offering periods. In non-U.S. jurisdictions where participation in the 2021 ESPP through payroll deductions is prohibited, the plan administrator may provide that an eligible employee may elect to participate through contributions to the participants account under the 2021 ESPP in a form acceptable to the 2021 ESPP administrator in lieu of or in addition to payroll deductions.
The 2021 ESPP permits participants to purchase common stock through payroll deductions of up to a specified percentage of their eligible compensation. The plan administrator will establish a maximum number of shares that may be purchased by a participant during any offering period. In addition, no employee will be permitted to accrue the right to purchase stock under the Section 423 Component at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of our common stock as of the first day of the offering period).
On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of our common stock. The option will expire at the end of the applicable offering period, and will be exercised at that time to the extent of the payroll deductions accumulated during the offering period. The purchase price of the shares, in the absence of a contrary designation, will be 85% of the lower of the fair market value of our common stock on the first trading day of the offering period or on the purchase date. Participants may voluntarily end their participation in the 2021 ESPP at any time during a specified period prior to the end of the applicable offering period, and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Participation ends automatically upon a participants termination of employment.
A participant may not transfer rights granted under the 2021 ESPP other than by will or the laws of descent and distribution, and are generally exercisable only by the participant.
Certain Transactions
In the event of certain non-reciprocal transactions or events affecting our common stock, the plan administrator will make equitable adjustments to the 2021 ESPP and outstanding rights. In the event of certain unusual or non-recurring events or transactions, including a change in control, the plan administrator may provide for (1) either the replacement of outstanding rights with other rights or property or termination of outstanding rights in exchange for cash, (2) the assumption or substitution of outstanding rights by the successor or survivor corporation or parent or subsidiary thereof, if any, (3) the adjustment in the number and type of shares of stock subject to outstanding rights, (4) the use of participants accumulated payroll deductions to purchase stock on a new purchase date prior to the next scheduled purchase date and termination of any rights under ongoing offering periods or (5) the termination of all outstanding rights.
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Plan Amendment
The plan administrator may amend, suspend or terminate the 2021 ESPP at any time. However, stockholder approval will be obtained for any amendment that increases the aggregate number or changes the type of shares that may be sold pursuant to rights under the 2021 ESPP or changes the corporations or classes of corporations whose employees are eligible to participate in the 2021 ESPP.
Securities Laws
The 2021 ESPP has been designed to comply with various securities laws in the same manner as described above in the description of the 2021 Plan.
Federal Income Taxes
The material federal income tax consequences of the 2021 ESPP under current federal income tax law are summarized in the following discussion, which deals with the general tax principles applicable to the 2021 ESPP. The following discussion is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. Foreign, state and local tax laws, and employment, estate and gift tax considerations are not discussed due to the fact that they may vary depending on individual circumstances and from locality to locality.
The 2021 ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Code. Under the applicable Code provisions, no income will be taxable to a participant until the sale or other disposition of the shares purchased under the 2021 ESPP. This means that an eligible employee will not recognize taxable income on the date the employee is granted an option under the 2021 ESPP (i.e., the first day of the offering period). In addition, the employee will not recognize taxable income upon the purchase of shares. Upon the sale or other disposition of the shares purchased under the 2021 ESPP, the participant will generally be subject to tax in an amount that depends upon the length of time such shares are held by the participant prior to disposing of them. If the shares are sold or disposed of more than two years from the first day of the offering period during which the shares were purchased and more than one year from the date of purchase, or if the participant dies while holding the shares, the participant (or his or her estate) will recognize ordinary income measured as the lesser of: (1) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price; or (2) an amount equal to 15% of the fair market value of the shares as of the first day of the offering period. Any additional gain will be treated as long-term capital gain. If the shares are held for the holding periods described above but are sold for a price that is less than the purchase price, there is no ordinary income and the participating employee has a long-term capital loss for the difference between the sale price and the purchase price.
If the shares are sold or otherwise disposed of before the expiration of the holding periods described above, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price and we will be entitled to a tax deduction for compensation expense in the amount of ordinary income recognized by the employee. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares were held following the date they were purchased by the participant prior to disposing of them. If the shares are sold or otherwise disposed of before the expiration of the holding periods described above but are sold for a price that is less than the purchase price, the participant will recognize ordinary income equal to the excess of the fair market value of the shares on the date of purchase over the purchase price (and we will be entitled to a corresponding deduction), but the participant generally will be able to report a capital loss equal to the difference between the sales price of the shares and the fair market value of the shares on the date of purchase.
Director Compensation
From time to time, we have granted cash- and stock-based compensation to Dr. Yamada for his service as Chairman of our Board of Directors. We did not, however, grant any stock-based compensation to Dr. Yamada during 2020. We also pay Dr. Yamada an annual retainer of $100,000 for his service as Chairman of the Board.
On May 29, 2021, our board of directors approved the appointment of Heidi Kunz to our board of directors and an offer letter setting forth the terms and conditions of her board service. In connection with her appointment, our board of directors granted to Ms. Kunz an option to purchase 25,266 shares of our common stock in connection with her appointment to the board. This option vests in equal monthly installments over the three year period following her
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commencement of service on the board, subject to her continued service. The option was granted at an exercise price of $7.44 per share, which was the fair market value of a share of our common stock on the grant date. The option will vest in full upon a change in control.
In connection with this offering, our board of directors has approved the grant of 8,750 restricted stock units pursuant to the 2021 Plan to Ms. Kunz. The restricted stock units will vest in three equal annual installments on the first three anniversaries of Ms. Kunzs commencement of service as a member of the board, subject to her continued service, and will vest in full upon a change in control.
In connection with this offering, our board of directors has approved the grant of 25,500 stock options and 8,500 restricted stock units pursuant to the 2021 Plan to Ms. Veneman in connection with her initial appointment to our board of directors. The stock options will vest in 36 equal monthly installments following the date of her commencement of service as a member of the board, subject to her continued service. The initial restricted stock units will vest in three equal installments on each of the first three anniversaries of Ms. Venemans commencement of service as a member of the board, subject to her continued service. The awards granted to Ms. Veneman will vest in full upon a change in control.
In addition, we have reimbursed, and will continue to reimburse, our non-employee directors for their actual out-of-pocket costs and expenses incurred in connection with attending board meetings.
The following table summarizes compensation received by our non-employee directors during the year ended December 31, 2020. Mr. Simpson, our Chief Executive Officer, is also a member of our board of directors, but does not receive any additional compensation for his service as a director in addition to the compensation he receives as an employee. Mr. Simpsons compensation is described further above.
NAME |
FEES EARNED
OR PAID IN CASH ($) |
OPTION
AWARDS ($) |
ALL OTHER
COMPENSATION ($) |
TOTAL
($) |
||||||||||||
Tadataka Yamada, M.D. |
100,000 | | | 100,000 | ||||||||||||
Elisha P. Gould III |
| | | | ||||||||||||
Jason Hafler, Ph.D. |
| | | | ||||||||||||
Mark McDade |
| | | | ||||||||||||
Eric Moessinger (1) |
| | | |
(1) | Mr. Moessinger resigned from our board of directors on May 25, 2021. |
The aggregate number of shares subject to stock options or restricted shares outstanding (including shares issued upon early exercise of options) at December 31, 2020 for the individuals who served as non-employee directors during 2020 was as follows:
NAME |
NUMBER OF SECURITIES
UNDERLYING OPTIONS OUTSTANDING AT DECEMBER 31, 2020 |
NUMBER OF SECURITIES
UNDERLYING SHARES OF RESTRICTED STOCK OUTSTANDING AT DECEMBER 31, 2020 |
||||||
Tadataka Yamada, M.D. |
| 208,177 | ||||||
Elisha P. Gould III |
| | ||||||
Jason Hafler, Ph.D. |
| | ||||||
Mark McDade |
| | ||||||
Eric Moessinger |
| |
Our board of directors and our stockholders have approved the terms of a non-employee director compensation program. The material terms of the non-employee director compensation are summarized below.
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The non-employee director compensation program will provide for annual retainer fees and/or long-term equity awards for our non-employee directors. We expect each non-employee director will receive an annual retainer of $35,000, with our chairman of the board receiving an annual retainer of $100,000. Non-employee directors serving as the chairs of the audit, compensation and nominating and corporate governance committees will receive additional annual retainers of $15,000, $10,000 and $8,000, respectively. Non-employee directors serving as members of the audit, compensation and nominating and corporate governance committees will receive additional annual retainers of $7,500, $5,000 and $4,000, respectively.
Non-employee directors will also receive an initial grant of options to purchase 25,500 shares of our common stock, and 8,500 restricted stock units. The initial stock option awards will vest in 36 equal monthly installments following the date of the initial appointment or election, subject to continued service. The initial restricted stock unit awards will vest in three equal installments on each of the first three anniversaries of the initial appointment or election, subject to continued service.
On the date of each annual meeting of our stockholders following this offering, each non-employee director will be eligible to receive an annual grant of options to purchase 12,750 shares of our common stock, and 4,250 restricted stock units. The annual stock option awards will vest in 12 equal monthly installments following the date of the annual meeting (but in all events no later than the next occurring annual meeting of our stockholders), subject to continued service. The annual restricted stock unit awards will vest on the first to occur of (1) the first anniversary of the grant date or (2) the next occurring annual meeting of our stockholders, subject to continued service.
The equity awards granted to our non-employee directors will also vest in full upon a change in control.
Compensation under our non-employee director compensation program will be subject to the annual limits on non-employee director compensation set forth in the 2021 Plan, as described above. Our board of directors or its authorized committee may modify the non-employee director compensation program from time to time in the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, subject to the annual limit on non-employee director compensation set forth in the 2021 Plan. As provided in the 2021 Plan, our board of directors or its authorized committee may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the board of directors or its authorized committee may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation or in other compensation decisions involving non-employee directors.
Limitations of Liability and Indemnification Matters
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, which prohibits our amended and restated certificate of incorporation from limiting the liability of our directors for the following:
∎ |
any breach of the directors duty of loyalty to us or our stockholders; |
∎ |
acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; |
∎ |
unlawful payment of dividends or unlawful stock repurchases or redemptions; or |
∎ |
any transaction from which the director derived an improper personal benefit. |
Our amended and restated certificate of incorporation and our amended and restated bylaws also provide that if Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.
Our amended and restated certificate of incorporation and our amended and restated bylaws also provide that we shall have the power to indemnify our employees and agents to the fullest extent permitted by law. Our amended and restated bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in this capacity, regardless of whether our amended and restated bylaws would permit indemnification. We have obtained directors and officers liability insurance.
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We have entered into separate indemnification agreements with our directors and executive officers, in addition to indemnification provided for in our amended and restated certificate of incorporation and amended and restated bylaws. These agreements, among other things, provide for indemnification of our directors and executive officers for expenses, judgments, fines and settlement amounts incurred by this person in any action or proceeding arising out of this persons services as a director or executive officer or at our request. We believe that these provisions in our amended and restated certificate of incorporation and amended and restated bylaws and indemnification agreements are necessary to attract and retain qualified persons as directors and executive officers.
The above description of the indemnification provisions of our amended and restated certificate of incorporation, our amended and restated bylaws and our indemnification agreements is not complete and is qualified in its entirety by reference to these documents, each of which is filed as an exhibit to the registration statement of which this prospectus is a part.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholders investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The following includes a summary of transactions since January 1, 2018 to which we have been a party in which the amount involved exceeded or will exceed the lesser of $120,000 and one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under Executive and Director Compensation. We also describe below certain other transactions with our directors, executive officers and stockholders.
Preferred Stock Financings
Series 1 Convertible Preferred Stock Financings
In December 2017, we entered into a Series 1 preferred stock purchase agreement, pursuant to which we issued and sold to investors in an initial closing in December 2017 and subsequent closings in February, March, April and August 2018 and January 2019, in private placements, an aggregate of 3,535,000 shares of Series 1 convertible preferred stock. The per share purchase price was $1.00, and we received gross proceeds of approximately $3.5 million. The father of Douglas Holtzman, Ph.D., our Chief Scientific Officer, purchased 150,000 shares of Series 1 convertible preferred stock in August 2018. In August 2019, all shares of Series 1 convertible preferred stock automatically converted into shares of Series A-2 convertible preferred stock in the Series A convertible preferred stock financing described below.
Series A Convertible Preferred Stock Financings
In August 2019, we entered into a Series A preferred stock purchase agreement, pursuant to which we issued and sold to investors in an initial closing and subsequent closing in August 2019 and February 2021, in private placements, an aggregate of 49,193,959 shares of Series A-1 convertible preferred stock. The per share purchase price was $0.9615, and we received gross proceeds of approximately $47.3 million. Additionally, in August 2019, all shares of Series 1 convertible preferred stock automatically converted into 4,949,794 shares of Series A-2 convertible preferred stock.
Series B Convertible Preferred Stock Financing
In March 2021, we entered into a Series B preferred stock purchase agreement, pursuant to which we issued and sold to investors, in a private placement, an aggregate of 32,958,612 shares of Series B-1 convertible preferred stock. The Series B-1 per share purchase price was $2.82172, and we received gross proceeds of approximately $93 million. Additionally, a convertible promissory note, with a principal amount of $6.5 million, automatically converted into 2,805,850 shares of Series B-2 convertible preferred stock, at a conversion price of $2.39846 per share.
The following table sets forth the aggregate number of shares acquired by the listed directors, executive officers or holders of more than 5% of our capital stock, or their affiliates. Each outstanding share of convertible preferred stock, including the shares identified in the table below, will convert into shares of common stock at a ratio of one-for-4.1557 immediately prior to the closing of this offering.
PARTICIPANTS |
SERIES A-1
CONVERTIBLE PREFERRED STOCK |
SERIES A-2
CONVERTIBLE PREFERRED STOCK |
SERIES B-1
CONVERTIBLE PREFERRED STOCK |
SERIES B-2
CONVERTIBLE PREFERRED STOCK |
||||||||||||
5% or Greater Stockholders (1) |
||||||||||||||||
Entities affiliated with Adams Street Partners, LLC (2) |
12,480,498 | | 1,063,181 | | ||||||||||||
Aventis, Inc. (3) |
12,480,498 | | 354,393 | | ||||||||||||
NanoDimension III, L.P. (4) |
10,400,415 | | 1,027,741 | | ||||||||||||
Entities affiliated with RA Capital Management, L.P. (5) |
| 12,935,372 | | |||||||||||||
Qiming US Healthcare Fund II, L.P. (6) |
12,480,498 | | 1,275,817 | |
(1) | Additional details regarding these stockholders and their equity holdings are provided in Principal Stockholders. |
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(2) | Represents securities acquired by Adams Street 2016 Direct Venture/Growth Fund LP, Adams Street 2017 Direct Venture/Growth Fund LP, Adams Street 2018 Direct Venture/Growth Fund LP, Adams Street 2019 Direct Growth Equity Fund LP, Adams Street Venture/Growth Fund VI LP and Adams Street Growth Equity Fund VII LP. Elisha P. Gould III, a member of our board of directors, was a partner of Adam Street Partners, LLC at the time of our Series A and Series B convertible preferred stock financings. |
(3) | Aventis, Inc. is a wholly-owned subsidiary of Sanofi, a French Corporation and the ultimate holding company of a group of business entities (the Sanofi Group). Sanofi Ventures is a business unit of the Sanofi Group in charge of managing the Sanofi Group Ventures Investments. Jason Hafler, Ph.D., a member of our board of directors, was the managing director of Sanofi Ventures at the time of our Series A and Series B convertible preferred stock financings. |
(4) | NanoDimension III, L.P. is affiliated with ND Capital. Eric Moessinger, a member of our board of directors from August 2019 to May 2021, was a partner at ND Capital at the time of our Series A and Series B convertible preferred stock financings. |
(5) | Represents securities acquired by RA Capital Healthcare Fund, L.P. and RA Capital Nexus Fund II, L.P., of which RA Capital Management, L.P. is the investment manager. The general partner of RA Capital Management, L.P. is RA Capital Management GP, LLC, of which Peter Kolchinsky, Ph.D., a member of our board of directors, was a managing member at the time of our Series B convertible preferred stock financing. |
(6) | Qiming US Healthcare GP II, LLC (QHC GP II) is the general partner of Qiming US Healthcare Fund II, L.P. Mark McDade, a member of our board of directors, was a managing member of QHC GP II at the time of our Series A and Series B convertible preferred stock financings. |
Investors Rights Agreement
We entered into an amended and restated investors rights agreement in August 2019, as amended and restated in March 2021 (the IRA), with the holders of our convertible preferred stock and certain holders of our common stock, including the holders of more than 5% of our capital stock listed above as well as entities with which certain of our directors are affiliated. This agreement provides for certain rights relating to the registration of their shares of common stock issuable upon conversion of their convertible preferred stock and certain additional covenants made by us. Except for the registration rights (including the related provisions pursuant to which we have agreed to indemnify the parties to the IRA), all rights under this agreement will terminate upon closing of this offering. The registration rights will continue following this offering and will terminate five years after the closing of this offering. See the section titled Description of Capital StockRegistration Rights for more information regarding these registration rights.
Voting Agreement
We entered into an amended and restated voting agreement in August 2019, as amended and restated in March 2021 (the Voting Agreement), with the holders of our convertible preferred stock and certain holders of our common stock, including the holders of more than 5% of our capital stock listed above as well as entities with which certain of our directors are affiliated, pursuant to which the following directors were each elected to serve as members on our board of directors and, as of the date of this prospectus, continue to so serve: Elisha P. Gould III, Jason Hafler, Ph.D., Peter Kolchinsky, Ph.D., Heidi Kunz, Mark McDade, Adam Simpson and Tadataka Yamada, M.D. Pursuant to the Voting Agreement, Mr. Simpson, as our Chief Executive Officer, serves on our board of directors as the CEO director. Mr. Gould, Dr. Hafler, Ms. Kunz and Mr. McDade were initially selected to serve on our board of directors as representatives of the holders of our Series A-1 convertible preferred stock and Dr. Kolchinsky was initially selected to serve on our board of directors as a representative of the holders of our Series B-1 convertible preferred stock. Dr. Yamada was initially selected to serve as the chair of our board of directors as designated by a majority of our common and preferred stockholders, voting together as a single class.
The Voting Agreement will terminate upon the closing of this offering, and members previously elected to our board of directors pursuant to this agreement will continue to serve as directors until they resign, are removed or their successors are duly elected by holders of our common stock. The composition of our board of directors after this offering is described in more detail under ManagementBoard Composition and Election of Directors.
Right of Refusal and Co-Sale Agreement
We entered into an amended and restated right of first refusal and co-sale agreement in August 2019, as amended and restated in March 2021 (the ROFR Agreement), with entities with which certain of our directors are affiliates, which entities are referred to in the ROFR Agreement as Key Holders, and certain other holders of convertible preferred stock, including the holders of more than 5% of our capital stock listed above. Pursuant to the ROFR Agreement, we have a right of first refusal on certain transfers of our shares by the Key Holders, holders of our
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convertible preferred stock have a secondary right of first refusal on such transfers, and such convertible preferred stockholders have a right of co-sale in respect of such transfers. The ROFR Agreement will terminate upon the completion of this offering.
Equity Grants to Executive Officers and Directors
We have granted restricted stock and stock options to certain of our executive officers and non-employee directors, as more fully described in the section titled Executive and Director Compensation.
Employment Arrangements
We have entered into employment letter agreements with our executive officers. For more information regarding these letter agreements, see the section titled Executive and Director CompensationEmployment Letter Agreements with Our Executive Officers.
Director and Officer Indemnification
We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us or will require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the persons services as a director or executive officer.
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Further, we have purchased a policy of directors and officers liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances. For further information, see Executive and Director CompensationLimitations of Liability and Indemnification Matters.
Policies and Procedures for Related Person Transactions
Our board of directors will adopt a written related person transaction policy, to be effective upon the closing of this offering, setting forth the policies and procedures for the review and approval or ratification of related-person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arms length transaction and the extent of the related persons interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.
Directed Share Program
At our request, the underwriters have reserved up to 5% of the shares offered by this prospectus for sale at the initial public offering price in a directed share program to our directors, officers, employees and related persons. See the section titled Underwriting for additional information.
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The following table sets forth information with respect to the beneficial ownership of our common stock as of June 15, 2021, and as adjusted to reflect the sale of shares of common stock in this offering, by:
∎ |
our named executive officers; |
∎ |
each of our directors; |
∎ |
all of our executive officers and directors as a group; and |
∎ |
each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock. |
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power. Applicable percentage ownership is based on 25,376,565 shares of common stock outstanding on June 15, 2021, which gives effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 21,634,898 shares of our common stock immediately prior to the closing of this offering and includes 687,334 shares subject to forfeiture or a right of repurchase. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or other rights held by such person that are currently exercisable or will become exercisable within 60 days of June 15, 2021 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.The percentages of shares beneficially owned after this offering set forth below are calculated without giving effect to any potential purchases in this offering, including pursuant to the directed share program relating to this offering.
Unless otherwise indicated, the address of each beneficial owner listed below is c/o Icosavax, Inc., 1616 Eastlake Avenue E., Suite 208, Seattle, Washington 98102. We believe, based on information provided to us, that each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
NUMBER OF SHARES
BENEFICIALLY OWNED |
PERCENTAGE OF SHARES
BENEFICIALLY OWNED |
|||||||||||
NAME OF BENEFICIAL OWNER |
BEFORE
OFFERING |
AFTER
OFFERING |
||||||||||
5% or Greater Stockholders |
||||||||||||
Entities affiliated with Adams Street Partners, LLC (1) |
3,259,058 | 12.8 | % | 9.2 | % | |||||||
Aventis, Inc. (2) |
3,088,502 | 12.2 | % | 8.7 | % | |||||||
NanoDimension III, L.P. (3) |
2,749,995 | 10.8 | % | 7.8 | % | |||||||
Entities affiliated with RA Capital Management, L.P. (4) |
3,112,681 | 12.3 | % | 8.8 | % | |||||||
Qiming US Healthcare Fund II, L.P. (5) |
3,310,228 | 13.0 | % | 9.4 | % | |||||||
Named Executive Officers and Directors |
||||||||||||
Adam Simpson (6) |
792,037 | 3.1 | % | 2.2 | % | |||||||
Douglas Holtzman, Ph.D. (7) |
293,422 | 1.2 | % | * | ||||||||
Niranjan Kanesa-thasan, M.D. (8) |
130,530 | * | * | |||||||||
Cassia Cearley, Ph.D. (9) |
50,204 | * | * | |||||||||
Tadataka Yamada, M.D. (10) |
1,232,592 | 4.8 | % | 3.4 | % | |||||||
Elisha P. Gould III (1) |
3,259,058 | 12.8 | % | 9.2 | % | |||||||
Jason Hafler, Ph.D. (2) |
3,088,502 | 12.2 | % | 8.7 | % | |||||||
Peter Kolchinsky, Ph.D. (4) |
3,112,681 | 12.3 | % | 8.8 | % | |||||||
Heidi Kunz |
| * | * | |||||||||
Mark McDade (5) |
3,310,228 | 13.0 | % | 9.4 | % | |||||||
Ann M. Veneman |
| * | * | |||||||||
All executive officers and directors as a group (13 persons) (11) |
15,373,030 | 59.2 | % | 42.7 | % |
* | Less than 1%. |
(1) |
Consists of 948,188 shares held by Adams Street Venture/Growth Fund VI LP (AS VI), 916,558 shares held by Adams Street Growth Equity Fund VII LP (AS GE VII), 272,131 shares held by Adams Street 2016 Direct Venture/Growth Fund LP (AS 2016), |
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352,037 shares held by Adams Street 2017 Direct Venture/Growth Fund LP (AS 2017), 525,729 shares held by Adams Street 2018 Direct Venture/Growth Fund LP (AS 2018) and 244,415 shares held by Adams Street 2019 Direct Growth Equity Fund VII LP (AS 2019). The shares owned by AS VI, AS VII, AS 2016, AS 2017, AS 2018 and AS 2019 may be deemed to be beneficially owned by Adams Street Partners, LLC, the managing member of the general partner of the general partner of each of AS VI, AS GE VII, AS 2016, AS 2017, AS 2018 and AS 2019. Thomas S. Bremner, Jeffrey T. Diehl, Elisha P. Gould III, Robin P. Murray and Fred Wang, each of whom is a partner of Adams Street Partners, LLC (or a subsidiary thereof), may be deemed to have shared voting and investment power over the shares. Adams Street Partners, LLC and Thomas Bremner, Jeffrey Diehl, Elisha P. Gould III, Robin Murray and Fred Wang disclaim beneficial ownership of the shares except to the extent of their pecuniary interest therein. The address of Adams Street Partners, LLC is One North Wacker Drive, Suite 2700, Chicago, Illinois 60606. |
(2) | Aventis, Inc. is a corporation incorporated in the Commonwealth of Pennsylvania and a wholly owned subsidiary of Sanofi, a French Corporation and the ultimate holding company of a group of business entities (the Sanofi Group). Sanofi Ventures is a business unit of the Sanofi Group in charge of managing the Sanofi Group Ventures Investments. Dr. Hafler is a U.S. based employee of Sanofi, serves as the managing director of Sanofi Ventures and has sole voting and investment control over the shares held by Aventis, Inc. Dr. Hafler disclaims beneficial ownership of such shares except to the extent of any pecuniary interest therein. The address of Sanofi Ventures is 50 Binney Street, Cambridge, Massachusetts 02142. |
(3) | NanoDimension III Management Limited (ND Management) is the general partner of NanoDimension III GP Limited Partnership, which in turn is the general partner of NanoDimension III, L.P. (ND III). ND Management is wholly owned by The Eiger Trust. ND Capital disclaims beneficial ownership of the shares except to the extent of its pecuniary interest therein. The address of ND Capital is Governors Square, Unit 3-213-6, P.O. Box 526 WB, 23, Lime Tree Bay Ave, Grand Cayman, KY1-1302, Cayman Islands. |
(4) | Consists of 2,645,779 shares held by RA Capital Healthcare Fund, L.P. (RA Healthcare) and 466,902 shares held by RA Capital Nexus Fund II, L.P. (Nexus II). RA Capital Management, L.P. is the investment manager for RA Healthcare and Nexus II. The general partner of RA Capital Management, L.P. is RA Capital Management GP, LLC, of which Peter Kolchinsky, Ph.D. and Rajeev Shah are the managing members. RA Capital Management, L.P., RA Capital Management GP, LLC, Peter Kolchinsky, Ph.D. and Rajeev Shah may be deemed to have voting and investment power over the shares held of record by RA Healthcare and Nexus II. RA Capital Management, L.P., RA Capital Management GP, LLC, Peter Kolchinsky, Ph.D. and Rajeev Shah disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The address of the entities listed above is 200 Berkeley Street, 18th Floor, Boston, Massachusetts 02116. |
(5) | Qiming US Healthcare Fund II, L.P. (QHC II) is a venture capital firm with offices in Seattle, WA, San Francisco, CA, and Cambridge, MA. The general partner of QHC II is Qiming U.S. Healthcare GP II, LLC (QHC GP II). Gary Rieschel and Mark McDade are the managing members of QHC GP II and have voting and investment control over the shares held by QHC II. Each of QHC GP II, Mr. Rieschel and Mr. McDade may be deemed to beneficially own the shares beneficially owned by Qiming U.S. Healthcare Fund II, L.P., but each disclaims beneficial ownership of such shares except to the extent of any pecuniary interest therein. The address for QHC II and these individuals is 11100 NE 8th St., Suite 200, Bellevue, Washington 98004. |
(6) | Includes (i) 751,325 shares held by a family trust of Mr. Simpson, for which he is a co-trustee, and (ii) 40,712 shares underlying options held by Mr. Simpson that are exercisable as of June 15, 2021 or will become exercisable within 60 days after such date. |
(7) | Includes 52,440 shares over which Dr. Holtzman has power-of-attorney (POA). As POA, Dr. Holtzman holds voting and dispositive control over such shares. Dr. Holtzman disclaims beneficial ownership of the shares over which he has POA except to the extent of any pecuniary interest therein. |
(8) | Includes 10,040 shares underlying options held by Dr. Kanesa-thasan that are exercisable as of June 15, 2021 or will become exercisable within 60 days after such date. |
(9) | Includes 15,061 shares underlying options held by Dr. Cearley that are exercisable as of June 15, 2021 or will become exercisable within 60 days after such date. |
(10) | Includes (i) 627,229 shares of common stock held by a family trust of Dr. Yamada, for which he is a co-trustee, and (ii) 481,266 shares underlying options held by Dr. Yamada that are exercisable as of June 15, 2021 or will become exercisable within 60 days after such date. |
(11) | Includes the shares described in footnotes 1, 2 and 4 through 10 above, 51,133 shares held by Charles Richardson, Ph.D. and 52,643 shares underlying options held by Dr. Richardson that are exercisable as of June 15, 2021 or will become exercisable within 60 days after such date. |
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General
The following description summarizes some of the terms of our amended and restated certificate of incorporation and amended and restated bylaws, our investors rights agreement and of the Delaware General Corporation Law. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description you should refer to our amended and restated certificate of incorporation, amended and restated bylaws and our investors rights agreement, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part.
Following the closing of this offering, our authorized capital stock will consist of 500,000,000 shares of common stock, $0.0001 par value per share, and 50,000,000 shares of preferred stock, $0.0001 par value per share.
Common Stock
As of March 31, 2021, there were 25,376,565 shares of our common stock outstanding and held of record by 51 stockholders, including 849,884 shares of restricted common stock which are subject to forfeiture or our right of repurchase, after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into 21,634,898 shares of common stock, which will automatically occur immediately prior to the closing of this offering. Based on the number of shares of common stock outstanding as of March 31, 2021, and further assuming the issuance by us of 10,000,000 shares of common stock in this offering, there will be 35,376,565 shares of common stock outstanding upon the closing of this offering. Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and do not have cumulative voting rights. Accordingly, the holders of a majority of the outstanding shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they so choose, other than any directors that holders of any preferred stock we may issue may be entitled to elect. Subject to supermajority votes for some matters, other matters shall be decided by the affirmative vote of our stockholders having a majority in voting power of the votes cast by the stockholders present or represented and voting on such matter. Our amended and restated certificate of incorporation and amended and restated bylaws also provide that our directors may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon. In addition, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon is required to amend or repeal, or to adopt any provision inconsistent with, several of the provisions of our amended and restated certificate of incorporation. See below in Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and BylawsAmendment of Charter Provisions.
Subject to preferences that may be applicable to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared by the board of directors out of legally available funds. In the event of our liquidation, dissolution or winding up, the holders of common stock will be entitled to share ratably in the assets legally available for distribution to stockholders after the payment of or provision for all of our debts and other liabilities, subject to the prior rights of any preferred stock then outstanding. Holders of common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking funds provisions applicable to the common stock. All outstanding shares of common stock are, and the common stock to be outstanding upon the closing of this offering will be, duly authorized, validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
Preferred Stock
Upon the closing of this offering, all of our previously outstanding shares of convertible preferred stock will have been converted into common stock, there will be no authorized shares of our previously outstanding convertible preferred stock, and we will have no shares of preferred stock outstanding. Under the terms of our amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, our board of directors has the authority, without further action by our stockholders, to issue up to 50,000,000 shares of
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preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the dividend, voting and other rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deterring or preventing a change in our control and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.
Options
As of March 31, 2021, options to purchase 1,717,446 shares of our common stock were outstanding, of which 111,141 were vested and exercisable as of that date. For additional information regarding the terms of the 2017 Plan, see Executive and Director CompensationIncentive Award Plans2017 Equity Incentive Plan.
Registration Rights
As of March 31, 2021, upon the closing of this offering holders of 24,212,800 shares of our common stock, which includes all of the shares of common stock issuable upon the automatic conversion convertible preferred stock immediately prior to the closing of this offering, will be entitled to the following rights with respect to the registration of such shares for public resale under the Securities Act, pursuant to a stockholders agreement by and among us and certain investors. The registration of shares of common stock as a result of the following rights being exercised would enable holders to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective.
Demand Registration Rights
After the completion of this offering, the holders of up to 21,634,898 shares of our common stock will be entitled to certain demand registration rights.
Form S-1
If at any time beginning six months following the effective date of the registration statement of which this prospectus forms a part, the holders of a majority of the registrable securities that are party to the IRA request in writing that we effect a registration with respect to all or a part of the registrable securities then outstanding where the aggregate price to the public of the offering is $10.0 million or more, we may be required to provide notice to all holders of registrable securities party to the IRA and to use commercially reasonable efforts to effect such registration; provided, however, that we will not be required to effect such a registration if, among other things, within the preceding 12 months, we have already effected two registrations for the holders of registrable securities in response to these demand registration rights.
Form S-3
If at any time we become entitled under the Securities Act to register our shares on Form S-3, the holders of at least twenty percent of the registrable securities that are party to the IRA request in writing that we effect a registration with respect to all or a part of the registrable securities then outstanding where the price to the public of the offering is $3.0 million or more, we may be required to provide notice to all holders of registrable securities party to the IRA and to use commercially reasonable efforts to effect such registration; provided, however, that we will not be required to effect such a registration if, among other things, within the preceding 12 months, we have already effected two registrations on Form S-3 for the holders of registrable securities.
If the holders requesting registration intend to distribute their shares by means of an underwriting, the underwriter of such offering will have the right to limit the numbers of shares to be underwritten for reasons related to the marketing of the shares.
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Piggyback Registration Rights
After the completion of this offering, the holders of up to 24,212,800 shares of our common stock will be entitled to certain piggyback registration rights. If at any time following the closing of this offering we propose to register any shares of our common stock under the Securities Act, subject to certain exceptions, the holders of such registrable securities party to the IRA will be entitled to notice of the registration and to include their shares of registrable securities in the registration. If our proposed registration involves an underwriting, the managing underwriter of such offering will have the right to limit the number of shares to be underwritten for reasons related to the marketing of the shares.
Indemnification
Our investors rights agreement contains customary cross indemnification provisions, under which we are obligated to indemnify holders of registrable securities in the event of material misstatements or omissions in a registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions attributable to them.
Expenses
Ordinarily, other than underwriting discounts and commissions, we will be required to pay all expenses incurred by us related to any registration effected pursuant to the exercise of these registration rights. These expenses may include all registration and filing fees, printing expenses, fees and disbursements of our counsel, reasonable fees and disbursements of a counsel for the selling securityholders, blue sky fees and expenses and the expenses of any special audits incident to the registration.
Termination of Registration Rights
The registration rights terminate five years after the closing of this offering.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Some provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions which provide for payment of a premium over the market price for our shares.
These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Undesignated Preferred Stock
The ability of our board of directors, without action by the stockholders, to issue up to 50,000,000 shares of undesignated preferred stock with voting or other rights or preferences as designated by our board of directors could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.
Stockholder Meetings
Our amended and restated bylaws provide that a special meeting of stockholders may be called only by our chairman of the board of directors, chief executive officer or president, or by a resolution adopted by a majority of our board of directors.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.
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Elimination of Stockholder Action by Written Consent
Our amended and restated certificate of incorporation and amended and restated bylaws eliminate the right of stockholders to act by written consent without a meeting.
Staggered Board of Directors
Our amended and restated bylaws provides that our board of directors will be divided into three classes. The directors in each class will serve for a three-year term, with one class being elected each year by our stockholders. For more information on the classified board of directors, see ManagementBoard Composition and Election of Directors. This system of electing directors may tend to discourage a third party from attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.
Removal of Directors
Our amended and restated certificate of incorporation provides that no member of our board of directors may be removed from office except for cause and, in addition to any other vote required by law, upon the approval of not less than two thirds of the total voting power of all of our outstanding voting stock then entitled to vote in the election of directors.
Stockholders Not Entitled to Cumulative Voting
Our amended and restated certificate of incorporation does not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that holders of our preferred stock may be entitled to elect.
Delaware Anti-Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed to be interested stockholders from engaging in a business combination with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporations voting stock. Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors.
Choice of Forum
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative form, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, creditors or other constituents; (iii) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or our amended and restated certificate of incorporation or amended and restated bylaws; (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; or (v) any action asserting a claim governed by the internal affairs doctrine. The provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, our amended and restated certificate of incorporation will also provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. In any case, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. The enforceability of similar choice of forum provisions in other companies certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
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Our amended and restated certificate of incorporation also provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to this choice of forum provision.
Amendment of Charter Provisions
The amendment of any of the above provisions, except for the provision making it possible for our board of directors to issue preferred stock, would require approval by holders of at least two thirds of the total voting power of all of our outstanding voting stock.
The provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our board of directors and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. The transfer agent and registrars address is 250 Royall Street, Canton, MA 02021.
The Nasdaq Global Select Market Listing
We have applied to have our common stock listed on the Nasdaq Global Select Market under the symbol ICVX.
Limitations of Liability and Indemnification Matters
For a discussion of liability and indemnification, see Executive and Director CompensationLimitations of Liability and Indemnification Matters.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our common stock. Future sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could adversely affect the market price of our common stock. Although we intend to apply to have our common stock listed on Nasdaq, we cannot assure you that there will be an active public market for our common stock.
Based on the number of shares of our common stock outstanding as of March 31, 2021, and assuming (i) the issuance of 10,000,000 shares in this offering, (ii) the automatic conversion of all of our outstanding shares of convertible preferred stock into 21,634,898 shares of common stock and the related reclassification of the carrying value of the convertible preferred stock to permanent equity upon the closing of this offering, (iii) no exercise of the underwriters option to purchase additional shares of common stock and (iv) no exercise of outstanding options, we will have outstanding an aggregate of 35,376,565 shares of common stock immediately following this offering.
Of these shares, all shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our affiliates, as that term is defined in Rule 144 under the Securities Act. Shares purchased by our affiliates would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.
The remaining 25,376,565 shares of common stock will be restricted securities, as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration, such as under Rule 144 or 701 under the Securities Act, each of which is summarized below. We expect that substantially all of these shares will be subject to the 180-day lock-up period under the lock-up agreements described below.
Lock-Up Agreements
We, our officers, directors and holders of all or substantially all of our securities, have agreed with the underwriters that for a period of 180 days, after the date of this prospectus, subject to specified exceptions, we or they will not sell or offer to sell any shares or related securities currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by the holder or family member, enter into any swap, make any demand for, or exercise any right with respect to, the registration under the Securities Act of the offer and sale of any shares or related securities, or cause to be filed a registration statement, prospectus or prospectus supplement (or an amendment or supplement thereto) with respect to any such registration, or publicly announce any intention to do any of the foregoing. Upon expiration of the lock-up period, certain of our stockholders will have the right to require us to register their shares under the Securities Act. See Registration Rights below and Description of Capital StockRegistration Rights.
Jefferies LLC, Cowen and Company, LLC and Evercore Group L.L.C. may, in their sole discretion and at any time or from time to time before the termination of the lock-up period, in certain cases without public notice, release all or any portion of the securities subject to lock-up agreements. There are no existing agreements between the underwriters and any of our stockholders who will execute a lock-up agreement providing consent to the sale of shares prior to the expiration of the lock-up period.
Upon the expiration of the lock-up period, substantially all of the shares subject to such lock-up restrictions will become eligible for sale, subject to the limitations discussed above.
Rule 10b5-1 Trading Plans
Following the closing of this offering, certain of our officers, directors and significant stockholders may adopt written plans, known as Rule 10b5-1 trading plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis to diversify their assets and investments. Under these 10b5-1 trading plans, a broker may execute trades pursuant to parameters established by the officer, director or stockholder when entering into the plan, without further direction from such officer, director or stockholder. Such sales would not commence until the expiration of the applicable lock-up agreements entered into by such officer, director or stockholder in connection with this offering.
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Rule 144
Affiliate Resales of Restricted Securities
In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially owned shares of our common stock for at least six months would be entitled to sell in brokers transactions or certain riskless principal transactions or to market makers, a number of shares within any three-month period that does not exceed the greater of:
∎ |
1% of the number of shares of our common stock then outstanding, which will equal approximately 353,765 shares immediately after this offering; or |
∎ |
the average weekly trading volume in our common stock on Nasdaq during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC and Nasdaq concurrently with either the placing of a sale order with the broker or the execution of a sale directly with a market maker.
Non-Affiliate Resales of Restricted Securities
In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement.
Non-affiliate resales are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144.
Rule 701
In general, under Rule 701, any of an issuers employees, directors, officers, consultants or advisors who purchases shares from the issuer in connection with a compensatory stock or option plan or other written agreement before the effective date of a registration statement under the Securities Act is entitled to sell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of the issuer can resell shares in reliance on Rule 144 without having to comply with the holding period requirement, and non-affiliates of the issuer can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.
Equity Plans
We intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of common stock subject to outstanding stock options and common stock issued or issuable under our equity incentive plans and employee stock purchase plan. We expect to file the registration statement covering shares offered pursuant to these stock plans shortly after the date of this prospectus, permitting the resale of such shares by non-affiliates in the public market without restriction under the Securities Act and the sale by affiliates in the public market subject to compliance with the resale provisions of Rule 144.
Registration Rights
Upon the closing of this offering holders of 24,212,800 shares of our common stock, which includes all of the shares of common stock issuable upon the automatic conversion of our convertible preferred stock into 21,634,898 shares of our common stock immediately prior to the closing of this offering, will be entitled to various rights with respect to the registration of these shares under the Securities Act upon the closing of this offering. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchase by our affiliates. See Description of Capital StockRegistration Rights for additional information. Shares covered by a registration statement will be eligible for sale in the public market upon the expiration or release from the terms of the lock-up agreement.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the Code) Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the IRS) in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.
This discussion is limited to Non-U.S. Holders that hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holders particular circumstances, including the impact of the alternative minimum tax or the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:
∎ |
U.S. expatriates and former citizens or long-term residents of the United States; |
∎ |
persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment; |
∎ |
banks, insurance companies, and other financial institutions; |
∎ |
brokers, dealers or traders in securities; |
∎ |
controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax; |
∎ |
partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); |
∎ |
tax-exempt organizations or governmental organizations; |
∎ |
persons deemed to sell our common stock under the constructive sale provisions of the Code; |
∎ |
persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; |
∎ |
persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement (as defined in the Code); |
∎ |
tax-qualified retirement plans; and |
∎ |
qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds. |
If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
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Definition of a Non-U.S. Holder
For purposes of this discussion, a Non-U.S. Holder is any beneficial owner of our common stock that is neither a U.S. person nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
∎ |
an individual who is a citizen or resident of the United States; |
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a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia; |
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an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
∎ |
a trust that (i) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes. |
Distributions
As described in the section titled Dividend Policy, we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holders adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below in Sale or Other Taxable Disposition.
Subject to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder of our common stock will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). If a Non-U.S. Holder holds the stock through a financial institution or other agent acting on the Non-U.S. Holders behalf, the Non-U.S. Holder will be required to provide appropriate documentation to the agent, who then will be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States.
Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
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Sale or Other Taxable Disposition
A Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
∎ |
the gain is effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such gain is attributable); |
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the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or |
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our common stock constitutes a U.S. real property interest (USRPI) by reason of our status as a U.S. real property holding corporation (USRPHC) for U.S. federal income tax purposes. |
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
A Non-U.S. Holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on gain realized upon the sale or other taxable disposition of our common stock, which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder of our common stock will not be subject to U.S. federal income tax if our common stock is regularly traded, as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually or constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holders holding period.
Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments of dividends on our common stock will not be subject to backup withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the holder is a United States person and the holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any distributions on our common stock paid to the Non-U.S. Holder, regardless of whether such distributions constitute dividends or whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such holder is a United States person, or the holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
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Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holders U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections are commonly referred to as the Foreign Account Tax Compliance Act (FATCA) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or subject to the proposed Treasury Regulations discussed below, gross proceeds from the sale or other disposition of, our common stock paid to a foreign financial institution or a non-financial foreign entity (each as defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity either certifies it does not have any substantial United States owners (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in clause (i) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain specified United States persons or United States owned foreign entities (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign entities located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our common stock. While withholding under FATCA would also have applied to payments of gross proceeds from the sale or other disposition of stock on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers (including applicable withholding agents) generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
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Subject to the terms and conditions set forth in the underwriting agreement, dated , 2021, among us, Jefferies LLC, Cowen and Company, LLC, Evercore Group L.L.C. and William Blair & Company, L.L.C., as the representatives of the underwriters named below, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the respective number of shares of common stock shown opposite its name below:
UNDERWRITER |
NUMBER OF
SHARES |
|||
Jefferies LLC |
||||
Cowen and Company, LLC |
||||
Evercore Group L.L.C. |
||||
William Blair & Company, L.L.C. |
||||
|
|
|||
Total |
10,000,000 | |||
|
|
The underwriting agreement provides that the obligations of the several underwriters are subject to certain conditions precedent such as the receipt by the underwriters of officers certificates and legal opinions and approval of certain legal matters by their counsel. The underwriting agreement provides that the underwriters will purchase all of the shares of common stock if any of them are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated. We have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.
The underwriters have advised us that, following the completion of this offering, they currently intend to make a market in the common stock as permitted by applicable laws and regulations. However, the underwriters are not obligated to do so, and the underwriters may discontinue any market-making activities at any time without notice in their sole discretion. Accordingly, no assurance can be given as to the liquidity of the trading market for the common stock, that you will be able to sell any of the common stock held by you at a particular time or that the prices that you receive when you sell will be favorable.
The underwriters are offering the shares of common stock subject to their acceptance of the shares of common stock from us and subject to prior sale. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part. In addition, the underwriters have advised us that they do not intend to confirm sales to any account over which they exercise discretionary authority.
Commission and Expenses
The underwriters have advised us that they propose to offer the shares of common stock to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers, which may include the underwriters, at that price less a concession not in excess of $ per share of common stock. After the offering, the initial public offering price and concession to dealers may be reduced by the representatives. No such reduction will change the amount of proceeds to be received by us as set forth on the cover page of this prospectus.
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The following table shows the public offering price, the underwriting discounts and commissions that we are to pay the underwriters and the proceeds, before expenses, to us in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase additional shares.
PER SHARE | TOTAL | |||||||||||||||
WITHOUT
OPTION TO PURCHASE ADDITIONAL SHARES |
WITH
OPTION TO PURCHASE ADDITIONAL SHARES |
WITHOUT
OPTION TO PURCHASE ADDITIONAL SHARES |
WITH
OPTION TO PURCHASE ADDITIONAL SHARES |
|||||||||||||
Public offering price |
$ | $ | $ | $ | ||||||||||||
Underwriting discounts and commissions paid by us |
$ | $ | $ | $ | ||||||||||||
Proceeds to us, before expenses |
$ | $ | $ | $ |
We estimate expenses payable by us in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $3.5 million. We have also agreed to pay the filing fees incident to, and the fees and disbursements of counsel for the underwriters in connection with the required review by the Financial Industry Regulatory Authority, Inc. in an amount of up to $40,000.
Determination of Offering Price
Prior to this offering, there has not been a public market for our common stock. Consequently, the initial public offering price for our common stock will be determined by negotiations between us and the representatives. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.
We offer no assurances that the initial public offering price will correspond to the price at which the common stock will trade in the public market subsequent to the offering or that an active trading market for the common stock will develop and continue after the offering.
Listing
We have applied to have our common stock listed on the Nasdaq Global Select Market under the trading symbol ICVX.
Stamp Taxes
If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
Option to Purchase Additional Shares
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of 1,500,000 shares from us at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. If the underwriters exercise this option, each underwriter will be obligated, subject to specified conditions, to purchase a number of additional shares proportionate to that underwriters initial purchase commitment as indicated in the table above. This option may be exercised only if the underwriters sell more shares than the total number set forth on the cover page of this prospectus.
No Sales of Similar Securities
We, our officers, directors and holders of all or substantially all our outstanding capital stock and other securities have agreed, subject to specified exceptions, not to directly or indirectly:
∎ |
sell or offer to sell any shares or related securities currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by the holder or family member, or |
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enter into any swap, or |
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∎ |
otherwise dispose of any shares of common stock, options or warrants to acquire shares of common stock, or securities exchangeable or exercisable for or convertible into shares of common stock currently or hereafter owned either of record or beneficially, or |
∎ |
publicly announce an intention to do any of the foregoing for a period of 180 days after the date of this prospectus without the prior written consent of Jefferies LLC, Cowen and Company, LLC and Evercore Group L.L.C. (the Lock-up Representatives). |
This restriction terminates after the close of trading of the common stock on and including the 180th day after the date of this prospectus.
The Lock-up Representatives may, in their sole discretion and at any time or from time to time before the termination of the 180-day period release all or any portion of the securities subject to lock-up agreements. There are no existing agreements between the underwriters and any of our shareholders who will execute a lock-up agreement, providing consent to the sale of shares prior to the expiration of the lock-up period.
Stabilization
The underwriters have advised us that they, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the common stock at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involve either covered short sales or naked short sales.
Covered short sales are sales made in an amount not greater than the underwriters option to purchase additional shares of our common stock in this offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares of our common stock or purchasing shares of our common stock in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option to purchase additional shares.
Naked short sales are sales in excess of the option to purchase additional shares of our common stock. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering.
A stabilizing bid is a bid for the purchase of shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A syndicate covering transaction is the bid for or the purchase of shares of common stock on behalf of the underwriters to reduce a short position incurred by the underwriters in connection with the offering. Similar to other purchase transactions, the underwriters purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concession otherwise accruing to a syndicate member in connection with the offering if the common stock originally sold by such syndicate member are purchased in a syndicate covering transaction and therefore have not been effectively placed by such syndicate member.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. The underwriters are not obligated to engage in these activities and, if commenced, any of the activities may be discontinued at any time.
The underwriters may also engage in passive market making transactions in our common stock on the Nasdaq Global Select Market in accordance with Rule 103 of Regulation M during a period before the commencement of offers or sales of shares of our common stock in this offering and extending through the completion of distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market makers bid, that bid must then be lowered when specified purchase limits are exceeded.
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Electronic Distribution
A prospectus in electronic format may be made available by e-mail or on the web sites or through online services maintained by one or more of the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares of common stock for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters web sites and any information contained in any other web site maintained by any of the underwriters is not part of this prospectus, has not been approved and/or endorsed by us or the underwriters and should not be relied upon by investors.
Directed Share Program
At our request, the underwriters have reserved for sale at the initial public offering price up to 575,000 shares of common stock for employees, directors and other persons associated with us who have expressed an interest in purchasing shares in the offering. The number of shares of common stock available for sale to the general public in the offering will be reduced to the extent these persons purchase the directed shares in the program. Any directed shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares. Directed shares purchased in the program will not be subject to a lock-up restriction, with the exception of directed shares purchased by our directors and officers, which will be subject to a 180-day lock-up restriction. The Lock-Up Representatives in their sole discretion may release any of the shares subject to these lock-up restrictions at any time. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with sales of the directed shares.
Other Activities and Relationships
The underwriters and certain of their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their respective affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriters and certain of their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own accounts and for the accounts of their respective customers, and such investment and securities activities may involve securities and/or instruments issued by us and our affiliates. If the underwriters or their respective affiliates have a lending relationship with us, they routinely hedge their credit exposure to us consistent with their customary risk management policies. The underwriters and their respective affiliates may hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the common stock offered hereby. Any such short positions could adversely affect future trading prices of the common stock offered hereby. The underwriters and certain of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Disclaimers About Non-U.S. Jurisdictions
Canada
Resale Restrictions
The distribution of shares of our common stock in Canada is being made only in the provinces of Ontario, Quebec, Alberta, Manitoba, New Brunswick and Nova Scotia British Columbia on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of these securities are made. Any resale of the shares of common stock in Canada must be made under applicable securities laws which may vary depending on the relevant jurisdiction, and which may require resales to
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be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the securities.
Representations of Canadian Purchasers
By purchasing shares of common stock in Canada and accepting delivery of a purchase confirmation, a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:
∎ |
the purchaser is entitled under applicable provincial securities laws to purchase the shares of common stock without the benefit of a prospectus qualified under those securities laws as it is an accredited investor as defined under National Instrument 45-106Prospectus Exemptions or Section 73.3(1) of the Securities Act (Ontario), as applicable, |
∎ |
the purchaser is a permitted client as defined in National Instrument 31-103Registration Requirements, Exemptions and Ongoing Registrant Obligations, |
∎ |
where required by law, the purchaser is purchasing as principal and not as agent, and |
∎ |
the purchaser has reviewed the text above under Resale Restrictions. |
Conflicts of Interest
Canadian purchasers are hereby notified that the underwriters are relying on the exemption set out in section 3A.3 or 3A.4, if applicable, of National Instrument 33-105Underwriting Conflicts from having to provide certain conflict of interest disclosure in this document.
Statutory Rights of Action
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if the prospectus (including any amendment thereto) such as this document contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser of these securities in Canada should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Enforcement of Legal Rights
All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.
Taxation and Eligibility for Investment
Canadian purchasers of shares of common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the shares of common stock in their particular circumstances and about the eligibility of the shares of common stock for investment by the purchaser under relevant Canadian legislation.
Australia
This prospectus is not a disclosure document for the purposes of Australias Corporations Act 2001 (Cth) of Australia (the Australian Corporations Act), has not been lodged with the Australian Securities & Investments Commission and is only directed to the categories of exempt persons set out below. Accordingly, if you receive this prospectus in Australia:
You confirm and warrant that you are either:
∎ |
a sophisticated investor under section 708(8)(a) or (b) of the Australian Corporations Act; |
∎ |
a sophisticated investor under section 708(8)(c) or (d) of the Australian Corporations Act and that you have provided an accountants certificate to the Company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Australian Corporations Act and related regulations before the offer has been made; |
∎ |
a person associated with the Company under Section 708(12) of the Australian Corporations Act; or |
∎ |
a professional investor within the meaning of section 708(11)(a) or (b) of the Australian Corporations Act. |
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To the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Australian Corporations Act any offer made to you under this prospectus is void and incapable of acceptance.
You warrant and agree that you will not offer any of the securities issued to you pursuant to this prospectus for resale in Australia within 12 months of those securities being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Australian Corporations Act.
European Economic Area
In relation to each Member State of the European Economic Area (each, a Relevant State), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which have been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that the shares may be offered to the public in that Relevant State at any time:
∎ |
to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation; |
∎ |
to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the underwriters or the underwriters nominated by us for any such offer; or |
∎ |
in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of common shares shall require us or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an offer common shares to the public in relation to the common shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and the common shares to be offered so as to enable an investor to decide to purchase or subscribe to the common shares, and the expression Prospectus Regulation means Regulation (EU) 2017/1129.
Hong Kong
No securities have been offered or sold, and no securities may be offered or sold, in Hong Kong, by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent; or to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (SFO) and any rules made under that Ordinance; or in other circumstances which do not result in the document being a prospectus as defined in the Companies Ordinance (Cap. 32) of Hong Kong (CO) or which do not constitute an offer or invitation to the public for the purpose of the CO or the SFO. No document, invitation or advertisement relating to the securities has been issued or may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under that Ordinance.
This prospectus has not been registered with the Registrar of Companies in Hong Kong. Accordingly, this prospectus may not be issued, circulated or distributed in Hong Kong, and the securities may not be offered for subscription to members of the public in Hong Kong. Each person acquiring the securities will be required, and is deemed by the acquisition of the securities, to confirm that he is aware of the restriction on offers of the securities described in this prospectus and the relevant offering documents and that he is not acquiring, and has not been offered any securities in circumstances that contravene any such restrictions.
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Israel
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968 (the Israeli Securities Law) and has not been filed with or approved by the Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, and any offer of the shares is directed only at, (i) a limited number of persons in accordance with the Israeli Securities Law and (ii) investors listed in the first addendum to the Israeli Securities Law (the Israeli Addendum), consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and qualified individuals, each as defined in the Israeli Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case, purchasing for their own account or, where permitted under the Israeli Addendum, for the accounts of their clients who are investors listed in the Israeli Addendum). Qualified investors are required to submit written confirmation that they fall within the scope of the Israeli Addendum, are aware of the meaning of same and agree to it.
Japan
The offering has not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948 of Japan, as amended) (FIEL), and the underwriters will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEL and any other applicable laws, regulations and ministerial guidelines of Japan.
Singapore
This prospectus has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
∎ |
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
∎ |
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the notes pursuant to an offer made under Section 275 of the SFA except:
∎ |
to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
∎ |
where no consideration is or will be given for the transfer; |
∎ |
where the transfer is by operation of law; |
∎ |
as specified in Section 276(7) of the SFA; or |
∎ |
as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
- 185 -
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this prospectus nor any other offering or marketing material relating to the offering, the Company or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.
United Kingdom
No shares have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the Shares which has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any time:
(a) to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or
(c) in any other circumstances falling within Section 86 of the Financial Services and Markets Act of 2002 (the FSMA).
provided that no such offer of the shares shall require the Issuer or any Manager to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation.
For the purposes of this provision, the expression an offer to the public in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares and the expression UK Prospectus Regulation means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
- 186 -
The validity of the shares of common stock offered hereby will be passed upon for us by Latham & Watkins LLP, San Diego, California. Certain attorneys of Latham & Watkins LLP own an aggregate of 34,959 shares of our convertible preferred stock, which will convert into an aggregate of 34,959 shares of our common stock immediately prior to the closing of this offering. The underwriters are being represented by Wilmer Cutler Pickering Hale and Dorr LLP, New York, New York.
- 187 -
Ernst & Young LLP, independent registered public accounting firm, has audited our financial statements as of December 31, 2020 and 2019, and for each of the two years in the period ended December 31, 2020, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLPs report, given on their authority as experts in accounting and auditing.
- 188 -
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. Upon the closing of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. The SEC maintains an Internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically with the SEC. The address of that site is www.sec.gov.
Upon the closing of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available at the website of the SEC referred to above. We maintain a website at www.Icosavax.com. Upon the closing of this offering, you may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on our website, and you should not consider the contents of our website in making an investment decision with respect to our common stock.
- 189 -
ICOSAVAX, INC.
PAGE | ||||
Audited financial statements: |
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F-2 | ||||
F-3 | ||||
F-4 | ||||
Statements of Convertible Preferred Stock and Stockholders Deficit |
F-5 | |||
F-6 | ||||
F-7 | ||||
Unaudited interim condensed financial statements: |
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F-27 | ||||
F-28 | ||||
Condensed Statements of Convertible Preferred Stock and Stockholders Deficit |
F-29 | |||
F-30 | ||||
F-31 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Icosavax, Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Icosavax, Inc. (the Company) as of December 31, 2019 and 2020, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders deficit and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Companys auditor since 2019.
Seattle, Washington
May 14, 2021, except for Note 11(f), as to which the date is July 22, 2021
F-2
ICOSAVAX, INC.
(in thousands, except share and par value data)
See accompanying notes to financial statements
F-3
ICOSAVAX, INC.
Statements of Operations and Comprehensive Loss
(in thousands, except share data)
YEAR ENDED DECEMBER 31, | ||||||||
2019 | 2020 | |||||||
Grant revenue |
$ | | $ | 1,616 | ||||
Operating expenses: |
||||||||
Research and development |
$ | 4,157 | $ | 17,667 | ||||
General and administrative |
1,241 | 2,659 | ||||||
|
|
|
|
|||||
Total operating expenses |
5,398 | 20,326 | ||||||
|
|
|
|
|||||
Loss from operations |
(5,398 | ) | (18,710 | ) | ||||
Other income (expense): |
||||||||
Change in fair value of derivative liability |
| 187 | ||||||
Interest and other income (expense) |
101 | (331 | ) | |||||
|
|
|
|
|||||
Total other income (expense) |
101 | (144 | ) | |||||
|
|
|
|
|||||
Net loss and comprehensive loss |
$ | (5,297 | ) | $ | (18,854 | ) | ||
Series 1 preferred stock dividends |
(272 | ) | | |||||
Series 1 preferred stock extinguishment |
(400 | ) | | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders |
$ | (5,969 | ) | (18,854 | ) | |||
|
|
|
|
|||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | (3.76 | ) | $ | (8.40 | ) | ||
|
|
|
|
|||||
Weighted-average shares of common stock outstanding, basic and diluted |
1,588,083 | 2,245,223 | ||||||
|
|
|
|
See accompanying notes to financial statements
F-4
ICOSAVAX, INC.
Statements of Convertible Preferred Stock and Stockholders Deficit
(in thousands, except share amounts)
CONVERTIBLE PREFERRED
STOCK |
COMMON STOCK |
ADDITIONAL
PAID-IN CAPITAL |
ACCUMULATED
DEFICIT |
TOTAL
STOCKHOLDERS DEFICIT |
||||||||||||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||||||
Balance at December 31, 2018 |
2,935,000 | $ | 2,891 | 1,277,129 | $ | 1 | $ | 9 | $ | (2,358 | ) | $ | (2,348 | ) | ||||||||||||||||||
Shares released from restriction upon vesting of early-exercised stock options |
| | 155,051 | | 2 | | 2 | |||||||||||||||||||||||||
Vesting of shares of restricted common stock |
| | 469,476 | | | | | |||||||||||||||||||||||||
Issuance of convertible preferred stock for cash of $1.00 per share net of $13,000 in issuance costs |
600,000 | 587 | | | | | | |||||||||||||||||||||||||
Dividends declared |
| 272 | | | | (272 | ) | (272 | ) | |||||||||||||||||||||||
Issuance of convertible preferred stock for cash of $0.9615 per share net of $288,000 of issuance costs |
27,249,085 | 25,912 | | | | | | |||||||||||||||||||||||||
Issuance of convertible preferred stock upon conversion of earlier-issued upon qualified financing |
1,414,794 | 400 | | | (83 | ) | (317 | ) | (400 | ) | ||||||||||||||||||||||
Stock-based compensation |
| | | | 72 | | 72 | |||||||||||||||||||||||||
Net loss and comprehensive loss |
| | | | | (5,297 | ) | (5,297 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at December 31, 2019 |
32,198,879 | $ | 30,062 | 1,901,656 | $ | 1 | $ | | $ | (8,244 | ) | $ | (8,243 | ) | ||||||||||||||||||
|
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|
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|
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|
|
|
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Shares released from restriction upon vesting of early-exercised stock options |
| | 267,894 | 1 | 136 | | 137 | |||||||||||||||||||||||||
Vesting of shares of restricted common stock |
| | 469,476 | | | | | |||||||||||||||||||||||||
Stock-based compensation |
| | | | 257 | | 257 | |||||||||||||||||||||||||
Net loss and comprehensive loss |
| | | | | (18,854 | ) | (18,854 | ) | |||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at December 31, 2020 |
32,198,879 | $ | 30,062 | 2,639,026 | $ | 2 | $ | 393 | $ | (27,098 | ) | $ | (26,703 | ) | ||||||||||||||||||
|
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|
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|
|
|
|
|
|
See accompanying notes to financial statements
F-5
ICOSAVAX, INC.
(in thousands)
YEARS ENDED
DECEMBER 31, |
||||||||
2019 | 2020 | |||||||
Operating activities: |
||||||||
Net loss |
$ | (5,297 | ) | $ | (18,854 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities: |
||||||||
Stock-based compensation |
72 | 257 | ||||||
Depreciation |
| 1 | ||||||
Non-cash interest expense |
| 417 | ||||||
Change in fair value of derivative liability |
| (187 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Prepaids and other current assets |
(45 | ) | (453 | ) | ||||
Accounts payable |
452 | 1,119 | ||||||
Accrued and other current liabilities |
249 | 1,108 | ||||||
Deferred revenue |
| 2,384 | ||||||
|
|
|
|
|||||
Net cash used in operating activities |
(4,569 | ) | (14,208 | ) | ||||
Investing activities: |
||||||||
Purchases of property and equipment |
| (11 | ) | |||||
|
|
|
|
|||||
Net cash used in investing activities |
| (11 | ) | |||||
Financing activities: |
||||||||
Proceeds from issuance of convertible promissory notes, net of issuance costs |
| 6,464 | ||||||
Proceeds from early exercise of stock options |
243 | 174 | ||||||
Proceeds from issuance of convertible preferred stock |
26,499 | | ||||||
|
|
|
|
|||||
Net cash provided by financing activities |
26,742 | 6,638 | ||||||
|
|
|
|
|||||
Net increase (decrease) in cash and restricted cash |
22,173 | (7,581 | ) | |||||
Cash and restricted cash at beginning of period |
906 | 23,079 | ||||||
|
|
|
|
|||||
Cash and restricted cash at end of period |
$ | 23,079 | $ | 15,498 | ||||
|
|
|
|
See accompanying notes to financial statements
F-6
1. Description of Business
Organization
Icosavax, Inc. (the Company) was incorporated in the state of Delaware on November 1, 2017, and is located in Seattle, Washington. The Company is focused on the research and development of vaccines against infectious diseases. The Company was founded on computationally designed virus-like particle technology, exclusively licensed for a variety of infectious disease indications from the Institute for Protein Design at the University of Washington.
The Companys business involves inherent risks. These risks include, among others, dependence on key personnel, licensors and third-party service providers, patentability of the Companys products and processes, and clinical efficacy of the Companys products under development. Any of the technologies covering the Companys existing products under development could become obsolete or diminished in value by discoveries and developments at other organizations.
Liquidity
The Company had an accumulated deficit of $27.1 million, cash of $13.1 million, and restricted cash of $2.4 million at December 31, 2020.
In February 2021, the Company issued 21,944,874 shares of its Series A-1 convertible preferred stock for gross proceeds of $21.1 million. In March 2021, the Company issued 35,764,462 shares of Series B preferred stock for gross proceeds of $93.0 million, including conversion of a convertible promissory note of $6.5 million and accrued interest thereon. As a result of these financing activities, management believes the Company has sufficient capital to execute its strategic plan and fund operations through at least the next twelve months from the date these financial statements are issued.
The Company has devoted substantially all of its resources to organizing and staffing the Company, business planning, raising capital, in-licensing intellectual property rights, developing vaccines candidates, scaling up manufacturing of vaccine candidates, and preparing for its ongoing and planned preclinical studies and clinical trials. The Company has a limited operating history, and the sales and income potential of its business is unproven. The Company has incurred net losses and negative cash flows from operating activities since its inception and expects to continue to incur net losses into the foreseeable future as it continues the development of its vaccine candidates. From inception to December 31, 2020, the Company has funded its operations through the issuance of convertible promissory notes and sale of its convertible preferred stock.
As the Company continues to pursue its business plan, it expects to finance its operations through equity offerings, debt financings or other capital sources, including potential strategic collaborations, licenses, and other similar arrangements. However, there can be no assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it may need to delay, reduce or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Companys business, results of operations or financial condition. The accompanying financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB).
F-7
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates are used for, but not limited to, commitments and contingencies, stock-based compensation (fair value of common stock underlying options), derivative liability, and the timing of research and development accruals and income taxes. Although these estimates are based on the Companys knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions.
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Companys business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. The Company has considered potential impacts arising from the COVID-19 pandemic and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgments or revise the carrying value of its assets or liabilities.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and restricted cash. The Company is exposed to credit risk from its deposits of cash in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company maintains an Insured Cash Sweep account where balances are maintained in interest bearing demand accounts. The Company has not experienced any losses on its deposits of cash since inception, and management believes that the Company is not exposed to significant credit risk due to the financial positions of the respective depository institutions in which those deposits are held.
Comprehensive Loss
Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Companys comprehensive loss was the same as its reported net loss for all periods presented.
Fair Value of Financial Instruments
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
The carrying amounts of all cash, restricted cash, prepaid expenses and other assets, accounts payable, and accrued and other current liabilities are considered to be representative of their respective fair values due to their short maturities.
The carrying values of the derivative liability of $1.6 million (level 3 fair value) and the convertible promissory note of $4.9 million in the accompanying balance sheet at December 31, 2020 approximate fair value because they collectively converted into 2,805,850 shares of Series B convertible preferred stock in March 2021.
Cash
Cash represents funds in the Companys operating bank account. The Company has no cash equivalents.
Restricted Cash
The Companys current restricted cash includes payments received under the Grant Agreement (as defined in Note 4) with the Bill & Melinda Gates Foundation (BMGF) under which the Company was awarded a grant of up to $10.0 million. The Company will utilize the Grant Agreement funds as it incurs expenses for services performed under the agreement.
F-8
The following table provides a reconciliation of cash and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows (in thousands):
AS OF DECEMBER 31, | ||||||||
2019 | 2020 | |||||||
Cash |
$ | 23,079 | $ | 13,114 | ||||
Restricted cash, current |
| 2,384 | ||||||
|
|
|
|
|||||
Total cash and restricted cash |
$ | 23,079 | $ | 15,498 | ||||
|
|
|
|
Property and equipment, net
Property and equipment, net is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally two to five years).
Impairment of Long-Lived Assets
The Company regularly reviews the carrying value and estimated lives of its long-lived assets, including property and equipment to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. Should an impairment exist, the impairment loss would be measured based on the excess over the carrying amount of the assets fair value. The Company has not recognized any impairment losses from inception through December 31, 2020.
Derivative Liability, Convertible Notes Discount and Amortization
The Companys convertible note (see Note 7) had conversion and redemption features that met the definition of an derivative and were therefore subject to derivative accounting. The initial recognition of the fair value of the derivative resulted in a discount to the convertible note, with a corresponding derivative liability. The discount to the convertible note was amortized using the effective interest method. The amortization of the discount is included in interest and other income (expense) in the statements of operations and comprehensive loss. The derivative liability related to these features was recorded at estimated fair value and is remeasured on a recurring basis. Any changes in fair value are reflected as change in change in fair value of derivative liability in the statements of operations and comprehensive loss at each reporting date while such instruments were outstanding. The derivative liability was settled in 2021 upon conversion of the underlying convertible note into Series B convertible preferred stock.
Leases
At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company records the associated lease liability and corresponding right-of-use asset upon commencement of the lease using the implicit rate or a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. The Company additionally evaluates leases at their inception to determine if they are to be accounted for as an operating lease or a finance lease. A lease is accounted for as a finance lease if it meets one of the following five criteria: the lease has a purchase option that is reasonably certain of being exercised, the present value of the future cash flows is substantially all of the fair market value of the underlying asset, the lease term is for a significant portion of the remaining economic life of the underlying asset, the title to the underlying asset transfers at the end of the lease term, or if the underlying asset is of such a specialized nature that it is expected to have no alternative uses to the lessor at the end of the term. Leases that do not meet the finance lease criteria are accounted for as an operating lease. Operating lease assets represent a right to use an underlying asset for the lease term and operating lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease liabilities with a term greater than one year and their corresponding right-of-use assets are recognized on the balance sheet at the commencement date of the lease based on the present value of lease payments over the expected lease term. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. As the Companys leases do not typically provide an implicit rate, the Company utilizes the appropriate incremental borrowing rate, determined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and in a similar economic environment. Lease cost is recognized on a
F-9
straight-line basis over the lease term and variable lease payments are recognized as operating expenses in the period in which the obligation for those payments is incurred. Variable lease payments primarily include common area maintenance, utilities, real estate taxes, insurance, and other operating costs that are passed on from the lessor in proportion to the space leased by the Company. The Company has elected the practical expedient to not separate lease and non-lease components.
Grant Revenue
The Companys current revenue consists of revenue under its Grant Agreement with BMGF (see Note 4). The Company is reimbursed for certain costs that support development activities, including the Companys clinical trial notification (CTN) preparations for and planned first-in-human Phase 1/2 clinical trial of SARS-CoV-2 RBD VLP vaccine in Australia. The Companys Grant Agreement does not provide a direct economic benefit to BMGF. Rather, the Company entered into an agreement with BMGF to make a certain amount of any resulting vaccine available and accessible at affordable pricing to people in certain low- and middle-income countries. The Company assessed this cost reimbursement agreement to determine if the agreement should be accounted for as an exchange transaction or a contribution. Such an agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred. Contributions are recognized as grant revenue when all donor-imposed conditions have been met. As BMGF ultimately determines if milestones under the agreement are met and if funding should continue, there may be a difference in timing between when research and development expenses are incurred and when grant revenue is recognized.
Accrued Research and Development Expense
The Company is required to estimate its obligation for expenses incurred under contracts with vendors, consultants, and contract research organizations, in connection with conducting research and development activities. The financial terms of these contracts are subject to negotiations, which 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. The Company reflects research and development expenses in its financial statements by recognizing those expenses in the periods in which services and efforts are expended. The Company accounts for these expenses according to the progress of the preclinical study or clinical trial, as measured by the timing of various aspects of the study, trial or related activities. The Company determines accrual estimates through review of the underlying contracts along with preparation of financial models taking into account discussions with research and other key personnel and third-party service providers as to the progress of studies or trials, or other services being conducted. To date, the Company has had no material differences between its estimates of such expenses and the amounts actually incurred. During the course of a study or trial, the Company adjusts its expense recognition if actual results differ from its estimate. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.
Research and Development
Research and development costs are expensed as incurred and consist primarily of external and internal costs related to the development of vaccine candidates, including salaries and benefits, stock-based compensation, facilities and depreciation, contracted research, consulting arrangements, and other expenses incurred to sustain the Companys research and development programs.
Interest Income
Interest income consists of interest income earned on interest bearing demand accounts.
Stock-Based Compensation
Stock-based compensation expense represents the cost of the grant date fair value of employee, officer, director and non-employee stock option grants, estimated in accordance with the applicable accounting guidance, recognized on a straight-line basis over the vesting period. The vesting period generally approximates the expected service period of the awards. The Company recognizes forfeitures as they occur.
Liability for Early Exercise of Stock Options
Certain individuals were granted the ability to early exercise their stock options. The shares of common stock issued from the early exercise of unvested stock options are restricted and continue to vest in accordance with the original vesting schedule. The Company has the option to repurchase any unvested shares at the original purchase price
F-10
upon any voluntary or involuntary termination. The shares purchased by the employees and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. The cash received in exchange for exercised and unvested shares related to stock options granted is recorded as a liability for the early exercise of stock options on the accompanying balance sheets and will be reclassified as common stock and additional paid-in capital as the shares vest. Unvested shares issued under early exercise provisions subject to repurchase by the Company totaled 547,628 and 488,226 shares as of December 31, 2019 and 2020, respectively. As of December 31, 2019 and 2020, the Company recorded $250,000 and $283,000, respectively, associated with shares issued with repurchase rights as other noncurrent liabilities in the accompanying balance sheets.
Common Stock Valuation
Due to the absence of an active market for the Companys common stock, the Company utilized methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Guide: Valuation of Privately-Held Company Equity Securities Issued as Compensation to estimate the fair value of its common stock. In determining the exercise prices for options granted, the Company has considered the fair value of the common stock as of the grant date. The fair value of the common stock has been determined based upon a variety of factors.
Stock-Based Compensation
The Black-Scholes option pricing model uses inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include:
∎ |
Fair Value of Common Stock. The grant date fair market value of the shares of common stock underlying stock options has historically been determined by the Companys board of directors. Because there has been no public market for the Companys common stock, the board of directors exercises reasonable judgment and considers a number of objective and subjective factors to determine the best estimate of the fair market value, which include contemporaneous valuations performed by an independent third-party, the Companys results of operations and financial position, including its levels of available capital resources, its stage of development and material risks related to the Companys business, progress of the Companys research and development activities, the Companys business conditions and projections, the lack of marketability of the Companys common stock and preferred stock as a private company, the prices at which the Company sold shares of its convertible preferred stock to outside investors in arms-length transactions, the rights, preferences and privileges of the Companys redeemable convertible preferred stock relative to those of its common stock, the analysis of initial public offerings and the market performance of similar companies in the biopharmaceutical industry, the likelihood of achieving a liquidity event for the Companys securityholders, such as an initial public offering or a sale of the company, given prevailing market conditions, the hiring of key personnel and the experience of management, trends and developments in the Companys industry and external market conditions affecting the life sciences and biopharmaceutical industry sectors. |
∎ |
Expected Term. The expected term represents the period that the options granted are expected to be outstanding. The expected term of stock options issued is determined using the simplified method (based on the average of the vesting term and the original contractual term) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term. |
∎ |
Expected Volatility. Given that the Companys common stock is privately held, there is no active trading market for the Companys common stock. The Company derived the expected volatility from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within the Companys peer group that were deemed to be representative of future stock price trends as the Company has limited trading history for its common stock. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. |
∎ |
Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the options. |
∎ |
Expected Dividend Yield. The Company never paid dividends on its common stock and do not anticipate paying any dividends in the foreseeable future. Therefore, the Company used an expected dividend yield of zero. |
F-11
Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date.
Commitments and Contingencies
The Company recognizes a liability with regard to loss contingencies when it believes it is probable a liability has been incurred, and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range.
In the event the Company becomes subject to claims or suits arising in the ordinary course of business, the Company would accrue a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.
The Company has not recorded any such liabilities at either December 31, 2019 or 2020.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
As of December 31, 2019 and 2020, the Company maintained valuation allowances against its deferred tax assets as the Company concluded it had not met the more likely than not to be realized threshold. Changes in the valuation allowance when they are recognized in the provision for income taxes may result in a change in the estimated annual effective tax rate.
The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability. As of December 31, 2020, the Company had no accrued interest or penalties.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Companys potentially dilutive securities include outstanding stock options under the Companys equity incentive plan and have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Companys net loss position.
F-12
The following tables summarize the computation of the basic and diluted net loss per share (in thousands, except share and per share data):
YEAR ENDED DECEMBER 31, | ||||||||
2019 | 2020 | |||||||
Numerator: |
||||||||
Net Loss |
$ | (5,297 | ) | $ | (18,854 | ) | ||
Series 1 preferred stock dividends |
(272 | ) | | |||||
Series 1 preferred stock extinguishment |
(400 | ) | | |||||
|
|
|
|
|||||
Net loss attributable to common stockholders |
$ | (5,969 | ) | $ | (18,854 | ) | ||
|
|
|
|
|||||
Denominator: |
||||||||
Weighted-average common shares outstanding, basic and diluted |
3,142,528 | 3,517,671 | ||||||
Less: Weighted average unvested common stock |
(1,554,445 | ) | (1,272,448 | ) | ||||
|
|
|
|
|||||
Weighted average shares used to compute net loss per share, basic and diluted |
1,588,083 | 2,245,223 | ||||||
|
|
|
|
|||||
Net loss per share, basic and diluted |
$ | (3.76 | ) | $ | (8.40 | ) | ||
|
|
|
|
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive.
YEAR ENDED
DECEMBER 31, |
||||||||
2019 | 2020 | |||||||
Redeemable Series A convertible preferred stock |
32,198,879 | 32,198,879 | ||||||
Common stock options |
578,514 | 641,427 | ||||||
Unvested common stock |
1,486,671 | 957,711 | ||||||
|
|
|
|
|||||
Total |
34,264,064 | 33,798,017 | ||||||
|
|
|
|
Segments
The Company has determined that it operates and manages one operating segment, which is the business of researching and developing vaccines against infectious diseases. The Companys chief operating decision maker, its chief executive officer, reviews financial information on an aggregate basis for the purpose of allocating resources.
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In February 2016, the FASB issued ASU 2016-02, which requires a lessee to recognize a lease liability and a right-of-use asset for all leases with lease terms of more than 12 months. Additionally, certain qualitative and quantitative disclosures will be required in the financial statements. This guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. Companies may adopt this guidance using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company adopted this guidance utilizing the modified retrospective transition method effective January 1, 2020, and at the time of adoption, there was no impact on the Companys financial statements as the existing launch lab license premises was considered a short-term lease. The standard did not materially impact the Companys statement of operations and comprehensive loss or statement of cash flows and there was no cumulative-effect adjustment to accumulated deficit as of January 1, 2020.
F-13
In June 2016, the FASB issued ASU 2016-13, Financial InstrumentsCredit Losses: Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods, and early adoption is permitted. The Company adopted this guidance effective January 1, 2020. The adoption of ASU 2016-13 did not have a material cumulative impact on the Companys financial statements as of January 1, 2020. In addition, the outbreak of COVID-19 has not had a significant impact on the Companys expected credit losses or the Companys financial statements during 2020. The Company is continuing to monitor the impact of COVID-19 on expected credit losses.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value Measurement, which eliminates, modifies and adds disclosure requirements on fair value measurements. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The Company adopted this guidance effective on January 1, 2020, and the adoption of the standard did not have a material impact on the Companys financial statement disclosures.
In November 2019, the FASB issued ASU 2019-08, CompensationStock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which clarifies that an entity must measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. ASU 2019-08 is effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual reporting periods. The Company adopted this guidance effective on January 1, 2020, and there was no cumulative-effect adjustment to accumulated deficit as of January 1, 2020.
Recently Issued Accounting Standards Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income TaxesSimplifying the Accounting for Income Taxes (ASU 2019-12). Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that, in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. As of December 31, 2020, the Company has not adopted the guidance and does not expect the ASU to have a material impact on its financial statements and related disclosures.
3. Fair Value Measurements
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
F-14
Level 2Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).
No transfers between levels have occurred during the periods presented.
The following table summarizes financial liabilities that the Company measured at fair value on a recurring basis, classified in accordance with the fair value hierarchy (in thousands):
FAIR VALUE AT REPORT DATE
MEASUREMENTS USING |
||||||||||||||||
TOTAL | (LEVEL 1) | (LEVEL 2) | (LEVEL 3) | |||||||||||||
As of December 31, 2020: |
||||||||||||||||
Derivative liability |
$ | (1,604 | ) | $ | | $ | | $ | (1,604 | ) | ||||||
|
|
|
|
|
|
|
|
As further described in Note 7, the Company issued a convertible promissory note in August 2020. The convertible promissory note contained certain features that met the definition of a derivative and were required to be bifurcated. The Company has accounted for these as a single derivative comprising all the features requiring bifurcation. The fair value of the derivative liability was estimated using a scenario-based analysis comparing the probability-weighted present value of the convertible promissory note payoff at maturity with and without the bifurcated features. The Company considered possible outcomes available to the noteholders, including various financing dissolution scenarios. In addition, the probabilities applied to various scenarios, the key unobservable inputs are the time to liquidity for each scenario, and the discount rate.
The following table summarizes information about the significant unobservable inputs used in the fair value measurements for the derivative liability:
AUGUST 20,
2020 |
DECEMBER 31,
2020 |
|||||||
Probability of financing |
90% | 90% | ||||||
Probability of dissolution |
10% | 10% | ||||||
Time to liquidity (years) |
0.83 - 1.33 | 0.50 - 1.00 | ||||||
Discount rate |
11.9% | 8.3% |
The Company adjusted the carrying value of the derivative liability within the convertible promissory note to the estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as change in fair value of derivative liability in the statements of operations and comprehensive loss.
For the period from January 1, 2020 to December 31, 2020 and for the year ended December 31, 2020 the Company recognized $187,000 of other income in the statements of operations and comprehensive loss related to decreases in the fair value of the derivative liability.
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The following table provides a reconciliation of the fair value of the derivative liability using Level 3 significant unobservable inputs (in thousands):
DERIVATIVE
LIABILITY |
||||
Fair value at December 31, 2019 |
$ | | ||
Fair value of derivative liability at issuance of convertible promissory note |
(1,791 | ) | ||
Change in fair value of derivative liability (Note 7) |
187 | |||
|
|
|||
Fair value at December 31, 2020 |
$ | (1,604 | ) | |
|
|
4. Grant Agreement
Bill & Melinda Gates Foundation Grant Agreement
In support of the Companys development of a SARS-CoV-2 vaccine, in September 2020, the Company entered into the grant agreement with BMGF (the Grant Agreement), under which it was awarded a grant totaling up to $10.0 million (the Grant). The Grant supports development activities, including the Companys regulatory filing preparations and planned Phase 1 clinical trial. Unless terminated earlier by BMGF, the Grant Agreement will continue in effect until March 31, 2022. The Company concurrently entered into a Global Access Commitments Agreement (GACA) with BMGF as part of the Grant Agreement. Under the terms of the GACA, among other things, the Company agreed to make a certain amount of a SARS-CoV-2 vaccine available and accessible at affordable pricing to people in certain low- and middle-income countries, if the vaccine is commercialized.
Payments received in advance that are related to future performance are deferred and recognized as revenue when the research and development activities are performed. Cash payments received under the Grant Agreement are restricted as to their use until eligible expenditures are incurred.
At December 31, 2020, the Companys current restricted cash and deferred revenue balances on the balance sheet represent funds received from BMGF and its estimate of costs to be reimbursed and revenue to be recognized, respectively, in the next twelve months under the Grant Agreement.
During the year ended December 31, 2020, the Company received $4.0 million in funding from BMGF, $1.6 million of which was recognized as grant revenue and $2.4 million of which remained in restricted cash and deferred revenue in the accompanying balance sheets. In February 2021, the Company received an additional $2.7 million from BMGF.
5. Accrued and other current liabilities
Accrued and other current liabilities consist of the following (in thousands):
AS OF DECEMBER 31, | ||||||||
2019 | 2020 | |||||||
Accrued taxes |
$ | 1 | $ | 91 | ||||
Accrued vacation |
30 | 137 | ||||||
Accrued bonus |
140 | 696 | ||||||
Other accrued liabilities |
253 | 608 | ||||||
|
|
|
|
|||||
Total accrued and other current liabilities |
$ | 424 | $ | 1,532 | ||||
|
|
|
|
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6. License Agreements
License Agreement with the National Institutes of Health
On June 28, 2018, the Company entered into a non-exclusive patent license agreement (the NIH Agreement) with a U.S. government entity, the National Institutes of Health, represented by National Institute of Allergy and Infectious Disease (NIAID). The NIH Agreement was amended in September 2018 and September 2020. Under the NIH Agreement, the Company obtained a non-exclusive, worldwide, royalty-bearing, sublicensable license under certain NIAID patent rights, and transfer of know-how and biological materials for use in adjuvanted or non-adjuvanted vaccines for the prevention, cure, or treatment of RSV and metapneumovirus infection in humans.
Under the NIH Agreement, the Company is required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. In consideration of the rights granted to the Company under the NIH Agreement, the Company paid a licensing fee upon execution of the NIH Agreement of $100,000, and will pay annual minimum royalty payments starting in the second year after the initial sale of each licensed product which can be credited against any earned royalties due for sales made in the year. There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for the licensed products in the future. The Company is obligated to pay aggregate potential milestone payments of up to $2.1 million with respect to future development and regulatory based milestones, and up to $6.5 million with respect to future sales milestones following commercialization. Additionally, the Company has agreed to pay a tiered royalty of a low single digit percentage on net sales of all products applicable to the license. Additional royalties would be due in connection with sublicenses. The Companys royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
The NIH Agreement will terminate upon the last expiration of the patent rights or the Company may terminate the entirety of the agreement upon discontinuation of development or sales of licensed products and provision of written notice thereof to NIH.
During the years ended December 31, 2019 and 2020, the Company paid $37,500 and $50,000, respectively, in fees associated with the license, which were recorded as research and development expenses.
License Agreements with University of Washington
On June 29, 2018, the Company entered into an exclusive license agreement with an academic entity, University of Washington (the UW 2018 Agreement), for an exclusive license to covered intellectual property, a non-exclusive, worldwide license to use licensed know-how, and rights to sublicense for computationally designed nanoparticles and vaccines. The UW 2018 Agreement was amended in June 2019 and again in November 2020. The Companys rights and obligations under the UW 2018 Agreement are subject to certain U.S. government rights, certain global access commitment rights for humanitarian purposes to BMGF, certain rights to Howard Hughes Medical Institute, and certain other limited rights retained by University of Washington.
The Company issued 192,276 shares of common stock on August 1, 2018 in exchange for the UW 2018 Agreements exclusive license. The shares issued were recorded at their estimated fair value, which is de minimis, with the related expense classified as research and development in 2018.
Under the UW 2018 Agreement, the Company is required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. In consideration of the rights granted to the Company under the UW 2018 Agreement, the Company is required to pay an annual maintenance fee in the mid four figures starting in 2020. Additionally, the Company is required to pay minimum annual royalties following the first year after commercial sale of each licensed product. There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for licensed products in the future. The aggregate potential milestone payments for future development, regulatory, and sales-based milestones are $1.35 million per indication, up to a maximum of $6.75 million in total milestone payments. Additionally, the Company has agreed to pay a royalty of a low single digit percentage on net sales of all licensed products. Additional royalties would be due in connection with sublicenses and milestones. The Companys royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
F-17
The UW 2018 Agreement will terminate when all licensed rights have been terminated and all obligations due to the University of Washington have been fulfilled, or the Company may terminate the entirety of the agreement upon written notice thereof to the University of Washington.
During the year ended December 31, 2019, the Company paid $78,000 in fees associated with the license, which were expensed as incurred.
During the year ended December 31, 2020, the Company paid $5,000 in fees associated with the license, which were expensed as incurred.
On July 2, 2020, the Company entered into a non-exclusive license agreement with respect to specified intellectual property with options for exclusivity in North America and Europe subject to the performance of certain development milestones, with an academic entity, University of Washington (the UW 2020 Agreement). Under the UW 2020 Agreement, the Company also received a non-exclusive, worldwide license to use specific know-how and rights to sublicense for computationally designed nanoparticles and vaccines. The UW 2020 Agreement was amended in August 2020 and subsequently in May 2021. The Companys rights and obligations under the UW 2020 Agreement as amended are subject to certain U.S. government rights, certain global access commitment rights for humanitarian purposes to BMGF, certain rights to Howard Hughes Medical Institute, and certain other limited rights retained by the University of Washington.
Under the UW 2020 Agreement as amended, the Company is required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. The Company has agreed to pay a royalty of a low single digit percentage on net sales of all products applicable to the license. However, the Company will not be required to pay royalties on net sales of any licensed product under the UW 2020 Agreement as amended if the Company is required to pay royalties on net sales under the UW 2018 Agreement. Additional royalties would be due in connection with sublicenses and milestones. The Companys royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
The UW 2020 Agreement as amended will terminate when all licensed rights have been terminated and all obligations due to the University of Washington have been fulfilled, or the Company may terminate the entirety of the agreement upon written notice thereof to the University of Washington.
During the year ended December 31, 2020, the Company reimbursed the University of Washington for patent expenses under the UW 2018 Agreement and UW 2020 Agreement as amended of $139,000, which were expensed as incurred.
During the years ended December 31, 2019 and 2020, the Company did not incur any other fees or make any payments associated with the UW 2020 Agreement as amended.
7. Convertible Promissory Note
In August 2020, the Company issued a $6.5 million convertible promissory note (Convertible Promissory Note). The Convertible Promissory Note accrued interest at a rate of 6% a year with maturity date two years from issuance.
The Convertible Promissory Note could be converted or redeemed as follows (i) automatically converted in a qualified Series B financing transaction from which the Company would receive total gross proceeds of not less than $5.0 million at a conversion price equal to 85% of the per share price paid by investors for such securities, (ii) automatically converted upon initial public offering at a conversion price equal to 85% of the per share price off common stock in the initial public offering, (iii) optionally converted into Series A-3 preferred stock if a change in control, initial public offering, or qualified Series B financing had not occurred prior to the maturity date at a price equal to an amount determined by dividing $140 million by the fully diluted capitalization of the Company at the time of conversion, or (iv) repaid upon a change in control for an amount equal to the issue price plus accrued and unpaid interest or an amount as would have been payable if the noteholders had optionally converted into shares of Series A-3 preferred stock. The Convertible Promissory Note was converted in March 2021 in connection with the Series B financing.
F-18
The Convertible Promissory Note is accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (ASC 470-20) and ASC 815-15, Derivatives and Hedging - Embedded Derivatives (ASC 815-15). Under ASC 815-15, an feature is required to be bifurcated if all three conditions are met: (1) economic characteristics and risks of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the host contract, (2) the hybrid instrument is not remeasured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur, and (3) a separate instrument which the same terms as the derivative would be considered a derivative instrument subject to derivative accounting (the initial net investment for the hybrid instrument should not be considered to be the initial net investment for the derivative. The Company bifurcated certain features that were required to be accounted separately for as a single derivative. The initial fair value of this derivative of $1.8 million was recorded as a liability, and as a reduction to the carrying value of the Convertible Promissory Note. The Company also incurred approximately $36,000 of issuance costs related to the Convertible Promissory Note, which were also recorded as a reduction to the Convertible Promissory Note on the balance sheet.
The debt discount comprised of the initial fair value of the derivative liability and the issuance costs is amortized using the effective interest method over the two-year contractual term of the Convertible Promissory Note and presented as a direct reduction of the debt liability. The debt discount is being amortized at an effective interest rate of 23.8%.
Total Convertible Promissory Note consisted of the following as of (in thousands):
DECEMBER 31,
2020 |
||||
Principal amount |
$ | 6,500 | ||
Discount related to the derivative liability and issuance costs |
(1,553 | ) | ||
|
|
|||
Net carrying amount of Convertible Promissory Note |
$ | 4,947 | ||
|
|
Interest expense incurred in connection with the Convertible Promissory Note consisted of the following for the year ended December 31 (in thousands):
DECEMBER 31,
2020 |
||||
Coupon interest at 6% |
$ | 143 | ||
Accretion of discount and amortization of issuance costs |
274 | |||
|
|
|||
Total interest expense on Convertible Promissory Note |
$ | 417 | ||
|
|
On March 19, 2021, in connection with the closing of the Series B convertible preferred stock financing, the Convertible Promissory Note converted into 2,805,850 shares of Series B-2 convertible preferred stock.
8. Convertible Preferred Stock and Stockholders Deficit
Stockholders Deficit
Under the Amended and Restated Certificate of Incorporation dated August 15, 2019, the Company had a total of 132,039,749 shares of capital stock authorized for issuance, consisting of 78,000,000 shares of common stock, par value of $0.0001 per share, and 54,039,749 shares of convertible preferred stock, par value of $0.0001 per share.
Convertible Preferred StockSeries 1
On December 15, 2017, the Company entered into a Series 1 convertible preferred stock purchase agreement. Under the agreement, the Company issued 1,000,000 shares of Series 1 convertible preferred stock (Series 1) at $1.00 per share for total proceeds of $1.0 million. Additional sales of Series 1 shares took place in February, March, April, and August 2018 and January 2019 for 885,000, 200,000, 250,000, 600,000 and 600,000 shares, respectively. Gross proceeds raised from all sales of Series 1 shares totaled $3.5 million.
F-19
Each share of Series 1 stock was convertible into new preferred stock based on a conversion price for a qualified financing determined by dividing (i) original issue price of $1.00 plus unpaid accrued dividends, which totaled $272,000 at conversion, by (ii) the lesser of 80% of the new preferred stock issue price or the conversion price.
In August 2019, upon completion of a qualified financing, all Series 1 shares and dividends declared during 2019 thereon of $272,000 were converted into Series A-2 convertible preferred stock (Series A-2). The fair value of the Series A-2 shares issued exceeded the carrying value of the Series 1 shares converted by $400,000, resulting in a $83,000 reduction of additional paid-in capital to zero and a $317,000 increase in accumulated deficit. Series A-2 shares were issued at an original issue price of $0.7692 per share. The $400,000 conversion benefit and $272,000 dividend each increased the 2019 net loss attributable to common stockholders and the 2019 net loss per share.
Convertible Preferred StockSeries A-1
On August 15, 2019, the Company entered into a Series A convertible preferred stock purchase agreement (the Series A Purchase Agreement). Under the agreement, the Company issued 27,249,085 shares of Series A-1 convertible preferred stock (Series A-1), in an initial closing, at $0.9615 per share for total proceeds of $26.2 million.
The Series A Purchase Agreement provided for an additional closing for the Series A-1 purchasers for the issuance of 21,840,870 shares of Series A-1 preferred stock, at a purchase price of $0.9615 per share for aggregate cash proceeds of $21.0 million, to occur no later than April 1, 2021 upon the achievement of the Closing Milestones (as defined in the Series A Purchase Agreement) or a waiver of the Closing Milestones by the Companys Board of Directors.
The Company determined that the right of the investors to purchase an additional number of shares of Series A-1 convertible preferred stock upon the achievement of the Closing Milestones, did not meet the definition of a freestanding financial instrument as the preferred shares issued at the initial closing and the future tranche right were not legally detachable and separately exercisable.
A milestone closing of 21,944,874 Series A-1 shares closed in February 2021, which was contingent on the Company achieving certain regulatory, research and development and operational milestones. With the milestone closing, the Company sold 21,944,874 shares of Series A-1 preferred stock for gross proceeds of $21.1 million.
Conversion
Each share of Series A-1 is convertible into common stock: (i) at the option of the holder, or (ii) automatically upon the closing of a public offering with a price to the public of at least $15.983 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Companys common stock) for at least $50 million in gross proceeds. The conversion ratio of Series A-1 to common stock is currently one-for-4.1557, subject to adjustment upon any future stock splits or stock dividends, issuance of additional shares for less consideration, other distribution of payable in securities, or upon a reorganization, recapitalization, reclassification, merger or consolidation of the Company.
Dividends
The holders of the Series A-1 convertible preferred stock have preferential rights over common stockholders to non-cumulative dividends payable when declared by the Board, at the annual rate of $0.07692 per share. Dividends were not declared during 2019 or 2020.
Voting
Series A-1 stockholders are entitled to the number of votes equal to the number of shares of common stock into which the preferred stock could be converted. In addition, the Series A-1 stockholders have certain rights whereby the Company is precluded from carrying out certain actions specified in the Companys Amended and Restated Certificate of Incorporation without the approval of the holders of a majority of the Series A-1 shares.
Liquidation
Upon the occurrence of a liquidation event, the Series A-1 stockholders have preferential rights over common stockholders as to liquidation payments of their original issuance price of $0.9615 per share, plus any dividends declared and unpaid, on a pro rata, pari passu basis. Any additional distributions after the payment of the liquidation preferences of the Series A-1 shares and Series A-2 shares will be made to the holders of common stock on a pro rata basis.
F-20
Convertible Preferred StockSeries A-2
Under the Series A Purchase Agreement, the Company also issued 4,929,794 shares of Series A-2 in 2019 with a fair value of $4.2 million (or $0.85 per share net of issuance cost of $57,000) upon conversion of Series 1 shares with a carrying value of $3.8 million (or $1.00 per share). The $400,000 difference between the fair value of Series A-2 and the carrying value of Series 1 was recorded as a $83,000 reduction to additional paid-in capital (bringing its balance to zero) with the remainder recorded as an increase to accumulated deficit.
Conversion
Each share of Series A-2 is convertible into common stock: (i) at the option of the holder, or (ii) automatically upon the closing of a public offering with a price to the public of at least $15.983 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Companys common stock) for at least $50 million in gross proceeds. The conversion ratio of Series A-2 to common stock is currently one-for-4.1557, subject to adjustment.
Dividends
The holders of the Series A-2 convertible preferred stock have preferential rights over common stockholders to non-cumulative dividends payable when declared by the Board, at the annual rate of $0.061536 per share. Dividends were not declared during 2019 or 2020.
Voting
Series A-2 stockholders are entitled to the number of votes equal to the number of shares of common stock into which the preferred stock could be converted.
Liquidation
Upon the occurrence of a liquidation event, the Series A-2 stockholders have preferential rights over common stockholders as to liquidation payments of their original issuance price of $0.7692 per share, plus any dividends declared and unpaid, on a pro rata, pari passu basis. Any additional distributions after the payment of the liquidation preferences of the Series A-1 shares and Series A-2 shares will be made to the holders of common stock on a pro rata basis.
Convertible Preferred Stock Classification
Redemption
The Series A-1 and A-2 convertible preferred stock is not explicitly redeemable at the option of the holder at a specified date in the future or at the option of the Company.
The Companys convertible preferred stock has been classified as temporary equity on the accompanying balance sheet instead of in stockholders deficit in accordance with authoritative guidance for the classification and measurement of redeemable securities. Upon certain change in control events that are outside of the Companys control, including liquidation, sale or transfer of control of the Company, holders of the convertible preferred stock can cause its redemption. The Company has determined not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because of the uncertainty of whether or when such events would occur.
Common Stock
As of December 31, 2019 and 2020, of the 78,000,000 authorized shares of common stock, 2,580,600 and 3,596,936 shares were issued, respectively, and 1,901,656 and 2,639,026 shares were outstanding, respectively.
In December 2017, the Company entered into restricted stock purchase agreements and issued 3,413,872 shares of restricted common stock to members of management, and subject to repurchase by the Company. Any shares subject to repurchase by the Company are not deemed, for accounting purposes, to be outstanding until those shares vest. The management grants vested 20% upon issuance and the remaining 80% vest over 48 months in equal monthly installments. The grants provide for accelerated vesting upon a change in control or other contractually specified contingencies. In June 2018, 232,971 shares of the outstanding restricted shares were canceled, and the original proceeds were returned upon the departure of the founder. Given the early stage of the Company at the time of the grants, the value of all grants and the cash exchanged for the shares was de minimis.
F-21
In December 2017 and August 2018, the Company issued 77,418 and 192,276 shares, respectively of common stock to a university in connection with obtaining a licensing agreement. The shares issued to a university were fully vested upon issuance.
As of January 1, 2020, the Company had 2,347,629 shares of restricted common stock that had been issued to members of management at a price of $0.004 and 269,694 shares of common stock that had been issued to a university in connection with obtaining a licensing agreement.
At December 31, 2019 and 2020, 1,408,469 and 1,877,945 shares of the restricted common stock have vested, respectively. At December 31, 2020, 469,684 shares remaining subject to vesting conditions and are expected to vest by December 2021.
Common stock reserved for future issuance consisted of the following:
As of December 31, 2019 and 2020, the Companys convertible preferred stock consisted of the following:
SHARES
AUTHORIZED AND DESIGNATED |
SHARES ISSUED
AND OUTSTANDING |
SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION |
AGGREGATE
LIQUIDATION PREFERENCE |
CARRYING
VALUE |
||||||||||||||||
Series A-1 |
49,089,955 | 27,249,085 | 6,557,031 | $ | 26,200 | $ | 25,912 | |||||||||||||
Series A-2 |
4,949,794 | 4,949,794 | 1,191,082 | 3,807 | 4,150 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
54,039,749 | 32,198,879 | 7,748,113 | $ | 30,007 | $ | 30,062 |
Stock Options
In 2017, the Company established a stock option plan (the Plan) under which incentives may be granted to officers, employees, directors, consultants and advisors. Awards under the Plan may consist of restricted stock and incentive and non-qualified stock options to purchase shares of common stock of the Company.
The Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. The number of shares of common stock, which may be granted under the Plan, shall not exceed 1,683,686. All existing grants are subject to a time-based vesting period which will generally be four years. On the first anniversary of the grant date of each existing grant, 25% of the grant will vest with the remaining 75% to vest in equal monthly installments over the remaining 36 months provided the participant has a continuing service relationship with the Company. Certain option and share awards provide for accelerated vesting if there is a change in control or if other contractually specified contingencies are met.
The term of stock options granted under the Plan cannot exceed ten years. Options shall not have an exercise price less than 100% of the fair market value of the Companys common stock on the grant date, and generally vest over a period of four years.
F-22
A summary of the status of the options issued under the Plan as of December 31, 2020, and information with respect to the changes in options outstanding is as follows:
OPTION POOL
AVAILABLE FOR GRANT |
OPTIONS
OUTSTANDING |
WEIGHTED-
AVERAGE EXERCISE PRICE PER SHARE |
WEIGHTED-
AVERAGE REMAINING CONTRACT TERM |
AGGREGATE
INTRINSIC VALUE |
||||||||||||||||
Outstanding at December 31, 2019 |
812,816 | 578,514 | $ | 0.84 | 9.80 | |||||||||||||||
Granted |
(271,405 | ) | 271,405 | 0.84 | | |||||||||||||||
Exercised (early) |
| (208,492 | ) | 0.84 | | ($ | 113,000 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Outstanding at December 31, 2020 |
541,411 | 641,427 | $ | 0.84 | 9.02 | $ | 347,000 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Vested and expected to vest as of December 31, 2020 |
641,427 | $ | 0.84 | 9.02 | $ | 347,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Vested and exercisable at December 31, 2020 |
112,294 | $ | 0.84 | 8.78 | $ | 61,000 |
Exercisable options in the table above reflect the number of options vested as of the date reported. The plan permits early exercises of options. Cash received for early exercise of unvested options is carried as an other noncurrent liability in the accompanying balance sheet and totaled $283,000 at December 31, 2020.
The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the estimate fair value of the Companys common stock for all options that were in-the-money at December 31, 2020.
The weighted-average grant date fair value of employee option grants during the years ended December 31, 2019 and 2020 were $0.88 and $1.06 per share, respectively.
Stock-Based Compensation Expense
For the years ended December 31, 2019 and 2020, the Company recognized stock-based compensation expense of $72,000 and $257,000, respectively.
The Company recognizes compensation expense for options granted to employees and the board of directors based on their grant date fair value. During the year ended December 31, 2019, the Company granted 870,866 options, with a grant date fair value of $766,000. During the year ended December 31, 2020, the Company granted 271,405 options, with a grant date fair value of $287,000. The compensation expense is recognized over the vesting period of 4 years on a straight-line basis.
The fair value of each stock option granted was determined using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee and nonemployee stock option grants issued during years ended were as follows:
YEAR ENDED DECEMBER 31, | ||||
2019 | 2020 | |||
Risk-free rate of interest |
1.66% - 1.82% | 0.3% - 1.4% | ||
Expected term (years) |
4 - 6.25 years | 5.9 - 6.08 years | ||
Expected stock price volatility |
60.5% - 66.4% | 80.2% - 86.4% | ||
Dividend yield |
| |
As of December 31, 2020, the unrecognized compensation cost related to outstanding stock options was $749,000 and is expected to be recognized as expense over weighted-average period of approximately 2.8 years.
F-23
9. Income Taxes
The provision for income taxes differs from the amount expected by applying the federal statutory rates to the net loss before taxes as follows:
YEAR ENDED DECEMBER 31, | ||||||||
2019 | 2020 | |||||||
U.S. federal statutory income tax rate |
21.0 | % | 21.0 | % | ||||
Adjustments for tax effects of: |
||||||||
State income taxes, net of federal tax |
0.6 | 0.6 | ||||||
Other permanent differences |
(0.3 | ) | (0.6 | ) | ||||
Research and development tax credits |
4.8 | 3.8 | ||||||
Research and development credit permanent adjustment |
(1.0 | ) | (1.3 | ) | ||||
Uncertain tax positions |
(1.6 | ) | (1.0 | ) | ||||
Change in valuation allowance |
(23.5 | ) | (22.5 | ) | ||||
|
|
|
|
|||||
Effective income tax rate |
| % | | % | ||||
|
|
|
|
The tax effects at December 31, 2019 and 2020, of the temporary differences and carryforwards that give rise to deferred tax assets and liabilities, are as follows (in thousands):
Due to the uncertainty surrounding the realization of deductible tax attributes in future tax returns, the Company has recorded a valuation allowance against its net deferred tax assets as of December 31, 2019 and 2020. Utilization of the net operating loss carryforwards is dependent on future taxable income. As such, realization is not assured, and a valuation allowance has been established.
The valuation allowance for deferred tax assets was approximately $6.1 million as of December 31, 2020, an increase of $4.3 million during the year ended December 31, 2020. The Company has total net operating loss carryforwards for U.S. federal income tax and state purposes of approximately $21.0 million and $2.2 million, respectively, as of December 31, 2020, which begin to expire in 2037 and 2039, respectively. Federal net operating losses generated after January 1, 2018 will be carried forward indefinitely. The Company has research and development tax credit carryforwards of approximately $1.0 million as of December 31, 2020, which begin to expire in 2037. Additionally, the Company has state research and development credit carryforwards of approximately $45,000 as of December 31, 2020, which carryforward indefinitely. The operating loss carryforwards and research and development tax credits may be limited due to a change in control in the Companys ownership as defined by the Internal Revenue Code Sections 382 and 383.
F-24
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted and signed into law in response to the COVID-19 pandemic. The CARES Act, among other things, included several significant provisions that impacted corporate taxpayers accounting for income taxes. The Company did record any qualitative or quantitative impacts as a result of the CARES Act.
The Company files income tax returns in the U.S. federal jurisdiction, California, Massachusetts, North Carolina and Montana. The Company is not currently under examination but is open to audit by the I.R.S. for tax years beginning in 2017.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for uncertain tax positions were as follows (in thousands):
YEAR ENDED DECEMBER 31, | ||||||||
2019 | 2020 | |||||||
Unrecognized tax benefits, beginning of year |
$ | | $ | 84 | ||||
Additions based on tax positions relating to current year |
64 | 242 | ||||||
Additions based on tax positions relating to prior year |
20 | | ||||||
Reductions for positions of prior years |
| (63 | ) | |||||
|
|
|
|
|||||
Unrecognized tax benefits, end of year |
$ | 84 | 263 | |||||
|
|
|
|
10. Employee Savings Plan
The Company has a defined contribution 401(k) savings plan for those employees who meet minimum eligibility requirements. Under the terms of the plan, eligible employees may contribute up to 90% of their annual compensation to the plan, subject to Internal Revenue Service limitations. The Company may also, at its sole discretion, make contributions to the plan. The Company did not make any contributions to the plan during 2019 or 2020.
11. Subsequent Events
For purposes of the financial statements as of December 31, 2019 and 2020, and the years then ended, the Company evaluated subsequent events for recognition and measurement purposes through May 14, 2021, the date the financial statements were issued. Except as disclosed below, the Company has concluded that no events or transactions have occurred that require disclosure.
(a) Convertible Preferred StockSeries A Milestone
As discussed in Note 8, the Company entered into the Series A Purchase Agreement in August 2019, which provided for an additional closing for the Series A-1 purchasers for the issuance of 21,840,870 shares of Series A-1 preferred stock, at a purchase price of $0.9615 per share for aggregate cash proceeds of $21.0 million, to occur no later than April 1, 2021 upon the achievement of the Closing Milestones or a waiver of the Closing Milestones by the Companys Board of Directors. The milestone closing was contingent on the Company achieving certain regulatory, research and development and operational milestones. In February 2021, a milestone closing occurred at which the Company sold 21,944,874 shares of Series A-1 preferred stock for gross proceeds of $21.1 million.
(b) Series B Preferred Stock Purchase Agreement
On March 19, 2021, the Company entered into a preferred stock purchase agreement for the issuance of 35,764,462 shares of Series B preferred stock, $0.0001 par value per share. The Series B convertible preferred stock financing resulted in net cash proceeds of $92.5 million, net of $0.35 million in issuance costs from the sale of 32,958,612 shares of Series B-1 convertible preferred stock at a price of $2.82172 per share. In addition, the Convertible Promissory Note of $6.5 million that the Company issued in August 2020, including accrued interest as of the date of conversion of $0.2 million, was converted into 2,805,850 shares of Series B-2 convertible preferred stock on March 19, 2021 at 85% of the offerings share price.
F-25
(c) Amended and Restated Certificate of Incorporation and Amendment to the Plan
On January 29, 2021, the Board of Directors adopted the Amended and Restated Certificate of Incorporation, under which there are 136,143,753 shares of capital stock authorized for issuance, consisting of 82,000,000 shares of common stock, par value of $0.0001 per share, and 54,143,753 shares of convertible preferred stock, par value of $0.0001 per share.
On January 29, 2021, the Company entered into an Amendment to the Plan and approved an increase of stock available for awards up to 3,179,042, which increased the pool by 1,495,355 shares.
In connection with the Series B issuance in March 2021, the Board of Directors adopted the Amended and Restated Certificate of Incorporation, under which there are 224,237,623 shares of capital stock authorized for issuance, consisting of 134,329,408 shares of common stock, par value $0.0001 per share, and 89,908,215 shares of convertible preferred stock, par value $0.0001 per share.
On March 19, 2021, the Company entered into Amendment to the Plan and approved an increase of stock available for awards up to 7,130,414, which increased the pool by 3,951,372 shares.
(d) Stock Options Granted
In January 2021, the Company granted options to purchase 1,220,750 shares of common stock at an exercise price of $1.04 per share. In April 2021, the Company granted options to purchase 2,901,327 shares of common stock at an exercise price of $5.90 per share. The estimated unrecognized stock-based compensation expense for these awards is approximately $21.0 million. This estimate is based upon the estimated fair value of the Companys common stock as of each options grant date. For the purpose of recording stock-based compensation expense, the final fair value of options granted in or after April 2021 will take into account the Companys reassessment of fair value based on subsequent sales of stock, including shares that may be sold as part of an initial public offering as well as subsequent operational developments. Therefore, estimated unrecognized stock-based compensation for such grants is subject to change.
(e) Grant Agreement Milestones
As discussed in Note 4, the Company received $2.7 million in restricted cash from the Bill and Melinda Gates Foundation Grant Agreement in February 2021.
In July 2021, the Company received the final $3.3 million in restricted cash from the Bill and Melinda Gates Foundation Grant Agreement.
(f) Reverse Stock Split
In July 2021, the Company effected a one-for-4.1557 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Companys preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.
F-26
ICOSAVAX, INC.
(Unaudited)
(in thousands, except share and par value data)
DECEMBER 31,
2020 |
MARCH 31,
2021 |
|||||||
(Note 2) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash |
$ | 13,114 | $ | 121,878 | ||||
Restricted cash |
2,384 | 3,083 | ||||||
Prepaid expenses and other current assets |
662 | 226 | ||||||
|
|
|
|
|||||
Total current assets |
16,160 | 125,187 | ||||||
Property and equipment, net |
10 | 143 | ||||||
Deferred offering costs |
| 81 | ||||||
|
|
|
|
|||||
Total assets |
$ | 16,170 | $ | 125,411 | ||||
|
|
|
|
|||||
Liabilities, convertible preferred stock, and stockholders deficit |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 1,918 | $ | 1,777 | ||||
Accrued and other current liabilities |
1,532 | 788 | ||||||
Deferred revenue |
2,384 | 3,083 | ||||||
|
|
|
|
|||||
Total current liabilities |
5,834 | 5,648 | ||||||
Long-term convertible promissory note |
4,947 | | ||||||
Derivative liability |
1,604 | | ||||||
Other noncurrent liabilities |
426 | 311 | ||||||
|
|
|
|
|||||
Total liabilities |
12,811 | 5,959 | ||||||
Commitments and contingencies (Note 2) |
||||||||
Convertible preferred stock, $0.0001 par value; 54,039,749 and 89,908,215 shares authorized; 32,198,879 and 89,908,215 shares issued and outstanding; and $30,007 and $150,837 aggregate liquidation preference at December 31, 2020 and March 31, 2021, respectively |
30,062 | 151,638 | ||||||
Stockholders deficit: |
||||||||
Common stock, $0.0001 par value; 78,000,000 and 134,329,408 shares authorized; 3,596,936 and 3,741,667 shares issued; and 2,639,026 and 2,891,776 shares outstanding as of December 31, 2020 and March 31, 2021, respectively |
2 | 2 | ||||||
Additional paid-in capital |
393 | 761 | ||||||
Accumulated deficit |
(27,098 | ) | (32,949 | ) | ||||
|
|
|
|
|||||
Total stockholders deficit |
(26,703 | ) | (32,186 | ) | ||||
|
|
|
|
|||||
Total liabilities, convertible preferred stock and stockholders deficit |
$ | 16,170 | $ | 125,411 | ||||
|
|
|
|
See accompanying notes to financial statements
F-27
ICOSAVAX, INC.
Condensed Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share data)
THREE MONTHS ENDED
MARCH 31, |
||||||||
2020 | 2021 | |||||||
Grant revenue |
$ | | $ | 2,001 | ||||
Operating expenses: |
||||||||
Research and development |
$ | 2,920 | $ | 5,553 | ||||
General and administrative |
612 | 1,091 | ||||||
|
|
|
|
|||||
Total operating expenses |
3,532 | 6,644 | ||||||
|
|
|
|
|||||
Loss from operations |
(3,532 | ) | (4,643 | ) | ||||
Other income (expense): |
||||||||
Change in fair value of derivative liability |
| (205 | ) | |||||
Loss on extinguishment of convertible promissory note |
| (754 | ) | |||||
Interest and other income (expense) |
61 | (249 | ) | |||||
|
|
|
|
|||||
Total other income (expense) |
61 | (1,208 | ) | |||||
|
|
|
|
|||||
Net loss and comprehensive loss |
$ | (3,471 | ) | $ | (5,851 | ) | ||
|
|
|
|
|||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | (1.76 | ) | $ | (2.11 | ) | ||
|
|
|
|
|||||
Weighted-average shares of common stock outstanding, basic and diluted |
1,976,305 | 2,769,962 | ||||||
|
|
|
|
See accompanying notes to financial statements
F-28
ICOSAVAX, INC.
Condensed Statements of Convertible Preferred Stock and Stockholders Deficit
(Unaudited)
(in thousands, except share amounts)
CONVERTIBLE
PREFERRED STOCK |
COMMON STOCK |
ADDITIONAL
PAID-IN CAPITAL |
ACCUMULATED
DEFICIT |
TOTAL
STOCKHOLDERS DEFICIT |
||||||||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||
Balance at December 31, 2019 |
32,198,879 | $ | 30,062 | 1,901,656 | $ | 1 | $ | | $ | (8,244 | ) | $ | (8,243 | ) | ||||||||||||||
Shares released from restriction upon vesting of early-exercised stock options |
| | 25,641 | | 1 | | 1 | |||||||||||||||||||||
Vesting of shares of restricted common stock |
| | 117,369 | | | | | |||||||||||||||||||||
Stock-based compensation |
| | | | 54 | | 54 | |||||||||||||||||||||
Net loss and comprehensive loss |
| | | | | (3,471 | ) | (3,471 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at March 31, 2020 |
32,198,879 | $ | 30,062 | 2,044,666 | $ | 1 | $ | 55 | $ | (11,715 | ) | $ | (11,659 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONVERTIBLE
PREFERRED STOCK |
COMMON STOCK |
ADDITIONAL
PAID-IN CAPITAL |
ACCUMULATED
DEFICIT |
TOTAL
STOCKHOLDERS DEFICIT |
||||||||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||||||||||||||
Balance at December 31, 2020 |
32,198,879 | $ | 30,062 | 2,639,026 | $ | 2 | $ | 393 | $ | (27,098 | ) | $ | (26,703 | ) | ||||||||||||||
Issuance of Series A-1 convertible preferred stock for cash of $0.9615 per share net of $95,000 in issuance costs |
21,944,874 | 21,005 | | | | | | |||||||||||||||||||||
Issuance of Series B-1 convertible preferred stock for cash of $2.82172 per share net of $346,000 in issuance costs |
32,958,612 | 92,654 | | | | | | |||||||||||||||||||||
Issuance of Series B-2 convertible preferred stock upon conversion of convertible note |
2,805,850 | 7,917 | | | | | | |||||||||||||||||||||
Shares released from restriction upon vesting of early-exercised stock options |
| | 100,238 | | 63 | | 63 | |||||||||||||||||||||
Exercise of common stock options |
| | 35,143 | | 29 | | 29 | |||||||||||||||||||||
Vesting of shares of restricted common stock |
| | 117,369 | | | | | |||||||||||||||||||||
Stock-based compensation |
| | | | 276 | | 276 | |||||||||||||||||||||
Net loss and comprehensive loss |
| | | | | (5,851 | ) | (5,851 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at March 31, 2021 |
89,908,215 | $ | 151,638 | 2,891,776 | $ | 2 | $ | 761 | $ | (32,949 | ) | $ | (32,186 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial statements
F-29
ICOSAVAX, INC.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
THREE MONTHS ENDED
MARCH 31, |
||||||||
2020 | 2021 | |||||||
Operating activities: |
||||||||
Net loss |
$ | (3,471 | ) | $ | (5,851 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities: |
||||||||
Stock-based compensation |
54 | 276 | ||||||
Depreciation |
| 1 | ||||||
Non-cash interest expense |
| 264 | ||||||
Change in fair value of derivative liability |
| 205 | ||||||
Loss on extinguishment of convertible promissory note |
| 754 | ||||||
Changes in operating assets and liabilities: |
||||||||
Prepaids and other current assets |
(413 | ) | 436 | |||||
Accounts payable |
248 | (205 | ) | |||||
Accrued and other current liabilities |
39 | (761 | ) | |||||
Deferred revenue |
| 699 | ||||||
|
|
|
|
|||||
Net cash used in operating activities |
(3,543 | ) | (4,182 | ) | ||||
Investing activities: |
||||||||
Purchases of property and equipment |
(5 | ) | (134 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(5 | ) | (134 | ) | ||||
Financing activities: |
||||||||
Proceeds from issuance of convertible preferred stock, net of issuance costs |
| 113,659 | ||||||
Proceeds from exercise of stock options, including early exercise |
66 | 120 | ||||||
|
|
|
|
|||||
Net cash provided by financing activities |
66 | 113,779 | ||||||
|
|
|
|
|||||
Net (decrease) increase in cash and restricted cash |
(3,482 | ) | 109,463 | |||||
Cash and restricted cash at beginning of period |
23,079 | 15,498 | ||||||
|
|
|
|
|||||
Cash and restricted cash at end of period |
$ | 19,597 | $ | 124,961 | ||||
|
|
|
|
|||||
Supplemental disclosure of cash flow information: |
||||||||
Conversion of convertible note (including accrued interest) and derivative liability for Series B-2 convertible preferred stock |
| 7,917 | ||||||
|
|
|
|
|||||
Deferred offering costs included in accounts payable and accrued and other current liabilities |
| 81 | ||||||
|
|
|
|
|||||
Issuance costs and amounts payable for convertible preferred stock included in accounts payable and accrued liabilities |
| 163 | ||||||
|
|
|
|
See accompanying notes to financial statements
F-30
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business
Organization
Icosavax, Inc. (the Company) was incorporated in the state of Delaware on November 1, 2017, and is located in Seattle, Washington. The Company is focused on the research and development of vaccines against infectious diseases. The Company was founded on computationally designed virus-like particle technology, exclusively licensed for a variety of infectious disease indications from the Institute for Protein Design at the University of Washington.
The Companys business involves inherent risks. These risks include, among others, dependence on key personnel, licensors and third-party service providers, patentability of the Companys products and processes, and clinical efficacy of the Companys products under development. Any of the technologies covering the Companys existing products under development could become obsolete or diminished in value by discoveries and developments at other organizations.
Liquidity
The Company had an accumulated deficit of $32.9 million, cash of $121.9 million, and restricted cash of $3.1 million at March 31, 2021.
Management believes the Company has sufficient capital to execute its strategic plan and fund operations through at least the next twelve months from the date these condensed financial statements are issued.
The Company has devoted substantially all of its resources to organizing and staffing the Company, business planning, raising capital, in-licensing intellectual property rights, developing vaccines candidates, scaling up manufacturing of vaccine candidates, and preparing for its ongoing and planned preclinical studies and clinical trials. The Company has a limited operating history, and the sales and income potential of its business is unproven. The Company has incurred net losses and negative cash flows from operating activities since its inception and expects to continue to incur net losses into the foreseeable future as it continues the development of its vaccine candidates. From inception to March 31, 2021, the Company has funded its operations through the issuance of convertible promissory notes and sale of its convertible preferred stock.
As the Company continues to pursue its business plan, it expects to finance its operations through equity offerings, debt financings or other capital sources, including potential strategic collaborations, licenses, and other similar arrangements. However, there can be no assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it may need to delay, reduce or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Companys business, results of operations or financial condition. The accompanying financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements as of March 31, 2021 and for the three months ended March 31, 2020 and 2021 have been prepared in conformity with generally accepted accounting principles (GAAP) in the United States of America for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the Securities Act). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Companys financial position and the results of its operations and cash flows. The results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full fiscal year or any subsequent interim period. The condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all disclosures required by GAAP for complete financial statements. Because all of the disclosures required by GAAP for complete financial statements are not included
F-31
herein, these unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Companys audited financial statements for the year ended December 31, 2020 included elsewhere in this Draft Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission (SEC). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).
Use of Estimates
The Companys significant accounting policies are described in Note 2, Summary of significant accounting policies, of the Companys audited financial statements for the year ended December 31, 2020 included elsewhere in this Draft Registration Statement on Form S-1 to be filed with the SEC. There have been no material changes to the significant accounting policies previously disclosed in those audited financial statements.
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Companys business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. The Company has considered potential impacts arising from the COVID-19 pandemic and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgments or revise the carrying value of its assets or liabilities.
Deferred Offering Costs
The Company has deferred offering costs consisting of legal, accounting and other fees and costs directly attributable to its planned IPO. The deferred offering costs will be offset against the proceeds received upon the completion of the planned IPO. In the event the planned IPO is terminated, all of the deferred offering costs will be expensed within the Companys statements of operations and comprehensive loss. As of March 31, 2021, deferred offering costs of $81,000 were recorded within long-term assets on the balance sheet.
Fair Value of Financial Instruments
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
The carrying amounts of all cash, restricted cash, prepaid expenses and other assets, accounts payable, and accrued and other current liabilities are considered to be representative of their respective fair values due to their short maturities.
Derivative Liability, Convertible Notes Discount and Amortization
The Companys convertible note (see Note 7) had conversion and redemption features that met the definition of an embedded derivative and were therefore subject to bifurcation and derivative accounting. The initial recognition of the fair value of the derivative resulted in a discount to the convertible note, with a corresponding derivative liability. The discount to the convertible note was amortized using the effective interest method. The amortization of the discount is included in interest and other income (expense) in the statements of operations and comprehensive loss. The derivative liability related to these features was recorded at estimated fair value and is remeasured on a recurring basis. Any changes in fair value are reflected as change in change in fair value of derivative liability in the statements of operations and comprehensive loss at each reporting date while such instruments were outstanding. The derivative liability was settled in March 2021 upon conversion of the underlying convertible note into Series B convertible preferred stock, resulting in a loss on extinguishment of convertible promissory note.
Liability for Early Exercise of Stock Options
Certain individuals were granted the ability to early exercise their stock options. The shares of common stock issued from the early exercise of unvested stock options are restricted and continue to vest in accordance with the original vesting schedule. The Company has the option to repurchase any unvested shares at the original purchase price
F-32
upon any voluntary or involuntary termination. The shares purchased by the employees and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. The cash received in exchange for exercised and unvested shares related to stock options granted is recorded as a liability for the early exercise of stock options on the accompanying balance sheets and will be reclassified as common stock and additional paid-in capital as the shares vest. Unvested shares issued under early exercise provisions subject to repurchase by the Company totaled 488,226 and 541,180 shares as of December 31, 2020 and March 31, 2021, respectively. As of December 31, 2020 and March 31, 2021, the Company recorded $283,000 and $311,000, respectively, associated with shares issued with repurchase rights as other noncurrent liabilities in the accompanying condensed balance sheets.
Commitments and Contingencies
The Company recognizes a liability with regard to loss contingencies when it believes it is probable a liability has been incurred, and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range.
In the event the Company becomes subject to claims or suits arising in the ordinary course of business, the Company would accrue a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.
The Company has not recorded any such liabilities at either December 31, 2020 or March 31, 2021.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted- average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and common stock equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Companys potentially dilutive securities include outstanding stock options under the Companys equity incentive plan and have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Companys net loss position.
The following tables summarize the computation of the basic and diluted net loss per share (in thousands, except share and per share data):
THREE MONTHS ENDED
MARCH 31, |
||||||||
2020 | 2021 | |||||||
Numerator: |
||||||||
Net Loss |
$ | (3,471 | ) | $ | (5,851 | ) | ||
|
|
|
|
|||||
Denominator: |
||||||||
Weighted-average common shares outstanding, basic and diluted |
3,461,031 | 3,674,126 | ||||||
Less: Weighted average unvested common stock |
(1,484,726 | ) | (904,164 | ) | ||||
|
|
|
|
|||||
Weighted average shares used to compute net loss per share, basic and diluted |
1,976,305 | 2,769,692 | ||||||
|
|
|
|
|||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | (1.76 | ) | $ | (2.11 | ) | ||
|
|
|
|
F-33
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive.
Segments
The Company has determined that it operates and manages one operating segment, which is the business of researching and developing vaccines against infectious diseases. The Companys chief operating decision maker, its chief executive officer, reviews financial information on an aggregate basis for the purpose of allocating resources.
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Income TaxesSimplifying the Accounting for Income Taxes (ASU 2019-12). The new guidance simplifies the accounting for income taxes by removing several exceptions in the current standard and adding guidance to reduce complexity in certain areas, such as requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The new standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 for all non-public entities, with early adoption permitted, and is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods for public entities. Early adoption is permitted. The Company adopted ASU 2019-12 on January 1, 2021 and the standard did not have a material impact on its condensed financial statements and related disclosures.
There were no other significant updates to the recently issued accounting standards other than as disclosed herewith for the three months ended March 31, 2021. Although there are several other new accounting pronouncements issued or proposed by the FASB, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.
3. Fair Value Measurements
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).
No transfers between levels have occurred during the periods presented.
F-34
The following table summarizes financial liabilities that the Company measured at fair value on a recurring basis, classified in accordance with the fair value hierarchy (in thousands):
FAIR VALUE AT REPORT DATE
MEASUREMENTS USING |
||||||||||||||||
TOTAL | (LEVEL 1) | (LEVEL 2) | (LEVEL 3) | |||||||||||||
As of December 31, 2020: |
||||||||||||||||
Bifurcated derivative liability |
$ | (1,604 | ) | $ | | $ | | $ | (1,604 | ) | ||||||
|
|
|
|
|
|
|
|
There were no assets or liabilities measured at fair value on a recurring basis as of March 31, 2021.
As further described in Note 7, the Company issued a convertible promissory note in August 2020. The convertible promissory note contained certain features that met the definition of a derivative and were required to be bifurcated. The Company has accounted for these as a single derivative comprising all the features requiring bifurcation. The fair value of the derivative liability was estimated using a scenario-based analysis comparing the probability-weighted present value of the convertible promissory note payoff at maturity with and without the bifurcated features. The Company considered possible outcomes available to the noteholders, including various financing dissolution scenarios. In addition, the probabilities applied to various scenarios, the key unobservable inputs are the time to liquidity for each scenario, and the discount rate.
The following table summarizes information about the significant unobservable inputs used in the fair value measurements for the derivative liability:
AUGUST 20,
2020 |
DECEMBER 31,
2020 |
MARCH 19,
2021 |
||||||||||
Probability of financing |
90% | 90% | 100% | |||||||||
Probability of dissolution |
10% | 10% | % | |||||||||
Time to liquidity (years) |
0.83 - 1.33 | 0.50 - 1.00 | | |||||||||
Discount rate |
11.9% | 8.3% | 7.6% |
The Company adjusted the carrying value of the derivative liability within the convertible promissory note to the estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as change in fair value of derivative liability in the statements of operations and comprehensive loss.
For the period from January 1, 2020 to March 31, 2020 and for the three months ended March 31, 2020, there was no change in the fair value of the derivative liability recognized in the statements of operations and comprehensive loss.
For the period from January 1, 2021 to March 31, 2021 and for the three months ended March 31, 2021 the Company recognized $205,000 of other expense in the statements of operations and comprehensive loss related to increases in the fair value of the derivative liability.
On March 19, 2021, in connection with the closing of the Series B convertible preferred stock financing, the convertible promissory note (including accrued interest) and derivative liability converted into 2,805,850 shares of Series B-2 convertible preferred stock. As a result of the conversion, the Company recorded a loss on extinguishment of convertible promissory note of $754,000 in other expense in the statements of operations and comprehensive loss, which included the unamortized debt issuance costs.
F-35
The following table provides a reconciliation of the fair value of the derivative liability using Level 3 significant unobservable inputs (in thousands):
DERIVATIVE
LIABILITY |
||||
Fair value at December 31, 2020 |
$ | (1,604) | ||
|
|
|||
Change in fair value of derivative liability (Note 7) |
(205 | ) | ||
Reclassification of derivative liability into convertible preferred stock resulting from conversion of convertible promissory note |
1,809 | |||
|
|
|||
Fair value at March 31, 2021 |
$ | | ||
|
|
4. Grant Agreement
Bill & Melinda Gates Foundation Grant Agreement
In support of the Companys development of a SARS-CoV-2 vaccine, in September 2020, the Company entered into the grant agreement (the Grant Agreement) with the Bill & Melinda Gates Foundation (BMGF), under which it was awarded a grant totaling up to $10.0 million (the Grant). The Grant supports development activities, including the Companys regulatory filing preparations and planned Phase 1 clinical trial. Unless terminated earlier by BMGF, the Grant Agreement will continue in effect until March 31, 2022. The Company concurrently entered into a Global Access Commitments Agreement (GACA) with BMGF as part of the Grant Agreement. Under the terms of the GACA, among other things, the Company agreed to make a certain amount of a SARS-CoV-2 vaccine available and accessible at affordable pricing to people in certain low- and middle-income countries, if the vaccine is commercialized.
Payments received in advance that are related to future performance are deferred and recognized as revenue when the research and development activities are performed. Cash payments received under the Grant Agreement are restricted as to their use until eligible expenditures are incurred.
At both December 31, 2020 and March 31, 2021, the Companys current restricted cash and deferred revenue balances on the balance sheet represent funds received from BMGF and its estimate of costs to be reimbursed and revenue to be recognized, respectively, in the next twelve months under the Grant Agreement.
During the three months ended March 31, 2020, no funding had been received from BMGF. During the three months ended March 31, 2021, the Company received $2.7 million from BMGF.
During the three months ended March 31, 2021, the Company recognized revenue from the Grant of $2.0 million and has recognized approximately $3.6 million in revenue since the inception of the agreement.
In July 2021, the Company received the final $3.3 million payment from the Grant Agreement.
5. Accrued and other current liabilities
Accrued and other current liabilities consist of the following (in thousands):
DECEMBER 31,
2020 |
MARCH 31,
2021 |
|||||||
Accrued taxes |
$ | 91 | $ | | ||||
Accrued vacation |
137 | 208 | ||||||
Accrued bonus |
696 | 245 | ||||||
Other accrued liabilities |
608 | 335 | ||||||
|
|
|
|
|||||
Total accrued and other current liabilities |
$ | 1,532 | $ | 788 | ||||
|
|
|
|
F-36
6. License Agreements
License Agreement with the National Institutes of Health
On June 28, 2018, the Company entered into a non-exclusive patent license agreement (the NIH Agreement) with a U.S. government entity, the National Institutes of Health, represented by National Institute of Allergy and Infectious Disease (NIAID). The NIH Agreement was amended in September 2018 and September 2020. Under the NIH Agreement, the Company obtained a non-exclusive, worldwide, royalty-bearing, sublicensable license under certain NIAID patent rights, and transfer of know-how and biological materials for use in adjuvanted or non-adjuvanted vaccines for the prevention, cure, or treatment of RSV and metapneumovirus infection in humans.
Under the NIH Agreement, the Company is required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. In consideration of the rights granted to the Company under the NIH Agreement, the Company paid a licensing fee upon execution of the NIH Agreement of $100,000, and will pay annual minimum royalty payments starting in the second year after the initial sale of each licensed product which can be credited against any earned royalties due for sales made in the year. There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for the licensed products in the future. The Company is obligated to pay aggregate potential milestone payments of up to $2.1 million with respect to future development and regulatory based milestones, and up to $6.5 million with respect to future sales milestones following commercialization. Additionally, the Company has agreed to pay a tiered royalty of a low single digit percentage on net sales of all products applicable to the license. Additional royalties would be due in connection with sublicenses. The Companys royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
The NIH Agreement will terminate upon the last expiration of the patent rights or the Company may terminate the entirety of the agreement upon discontinuation of development or sales of licensed products and provision of written notice thereof to NIH.
During the three months ended March 31, 2020 and 2021, the Company paid $0 and $25,000, respectively, in fees associated with the license, which were recorded as research and development expenses.
License Agreements with University of Washington
On June 29, 2018, the Company entered into an exclusive license agreement with an academic entity, University of Washington (the UW 2018 Agreement), for an exclusive license to covered intellectual property, a non-exclusive, worldwide license to use licensed know-how, and rights to sublicense for computationally designed nanoparticles and vaccines. The UW 2018 Agreement was amended in June 2019 and again in November 2020. The Companys rights and obligations under the UW 2018 Agreement are subject to certain U.S. government rights, certain global access commitment rights for humanitarian purposes to BMGF, certain rights to Howard Hughes Medical Institute, and certain other limited rights retained by University of Washington.
The Company issued 192,276 shares of common stock on August 1, 2018 in exchange for the UW 2018 Agreements exclusive license. The shares issued were recorded at their estimated fair value, which is de minimis, with the related expense classified as research and development in 2018.
Under the UW 2018 Agreement, the Company is required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. In consideration of the rights granted to the Company under the UW 2018 Agreement, the Company is required to pay an annual maintenance fee in the mid four figures starting in 2020. Additionally, the Company is required to pay minimum annual royalties following the first year after commercial sale of each licensed product. There are milestone payments due upon the completion of certain development, regulatory, and commercial milestones for licensed products in the future. The aggregate potential milestone payments for future development, regulatory, and sales-based milestones are $1.35 million per indication, up to a maximum of $6.75 million in total milestone payments. Additionally, the Company has agreed to pay a royalty of a low single digit percentage on net sales of all licensed products. Additional royalties would be due in connection with sublicenses and milestones. The Companys royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
F-37
The UW 2018 Agreement will terminate when all licensed rights have been terminated and all obligations due to the University of Washington have been fulfilled, or the Company may terminate the entirety of the agreement upon written notice thereof to the University of Washington.
During the three months ended March 31, 2020 and 2021, the Company did not make any payments associated with the license.
On July 2, 2020, the Company entered into a non-exclusive license agreement with respect to specified intellectual property with options for exclusivity in North America and Europe subject to the performance of certain development milestones, with an academic entity, University of Washington (the UW 2020 Agreement). Under the UW 2020 Agreement, the Company also received a non-exclusive, worldwide license to use specific know-how and rights to sublicense for computationally designed nanoparticles and vaccines. The UW 2020 Agreement was amended in August 2020 and subsequently in May 2021. The Companys rights and obligations under the UW 2020 Agreement as amended are subject to certain U.S. government rights, certain global access commitment rights for humanitarian purposes to BMGF, certain rights to Howard Hughes Medical Institute, and certain other limited rights retained by the University of Washington.
Under the UW 2020 Agreement as amended, the Company is required to use commercially reasonable efforts to meet certain specified development, sales and regulatory milestones related to the licensed products within specified time periods. The Company has agreed to pay a royalty of a low single digit percentage on net sales of all products applicable to the license. However, the Company will not be required to pay royalties on net sales of any licensed product under the UW 2020 Agreement as amended if the Company is required to pay royalties on net sales under the UW 2018 Agreement. Additional royalties would be due in connection with sublicenses and milestones. The Companys royalty obligations continue for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
The UW 2020 Agreement as amended will terminate when all licensed rights have been terminated and all obligations due to the University of Washington have been fulfilled, or the Company may terminate the entirety of the agreement upon written notice thereof to the University of Washington.
During the three months ended March 31, 2020 and 2021, the Company reimbursed the University of Washington for patent expenses under the UW 2018 Agreement and UW 2020 Agreement as amended of $43,000 and $27,000, respectively, which were expensed as incurred.
During the three months ended March 31, 2020 and 2021, the Company did not incur any other fees or make any payments associated with the UW 2020 Agreement as amended.
7. Convertible Promissory Note
In August 2020, the Company issued a $6.5 million convertible promissory note (Convertible Promissory Note). The Convertible Promissory Note accrued interest at a rate of 6% a year with maturity date two years from issuance.
The Convertible Promissory Note could be converted or redeemed as follows (i) automatically converted in a qualified Series B financing transaction from which the Company would receive total gross proceeds of not less than $5.0 million at a conversion price equal to 85% of the per share price paid by investors for such securities, (ii) automatically converted upon initial public offering at a conversion price equal to 85% of the per share price off common stock in the initial public offering, (iii) optionally converted into Series A-3 preferred stock if a change in control, initial public offering, or qualified Series B financing had not occurred prior to the maturity date at a price equal to an amount determined by dividing $140 million by the fully diluted capitalization of the Company at the time of conversion, or (iv) repaid upon a change in control for an amount equal to the issue price plus accrued and unpaid interest or an amount as would have been payable if the noteholders had optionally converted into shares of Series A-3 preferred stock. The Convertible Promissory Note was converted in March 2021 in connection with the Series B financing.
The Convertible Promissory Note is accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (ASC 470-20) and ASC 815-15, Derivatives and Hedging - Embedded Derivatives (ASC 815-15). Under
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ASC 815-15, an embedded feature is required to be bifurcated if all three conditions are met: (1) economic characteristics and risks of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the host contract, (2) the hybrid instrument is not remeasured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur, and (3) a separate instrument which the same terms as the embedded derivative would be considered a derivative instrument subject to derivative accounting (the initial net investment for the hybrid instrument should not be considered to be the initial net investment for the embedded derivative. The Company bifurcated certain features that were required to be accounted separately for as a single embedded derivative. The initial fair value of this derivative of $1.8 million was recorded as a liability, and as a reduction to the carrying value of the Convertible Promissory Note. The Company also incurred approximately $36,000 of issuance costs related to the Convertible Promissory Note, which were also recorded as a reduction to the Convertible Promissory Note on the balance sheet.
The debt discount comprised of the initial fair value of the derivative liability and the issuance costs were amortized using the effective interest method over the two-year contractual term of the Convertible Promissory Note and presented as a direct reduction of the debt liability. The debt discount was being amortized at an effective interest rate of 23.8%.
Interest expense incurred in connection with the Convertible Promissory Note consisted of the following (in thousands):
YEAR ENDED
DECEMBER 31, 2020 |
THREE MONTHS
ENDED MARCH 31, 2021 |
|||||||
Coupon interest at 6% |
$ | 143 | $ | 86 | ||||
Accretion of discount and amortization of issuance costs |
274 | 178 | ||||||
|
|
|
|
|||||
Total interest expense on Convertible Promissory Note |
$ | 417 | $ | 264 | ||||
|
|
|
|
On March 19, 2021, in connection with the closing of the Series B convertible preferred stock financing, the convertible promissory note (including accrued interest) and derivative liability converted into 2,805,850 shares of Series B-2 convertible preferred stock at an issuance price of $2.39846 per share. As a result of the conversion, the Company recorded a loss on extinguishment of convertible promissory note of $0.8 million in other expense in the statements of operations and comprehensive loss for the three months ended March 31, 2021, which included the unamortized debt issuance costs.
8. Convertible Preferred Stock and Stockholders Deficit
Stockholders Deficit
Under the Amended and Restated Certificate of Incorporation dated March 19, 2021, the Company had a total of 224,237,623 shares of capital stock authorized for issuance, consisting of 134,329,408 shares of common stock, par value of $0.0001 per share, and 89,908,215 shares of convertible preferred stock, par value of $0.0001 per share.
Convertible Preferred StockSeries A-1
On August 15, 2019, the Company entered into a Series A convertible preferred stock purchase agreement (the Series A Purchase Agreement). Under the agreement, the Company issued 27,249,085 shares of Series A-1 convertible preferred stock (Series A-1), in an initial closing, at $0.9615 per share for total proceeds of $26.2 million.
The Series A Purchase Agreement provided for an additional closing for the Series A-1 purchasers for the issuance of 21,840,870 shares of Series A-1 preferred stock, at a purchase price of $0.9615 per share for aggregate cash proceeds of $21.0 million, to occur no later than April 1, 2021 upon the achievement of the Closing Milestones (as defined in the Series A Purchase Agreement) or a waiver of the Closing Milestones by the Companys Board of Directors.
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The Company determined that the right of the investors to purchase an additional number of shares of Series A-1 convertible preferred stock upon the achievement of the Closing Milestones, did not meet the definition of a freestanding financial instrument as the preferred shares issued at the initial closing and the future tranche right were not legally detachable and separately exercisable.
A milestone closing of 21,944,874 Series A-1 shares closed in February 2021, which was contingent on the Company achieving certain regulatory, research and development and operational milestones. With the milestone closing, the Company sold 21,944,874 shares of Series A-1 preferred stock for gross proceeds of $21.1 million.
Conversion
Each share of Series A-1 is convertible into common stock: (i) at the option of the holder, or (ii) automatically upon the closing of a public offering with a price to the public of at least $17.58933 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Companys common stock) for at least $50 million in gross proceeds. The conversion ratio of Series A-1 to common stock is currently one-for-4.1557, subject to adjustment upon any future stock splits or stock dividends, issuance of additional shares for less consideration, other distribution of payable in securities, or upon a reorganization, recapitalization, reclassification, merger or consolidation of the Company.
Dividends
The holders of the Series A-1 convertible preferred stock have preferential rights over common stockholders to non-cumulative dividends payable when declared by the Board, at the annual rate of $0.07692 per share. Dividends were not declared during the year ended December 31, 2020 or the three months ended March 31, 2021.
Voting
Series A-1 stockholders are entitled to the number of votes equal to the number of shares of common stock into which the preferred stock could be converted. In addition, the Series A-1 stockholders have certain rights whereby the Company is precluded from carrying out certain actions specified in the Companys Amended and Restated Certificate of Incorporation without the approval of the holders of a majority of the Series A-1 shares.
Liquidation
Upon the occurrence of a liquidation event, the Series A-1 stockholders have preferential rights over common stockholders as to liquidation payments of their original issuance price of $0.9615 per share, plus any dividends declared and unpaid, on a pro rata, pari passu basis. Any additional distributions after the payment of the liquidation preferences of the Series A-1 shares and Series A-2 shares will be made to the holders of common stock on a pro rata basis.
Convertible Preferred StockSeries A-2
Under the Series A Purchase Agreement, the Company also issued 4,929,794 shares of Series A-2 in 2019 with a fair value of $4.2 million (or $0.85 per share net of issuance cost of $57,000) upon conversion of Series 1 shares with a carrying value of $3.8 million (or $1.00 per share). The $400,000 difference between the fair value of Series A-2 and the carrying value of Series 1 was recorded as a $83,000 reduction to additional paid-in capital (bringing its balance to zero) with the remainder recorded as an increase to accumulated deficit.
Conversion
Each share of Series A-2 is convertible into common stock: (i) at the option of the holder, or (ii) automatically upon the closing of a public offering with a price to the public of at least $17.58933 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Companys common stock) for at least $50 million in gross proceeds. The conversion ratio of Series A-2 to common stock is currently one-for-4.1557, subject to adjustment.
Dividends
The holders of the Series A-2 convertible preferred stock have preferential rights over common stockholders to non-cumulative dividends payable when declared by the Board, at the annual rate of $0.061536 per share. Dividends were not declared during the year ended December 31, 2020 or the three months ended March 31, 2021.
Voting
Series A-2 stockholders are entitled to the number of votes equal to the number of shares of common stock into which the preferred stock could be converted.
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Liquidation
Upon the occurrence of a liquidation event, the Series A-2 stockholders have preferential rights over common stockholders as to liquidation payments of their original issuance price of $0.7692 per share, plus any dividends declared and unpaid, on a pro rata, pari passu basis. Any additional distributions after the payment of the liquidation preferences of the Series A-1 shares and Series A-2 shares will be made to the holders of common stock on a pro rata basis.
Convertible Preferred StockSeries B
On March 19, 2021, the Company entered into a preferred stock purchase agreement for the issuance of 35,764,462 shares of Series B preferred stock, $0.0001 par value per share. The Series B convertible preferred stock financing resulted in net cash proceeds of $92.7 million, net of $0.35 million in issuance costs from the sale of 32,958,612 shares of Series B-1 convertible preferred stock at a price of $2.82172 per share. In addition, the Convertible Promissory Note of $6.5 million that the Company issued in August 2020, including accrued interest as of the date of conversion of $0.2 million, was converted into 2,805,850 shares of Series B-2 convertible preferred stock on March 19, 2021 at 85% of the offerings share price.
Conversion
Each share of Series B is convertible into common stock: (i) at the option of the holder, or (ii) automatically upon the closing of a public offering with a price to the public of at least $17.58933 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Companys common stock) for at least $50 million in gross proceeds. The conversion ratio of Series B to common stock is currently one-for-4.1557, subject to adjustment upon any future stock splits or stock dividends, issuance of additional shares for less consideration, other distribution of payable in securities, or upon a reorganization, recapitalization, reclassification, merger or consolidation of the Company.
Dividends
The holders of the Series B convertible preferred stock have preferential rights over common stockholders to non-cumulative dividends payable when declared by the Board, at the annual rate of $0.2257376 per share for Series B-1 and $0.1918768 per share for Series B-2. Dividends were not declared during the three months ended March 31, 2021.
Voting
Series B stockholders are entitled to the number of votes equal to the number of shares of common stock into which the preferred stock could be converted. In addition, the Series B stockholders have certain rights whereby the Company is precluded from carrying out certain actions specified in the Companys Amended and Restated Certificate of Incorporation without the approval of the holders of a majority of the Series B shares.
Liquidation
Upon the occurrence of a liquidation event, the Series B stockholders have preferential rights over common stockholders as to liquidation payments of their original issuance price of $2.82172 per share, plus any dividends declared and unpaid, on a pro rata, pari passu basis. Any additional distributions after the payment of the liquidation preferences of the Series B shares will be made to the holders of common stock on a pro rata basis.
Convertible Preferred Stock Classification
Redemption
The Series A and B convertible preferred stock is not explicitly redeemable at the option of the holder at a specified date in the future or at the option of the Company.
The Companys convertible preferred stock has been classified as temporary equity on the accompanying balance sheet instead of in stockholders deficit in accordance with authoritative guidance for the classification and measurement of redeemable securities. Upon certain change in control events that are outside of the Companys control, including liquidation, sale or transfer of control of the Company, holders of the convertible preferred stock can cause its redemption. The Company has determined not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because of the uncertainty of whether or when such events would occur.
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Common Stock
As of December 31, 2020 and March 31, 2021, of the 78,000,000 and 134,329,408 authorized shares of common stock, respectively, 3,596,936 and 3,741,667 shares were issued, respectively, and 2,639,026 and 2,891,776 shares were outstanding, respectively.
In December 2017, the Company entered into restricted stock purchase agreements and issued 2,580,600 shares of restricted common stock to members of management, and subject to repurchase by the Company. Any shares subject to repurchase by the Company are not deemed, for accounting purposes, to be outstanding until those shares vest. The management grants vested 20% upon issuance and the remaining 80% vest over 48 months in equal monthly installments. The grants provide for accelerated vesting upon a change in control or other contractually specified contingencies. In June 2018, 968,158 shares of the outstanding restricted shares were canceled, and the original proceeds were returned upon the departure of the founder. Given the early stage of the Company at the time of the grants, the value of all grants and the cash exchanged for the shares was de minimis.
In December 2017 and August 2018, the Company issued 77,418 and 192,276 shares, respectively of common stock to a university in connection with obtaining a licensing agreement. The shares issued to a university were fully vested upon issuance.
As of December 31, 2020 and March 31, 2021, the Company had 2,347,629 shares of restricted common stock that had been issued to members of management at a price of $0.004 and 269,694 shares of common stock that had been issued to a university in connection with obtaining a licensing agreement.
At December 31, 2020 and March 31, 2021, 1,877,945 and 1,995,314 shares of the restricted common stock have vested, respectively. At March 31, 2021, 352,144 shares remain subject to vesting conditions and are expected to vest by December 2021.
Common stock reserved for future issuance consisted of the following:
As of December 31, 2020, the Companys convertible preferred stock consisted of the following:
SHARES AUTHORIZED
AND DESIGNATED |
SHARES ISSUED
AND OUTSTANDING |
SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION |
AGGREGATE
LIQUIDATION PREFERENCE |
CARRYING
VALUE |
||||||||||||||||
Series A-1 |
49,089,955 | 27,249,085 | 6,557,031 | $ | 26,200 | $ | 25,912 | |||||||||||||
Series A-2 |
4,949,794 | 4,949,794 | 1,191,082 | 3,807 | 4,150 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
54,039,749 | 32,198,879 | 7,748,113 | $ | 30,007 | $ | 30,062 |
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As of March 31, 2021, the Companys convertible preferred stock consisted of the following:
SHARES AUTHORIZED
AND DESIGNATED |
SHARES ISSUED AND
OUTSTANDING |
SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION |
AGGREGATE
LIQUIDATION PREFERENCE |
CARRYING
VALUE |
||||||||||||||||
Series A-1 |
49,193,959 | 49,193,959 | 11,837,711 | $ | 47,300 | $ | 46,917 | |||||||||||||
Series A-2 |
4,949,794 | 4,949,794 | 1,191,082 | 3,807 | 4,150 | |||||||||||||||
Series B-1 |
32,958,612 | 32,958,612 | 7,930,924 | 93,000 | 92,654 | |||||||||||||||
Series B-2 |
2,805,850 | 2,805,850 | 675,181 | 6,730 | 7,917 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
89,908,215 | 89,908,215 | 21,634,898 | $ | 150,837 | $ | 151,638 |
Stock Options
In 2017, the Company established a stock option plan (the Plan) under which incentives may be granted to officers, employees, directors, consultants and advisors. Awards under the Plan may consist of restricted stock and incentive and non-qualified stock options to purchase shares of common stock of the Company.
The Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. The number of shares of common stock, which may be granted under the Plan, shall not exceed 7,130,414. All existing grants are subject to a time-based vesting period which will generally be four years. On the first anniversary of the grant date of each existing grant, 25% of the grant will vest with the remaining 75% to vest in equal monthly installments over the remaining 36 months provided the participant has a continuing service relationship with the Company. Certain option and share awards provide for accelerated vesting if there is a change in control or if other contractually specified contingencies are met.
The term of stock options granted under the Plan cannot exceed ten years. Options shall not have an exercise price less than 100% of the fair market value of the Companys common stock on the grant date, and generally vest over a period of four years.
A summary of the status of the options issued under the Plan as of March 31, 2021, and information with respect to the changes in options outstanding is as follows:
OPTION
POOL AVAILABLE FOR GRANT |
OPTIONS
OUTSTANDING |
WEIGHTED-
AVERAGE EXERCISE PRICE PER SHARE |
WEIGHTED-
AVERAGE REMAINING CONTRACT TERM |
AGGREGATE
INTRINSIC VALUE |
||||||||||||||||
Outstanding at December 31, 2020 |
541,411 | 641,427 | $ | 0.83 | 9.02 | |||||||||||||||
Authorized increase in plan shares |
5,446,716 | | | | ||||||||||||||||
Granted |
(1,220,750 | ) | 1,220,750 | 1.04 | | |||||||||||||||
Exercised (including early) |
| (144,731 | ) | 0.83 | | $ | (511,000 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||
Outstanding at March 31, 2021 |
4,767,377 | 1,717,446 | $ | 1.00 | 9.55 | $ | 8,454,000 | |||||||||||||
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|
|
|
|
|
|
|
|
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Vested and expected to vest as of March 31, 2021 |
1,717,446 | $ | 1.00 | 9.55 | $ | 8,454,000 | ||||||||||||||
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|
|
|
|
|
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Vested and exercisable at March 31, 2021 |
111,141 | $ | 0.83 | 8.75 | $ | 564,000 | ||||||||||||||
|
|
|
|
|
|
|
|
Exercisable options in the table above reflect the number of options vested as of the date reported. The plan permits early exercises of options. Cash received for early exercise of unvested options is carried as an other noncurrent liability in the accompanying balance sheet and totaled $311,000 at March 31, 2021.
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The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the estimate fair value of the Companys common stock for all options that were in-the-money at March 31, 2021.
The weighted-average grant date fair value of employee option grants during the three months ended March 31, 2021 was $3.83 per share.
Stock-Based Compensation Expense
Stock-based compensation expense for all equity awards has been reported in the statements of operations and comprehensive loss as follows:
THREE MONTHS ENDED
MARCH 31, |
||||||||
2020 | 2021 | |||||||
Research and development |
$ | 26,000 | $ | 113,000 | ||||
General and administrative |
28,000 | 163,000 | ||||||
|
|
|
|
|||||
Total |
$ | 54,000 | $ | 276,000 | ||||
|
|
|
|
The Company recognizes compensation expense for options granted to employees and the board of directors based on their grant date fair value. During the three months ended March 31,2020, the Company granted 84,221 options, with a grant date fair value of $88,000. During the three months ended March 31, 2021, the Company granted 1,220,750 options, with a grant date fair value of $4,679,000. The compensation expense is recognized over the vesting period of 4 years on a straight-line basis.
The fair value of each stock option granted was determined using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee and nonemployee stock option grants issued during years ended were as follows:
THREE MONTHS ENDED MARCH 31, | ||||
2020 | 2021 | |||
Risk-free rate of interest |
1.25% - 1.40% | 0.53% - 0.64% | ||
Expected term (years) |
6.08 years | 5.48 - 6.12 years | ||
Expected stock price volatility |
80.2% - 80.3% | 86.0% - 87.9% | ||
Dividend yield |
| |
As of March 31, 2021, the unrecognized compensation cost related to outstanding stock options was $5.2 million and is expected to be recognized as expense over a weighted-average period of approximately 3.5 years.
9. Income Taxes
There was no provision for income taxes recorded during the three months ended March 31, 2020 or 2021. The Companys deferred tax assets continue to be reduced by a full valuation allowance.
10. Employee Savings Plan
The Company has a defined contribution 401(k) savings plan for those employees who meet minimum eligibility requirements. Under the terms of the plan, eligible employees may contribute up to 90% of their annual compensation to the plan, subject to Internal Revenue Service limitations. The Company may also, at its sole discretion, make contributions to the plan. The Company did not make any contributions to the plan during the three months ended March 31, 2020 or 2021.
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11. Subsequent Events
For purposes of the unaudited condensed financial statements as of March 31, 2021 and for the three months then ended, the Company has evaluated the subsequent events through July 22, 2021, the date the unaudited condensed financial statements were issued. Except as disclosed below, the Company has concluded that no events or transactions have occurred that require disclosure.
Stock Options Granted
In April 2021, the Company granted options to purchase 2,901,327 shares of common stock at an exercise price of $5.90 per share. In May and June 2021, the Company granted options to purchase 512,545 shares of common stock at an exercise price of $7.44 per share. The estimated unrecognized stock-based compensation expense for these awards is at least $20.8 million. This estimate is based upon the estimated fair value of the Companys common stock as of each options grant date. For the purpose of recording stock-based compensation expense, the final fair value of options granted in or after April 2021 will take into account the Companys reassessment of fair value based on subsequent sales of stock, including shares that may be sold as part of an initial public offering as well as subsequent operational developments. Therefore, estimated unrecognized stock-based compensation for such grants is subject to change.
License Agreement with the University of Texas
In June 2021, the Company entered into an exclusive patent license agreement with an academic entity, the University of Texas at Austin (the UT Agreement). Under the UT Agreement, the Company obtained an exclusive, worldwide, royalty-bearing, sublicensable license under certain patent rights, to use licensed know-how for prevention, cure, amelioration or treatment of respiratory disease caused by metapneumovirus infection in all vaccine fields, excluding mRNA-based vaccines.
The Company is obligated to pay aggregate potential milestone payments of up to $775,000 with respect to future development and regulatory based milestones, and up to $3.75 million with respect to future sales milestones following commercialization for each licensed product for so long as licensed patent rights exist and have not expired, been revoked, lapsed, or held unenforceable.
The UT Agreement will terminate upon the last expiration of the patent rights or the Company may terminate the entirety of the agreement upon written notice thereof to the University of Texas at Austin.
Grant Agreement Milestone
As discussed in Note 4, the Company received the final $3.3 million in restricted cash from the Grant Agreement with BMGF in July 2021.
Reverse stock split
In July 2021, the Company effected a one-for-4.1557 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Companys preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.
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10,000,000 Shares
Common Stock
PRELIMINARY PROSPECTUS
Jefferies | Cowen | Evercore ISI | William Blair |
, 2021
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the SEC registration fee, the Financial Industry Regulatory Authority, Inc. (FINRA) filing fee and the Nasdaq Global Select Market listing fee.
AMOUNT PAID
OR TO BE PAID |
||||
SEC registration fee |
$ | 20,075 | ||
FINRA filing fee |
28,100 | |||
Nasdaq Global Select Market listing fee |
170,000 | |||
Accountants fees and expenses |
1,000,000 | |||
Legal fees and expenses |
1,750,000 | |||
Transfer Agents fees and expenses |
325,000 | |||
Printing and engraving expenses |
3,500 | |||
Miscellaneous |
203,325 | |||
|
|
|||
Total expenses |
$ | 3,500,000 | ||
|
|
Item 14. Indemnification of Directors and Officers.
Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our certificate of incorporation provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.
Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Our amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by
II-1
reason of the fact that he or she is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an Indemnitee), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our amended and restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.
We have entered into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.
We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.
In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act, against certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding unregistered securities issued by us since January 1, 2018. Also included is the consideration received by us for such securities and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
(a) |
Issuances of Securities |
1. |
In February, March, April and August 2018 and January 2019, we issued an aggregate of 2,535,000 shares of Series 1 convertible preferred stock to investors at a purchase price of $1.00 per share, for aggregate consideration of approximately $2.5 million. |
2. |
In August 2019 and February 2021, we issued an aggregate of 49,193,959 shares of Series A-1 convertible preferred stock to investors at a purchase price of $0.9615 per share, for aggregate consideration of approximately $47.3 million, and issued 4,949,794 shares of Series A-2 convertible preferred stock upon the conversion of (i) the Series 1 convertible preferred stock described in paragraph (1) above and (ii) 1,000,000 additional shares of Series 1 convertible preferred stock issued prior to January 1, 2018 and accrued dividends on such Series 1 convertible preferred stock. |
3. |
In August 2020, we issued a convertible promissory note with a principal amount of $6.5 million, and received gross proceeds of approximately $6.5 million. |
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4. |
In March 2021, we issued an aggregate of 32,958,612 shares of Series B-1 convertible preferred stock to investors at a purchase price of $2.82172 per share, for aggregate consideration of approximately $99.5 million, which included the conversion of the convertible promissory note described in paragraph (3) above into 2,805,850 shares of Series B-2 convertible preferred stock, at a conversion price of $2.39846 per share. |
No underwriters were involved in the foregoing issuances of securities. The securities described in this section (a) of Item 15 were issued to investors in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required. All holders of securities described above represented to us in connection with their purchase or issuance that they were accredited investors and were acquiring the securities for their own account for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The holders received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.
(b) |
Grants and Exercises of Stock Options |
1. |
From January 1, 2018 through December 31, 2020, we granted stock options to purchase an aggregate of 1,621,040 shares of our common stock at a weighted-average exercise price of $0.62 per share, to certain of our employees, consultants and directors in connection with services provided to us by such persons. Through the effective date of this registration statement, 1,124,344 of these options have been exercised for aggregate consideration of $0.5 million and none have been cancelled. |
2. |
Since January 1, 2021, we have granted stock options to purchase an aggregate of 4,634,622 shares of our common stock at a weighted-average exercise price of $4.78 per share, to certain of our employees, consultants and directors in connection with services provided to us by such persons. Through the effective date of this registration statement, none of these options have been exercised or cancelled. |
The stock options and common stock issued upon exercise of such options as described in this section (b) of Item 15 were issued pursuant to written compensatory plans or arrangements with our employees and directors, in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 701 promulgated under the Securities Act or the exemption set forth in Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder relative to transactions by an issuer not involving any public offering. All recipients either received adequate information about us or had access, through employment or other relationships, to such information.
All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. All certificates representing the issued shares of capital stock described in this Item 15 included appropriate legends setting forth that the securities had not been registered and the applicable restrictions on transfer.
Item 16. Exhibits and Financial Statement Schedules.
(c) |
Exhibits. See Exhibit Index attached to this registration statement, which is incorporated by reference herein. |
(d) |
Financial Statement Schedules. Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. |
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters, at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities
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Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned hereby undertakes that:
(1) |
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(2) |
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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Exhibit Index
* | Previously filed. |
# | Indicates management contract or compensatory plan. |
| Portions of this exhibit have been omitted for confidentiality purposes. |
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Seattle, State of Washington, on this 22nd day of July, 2021.
ICOSAVAX, INC. | ||
By: |
/s/ Adam Simpson |
|
Adam Simpson | ||
Chief Executive Officer and Director |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities held on the dates indicated.
SIGNATURE |
TITLE |
DATE |
||
/s/ Adam Simpson Adam Simpson |
Chief Executive Officer and Director (principal executive officer) | July 22, 2021 | ||
/s/ Thomas Russo, CFA Thomas Russo, CFA |
Chief Financial Officer (principal financial and accounting officer) | July 22, 2021 | ||
* Tadataka Yamada, M.D. |
Chairman | July 22, 2021 | ||
* Elisha P. Gould III |
Director | July 22, 2021 | ||
* Jason Hafler, Ph.D. |
Director | July 22, 2021 | ||
* Peter Kolchinsky, Ph.D. |
Director | July 22, 2021 | ||
* Heidi Kunz |
Director | July 22, 2021 | ||
* Mark McDade |
Director | July 22, 2021 | ||
/s/ Ann M. Veneman Ann M. Veneman |
Director | July 22, 2021 |
*By /s/ Adam Simpson |
Adam Simpson |
Attorney-in-fact |
Exhibit 1.1
[Number of Shares]
ICOSAVAX, INC.
UNDERWRITING AGREEMENT
[Date], 2021
Jefferies LLC
Cowen and Company, LLC
Evercore Group L.L.C.
William Blair & Company, L.L.C.
As Representatives of the Several Underwriters
c/o Jefferies LLC
520 Madison Avenue
New York, New York 10022
c/o Cowen and Company, LLC
599 Lexington Avenue, 25th Floor
New York, New York 10022
c/o Evercore Group L.L.C.
55 East 52nd Street
New York, New York 10055
c/o William Blair & Company, L.L.C.
150 North Riverside Plaza
Chicago, Illinois 60606
Ladies and Gentlemen:
Introductory. Icosavax, Inc., a Delaware corporation (the Company), proposes to issue and sell to the several underwriters named in Schedule A (the Underwriters) an aggregate of [●] shares of its common stock, par value $0.0001 per share (the Shares). The [●] Shares to be sold by the Company are called the Firm Shares. In addition, the Company has granted to the Underwriters an option to purchase up to an additional [●] Shares as provided in Section 2. The additional [●] Shares to be sold by the Company pursuant to such option are collectively called the Optional Shares. The Firm Shares and, if and to the extent such option is exercised, the Optional Shares are collectively called the Offered Shares. Jefferies LLC (Jefferies), Cowen and Company, LLC (Cowen), Evercore Group L.L.C. (Evercore) and William Blair & Company, L.L.C. (William Blair) have agreed to act as representatives of the several Underwriters (in such capacity, the Representatives) in connection with the offering and sale of the Offered Shares. To the extent there are no additional underwriters listed on Schedule A, the term Representatives as used herein shall mean you, as Underwriters, and the term Underwriters shall mean either the singular or the plural, as the context requires.
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Jefferies agrees that up to [] of the Firm Shares to be purchased by the Underwriters (the Directed Shares) shall be reserved for sale to certain eligible directors, officers and employees of the Company and persons having business relationships with the Company (collectively, the Participants), as part of the distribution of the Offered Shares by the Underwriters (the Directed Share Program) subject to the terms of this Agreement, the applicable rules, regulations and interpretations of the Financial Industry Regulatory Authority, Inc. (FINRA) and all other applicable laws, rule and regulations. The Directed Share Program shall be administered by Jefferies. To the extent that the Directed Shares are not orally confirmed for purchase by the Participants by the end of the first business day after the date of this Agreement, such Directed Shares may be offered to the public by the Underwriters as part of the public offering contemplated hereby.
The Company has prepared and filed with the Securities and Exchange Commission (the Commission) a registration statement on Form S-1, File No. 333-257733 which contains a form of prospectus to be used in connection with the public offering and sale of the Offered Shares. Such registration statement, as amended, including the financial statements, exhibits and schedules thereto, in the form in which it became effective under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the Securities Act), including any information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A under the Securities Act, is called the Registration Statement. Any registration statement filed by the Company pursuant to Rule 462(b) under the Securities Act in connection with the offer and sale of the Offered Shares is called the Rule 462(b) Registration Statement, and from and after the date and time of filing of any such Rule 462(b) Registration Statement the term Registration Statement shall include the Rule 462(b) Registration Statement. The prospectus, in the form first used by the Underwriters to confirm sales of the Offered Shares or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act, is called the Prospectus. The preliminary prospectus dated [●] describing the Offered Shares and the offering thereof is called the Preliminary Prospectus, and the Preliminary Prospectus and any other prospectus in preliminary form that describes the Offered Shares and the offering thereof and is used prior to the filing of the Prospectus is called a preliminary prospectus. As used herein, Applicable Time is [●][a.m.][p.m.] (New York City time) on [●]. As used herein, free writing prospectus has the meaning set forth in Rule 405 under the Securities Act, and Time of Sale Prospectus means the Preliminary Prospectus together with the free writing prospectuses, if any, identified in Schedule B hereto and the pricing information set forth on Schedule C hereto. As used herein, Road Show means a road show (as defined in Rule 433 under the Securities Act) relating to the offering of the Offered Shares contemplated hereby that is a written communication (as defined in Rule 405 under the Securities Act). As used herein, Section 5(d) Written Communication means each written communication (within the meaning of Rule 405 under the Securities Act) that is made in reliance on Section 5(d) of the Securities Act by the Company or any person authorized to act on behalf of the Company to one or more potential investors that are qualified institutional buyers (QIBs) and/or institutions that are accredited investors (IAIs), as such terms are respectively defined in Rule 144A and Rule 501(a) under the Securities Act, to determine whether such investors might have an interest in the offering of the Offered Shares; Section 5(d) Oral Communication means each oral communication, if any, made in reliance on Section 5(d) of the Securities Act by the Company or any person authorized to act on behalf of the Company made to one or more QIBs and/or one or more IAIs to determine whether such investors might have an interest in the offering of the Offered Shares; Marketing Materials means any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Offered Shares, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically); and Permitted Section 5(d) Communication means the Section 5(d) Written Communication(s) and Marketing Materials listed on Schedule D attached hereto.
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All references in this Agreement to (i) the Registration Statement, any preliminary prospectus (including the Preliminary Prospectus), or the Prospectus, or any amendments or supplements to any of the foregoing, or any free writing prospectus, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (EDGAR) and (ii) the Prospectus shall be deemed to include any electronic Prospectus provided for use in connection with the offering of the Offered Shares as contemplated by Section 3(o) of this Agreement.
The Company hereby confirms its agreements with the Underwriters as follows:
Section 1. Representations and Warranties of the Company.
The Company hereby represents, warrants and covenants to each Underwriter, as of the date of this Agreement, as of the First Closing Date (as hereinafter defined) and as of each Option Closing Date (as hereinafter defined), if any, as follows:
(a) Compliance with Registration Requirements. The Registration Statement has become effective under the Securities Act. The Company has complied, to the Commissions satisfaction with all requests of the Commission for additional or supplemental information, if any. No stop order suspending the effectiveness of the Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated or threatened by the Commission.
(b) Disclosure. Each preliminary prospectus and the Prospectus when filed complied in all material respects with the Securities Act and, if filed by electronic transmission pursuant to EDGAR, was identical (except as may be permitted by Regulation S-T under the Securities Act) to the copy thereof delivered to the Underwriters for use in connection with the offer and sale of the Offered Shares. Each of the Registration Statement and any post-effective amendment thereto, at the time it became or becomes effective, complied and will comply in all material respects with the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. As of the Applicable Time, the Time of Sale Prospectus (including any preliminary prospectus wrapper) did not, and at the First Closing Date (as defined in Section 2) and at each applicable Option Closing Date (as defined in Section 2), will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Prospectus (including any Prospectus wrapper), as of its date, did not, and at the First Closing Date and at each applicable Option Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the three immediately preceding sentences do not apply to statements in or omissions from the Registration Statement or any post-effective amendment thereto, or the Prospectus or the Time of Sale Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with written information relating to any Underwriter furnished to the Company in writing by the Representatives expressly for use therein, it being understood and agreed that the only such information consists of the information described in Section 9(b) below. There are no contracts or other documents required to be described in the Time of Sale Prospectus or the Prospectus or to be filed as an exhibit to the Registration Statement which have not been described or filed as required.
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(c) Free Writing Prospectuses; Road Show. As of the determination date referenced in Rule 164(h) under the Securities Act, the Company was not, is not or will not be (as applicable) an ineligible issuer in connection with the offering of the Offered Shares pursuant to Rules 164, 405 and 433 under the Securities Act. Each free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of Rule 433 under the Securities Act, including timely filing with the Commission, retention and legending, as applicable, and each such free writing prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Offered Shares did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, the Prospectus or any preliminary prospectus unless such information has been superseded or modified as of such time. Except for the free writing prospectuses, if any, identified in Schedule B, and electronic road shows, if any, furnished to you before first use, the Company has not prepared, used or referred to, and will not, without your prior written consent, prepare, use or refer to, any free writing prospectus. Each Road Show, when considered together with the Time of Sale Prospectus, did not, as of the Applicable Time, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(d) Directed Share Program. (i) The Registration Statement, the Prospectus, the Time of Sale Prospectus and any preliminary prospectus comply, and any further amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus, Time of Sale Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program, and (ii) no authorization, approval, consent, license, order registration or qualification of or with any government, governmental instrumentality or court, other than such as have been obtained, is necessary under the securities laws and regulations of foreign jurisdictions in which the Directed Shares are offered outside the United States. The Company has not offered, or caused the Underwriters to offer, any Offered Shares to any person pursuant to the Directed Share Program with the intent to unlawfully influence (i) a customer or supplier of the Company to alter the customers or suppliers level or type of business with the Company or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products.
(e) Distribution of Offering Material By the Company. Prior to the later of (i) the expiration or termination of the option granted to the several Underwriters in Section 2, (ii) the completion of the Underwriters distribution of the Offered Shares and (iii) the expiration of 25 days after the date of the Prospectus, the Company has not distributed and will not distribute any offering material in connection with the offering and sale of the Offered Shares other than the Registration Statement, the Time of Sale Prospectus, the Prospectus or any free writing prospectus reviewed and consented to by the Representatives, the free writing prospectuses, if any, identified on Schedule B hereto and any Permitted Section 5(d) Communications.
(f) The Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by the Company.
(g) Authorization of the Offered Shares. The Offered Shares have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company against payment therefor pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and the issuance and sale of the Offered Shares is not subject to any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase the Offered Shares.
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(h) No Applicable Registration or Other Similar Rights. There are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement, except for such rights as have been duly waived.
(i) No Material Adverse Change. Except as otherwise disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement, the Time of Sale Prospectus and the Prospectus: (i) there has been no material adverse change, or any development that could be expected to result in a material adverse change, in (A) the condition, financial or otherwise, or in the earnings, business, properties, operations, operating results, assets, liabilities or prospects, whether or not arising from transactions in the ordinary course of business, of the Company or (B) the ability of the Company to consummate the transactions contemplated by this Agreement or perform its obligations hereunder (any such change being referred to herein as a Material Adverse Change); (ii) the Company has not incurred any material liability or obligation, indirect, direct or contingent, including without limitation any losses or interference with their business from fire, explosion, flood, earthquakes, accident or other calamity, whether or not covered by insurance, or from any strike, labor dispute or court or governmental action, order or decree, that are material, individually or in the aggregate, to the Company and has not entered into any material transactions not in the ordinary course of business; and (iii) there has not been any material decrease in the capital stock or any material increase in any short-term or long-term indebtedness of the Company and there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for any repurchase or redemption by the Company of any class of capital stock.
(j) Independent Accountants. Ernst & Young LLP, which has expressed its opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) filed with the Commission as a part of the Registration Statement, the Time of Sale Prospectus and the Prospectus, is (i) an independent registered public accounting firm as required by the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the Exchange Act), and the rules of the Public Company Accounting Oversight Board (PCAOB), (ii) in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X under the Securities Act and (iii) a registered public accounting firm as defined by the PCAOB whose registration has not been suspended or revoked and who has not requested such registration to be withdrawn.
(k) Financial Statements. The financial statements filed with the Commission as a part of the Registration Statement, the Time of Sale Prospectus and the Prospectus present fairly, in all material respects, the financial position of the Company as of the dates indicated and the results of its operations, changes in stockholders equity and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements or supporting schedules are required to be included in the Registration Statement, the Time of Sale Prospectus or the Prospectus. The financial data set forth in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus under the captions Prospectus SummarySummary Financial Data, Selected Financial Data and Capitalization fairly present, in all material respects, the information set forth therein on a basis consistent with that of the audited financial statements contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus. To the Companys knowledge, no person who has been suspended or barred from being associated with a registered public accounting firm, or who has failed to comply with any sanction pursuant to Rule 5300 promulgated by the PCAOB, has participated in or otherwise aided the preparation of, or audited, the financial statements, supporting schedules or other financial data filed with the Commission as a part of the Registration Statement, the Time of Sale Prospectus and the Prospectus.
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(l) Companys Accounting System. The Company makes and keeps, in all material respects, accurate books and records and maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with managements general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with managements general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(m) Disclosure Controls and Procedures; Deficiencies in or Changes to Internal Control Over Financial Reporting. The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Exchange Act), which (i) are designed to ensure that material information relating to the Company is made known to the Companys principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared; (ii) have been evaluated by management of the Company for effectiveness as of the end of the Companys most recent fiscal quarter; and (iii) are effective in all material respects to perform the functions for which they were established. Since the end of the Companys most recent audited fiscal year, there have been no significant deficiencies or material weaknesses in the Companys internal control over financial reporting (whether or not remediated) and no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting. The Company is not aware of any change in its internal control over financial reporting that has occurred during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
(n) Incorporation and Good Standing of the Company. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus and to enter into and perform its obligations under this Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in the State of Washington and each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where a failure to be so qualified or in good standing would not reasonably be expected individually or in the aggregate to result in a Material Adverse Change.
(o) Subsidiaries. The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement.
(p) Capitalization and Other Capital Stock Matters. The authorized, issued and outstanding capital stock of the Company is as set forth in the Registration Statement, the Time of Sale Prospectus and the Prospectus under the caption Capitalization (other than for subsequent issuances, if any, pursuant to employee benefit plans, or upon the exercise of outstanding options or warrants, in each case described in the Registration Statement, the Time of Sale Prospectus and the Prospectus). The Shares (including the Offered Shares) conform in all material respects to the description thereof contained in the Time of Sale Prospectus. All of the issued and outstanding Shares have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with all federal and state securities laws. None of the outstanding Shares was issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company other than those described in the Registration Statement, the Time of Sale Prospectus and the Prospectus or other than have been waived. The descriptions of the Companys stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in the Registration Statement, the Time of Sale Prospectus and the Prospectus accurately and fairly present, in all material respects, the information required to be shown with respect to such plans, arrangements, options and rights.
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(q) Stock Exchange Listing. The Offered Shares have been approved for listing on The Nasdaq Global Market (the Nasdaq), subject only to official notice of issuance.
(r) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. The Company is not in violation of its charter or by-laws, partnership agreement or operating agreement or similar organizational documents, as applicable, or is in default (or, with the giving of notice or lapse of time, would be in default) (Default) under any indenture, loan, credit agreement, note, lease, license agreement, contract, franchise or other instrument (including, without limitation, any pledge agreement, security agreement, mortgage or other instrument or agreement evidencing, guaranteeing, securing or relating to indebtedness) to which the Company is a party or by which it may be bound, or to which any of their respective properties or assets are subject (each, an Existing Instrument), except for such Defaults as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. The Companys execution, delivery and performance of this Agreement, consummation of the transactions contemplated hereby and by the Registration Statement, the Time of Sale Prospectus and the Prospectus and the issuance and sale of the Offered Shares (including the use of proceeds from the sale of the Offered Shares as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus under the caption Use of Proceeds) (i) have been duly authorized by all necessary corporate action and will not result in any violation of the provisions of the charter or by-laws, partnership agreement or operating agreement or similar organizational documents, as applicable, of the Company, (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, or require the consent of any other party to, any Existing Instrument, except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change, and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company , except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Companys execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Registration Statement, the Time of Sale Prospectus and the Prospectus, except (A) such as have been obtained or made by the Company and are in full force and effect under the Securities Act and such as may be required under applicable state securities or blue sky laws or applicable rules, regulations and interpretations of FINRA and (B) such as have been obtained under the laws and regulations of jurisdictions outside the United States in which Directed Shares are offered. As used herein, a Debt Repayment Triggering Event means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holders behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company.
(s) Compliance with Laws. The Company has been and is in compliance with all applicable laws, rules and regulations, except where failure to be so in compliance would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change.
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(t) No Material Actions or Proceedings. There is no action, suit, proceeding, inquiry or investigation brought by or before any legal or governmental entity now pending or, to the knowledge of the Company, threatened, against or affecting the Company, which would be reasonably expected, individually or in the aggregate, to result in a Material Adverse Change. No material labor dispute with the employees of the Company, or with the employees of any principal supplier, manufacturer, customer or contractor of the Company, exists or, to the knowledge of the Company, is threatened or imminent.
(u) Intellectual Property Rights. To the Companys knowledge, the Company owns, or has obtained valid and enforceable licenses for, the patent applications, patents, trademarks, trade names, service names, copyrights, trade secrets and other intellectual property described in the Registration Statement, the Time of Sale Prospectus and the Prospectus as being owned or licensed by them (collectively, Intellectual Property). To the Companys knowledge, the conduct of its businesses in the manner described in the Registration Statement, the Time of Sale Prospectus, and the Prospectus does not and will not infringe or misappropriate rights of a third party, except any such infringement or misappropriation as would not, individually or in the aggregate, result in a Material Adverse Change. To the Companys knowledge, the Intellectual Property owned by the Company has not been adjudged by a court of competent jurisdiction to be invalid or unenforceable, in whole or in part. To the Companys knowledge: (i) there are no third parties who have rights to any Intellectual Property, except for rights of third-party licensors with respect to Intellectual Property that are disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus as licensed to the Company; and (ii) there is no infringement by third parties of any Intellectual Property except any such infringement as would not, individually or in the aggregate, result in a Material Adverse Change. There is no pending or, to the Companys knowledge, threatened action, suit, proceeding or claim by others: (A) challenging the Companys rights in or to any Intellectual Property; (B) challenging the validity, enforceability or scope of any Intellectual Property; or (C) asserting that the Company infringes or otherwise violates, or would, upon the commercialization of any product or service described in the Registration Statement, the Time of Sale Prospectus or the Prospectus as under development, infringe or violate, any patent, trademark, trade name, service name, copyright, trade secret or other proprietary intellectual property rights of others, except in each case (A), (B), and (C), any such action, suit, proceeding or claim would not, individually or in the aggregate, result in a Material Adverse Change. To the Companys knowledge, the Company has complied with the material terms of each agreement pursuant to which Intellectual Property has been licensed to the Company, and all such agreements are in full force and effect, except to the extent anything inconsistent with the foregoing would not, individually or in the aggregate, result in a Material Adverse Change. To the Companys knowledge, there are no material defects in any of the patents or patent applications included in the Intellectual Property. To the Companys knowledge, the Company has taken all reasonable steps to protect, maintain and safeguard its Intellectual Property, including the execution of appropriate nondisclosure, confidentiality agreements and invention assignment agreements and invention assignments with their employees, and no employee of the Company is in or has been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, nondisclosure agreement, or any restrictive covenant to or with a former employer where the basis of such violation relates to the Company Intellectual Property and such employees employment with the Company, except anything inconsistent with the foregoing that would not, individually or in the aggregate, result in a Material Adverse Change. To the Companys knowledge, the Companys patent counsel has complied or is in the process of complying with its duty of candor and good faith as required by the United States Patent and Trademark Office during the prosecution of the United States patents and patent applications included in the Company owned Intellectual Property. To the Companys knowledge, none of the Company owned Intellectual Property employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or any of its officers, directors or employees or otherwise in violation of the rights of any persons, except anything inconsistent with the foregoing that would not, individually or in the aggregate, result in a Material Adverse Change.
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(v) All Necessary Permits, etc. The Company possesses such valid and current certificates, authorizations or permits required by state, federal or foreign regulatory agencies or bodies to conduct their respective businesses as currently conducted and as described in the Registration Statement, the Time of Sale Prospectus or the Prospectus (Permits), except where the failure to possess the same would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, the Company is not in violation of, or in default under, any such Permits and has not received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such Permit, including any licensure, quality, safety and accreditation requirements under applicable federal, state, local or foreign laws or regulatory bodies.
(w) Title to Properties. The Company has good and marketable title to all of the real and personal property and other assets reflected as owned in the financial statements referred to in Section 1(k) above (or elsewhere in the Registration Statement, the Time of Sale Prospectus or the Prospectus), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, adverse claims and other defects. The real property, improvements, equipment and personal property held under lease by the Company are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company.
(x) Tax Law Compliance. Except as could not be expected, individually or in the aggregate, to result in a Material Adverse Change: (a) the Company has filed all necessary federal, state and foreign income and franchise tax returns or have properly requested extensions thereof and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them except as may be being contested in good faith and by appropriate proceedings and (b) the Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(k) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company has not been finally determined.
(y) Insurance. The Company is insured by recognized, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and earthquakes and policies covering the Company for product liability claims and clinical trial liability claims. The Company has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Change. The Company has not been denied any insurance coverage which it has sought or for which it has applied.
(z) Compliance with Environmental Laws. Except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change: (i) the Company is not in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, Hazardous Materials) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, Environmental Laws); (ii) the Company has all permits, authorizations and approvals required under any applicable Environmental Laws and is in compliance with their requirements; (iii) there are no pending or, to the Companys knowledge, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company; and (iv) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company relating to Hazardous Materials or any Environmental Laws.
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(aa) ERISA Compliance. The Company and any employee benefit plan (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, ERISA)) established or maintained by the Company or its ERISA Affiliates (as defined below) are in compliance in all material respects with ERISA. ERISA Affiliate means, with respect to the Company, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the Code) of which the Company is a member. No reportable event (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any employee benefit plan established or maintained by the Company or any of its ERISA Affiliates. No employee benefit plan established or maintained by the Company any of its ERISA Affiliates, if such employee benefit plan were terminated, would have any amount of unfunded benefit liabilities (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any employee benefit plan or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each employee benefit plan established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the Companys knowledge, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
(bb) Company Not an Investment Company. The Company is not, and will not be, either after receipt of payment for the Offered Shares or after the application of the proceeds therefrom as described under Use of Proceeds in the Registration Statement, the Time of Sale Prospectus or the Prospectus, required to register as an investment company under the Investment Company Act of 1940, as amended (the Investment Company Act).
(cc) No Price Stabilization or Manipulation; Compliance with Regulation M. The Company has not taken, directly or indirectly, without giving effect to activities by the Underwriters, any action designed to or that would reasonably be expected to cause or result in stabilization or manipulation of the price of the Shares or of any reference security (as defined in Rule 100 of Regulation M under the Exchange Act (Regulation M)) with respect to the Shares, whether to facilitate the sale or resale of the Offered Shares or otherwise, and has taken no action which would directly or indirectly violate Regulation M.
(dd) Related-Party Transactions. There are no business relationships or related-party transactions involving the Company or any other person required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus that have not been described as required.
(ee) FINRA Matters. All of the information provided to the Underwriters or to counsel for the Underwriters by the Company, its counsel, its officers and directors and, to the Companys knowledge, the holders of any securities (debt or equity) or options to acquire any securities of the Company in connection with the offering of the Offered Shares is, in all material respects, true, complete, correct and compliant with FINRAs rules and any letters, filings or other supplemental information provided to FINRA pursuant to FINRA Rules is true, complete and correct in all material respects.
(ff) Parties to Lock-Up Agreements. The Company has furnished to the Underwriters a letter agreement in the form attached hereto as Exhibit A (the Lock-up Agreement) from each of the directors and officers of the Company and from substantially all of the securityholders of the Company. If any additional persons shall become directors or officers of the Company prior to the end of the Lock-up Period (as defined below), the Company shall cause each such person, prior to or contemporaneously with their appointment or election as a director or officer of the Company, to execute and deliver to the Underwriters a Lock-up Agreement.
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(gg) Statistical and Market-Related Data. All statistical, demographic and market-related data included in the Registration Statement, the Time of Sale Prospectus or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate in all material respects. To the extent required, the Company has obtained the written consent to the use of such data from such sources.
(hh) Sarbanes-Oxley Act. There is, and has been, no failure on the part of the Company or any of the Companys directors or officers, in their capacities as such, to comply with any applicable provision of the Sarbanes-Oxley Act of 2002, as amended and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications.
(ii) No Unlawful Contributions or Other Payments. Neither the Company nor, to the Companys knowledge, any employee or agent of the Company, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any applicable law or of the character required to be disclosed in the Registration Statement, the Time of Sale Prospectus or the Prospectus.
(jj) Anti-Corruption and Anti-Bribery Laws. Neither the Company nor any director, officer, or employee of the Company, nor to the knowledge of the Company, any agent, affiliate or other person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made or taken any act in furtherance of an offer, promise, or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government official or employee, including of any government-owned or controlled entity or public international organization, or any political party, party official, or candidate for political office; (iii) violated or is in violation of any applicable provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended (the FCPA), the UK Bribery Act 2010, or any other applicable anti-bribery or anti-corruption law; or (iv) made, offered, authorized, requested, or taken an act in furtherance of any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment or benefit. The Company and, to the knowledge of the Company, the Companys affiliates have conducted their respective businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
(kk) Money Laundering Laws. The operations of the Company are, and have been conducted at all times, in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar applicable rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the Money Laundering Laws) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
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(ll) Sanctions. Neither the Company nor any of its directors, officers, or employees, nor, to the knowledge of the Company, after due inquiry, any agent, affiliate or other person acting on behalf of the Company is currently the subject or the target of any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, the United Nations Security Council, the European Union, Her Majestys Treasury of the United Kingdom, or other relevant sanctions authority (collectively, Sanctions); nor is the Company located, organized or resident in a country or territory that is the subject or the target of Sanctions, including, without limitation, Crimea, Cuba, Iran, North Korea, and Syria (collectively, Sanctioned Countries); and the Company will not directly or indirectly use the proceeds of this offering, or lend, contribute or otherwise make available such proceeds to any subsidiary or any joint venture partner or other person or entity, for the purpose of financing the activities of or business with any person, or in any country or territory, that at the time of such financing, is the subject or the target of Sanctions or in any other manner that will result in a violation by any person (including any person participating in the transaction whether as underwriter, advisor, investor or otherwise) of applicable Sanctions. For the past five years, the Company has not knowingly engaged in and is not now knowingly engaged in any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country.
(mm) Brokers. Except pursuant to this Agreement, there is no broker, finder or other party that is entitled to receive from the Company any brokerage or finders fee or other fee or commission as a result of any transactions contemplated by this Agreement.
(nn) Forward-Looking Statements. Each financial or operational projection or other forward-looking statement (as defined by Section 27A of the Securities Act or Section 21E of the Exchange Act) contained in the Registration Statement, the Time of Sale Prospectus or the Prospectus (i) was so included by the Company in good faith and with reasonable basis after due consideration by the Company of the underlying assumptions, estimates and other applicable facts and circumstances and (ii) is accompanied by meaningful cautionary statements identifying those factors that could cause actual results to differ materially from those in such forward-looking statement. No such statement was made with the knowledge of an executive officer or director of the Company that it was false or misleading.
(oo) No Outstanding Loans or Other Extensions of Credit. The Company does not have any outstanding extension of credit, in the form of a personal loan, to or for any director or executive officer (or equivalent thereof) of the Company except for such extensions of credit as are expressly permitted by Section 13(k) of the Exchange Act.
(pp) Cybersecurity. Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, the Companys information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, IT Systems) are adequate for, and operate and perform as required in connection with the operation of the business of the Company as currently conducted, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants. The Company has implemented and maintained commercially reasonable physical, technical and administrative controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data, including Personal Data, used in connection with their businesses. Personal Data means (i) a natural persons name, street address, telephone number, e-mail address, photograph, social security number or tax identification number, drivers license number, passport number, credit card number, bank information, or customer or account number; (ii) any information which would qualify as personally identifying information under the Federal Trade Commission Act, as amended; (iii) personal data as defined by GDPR; (iv) any information which would qualify as protected health information under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (collectively, HIPAA); and (v) any other piece of information that allows the identification of such natural person, or his or her family, or permits the collection or analysis of any data related to an identified persons health or sexual orientation. There have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any other person, nor any incidents under internal review or investigations relating to the same.
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(qq) Compliance with Data Privacy Laws. The Company is, and since June 1, 2018 has been, in material compliance with applicable state, federal and foreign data privacy and security laws and regulations, including, to the extent applicable, the Health Insurance Portability and Accountability Act of 1996, as amended (collectively, HIPAA), and the European Union General Data Protection Regulation (EU 2016/679) (collectively, the Privacy Laws). To the extent required by the Privacy Laws, the Company has in place, complies in all material respects with, and takes commercially reasonable steps reasonably designed to ensure compliance in all material respects with their policies and procedures relating to data privacy and security and the collection, storage, use, disclosure, and handling of Personal Data (the Policies). Since June 1, 2018, except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, the Company has made all disclosures to users or customers required by the Privacy Laws, and none of such disclosures made or contained in any Policy have, to the knowledge of the Company, been inaccurate or in violation of any Privacy Laws. The Company has not: (i) has received written notice of any actual or potential liability under or relating to, or actual or potential violation of, any of the Privacy Laws, and has no knowledge of any event or condition that would reasonably be expected to result in any such notice; (ii) is currently conducting or paying for, in whole or in part, any investigation, remediation, or other corrective action pursuant to any Privacy Law; or (iii) is a party to any order, decree, or agreement that imposes any obligation or liability by any governmental or regulatory authority under any Privacy Law.
(rr) Emerging Growth Company Status. From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged in any Section 5(d) Written Communication or any Section 5(d) Oral Communication) through the date hereof, the Company has been and is an emerging growth company, as defined in Section 2(a) of the Securities Act (an Emerging Growth Company).
(ss) Communications. The Company (i) has not alone engaged in communications with potential investors in reliance on Section 5(d) of the Securities Act other than Permitted Section 5(d) Communications or Section 5(d) Oral Communications, in each case, with the consent of the Representatives with entities that are QIBs or IAIs and (ii) has not authorized anyone other than the Representatives to engage in such communications; the Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Marketing Materials, Section 5(d) Oral Communications and Section 5(d) Written Communications; as of the Applicable Time, each Permitted Section 5(d) Communication, when considered together with the Time of Sale Prospectus, did not, as of the Applicable Time, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Permitted Section 5(d) Communication, if any, does not, as of the date hereof, conflict with the information contained in the Registration Statement, the Preliminary Prospectus and the Prospectus; and the Company has filed publicly on EDGAR at least 15 calendar days prior to any road show (as defined in Rule 433 under the Securities Act), any confidentially submitted registration statement and registration statement amendments relating to the offer and sale of the Offered Shares.
(tt) Clinical Data and Regulatory Compliance. The preclinical tests and clinical trials, and other studies conducted or sponsored by the Company (collectively, studies) that are described in, or the results of which are referred to in, the Registration Statement, the Time of Sale Prospectus or the Prospectus were and, if still pending, are being conducted in all material respects in accordance with all applicable Health Care Laws, including the protocols, procedures and controls designed and approved for such studies; each description of the results of such studies is accurate in all material
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respects, and the Company has no knowledge of any other studies, the results of which are inconsistent with, or otherwise call into question, the results described or referred to in the Registration Statement, the Time of Sale Prospectus or the Prospectus; the Company has made all such filings and obtained all such approvals as may be required by the Food and Drug Administration of the U.S. Department of Health and Human Services or any committee thereof or from any other U.S. or foreign government or drug regulatory agency, or health care facility Institutional Review Board having jurisdiction over such studies (collectively, the Regulatory Agencies) except where the failure to make such filings or obtain such approvals would not be expected, individually or in the aggregate, to result in a Material Adverse Change; and the Company has not received any written notice of, or written correspondence from, any Regulatory Agency requiring the termination or suspension of any studies that are described or referred to in the Registration Statement, the Time of Sale Prospectus or the Prospectus.
(uu) Compliance with Health Care Laws. The Company is, and at all times since June 1, 2018, has been, in compliance with all Health Care Laws, except where failure to be so in compliance would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change. For purposes of this Agreement, Health Care Laws means: (i) the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Section 301 et seq.), the Public Health Service Act (42 U.S.C. Section 201 et seq.), and the regulations promulgated thereunder; (ii) all applicable federal, state, local and foreign health care fraud and abuse laws, including, without limitation, the Anti-Kickback Statute (42 U.S.C. Section 1320a-7b(b)), the Civil False Claims Act (31 U.S.C. Section 3729 et seq.), the criminal false statements law (42 U.S.C. Section 1320a-7b(a)), 18 U.S.C. Sections 286 and 287, the health care fraud criminal provisions under HIPAA, the civil monetary penalties law (42 U.S.C. Section 1320a-7a), the exclusion law (42 U.S.C. Section 1320a-7), the Physician Payments Sunshine Act (42 U.S.C. Section 1320-7h), and applicable laws governing government funded or sponsored healthcare programs; (iii) HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. Section 17921 et seq.); (iv) all other similar local, state, federal, national, supranational and foreign laws, relating to the regulation of the Company; and (v) the regulations promulgated pursuant to such statutes. Except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change, since June 1, 2018, the Company has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any court or arbitrator or governmental or regulatory authority or third party alleging that any product, operation or activity is in violation of any Health Care Laws nor, to the Companys knowledge, is any such claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action threatened. Except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change, since June 1, 2018, the Company has filed, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Health Care Laws, and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and accurate on the date filed (or were corrected or supplemented by a subsequent submission). The Company is not a party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with or imposed by any governmental or regulatory authority. Additionally, since June 1, 2018, neither the Company nor any of its employees, officers, directors, or, to the Companys knowledge, agents has been excluded, suspended or debarred from participation in any U.S. federal health care program or human clinical research or, to the knowledge of the Company, is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.
(vv) No Rights to Purchase Preferred Stock. The issuance and sale of the Shares as contemplated hereby will not cause any holder of any shares of capital stock, securities convertible into or exchangeable or exercisable for capital stock or options, warrants or other rights to purchase capital stock or any other securities of the Company to have any right to acquire any shares of preferred stock of the Company.
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(ww) No Contract Terminations. The Company has not sent or received any communication regarding termination of, or intent not to renew, any of the contracts or agreements referred to or described in any preliminary prospectus, the Prospectus or any free writing prospectus, or referred to or described in, or filed as an exhibit to, the Registration Statement, and no such termination or non-renewal has been threatened by the Company or, to the Companys knowledge, any other party to any such contract or agreement, which threat of termination or non-renewal has not been rescinded as of the date hereof.
Any certificate signed by any officer of the Company and delivered to any Underwriter or to counsel for the Underwriters in connection with the offering, or the purchase and sale, of the Offered Shares shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.
The Company has a reasonable basis for making each of the representations set forth in this Section 1. The Company acknowledges that the Underwriters and, for purposes of the opinions to be delivered pursuant to Section 6 hereof, counsel to the Company and counsel to the Underwriters, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.
Section 2. Purchase, Sale and Delivery of the Offered Shares.
(a) The Firm Shares. Upon the terms herein set forth, the Company agrees to issue and sell to the several Underwriters an aggregate of [] Firm Shares. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Underwriters agree, severally and not jointly, to purchase from the Company the respective number of Firm Shares set forth opposite their names on Schedule A. The purchase price per Firm Share to be paid by the several Underwriters to the Company shall be $[] per share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased by the Underwriters and payment therefor shall be made at the offices of Wilmer Cutler Pickering Hale and Dorr LLP (or such other place as may be agreed to by the Company and the Representatives) at 9:00 a.m. New York City time, on [], or such other time and date not later than 1:30 p.m. New York City time, on [] as the Representatives shall designate by notice to the Company (the time and date of such closing are called the First Closing Date). The Company hereby acknowledges that circumstances under which the Representatives may provide notice to postpone the First Closing Date as originally scheduled include, but are not limited to, any determination by the Company or the Representatives to recirculate to the public copies of an amended or supplemented Prospectus or a delay as contemplated by the provisions of Section 11.
(c) The Optional Shares; Option Closing Date. In addition, on the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to an aggregate of [] Optional Shares from the Company at the purchase price per share to be paid by the Underwriters for the Firm Shares. The option granted hereunder may be exercised at any time and from time to time in whole or in part upon notice by the Representatives to the Company, which notice may be given at any time within 30 days from the date of this Agreement. Such notice shall set forth (i) the aggregate number of Optional Shares as to which the Underwriters are exercising the option and (ii) the time, date and place at which the Optional Shares will be delivered (which time and date may be simultaneous with, but not earlier than, the First Closing Date; and in the event that such time and date are simultaneous with the First Closing Date, the term First Closing Date shall refer to the time and date of delivery of the Firm Shares and such Optional Shares). Any such time and date of delivery, if subsequent to the First Closing Date, is called an Option Closing Date, and shall be determined by the Representatives and shall not be earlier than two or later than five full business days after delivery of such notice of exercise. If any Optional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Optional Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of Optional Shares to be purchased as the number of Firm Shares set forth on Schedule A opposite the name of such Underwriter bears to the total number of Firm Shares The Representatives may cancel the option at any time prior to its expiration by giving written notice of such cancellation to the Company.
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(d) Public Offering of the Offered Shares. The Representatives hereby advise the Company that the Underwriters intend to offer for sale to the public, initially on the terms set forth in the Registration Statement, the Time of Sale Prospectus and the Prospectus, their respective portions of the Offered Shares as soon after this Agreement has been executed and the Registration Statement has been declared effective as the Representatives, in their sole judgment, have determined is advisable and practicable.
(e) Payment for the Offered Shares. (i) Payment for the Offered Shares shall be made at the First Closing Date (and, if applicable, at each Option Closing Date) by wire transfer of immediately available funds to the order of the Company.
(ii) It is understood that the Representatives have been authorized, for their own accounts and the accounts of the several Underwriters, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Shares and any Optional Shares the Underwriters have agreed to purchase. Each of Jefferies, Cowen, Evercore and William Blair individually and not as the Representatives of the Underwriters, may (but shall not be obligated to) make payment for any Offered Shares to be purchased by any Underwriter whose funds shall not have been received by the Representatives by the First Closing Date or the applicable Option Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any of its obligations under this Agreement.
(f) Delivery of the Offered Shares. The Company shall deliver, or cause to be delivered to the Representatives for the accounts of the several Underwriters the Firm Shares at the First Closing Date, against release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The Company shall also deliver, or cause to be delivered to the Representatives for the accounts of the several Underwriters, the Optional Shares the Underwriters have agreed to purchase at the First Closing Date or the applicable Option Closing Date, as the case may be, against the release of a wire transfer of immediately available funds for the amount of the purchase price therefor. If Jefferies so elects, delivery of the Offered Shares may be made by credit to the accounts designated by Jefferies through The Depository Trust Companys full fast transfer or DWAC programs. If Jefferies so elects, any certificates for the Offered Shares shall be in definitive form and registered in such names and denominations as the Representatives shall have requested at least two full business days prior to the First Closing Date (or the applicable Option Closing Date, as the case may be) and shall be made available for inspection on the business day preceding the First Closing Date (or the applicable Option Closing Date, as the case may be) at a location in New York City as the Representatives may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters.
Section 3. Additional Covenants of the Company.
The Company further covenants and agrees with each Underwriter as follows:
(a) Delivery of Registration Statement, Time of Sale Prospectus and Prospectus. The Company shall furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period when a prospectus relating to the Offered Shares is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with sales of the Offered Shares, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request.
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(b) Representatives Review of Proposed Amendments and Supplements. During the period when a prospectus relating to the Offered Shares is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule), the Company (i) will furnish to the Representatives for review, a reasonable period of time prior to the proposed time of filing of any proposed amendment or supplement to the Registration Statement, a copy of each such amendment or supplement and (ii) will not amend or supplement the Registration Statement without the Representatives prior written consent. Prior to amending or supplementing any preliminary prospectus, the Time of Sale Prospectus or the Prospectus, the Company shall furnish to the Representatives for review, a reasonable amount of time prior to the time of filing or use of the proposed amendment or supplement, a copy of each such proposed amendment or supplement. The Company shall not file or use any such proposed amendment or supplement without the Representatives prior written consent. The Company shall file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.
(c) Free Writing Prospectuses. The Company shall furnish to the Representatives for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of each proposed free writing prospectus or any amendment or supplement thereto prepared by or on behalf of, used by, or referred to by the Company, and the Company shall not file, use or refer to any proposed free writing prospectus or any amendment or supplement thereto without the Representatives prior written consent. The Company shall furnish to each Underwriter, without charge, as many copies of any free writing prospectus prepared by or on behalf of, used by or referred to by the Company as such Underwriter may reasonably request. If at any time when a prospectus is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) in connection with sales of the Offered Shares (but in any event if at any time through and including the First Closing Date) there occurred or occurs an event or development as a result of which any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at such time, not misleading, the Company shall promptly amend or supplement such free writing prospectus to eliminate or correct such conflict or so that the statements in such free writing prospectus as so amended or supplemented will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at such time, not misleading, as the case may be; provided, however, that prior to amending or supplementing any such free writing prospectus, the Company shall furnish to the Representatives for review, a reasonable amount of time prior to the proposed time of filing or use thereof, a copy of such proposed amended or supplemented free writing prospectus, and the Company shall not file, use or refer to any such amended or supplemented free writing prospectus without the Representatives prior written consent.
(d) Filing of Underwriter Free Writing Prospectuses. The Company shall not take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of such Underwriter that such Underwriter otherwise would not have been required to file thereunder.
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(e) Amendments and Supplements to Time of Sale Prospectus. If the Time of Sale Prospectus is being used to solicit offers to buy the Offered Shares at a time when the Prospectus is not yet available to prospective purchasers, and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus so that the Time of Sale Prospectus does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances when delivered to a prospective purchaser, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, the Company shall (subject to Section 3(b) and Section 3(c) hereof) promptly prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances when delivered to a prospective purchaser, not misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the information contained in the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.
(f) Certain Notifications and Required Actions. After the date of this Agreement, the Company shall promptly advise the Representatives in writing of: (i) the receipt of any comments of, or requests for additional or supplemental information from, the Commission; (ii) the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus or the Prospectus; (iii) the time and date that any post-effective amendment to the Registration Statement becomes effective; and (iv) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or any amendment or supplement to any preliminary prospectus, the Time of Sale Prospectus or the Prospectus or of any order preventing or suspending the use of any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus or the Prospectus, or of any proceedings to remove, suspend or terminate from listing or quotation the Shares from any securities exchange upon which they are listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes. If the Commission shall enter any such stop order at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest possible moment. Additionally, the Company agrees that it shall comply with all applicable provisions of Rule 424(b), Rule 433 and Rule 430A under the Securities Act and will use its reasonable efforts to confirm that any filings made by the Company under Rule 424(b) or Rule 433 were received in a timely manner by the Commission.
(g) Amendments and Supplements to the Prospectus and Other Securities Act Matters. If any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus so that the Prospectus does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) to a purchaser, not misleading, or if in the opinion of the Representatives or counsel for the Underwriters it is otherwise necessary to amend or supplement the Prospectus to comply with applicable law, the Company agrees (subject to Section 3(b) and Section 3(c)) hereof to promptly prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) to a purchaser, not misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law. Neither the Representatives consent to, nor delivery of, any such amendment or supplement shall constitute a waiver of any of the Companys obligations under Section 3(b) or Section 3(c).
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(h) Blue Sky Compliance. The Company shall cooperate with the Representatives and counsel for the Underwriters to qualify or register the Offered Shares for sale under (or obtain exemptions from the application of) the state securities or blue sky laws or Canadian provincial securities laws (or other foreign laws) of those jurisdictions designated by the Representatives, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Offered Shares. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Representatives promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Offered Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest possible moment.
(i) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Offered Shares sold by it in the manner described under the caption Use of Proceeds in the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(j) Transfer Agent. The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Shares.
(k) Earnings Statement. The Company will make generally available to its security holders and to the Representatives as soon as practicable an earnings statement (which need not be audited) covering a period of at least twelve months beginning with the first fiscal quarter of the Company commencing after the date of this Agreement that will satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder.
(l) Continued Compliance with Securities Laws. The Company will comply with the Securities Act and the Exchange Act so as to permit the completion of the distribution of the Offered Shares as contemplated by this Agreement, the Registration Statement, the Time of Sale Prospectus and the Prospectus. Without limiting the generality of the foregoing, the Company will, during the period when a prospectus relating to the Offered Shares is required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule), file on a timely basis with the Commission and the Nasdaq all reports and documents required to be filed under the Exchange Act. Additionally, the Company shall report the use of proceeds from the issuance of the Offered Shares as may be required under Rule 463 under the Securities Act.
(m) Directed Share Program. In connection with the Directed Share Program, the Company will ensure that the Directed Shares will be restricted to the extent required by FINRA or its rules from sale, transfer, assignment, pledge or hypothecation for a period of three months following the date of the effectiveness of the Registration Statement. Jefferies will notify the Company as to which Participants will need to be so restricted. The Company will direct the transfer agent to place stop transfer restrictions upon such securities for such period of time. Should the Company release, or seek to release, from such restrictions any of the Directed Shares, the Company agrees to reimburse the Underwriters for any reasonable expenses (including, without limitation, legal expenses) they incur in connection with such release.
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(n) Listing. The Company will use its best efforts to list, subject to notice of issuance, the Offered Shares on the Nasdaq.
(o) Company to Provide Copy of the Prospectus in Form That May be Downloaded from the Internet. If requested by the Representatives, the Company shall cause to be prepared and delivered, at its expense, within one business day from the effective date of this Agreement, to the Representatives an electronic Prospectus to be used by the Underwriters in connection with the offering and sale of the Offered Shares. As used herein, the term electronic Prospectus means a form of Prospectus, and any amendment or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory to the Representatives, that may be transmitted electronically by the Representatives and the other Underwriters to offerees and purchasers of the Offered Shares; (ii) it shall disclose the same information as the paper Prospectus, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic Prospectus with a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, satisfactory to the Representatives, that will allow investors to store and have continuously ready access to the Prospectus at any future time, without charge to investors (other than any fee charged for subscription to the Internet as a whole and for on-line time). The Company hereby confirms that it has included or will include in the Prospectus filed pursuant to EDGAR or otherwise with the Commission and in the Registration Statement at the time it was declared effective an undertaking that, upon receipt of a request by an investor or his or her representative, the Company shall transmit or cause to be transmitted promptly, without charge, a paper copy of the Prospectus.
(p) Agreement Not to Offer or Sell Additional Shares. During the period commencing on and including the date hereof and continuing through and including the 180th day following the date of the Prospectus (such period being referred to herein as the Lock-up Period), the Company will not, without the prior written consent of Jefferies, Cowen and Evercore (together, the Lock-up Representatives) (which consent may be withheld in their sole discretion), directly or indirectly: (i) sell, offer to sell, contract to sell or lend any Shares or Related Securities (as defined below); (ii) effect any short sale, or establish or increase any put equivalent position (as defined in Rule 16a-1(h) under the Exchange Act) or liquidate or decrease any call equivalent position (as defined in Rule 16a-1(b) under the Exchange Act) of any Shares or Related Securities; (iii) pledge, hypothecate or grant any security interest in any Shares or Related Securities; (iv) in any other way transfer or dispose of any Shares or Related Securities; (v) enter into any swap, hedge or similar arrangement or agreement that transfers, in whole or in part, the economic risk of ownership of any Shares or Related Securities, regardless of whether any such transaction is to be settled in securities, in cash or otherwise; (vi) announce the offering of any Shares or Related Securities; (vii) submit or file any registration statement under the Securities Act in respect of any Shares or Related Securities (other than as contemplated by this Agreement with respect to the Offered Shares); (viii) effect a reverse stock split, recapitalization, share consolidation, reclassification or similar transaction affecting the outstanding Shares; or (ix) publicly announce the intention to do any of the foregoing; provided, however, that the Company may (A) effect the transactions contemplated hereby and (B) issue Shares or options to purchase Shares, or issue Shares upon exercise of options, pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, but only if the holders of such Shares or options agree in writing with the Underwriters not to sell, offer, dispose of or otherwise transfer any such Shares or options during such Lock-up Period without the prior written consent of the Lock-up Representatives (which consent may be withheld in its sole discretion). For purposes of the foregoing, Related Securities shall mean any options or warrants or other rights to acquire Shares or any securities exchangeable or exercisable for or convertible into Shares, or to acquire other securities or rights ultimately exchangeable or exercisable for, or convertible into, Shares.
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(q) Future Reports to the Representatives. During the period of five years hereafter, the Company will furnish to the Representatives, c/o Jefferies, at 520 Madison Avenue, New York, New York 10022, Attention: Global Head of Syndicate; c/o Cowen, at 599 Lexington Avenue, 25th Floor, New York, NY 10022, Attention: Bradley Friedman; c/o Evercore, at 55 East 52nd Street, New York, NY 10055, Attention: Kenneth Masotti; and c/o William Blair, at 150 North Riverside Plaza, Chicago, Illinois 60606, Attention: Kevin Cunningham: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders equity and cash flows for the year then ended and the opinion thereon of the Companys independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, FINRA or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company furnished or made available generally to holders of its capital stock; provided, however, that the requirements of this Section 3(q) shall be satisfied to the extent that such reports, statement, communications, financial statements or other documents are available on EDGAR.
(r) Investment Limitation. The Company shall not invest or otherwise use the proceeds received by the Company from its sale of the Offered Shares in such a manner as would require the Company to register as an investment company under the Investment Company Act.
(s) No Stabilization or Manipulation; Compliance with Regulation M. The Company will not take, and will ensure that no affiliate of the Company will take, directly or indirectly, any action designed to or that might cause or result in stabilization or manipulation of the price of the Shares or any reference security with respect to the Shares, whether to facilitate the sale or resale of the Offered Shares or otherwise, and the Company will, and shall cause each of its affiliates to, comply with all applicable provisions of Regulation M.
(t) Enforce Lock-Up Agreements. During the Lock-up Period, the Company will enforce all agreements between the Company and any of its securityholders that restrict or prohibit, expressly or in operation, the offer, sale or transfer of Shares or Related Securities or any of the other actions restricted or prohibited under the terms of the form of Lock-up Agreement. In addition, the Company will direct the transfer agent to place stop transfer restrictions upon any such securities of the Company that are bound by such lock-up agreements for the duration of the periods contemplated in such agreements, including, without limitation, lock-up agreements entered into by the Companys officers and directors and securityholders pursuant to Section 6(i) hereof.
(u) Company to Provide Interim Financial Statements. Prior to the First Closing Date and each applicable Option Closing Date, the Company will furnish the Underwriters, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Registration Statement and the Prospectus.
(v) Amendments and Supplements to Permitted Section 5(d) Communications. If at any time following the distribution of any Permitted Section 5(d) Communication, there occurred or occurs an event or development as a result of which such Permitted Section 5(d) Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Permitted Section 5(d) Communication to eliminate or correct such untrue statement or omission.
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(w) Emerging Growth Company Status. The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) the time when a prospectus relating to the Offered Shares is not required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) and (ii) the expiration of the Lock-up Period.
(x) Announcement Regarding Lock-ups. The Company agrees to announce the Underwriters intention to release any director or officer (within the meaning of Rule 16a-1(f) under the Exchange Act) of the Company from any of the restrictions imposed by any Lock-Up Agreement, by issuing, through a major news service, a press release in form and substance satisfactory to the Lock-up Representatives or, if consented to by the Lock-up Representatives, in a registration statement that is publicly filed in connection with a secondary offering of the Companys shares promptly following the Companys receipt of any notification from the Lock-up Representatives in which such intention is indicated, but in any case not later than the close of the third business day prior to the date on which such release or waiver is to become effective; provided, however, that nothing shall prevent the Lock-up Representatives, on behalf of the Underwriters, from announcing the same through a major news service, irrespective of whether the Company has made the required announcement; and provided, further, that no such announcement shall be made of any release or waiver granted solely to permit a transfer of securities that is not for consideration and where the transferee has agreed in writing to be bound by the terms of a Lock-Up Agreement in the form set forth as Exhibit A hereto.
(y) Certification Regarding Beneficial Owners. The Company will deliver to the Representatives, on or prior to the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of identifying documentation, and the Company undertakes to provide such additional supporting documentation as the Representatives may reasonably request in connection with the verification of the foregoing certification.
The Representatives, on behalf of the several Underwriters, may, in their sole discretion, waive in writing the performance by the Company of any one or more of the foregoing covenants or extend the time for their performance.
Section 4. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation (i) all expenses incident to the issuance and delivery of the Offered Shares (including all printing and engraving costs), (ii) all fees and expenses of the registrar and transfer agent of the Shares, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Offered Shares to the Underwriters, (iv) all fees and expenses of the Companys counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), the Time of Sale Prospectus, the Prospectus, each free writing prospectus prepared by or on behalf of, used by, or referred to by the Company, and each preliminary prospectus, each Permitted Section 5(d) Communication, and all amendments and supplements thereto, and this Agreement, (vi) all filing fees, attorneys fees and expenses incurred by the Company or the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Offered Shares for offer and sale under the state securities or blue sky laws or the provincial securities laws of Canada, and, if requested by the Representatives, preparing and printing a Blue Sky Survey or memorandum and a Canadian wrapper, and any supplements thereto, advising the Underwriters of such qualifications, registrations and exemptions, (vii) the costs, fees and expenses incurred by the Underwriters in connection with determining their compliance with the rules and regulations of FINRA related to the Underwriters participation in the offering and distribution of the
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Offered Shares, including any related filing fees and the legal fees of, and disbursements by, counsel to the Underwriters, (viii) the costs and expenses of the Company relating to investor presentations on any road show, any Permitted Section 5(d) Communication or any Section 5(d) Oral Communication undertaken in connection with the offering of the Offered Shares, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives, employees and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, (ix) the fees and expenses associated with listing the Offered Shares on the Nasdaq, (x) all other fees, costs and expenses of the nature referred to in Item 13 of Part II of the Registration Statement and (xi) all costs and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters, in connection with matters related to the Directed Shares which are designated by the Company for sale to Participants. Except as provided in this Section 4 or in Section 7, Section 9 or Section 10 hereof, the Underwriters shall pay their own expenses, including the fees and disbursements of their counsel.
Section 5. Covenant of the Underwriters. Each Underwriter severally and not jointly covenants with the Company not to take any action that would result in the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not, but for such actions, be required to be filed by the Company under Rule 433(d).
Section 6. Conditions of the Obligations of the Underwriters. The respective obligations of the several Underwriters hereunder to purchase and pay for the Offered Shares as provided herein on the First Closing Date and, with respect to the Optional Shares, each Option Closing Date, shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the First Closing Date as though then made and, with respect to the Optional Shares, as of each Option Closing Date as though then made, to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions:
(a) Comfort Letter. On the date hereof, the Representatives shall have received from Ernst & Young LLP, independent registered public accountants for the Company, a letter dated the date hereof addressed to the Underwriters, in form and substance satisfactory to the Representatives, containing statements and information of the type ordinarily included in accountants comfort letters to underwriters, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus, and each free writing prospectus, if any.
(b) Compliance with Registration Requirements; No Stop Order; No Objection from FINRA. For the period from and after the date of this Agreement and through and including the First Closing Date and, with respect to any Optional Shares purchased after the First Closing Date, each Option Closing Date:
(i) The Company shall have filed the Prospectus with the Commission (including the information required by Rule 430A under the Securities Act) in the manner and within the time period required by Rule 424(b) under the Securities Act; or the Company shall have filed a post-effective amendment to the Registration Statement containing the information required by such Rule 430A, and such post-effective amendment shall have become effective.
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(ii) No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment to the Registration Statement shall be in effect, and no proceedings for such purpose shall have been instituted or threatened by the Commission.
(iii) FINRA shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and through and including the First Closing Date and, with respect to any Optional Shares purchased after the First Closing Date, each Option Closing Date:
(i) in the judgment of the Representatives there shall not have occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company by any nationally recognized statistical rating organization as that term is used in Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act.
(d) Opinion of Counsel for the Company. On each of the First Closing Date and each Option Closing Date, the Representatives shall have received the opinion and negative assurance letter of Latham & Watkins LLP, counsel for the Company, dated as of such date, in form and substance satisfactory to the Underwriters.
(e) Opinion of IP Counsel. On each of the First Closing Date and each Option Closing Date, the Representatives shall have received the opinion of Cooley LLP, counsel for the Company with respect to intellectual property matters, dated as of such date, in form and substance satisfactory to the Underwriters.
(f) Opinion of Counsel for the Underwriters. On each of the First Closing Date and each Option Closing Date, the Representatives shall have received the opinion and negative assurance letter of Wilmer Cutler Pickering Hale and Dorr LLP, counsel for the Underwriters in connection with the offer and sale of the Offered Shares, dated as of such date, in form and substance satisfactory to the Underwriters.
(g) Officers Certificate. On each of the First Closing Date and each Option Closing Date, the Representatives shall have received a certificate executed by the Chief Executive Officer or President of the Company and the Chief Financial Officer of the Company, dated as of such date, to the effect set forth in Section 6(b)(ii) and further to the effect that:
(i) for the period from and including the date of this Agreement through and including such date, there has not occurred any Material Adverse Change;
(ii) the representations, warranties and covenants of the Company set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of such date; and
(iii) the Company has complied with all the agreements hereunder and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such date.
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(h) Bring-down Comfort Letter. On each of the First Closing Date and each Option Closing Date the Representatives shall have received from Ernst & Young LLP, independent registered public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Representatives, which letter shall: (i) reaffirm the statements made in the letter furnished by them pursuant to Section 6(a), except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the First Closing Date or the applicable Option Closing Date, as the case may be; and (ii) cover certain financial information contained in the Prospectus.
(i) Lock-Up Agreements. On or prior to the date hereof, the Company shall have furnished to the Representatives an agreement in the form of Exhibit A hereto from each of the directors and officers of the Company and from substantially all of the securityholders of the Company, and each such agreement shall be in full force and effect on each of the First Closing Date and each Option Closing Date.
(j) Rule 462(b) Registration Statement. In the event that a Rule 462(b) Registration Statement is filed in connection with the offering contemplated by this Agreement, such Rule 462(b) Registration Statement shall have been filed with the Commission on the date of this Agreement and shall have become effective automatically upon such filing.
(k) Approval of Listing. At the First Closing Date, the Offered Shares shall have been approved for listing on the Nasdaq, subject only to official notice of issuance.
(l) Additional Documents. On or before each of the First Closing Date and each Option Closing Date, the Representatives and counsel for the Underwriters shall have received such information, documents and opinions as they may reasonably request for the purposes of enabling them to pass upon the issuance and sale of the Offered Shares as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Offered Shares as contemplated herein and in connection with the other transactions contemplated by this Agreement shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters.
If any condition specified in this Section 6 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representatives by notice from Jefferies to the Company at any time on or prior to the First Closing Date and, with respect to the Optional Shares, at any time on or prior to the applicable Option Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 7, Section 9 and Section 10 shall at all times be effective and shall survive such termination.
Section 7. Reimbursement of Underwriters Expenses. If this Agreement is terminated by the Representatives pursuant to Section 6, Section 11 or Section 12, or if the sale to the Underwriters of the Offered Shares on the First Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Representatives and the other Underwriters (or such Underwriters as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Representatives and the Underwriters in connection with the proposed purchase and the offering and sale of the Offered Shares, including, but not limited to, fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges.
Section 8. Effectiveness of this Agreement. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.
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Section 9. Indemnification.
(a) Indemnification of the Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates, directors, officers, employees and agents, and each person, if any, who controls any Underwriter within the meaning of the Securities Act or the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Underwriter or such affiliate, director, officer, employee, agent or controlling person may become subject, under the Securities Act, the Exchange Act, other federal or state statutory law or regulation, or the laws or regulations of foreign jurisdictions where Offered Shares have been offered or sold or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon (A)(i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus that the Company has used, referred to or filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, any Marketing Material, any Section 5(d) Written Communication or the Prospectus (or any amendment or supplement to the foregoing) or any prospectus wrapper material distributed in connection with the reservation and sale of Directed Shares to the Participants, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (iii) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Shares or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) or (ii) above, or (B) the violation of any laws or regulations of foreign jurisdictions where Offered Shares have been offered or sold; and to reimburse each Underwriter and each such affiliate, director, officer, employee, agent and controlling person for any and all expenses (including the fees and disbursements of counsel) as such expenses are incurred by such Underwriter or such affiliate, director, officer, employee, agent or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company by the Representatives in writing expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any such free writing prospectus, any Marketing Material, any Section 5(d) Written Communication or the Prospectus (or any amendment or supplement thereto), it being understood and agreed that the only such information consists of the information described in Section 9(b) below. The indemnity agreement set forth in this Section 9(a) shall be in addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any
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amendment thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus, that the Company has used, referred to or filed, or is required to file, pursuant to Rule 433 of the Securities Act, any Section 5(d) Written Communication or the Prospectus (or any such amendment or supplement) or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, such preliminary prospectus, the Time of Sale Prospectus, such free writing prospectus, such Section 5(d) Written Communication or the Prospectus (or any such amendment or supplement), in reliance upon and in conformity with information relating to such Underwriter furnished to the Company by the Representatives in writing expressly for use therein; and to reimburse the Company, or any such director, officer or controlling person for any and all expenses (including the fees and disbursements of counsel) as such expenses are incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company hereby acknowledges that the only information that the Representatives have furnished to the Company expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) of the Securities Act, any Section 5(d) Written Communication or the Prospectus (or any amendment or supplement to the foregoing) are the statements set forth in the first sentence of the third paragraph, the concession figure in the first sentence of the fifth paragraph, the first sentence of the sixteenth paragraph and the first sentence of the twenty-first paragraph under the caption Underwriting in the Preliminary Prospectus and the Prospectus. The indemnity agreement set forth in this Section 9(b) shall be in addition to any liabilities that each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 9, notify the indemnifying party in writing of the commencement thereof, but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party to the extent the indemnifying party is not materially prejudiced as a proximate result of such failure and shall not in any event relieve the indemnifying party from any liability that it may have otherwise than on account of this indemnity agreement. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying partys election to so assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in
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accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the fees and expenses of more than one separate counsel (together with local counsel), representing the indemnified parties who are parties to such action), which counsel (together with any local counsel) for the indemnified parties shall be selected by Jefferies (in the case of counsel for the indemnified parties referred to in Section 9(a) above) or by the Company (in the case of counsel for the indemnified parties referred to in Section 9(b) above) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party and shall be paid as they are incurred.
(d) Settlements. The indemnifying party under this Section 9 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 9(c) hereof, the indemnifying party shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and does not include an admission of fault or culpability or a failure to act by or on behalf of such indemnified party.
(e) Indemnification for Directed Shares. In connection with the offer and sale of the Directed Shares, the Company agrees, promptly upon a request in writing, to indemnify and hold harmless the Underwriters from and against any and all losses, liabilities, claims, damages and expenses incurred by any of them as a result of the failure of the Participants to pay for and accept delivery of Directed Shares which, by the end of the first business day following the date of this Agreement, were subject to a properly confirmed agreement to purchase. The Company agrees to indemnify and hold harmless the Underwriters and their respective affiliates, directors, officers, employees and agents, and each person, if any, who controls any of the Underwriters within the meaning of the Securities Act or the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which the Underwriters or such controlling person may become subject, which is (i) caused by any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program (including any prospectus wrapper material distributed in connection with the reservation and sale of Directed Shares) or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of Directed Shares that such Participant agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program. The indemnity agreement set forth in this paragraph shall be in addition to any liabilities that the Company may otherwise have.
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Section 10. Contribution. If the indemnification provided for in Section 9 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Offered Shares pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Offered Shares pursuant to this Agreement shall be deemed to be in the same respective proportions as the total proceeds from the offering of the Offered Shares pursuant to this Agreement (before deducting expenses) received by the Company, and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth on the front cover page of the Prospectus, bear to the aggregate initial public offering price of the Offered Shares as set forth on such cover. The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Underwriters, on the other hand, and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 9(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 10; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 9(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 10.
Notwithstanding the provisions of this Section 10, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions received by such Underwriter in connection with the Offered Shares underwritten by it and distributed to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters obligations to contribute pursuant to this Section 10 are several, and not joint, in proportion to their respective underwriting commitments as set forth opposite their respective names on Schedule A. For purposes of this Section 10, each affiliate, director, officer, employee and agent of an Underwriter and each person, if any, who controls an Underwriter within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company.
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Section 11. Default of One or More of the Several Underwriters. If, on the First Closing Date or any Option Closing Date any one or more of the several Underwriters shall fail or refuse to purchase Offered Shares that it or they have agreed to purchase hereunder on such date, and the aggregate number of Offered Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Offered Shares to be purchased on such date, the Representatives may make arrangements satisfactory to the Company for the purchase of such Offered Shares by other persons, including any of the Underwriters, but if no such arrangements are made by such date, the other Underwriters shall be obligated, severally and not jointly, in the proportions that the number of Firm Shares set forth opposite their respective names on Schedule A bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as may be specified by the Representatives with the consent of the non-defaulting Underwriters, to purchase the Offered Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date. If, on the First Closing Date or any Option Closing Date any one or more of the Underwriters shall fail or refuse to purchase Offered Shares and the aggregate number of Offered Shares with respect to which such default occurs exceeds 10% of the aggregate number of Offered Shares to be purchased on such date, and arrangements satisfactory to the Representatives and the Company for the purchase of such Offered Shares are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party except that the provisions of Section 4, Section 7, Section 9 and Section 10 shall at all times be effective and shall survive such termination. In any such case either the Representatives or the Company shall have the right to postpone the First Closing Date or the applicable Option Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected.
As used in this Agreement, the term Underwriter shall be deemed to include any person substituted for a defaulting Underwriter under this Section 11. Any action taken under this Section 11 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
Section 12. Termination of this Agreement. Prior to the purchase of the Firm Shares by the Underwriters on the First Closing Date, this Agreement may be terminated by the Representatives by notice given to the Company if at any time: (i) trading or quotation in any of the Companys securities shall have been suspended or limited by the Commission or by the Nasdaq, or trading in securities generally on either the Nasdaq or the NYSE shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges; (ii) a general banking moratorium shall have been declared by any of federal, New York or Washington authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States or international political, financial or economic conditions, as in the judgment of the Representatives is material and adverse and makes it impracticable to market the Offered Shares in the manner and on the terms described in the Time of Sale Prospectus or the Prospectus or to enforce contracts for the sale of securities; (iv) in the judgment of the Representatives there shall have occurred any Material Adverse Change; or (v) the Company shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Representatives may interfere materially with the conduct of the business and operations of the Company regardless of whether or not such loss shall have been insured. Any termination pursuant to this Section 12 shall be without liability on the part of (a) the Company to any Underwriter, except that the Company shall be obligated to reimburse the expenses of the Representatives and the Underwriters pursuant to Section 4 or Section 7 hereof or (b) any Underwriter to the Company; provided, however, that the provisions of Section 9 and Section 10 shall at all times be effective and shall survive such termination.
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Section 13. No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Offered Shares pursuant to this Agreement, including the determination of the public offering price of the Offered Shares and any related discounts and commissions, is an arms-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand, and does not constitute a recommendation, investment advice or solicitation of any action by the Underwriters, (b) in connection with the offering contemplated hereby and the process leading to such transaction, each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company, or its stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) and no Underwriter has any obligation to the Company with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company, (e) the Underwriters have not provided any legal, accounting, regulatory, investment or tax advice with respect to the offering contemplated hereby and the Company has consulted its own legal, accounting, financial, regulatory and tax advisors to the extent it deemed appropriate and (f) none of the activities of the Underwriters in connection with the transactions contemplated herein constitutes a recommendation, investment advice or solicitation of any action by the Underwriters with respect to any entity or natural person.
Section 14. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and, anything herein to the contrary notwithstanding, will survive delivery of and payment for the Offered Shares sold hereunder and any termination of this Agreement.
Section 15. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows:
If to the Representatives: |
Jefferies LLC | |
520 Madison Avenue | ||
New York, New York 10022 | ||
Facsimile: (646) 619-4437 | ||
Attention: General Counsel | ||
c/o Cowen and Company, LLC | ||
599 Lexington Avenue, 25th Floor | ||
New York, NY 10022 | ||
Attention: Bradley Friedman | ||
c/o Evercore Group L.L.C. | ||
55 East 52nd Street | ||
New York, NY 10055 | ||
Attention: Kenneth Masotti | ||
c/o William Blair & Company, L.L.C. | ||
150 North Riverside Plaza | ||
Chicago, Illinois 60606 | ||
Attention: Kevin Cunningham |
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with a copy to: |
Wilmer Cutler Pickering Hale and Dorr LLP | |
7 World Trade Center | ||
250 Greenwich Street | ||
New York, NY 10007 | ||
Facsimile: (212) 230-8888 | ||
Attention: Lisa Firenze | ||
If to the Company: |
Icosavax, Inc. | |
1616 Eastlake Avenue E. Suite 208 | ||
Seattle, WA 98102 | ||
Attention: Chief Executive Officer | ||
with a copy to: |
Latham & Watkins LLP | |
12670 High Bluff Drive | ||
San Diego, CA 92130 | ||
Attention: Cheston Larson |
Any party hereto may change the address for receipt of communications by giving written notice to the others.
Section 16. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Underwriters pursuant to Section 11 hereof, and to the benefit of the affiliates, directors, officers, employees, agents and controlling persons referred to in Section 9 and Section 10, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term successors shall not include any purchaser of the Offered Shares as such from any of the Underwriters merely by reason of such purchase.
Section 17. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph or provision hereof. If any section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
Section 18. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
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For purposes of this Agreement, (A) BHC Act Affiliate has the meaning assigned to the term affiliate in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k); (B) Covered Entity means any of the following: (i) a covered entity as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a covered bank as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a covered FSI as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b); (C) Default Right has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable; and (D) U.S. Special Resolution Regime means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
Section 19. Governing Law Provisions. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in such state. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States of America located in the Borough of Manhattan in the City of New York or the courts of the State of New York in each case located in the Borough of Manhattan in the City of New York (collectively, the Specified Courts), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court, as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such partys address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.
Section 20. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 9 and the contribution provisions of Section 10, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Section 9 and Section 10 hereof fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, each free writing prospectus and the Prospectus (and any amendments and supplements to the foregoing), as contemplated by the Securities Act and the Exchange Act.
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If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.
Very truly yours, | ||
ICOSAVAX, INC. | ||
By: |
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Name: | ||
Title: |
[Signature Page to Underwriting Agreement]
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The foregoing Underwriting Agreement is hereby confirmed and accepted by the Representatives in New York, New York as of the date first above written.
JEFFERIES LLC | ||
COWEN AND COMPANY, LLC | ||
EVERCORE GROUP L.L.C. | ||
WILLIAM BLAIR & COMPANY, L.L.C. | ||
Acting individually and as Representatives of the several Underwriters named in the attached Schedule A. | ||
JEFFERIES LLC | ||
By: |
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Name: | ||
Title: | ||
COWEN AND COMPANY, LLC | ||
By: |
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Name: | ||
Title: | ||
EVERCORE GROUP L.L.C. | ||
By: |
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Name: | ||
Title: | ||
WILLIAM BLAIR & COMPANY, L.L.C. | ||
By: |
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Name: | ||
Title: |
[Signature Page to Underwriting Agreement]
Schedule A
Underwriters |
Number of Firm Shares
to
be
|
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Jefferies LLC |
[ | ] | ||
Cowen and Company, LLC |
[ | ] | ||
Evercore Group L.L.C |
[ | ] | ||
William Blair & Company, L.L.C |
[ | ] | ||
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Total |
[ | ] | ||
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Schedule B
Free Writing Prospectuses Included in the Time of Sale Prospectus
Schedule C
Pricing Information Included in the Time of Sale Prospectus
1. The Company is selling [______] Firm Shares.
2. The Company has granted an option to the Underwriters, severally and not jointly, to purchase up to an additional [_______] shares of Common Stock.
3. The initial public offering price per share for the Offered Shares shall be $[_____].
Schedule D
Permitted Section 5(d) Communications
Exhibit A
Form of Lock-up Agreement
[___], 2021
Jefferies LLC
Cowen and Company, LLC
Evercore Group, L.L.C. As Representatives of the Several Underwriters
c/o Jefferies LLC
520 Madison Avenue
New York, New York 10022
c/o Cowen and Company, LLC
599 Lexington Avenue, 25th Floor
New York, NY 10022
c/o Evercore Group, L.L.C.
55 East 52nd Street
New York, NY 10055
RE: |
Icosavax, Inc. (the Company) |
Ladies & Gentlemen:
The undersigned is an owner of shares of common stock, par value $0.0001 per share, of the Company (Shares) or of securities convertible into or exchangeable or exercisable for Shares. The Company proposes to conduct a public offering of Shares (the Offering) for which Jefferies LLC (Jefferies), Cowen and Company, LLC (Cowen), and Evercore Group, L.L.C. (Evercore) will act as the representatives of the underwriters for purposes of this agreement (the Lockup Representatives). The undersigned recognizes that the Offering will benefit each of the Company and the undersigned. The undersigned acknowledges that the underwriters are relying on the representations and agreements of the undersigned contained in this letter agreement in conducting the Offering and, at a subsequent date, in entering into an underwriting agreement (the Underwriting Agreement) and other underwriting arrangements with the Company with respect to the Offering.
Annex A sets forth definitions for capitalized terms used in this letter agreement that are not defined in the body of this agreement. Those definitions are a part of this agreement.
In consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agrees that, during the Lock-up Period, the undersigned will not (and will use reasonable efforts to cause any Family Member not to), without the prior written consent of the Lockup Representatives, which may withhold their consent in their sole discretion:
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Sell or Offer to Sell any Shares or Related Securities currently or hereafter owned either of record or beneficially (as defined in Rule 13d-3 under the Exchange Act) by the undersigned or such Family Member, |
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enter into any Swap, |
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make any demand for, or exercise any right with respect to, the registration under the Securities Act of the offer and sale of any Shares or Related Securities, or cause to be filed a registration statement, prospectus or prospectus supplement (or an amendment or supplement thereto) with respect to any such registration, or |
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publicly announce any intention to do any of the foregoing. |
The foregoing will not apply to the registration of the offer and sale of the Shares, and the sale of the Shares to the underwriters, in each case as contemplated by the Underwriting Agreement. In addition, the foregoing restrictions shall not apply to (i) the transfer of Shares or Related Securities as a bona fide gift, (ii) transfers or dispositions of the undersigneds Shares or Related Securities to any corporation, partnership, limited liability company or other entity of all of the beneficial ownership interests of which, in each case, are held by the undersigned or any Family Member, (iii) distributions of the undersigneds Shares or Related Securities to partners, members, stockholders or trust beneficiaries of the undersigned, (iv) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, the transfer of Shares or Related Securities to (A) another corporation, partnership limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 promulgated under the Securities Act) of the undersigned, (B) any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the undersigned or affiliates of the undersigned, or (C) limited partners, general partners, members, managers, managing members, entities described in the preceding clauses (A) and (B), (v) the transfer of Shares or Related Securities by operation of law, such as pursuant to a qualified domestic order, divorce settlement, divorce decree or separation agreement, or by will or intestate succession to the legal representative, heir, beneficiary or any Family Member or to a trust whose beneficiaries consist exclusively of one or more of the undersigned and/or a Family Member, (vi) transfers or dispositions of preferred stock to the Company in connection with the conversion of the outstanding preferred stock into Shares as disclosed in the final prospectus related to the Offering (the Prospectus), (vii) the transfer of Shares or Related Securities to the Company in connection with the termination of the undersigneds employment or other service with the Company, (viii) transfers of Shares to the Company as forfeitures to satisfy tax withholding and remittance obligations of the undersigned in connection with the vesting or exercise of equity awards granted pursuant to the Companys equity incentive plans or pursuant to a net exercise or cashless exercise by the stockholder of outstanding equity awards pursuant the Companys equity incentive plans that are described in the registration statement, or (ix) the transfer of Shares or Related Securities pursuant to a change of control of the Company (meaning the consummation of any bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of Shares the result of which is that any person (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act of more than 50% of the voting capital stock of the Company) after the Offering that has been approved by the independent members of the Companys board of directors, provided that in the event that such change of control is not completed, the Shares or Related Securities owned by the undersigned shall remain subject to the restrictions herein.
Notwithstanding the foregoing, it shall be a condition to such transfer that:
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in any such case as provided in clauses (i) through (iv), (a) each transferee executes and delivers to the Lockup Representatives an agreement in form and substance satisfactory to the Lockup Representatives stating that such transferee is receiving and holding such Shares and/or Related Securities subject to the provisions of this letter agreement and agrees not to Sell or Offer to Sell such Shares and/or Related Securities, engage in any Swap or engage in any other activities restricted under this letter agreement except in accordance with this letter agreement (as if such transferee had been an original signatory hereto) and (b) prior to the expiration of the Lock-up Period, no public disclosure or filing under the Exchange Act by any party to the transfer (donor, donee, transferor or transferee) shall be required, or made voluntarily; and |
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in any such case as provided in clauses (v) through (viii), prior to the expiration of the Lock-up Period, no public disclosure or filing under the Exchange Act by any party to the transfer (donor, donee, transferor or transferee) shall be required or made voluntarily during the Lock-up Period other than any required filing on Form 4, Form 5, Schedule 13D, Schedule 13F or Schedule 13G, which in each case shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in such clauses, as applicable, and in the case of clause (v) that the transferee has executed and delivered to the Lockup Representatives an agreement in form and substance satisfactory to the Lockup Representatives stating that such transferee is receiving and holding such Shares and/or Related Securities subject to the provisions of this letter agreement. |
If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any Company-directed Shares the undersigned may purchase or otherwise receive in the Offering (including pursuant to a directed share program).
[In the event that a director, officer or holder of at least 2.5% of the then outstanding Shares (measured as of the date of the Prospectus) who is a party to a lock-up agreement with the Lockup Representatives with respect to the Offering (collectively, the Restricted Parties) is released from its obligations under such lock-up agreement with respect to more than 2.5% in the aggregate of the then outstanding Shares (whether in one or multiple releases), then the same percentage of the total number of outstanding Shares held by the undersigned as the percentage of the total number of outstanding Shares held by such Restricted Party that are the subject of such release shall be immediately and fully released on the same terms from the applicable prohibitions set forth herein. Notwithstanding the foregoing, the provisions of this paragraph shall not apply (A) if the release or waiver is effected solely to permit a transfer not involving a disposition for value and if the transferee agrees in writing to be bound by the same terms described in this letter agreement to the extent and for the duration that such terms remain in effect at the time of transfer, (B) if the release or waiver is granted due to circumstances of any emergency or hardship of the undersigned, as determined by the Lockup Representatives after consultation with the Company or (C) if the release or waiver is granted to a holder of Shares or Related Securities in connection with an underwritten public offering (other than the Offering), whether or not such offering is wholly or partially a secondary offering, of Shares pursuant to a registration statement under the Securities Act, provided, that in the event of any release or waiver pursuant to this clause (C), the same percentage of the undersigneds Shares or Related Securities (determined as set forth above) shall be released, but only to the extent the undersigned has a right to participate in such underwritten public offering and has not been offered the opportunity to participate on a basis consistent with such rights in such underwritten public offering.]
Furthermore, notwithstanding the restrictions imposed by this letter agreement, the undersigned may (i) exercise an option to purchase Shares granted under any equity incentive plan or stock purchase plan of the Company, provided that the Shares issued upon such exercise shall continue to be subject to the restrictions on transfer set forth in this letter agreement, and provided further that no public disclosure or filing under the Exchange Act shall be required or made voluntarily during the Lock-up Period other than any required filing on Form 4, which shall clearly indicate in the footnotes thereto that the filing relates to the exercise of a stock option, that no Shares were sold by the reporting person and that the Shares received upon exercise of the stock option are subject to this letter agreement, (ii) establish a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Shares, provided that such plan does not provide for any transfers of Shares during the Lock-up Period and the entry into such plan is not publicly disclosed, including in any filing under the Exchange Act, during the Lock-Up Period, or (iii) transfer or dispose of Shares acquired in the Offering or in open market transactions after the date of the Prospectus; provided that no public disclosure or filing under the Exchange Act by any party to the transfer shall be required, or made voluntarily, during the Lock-Up Period.
In addition, if the undersigned is an officer or director of the Company, (i) the Lockup Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Shares, the Lockup Representatives will notify the Company of the impending release or waiver, and (ii) the Company (in accordance with the provisions of the Underwriting Agreement) will announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Lockup Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this letter agreement that are applicable to the transferor to the extent and for the duration that such terms remain in effect at the time of the transfer.
The undersigned also agrees and consents to the entry of stop transfer instructions with the Companys transfer agent and registrar against the transfer of Shares or Related Securities held by the undersigned and the undersigneds Family Members, if any, except in compliance with the foregoing restrictions.
With respect to the Offering only, the undersigned waives any registration rights relating to registration under the Securities Act of the offer and sale of any Shares and/or any Related Securities owned either of record or beneficially by the undersigned, including any rights to receive notice of the Offering.
The undersigned confirms that the undersigned has not, and has no knowledge that any Family Member has, directly or indirectly, taken any action designed to or that might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale of the Shares. The undersigned will not, and will cause any Family Member not to take, directly or indirectly, any such action.
The undersigned acknowledges and agrees that the underwriters have not provided any recommendation or investment advice nor have the underwriters solicited any action from the undersigned with respect to the Offering and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate.
Whether or not the Offering occurs as currently contemplated or at all depends on market conditions and other factors. The Offering will only be made pursuant to the Underwriting Agreement, the terms of which are subject to negotiation between the Company and the underwriters.
If (i) the Company notifies the Lockup Representatives in writing that it does not intend to proceed with the Offering, (ii) the Underwriting Agreement is not executed before December 31, 2021 (provided that the Company may by written notice to the undersigned prior to December 31, 2021 extend such date for a period up to an additional three months, in the event that the Underwriting Agreement has not been executed by such date), (iii) the Underwriting Agreement (other than the provisions thereof that survive termination) terminates or is terminated prior to payment for and delivery of the Shares, or (iv) the Company files an application with the Securities and Exchange Commission to withdraw the registration statement on Form S-1 related to the Offering, then in each case, this agreement shall automatically, and without any action on the part of any other party, terminate and be of no further force and effect, and the undersigned shall automatically be released from the obligations under this agreement.
The undersigned hereby represents and warrants that the undersigned has full power, capacity and authority to enter into this letter agreement. This letter agreement is irrevocable and will be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned.
This letter agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
Name of Security Holder |
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(Print Exact Name) | ||
By: |
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Signature | ||
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Printed Name of Person Signing | ||
(Indicate capacity of person signing if | ||
signing as custodian or trustee, or on behalf of an entity) |
[Signature Page to Lock-up Agreement]
Annex A
Certain Defined Terms
Used in Lock-up Agreement
For purposes of the letter agreement to which this Annex A is attached and of which it is made a part:
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Call Equivalent Position shall have the meaning set forth in Rule 16a-1(b) under the Exchange Act. |
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Exchange Act shall mean the Securities Exchange Act of 1934, as amended. |
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Family Member shall mean the spouse of the undersigned, an immediate family member of the undersigned or an immediate family member of the undersigneds spouse, in each case living in the undersigneds household or whose principal residence is the undersigneds household (regardless of whether such spouse or family member may at the time be living elsewhere due to educational activities, health care treatment, military service, temporary internship or employment or otherwise). Immediate family member as used above shall have the meaning set forth in Rule 16a-1(e) under the Exchange Act. |
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Lock-up Period shall mean the period beginning on the date hereof and continuing through the close of trading on the date that is 180 days after the date of the Prospectus (as defined in the Underwriting Agreement). |
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Put Equivalent Position shall have the meaning set forth in Rule 16a-1(h) under the Exchange Act. |
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Related Securities shall mean any options or warrants or other rights to acquire Shares or any securities exchangeable or exercisable for or convertible into Shares, or to acquire other securities or rights ultimately exchangeable or exercisable for or convertible into Shares. |
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Securities Act shall mean the Securities Act of 1933, as amended. |
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Sell or Offer to Sell shall mean to: |
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sell, offer to sell, contract to sell or lend, |
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effect any short sale or establish or increase a Put Equivalent Position or liquidate or decrease any Call Equivalent Position |
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pledge, hypothecate or grant any security interest in, or |
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in any other way transfer or dispose of, |
in each case whether effected directly or indirectly.
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Swap shall mean any swap, hedge or similar arrangement or agreement that transfers, in whole or in part, the economic risk of ownership of Shares or Related Securities, regardless of whether any such transaction is to be settled in securities, in cash or otherwise. |
Capitalized terms not defined in this Annex A shall have the meanings given to them in the body of this lock-up agreement.
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ICOSAVAX, INC.
Icosavax, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the General Corporation Law),
DOES HEREBY CERTIFY:
1. That the name of this corporation is Icosavax, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on November 1, 2017 under the name IcosaVax, Inc.
2. That the Board of Directors duly adopted resolutions proposing to amend and restate the Amended and Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:
RESOLVED, that the Amended and Restated Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:
FIRST: The name of this corporation is Icosavax, Inc. (the Corporation).
SECOND: The address of the registered office of the Corporation in the State of Delaware is 251 Little Falls Drive, Wilmington, Delaware 19808, New Castle County. The name of its registered agent at such address is Corporation Service Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.
FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 134,329,408 shares of Common Stock, $0.0001 par value per share (Common Stock) and (ii) 89,908,215 shares of Preferred Stock, $0.0001 par value per share (Preferred Stock).
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.
2. Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings); provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation or pursuant to the General Corporation Law. There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Amended and Restated Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
B. PREFERRED STOCK
49,193,959 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-1 Preferred Stock, 4,949,794 shares of the authorized Preferred Stock of the Corporation are hereby designated Series A-2 Preferred Stock, 32,958,612 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated Series B-1 Preferred Stock, and 2,805,850 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated Series B-2 Preferred Stock, with the respective rights, preferences, powers, privileges and restrictions, qualifications and limitations set forth herein. Unless otherwise indicated, references to sections or subsections in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth. As used herein, (i) Series A Preferred Stock means, collectively, Series A-1 Preferred Stock and Series A-2 Preferred Stock and (ii) Series B Preferred Stock means, collectively, Series B-1 Preferred Stock and Series B-2 Preferred Stock.
1. Dividends. |
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From and after the date of the issuance of any shares of Preferred Stock, the holders of Preferred Stock shall be entitled to receive a non-cumulative dividend of eight percent (8%) per annum of the Series A-1 Original Issue Price (as defined herein), the Series A-2 Original Issue Price (as defined herein), the Series B-1 Original Issue Price (as defined herein), or the Series B-2 Original Issue Price (as defined herein), as applicable. Such dividends shall be payable only when, as, and if declared by the Board of Directors and the Corporation shall be under no obligation to pay such dividends. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Amended and Restated Certificate of Incorporation) the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Preferred Stock as would equal the product of (A) the dividend payable on
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each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series A-1 Original Issue Price, Series A-2 Original Issue Price, Series B-1 Original Issue Price, or Series B-2 Original Issue Price, as applicable; provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Preferred Stock dividend. The Series A-1 Original Issue Price shall mean $0.9615 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A-1 Preferred Stock. The Series A-2 Original Issue Price shall mean $0.7692 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A-2 Preferred Stock. The Series B-1 Original Issue Price shall mean $2.82172 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B-1 Preferred Stock. The Series B-2 Original Issue Price shall mean $2.39846 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B-2 Preferred Stock.
2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.
2.1 Preferential Payments to Holders of Preferred Stock. In (a) the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders or, (b) the case of a Deemed Liquidation Event (as defined below), the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or the Available Proceeds (as defined below), in each case ((a) and (b)), on a pro rata, pari passu basis, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) one times the Series A-1 Original Issue Price, Series A-2 Original Issue Price, Series B-1 Original Issue Price, or Series B-2 Original Issue Price, as applicable, plus any dividends declared but unpaid thereon and (ii) such amount per share as would have been payable had all shares of such series of Preferred Stock been converted to Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the Preferred Stock Liquidation Amount). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Preferred
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Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
2.2 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment in full of all Preferred Stock Liquidation Amounts required to be paid to the holders of shares of Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Preferred Stock pursuant to Section 2.1 or the remaining Available Proceeds, as the case may be, shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.
2.3 Deemed Liquidation Events.
2.3.1 Definition. Each of the following events shall be considered a Deemed Liquidation Event unless the holders of at least a seventy percent (70%) of the outstanding shares of Series A-1 Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock, voting together as a single class on an as-converted basis (collectively, the Requisite Holders) elect otherwise:
(a) a merger or consolidation in which
(i) the Corporation is a constituent party or
(ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,
except any such merger or consolidation involving the Corporation or a subsidiary effected for the sole purpose of changing the domicile of the Corporation or in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or
(b) (1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or (2) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.
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2.3.2 Effecting a Deemed Liquidation Event.
(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the Merger Agreement) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be paid to the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2.
(b) In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (ii) to require the redemption of such shares of Preferred Stock, and (ii) if the Requisite Holders so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the Available Proceeds), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Preferred Stock at a price per share equal to the applicable Preferred Stock Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall redeem a pro rata portion of each holders shares of Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. The Board of Directors of the Corporation shall determine in good faith commercially reasonable procedures for the redemption of the shares of Preferred Stock pursuant to this Subsection 2.3.2(b). Prior to the distribution or redemption provided for in this Subsection 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.
2.3.3 Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities to be paid or distributed to such holders pursuant to such Deemed Liquidation Event. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation, including at least three (3) of the Preferred Directors.
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2.3.4 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the Additional Consideration), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the Initial Consideration) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.3.4, consideration placed into escrow or retained as a holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event and earn-out or milestone consideration payable based upon events occurring after the consummation of such Deemed Liquidation Event shall be deemed to be Additional Consideration.
3. Voting. |
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3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate of Incorporation, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class and on an as converted to Common Stock basis.
3.2 Election of Directors. The holders of record of the shares of Series A-1 Preferred Stock, exclusively and as a separate class, shall be entitled to elect four (4) directors of the Corporation (the Series A-1 Directors), and the holders of record of the shares of Series B Preferred Stock, voting together as a single class on an as-converted basis, shall be entitled to elect one (1) director of the Corporation (the Series B Director and, together with the Series A-1 Directors, the Preferred Directors). Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of shares of Series A-1 Preferred Stock or Series B Preferred Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Series A-1 Preferred Stock or Series B Preferred Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock
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and of any other class or series of voting stock (including the Preferred Stock), voting together as a single class on an as-converted basis, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Subsection 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2; provided, however, that for administrative convenience, the initial Series B Director may be appointed by the Board of Directors in connection with the approval of the initial issuance of Series B Preferred Stock without a separate action by the holders of record of the shares of Series B Preferred Stock.
3.3 Preferred Stock Protective Provisions. At any time when shares of Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, recapitalization, reclassification, or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the Requisite Holders given in writing or by vote at a meeting, consenting or voting (as the case may be) together as a single class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.
3.3.1 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;
3.3.2 amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or Bylaws of the Corporation;
3.3.3 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock (excluding any shares of Preferred Stock issued pursuant to that certain Series B Preferred Stock Purchase Agreement, dated on or after the filing date of this Amended and Restated Certificate of Incorporation, among the Corporation and the Investors named therein (as the same may be amended from time to time in accordance with its terms, the Purchase Agreement) or shares of Common Stock issued on conversion thereof), or increase the authorized number of shares of Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock of the Corporation;
3.3.4 (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation,
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the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege;
3.3.5 sell, issue, sponsor, create or distribute any digital tokens, cryptocurrency or other blockchain-based assets (collectively, Tokens), including through a pre-sale, initial coin offering, token distribution event or crowdfunding, or through the issuance of any instrument convertible into or exchangeable for Tokens;
3.3.6 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, or (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;
3.3.7 create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary;
3.3.8 amend or increase the number of shares of capital stock of the Corporation reserved for issuance pursuant to the Corporations 2017 Equity Incentive Plan (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock) or adopt or set aside or reserve shares of capital stock for issuance to the Corporations employees, consultants, advisors and directors pursuant to any similar equity incentive plan;
3.3.9 purchase or acquire, either directly or indirectly (including pursuant to any merger or consolidation or asset or stock purchase) any business, material assets of any business or securities in any other entity;
3.3.10 sell, license, transfer or otherwise dispose of assets of the Corporation having a value in excess of $500,000 outside of the ordinary course of business or incur any indebtedness in excess of $500,000 in the aggregate;
3.3.11 increase or decrease the authorized number of directors constituting the Board of Directors;
3.3.12 take any action with respect to any direct or indirect subsidiary of the Corporation, that if taken by the Corporation, would require approval pursuant to the protective provisions herein; or
3.3.13 amend this Subsection 3.3.
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3.4 Series B Preferred Stock Protective Provisions. At any time when shares of Series B Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, recapitalization, reclassification, or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the Series B Preferred Stock given in writing or by vote at a meeting, consenting or voting (as the case may be) together as a separate class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.
3.4.1 amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series B Preferred Stock;
3.4.2 create, or authorize the creation of, or issue or obligate itself to issue additional shares of Series B Preferred Stock, or increase the authorized number of shares of Series B Preferred Stock;
3.4.3 (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series B Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series B Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series B Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series B Preferred Stock in respect of any such right, preference or privilege; or
3.4.4 create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one (1) or more other subsidiaries) by the Corporation, or permit any subsidiary to create, or authorize the creation of, or issue or obligate itself to issue, any shares of any class or series of capital stock.
3.5 Series A Preferred Stock Protective Provisions. At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, recapitalization, reclassification, or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the Series A Preferred Stock given in writing or by vote at a meeting, consenting or voting (as the case may be) together as a separate class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.
3.5.1 amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock;
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3.5.2 create, or authorize the creation of, or issue or obligate itself to issue additional shares of Series A Preferred Stock, or increase the authorized number of shares of Series A Preferred Stock;
3.5.3 (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege; or
3.5.4 create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one (1) or more other subsidiaries) by the Corporation, or permit any subsidiary to create, or authorize the creation of, or issue or obligate itself to issue, any shares of any class or series of capital stock.
4. Optional |
Conversion. |
The holders of the Preferred Stock shall have conversion rights as follows (the Conversion Rights):
4.1 Right to Convert.
4.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A-1 Original Issue Price, Series A-2 Original Issue Price, Series B-1 Original Issue Price, or Series B-2 Original Issue Price, as applicable, by the applicable Conversion Price (as defined below) in effect at the time of conversion; provided that such holder may waive such option to convert upon written notice to the Corporation. The Series A-1 Conversion Price shall initially be $0.9615. The Series A-2 Conversion Price shall initially be $0.7692. The Series B-1 Conversion Price shall initially be $2.82172. The Series B-2 Conversion Price shall initially be $2.39846. The Conversion Price shall mean (i) with respect to any shares of Series A-1 Preferred Stock, the Series A-1 Conversion Price,(ii) with respect to any shares of Series A-2 Preferred Stock, the Series A-2 Conversion Price, (iii) with respect to any shares of Series B-1 Preferred Stock, the Series B-1 Conversion Price, or (iv) with respect to any shares of Series B-2 Preferred Stock, the Series B-2 Conversion Price. Such initial Series A-1 Conversion Price, Series A-2 Conversion Price, Series B-1 Conversion Price, and Series B-2 Conversion Price, and the rate at which shares of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B-1 Preferred Stock, and Series B-2 Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
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4.1.2 Termination of Conversion Rights. In the event of a notice of redemption of any shares of Preferred Stock pursuant to Section 2.3.2(b), the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.
4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
4.3 Mechanics of Conversion.
4.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporations transfer agent at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holders shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holders shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holders name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the Conversion Time), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common
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Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.
4.3.2 Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Amended and Restated Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Conversion Price of any series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price.
4.3.3 Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of any series of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of such series of Preferred Stock accordingly.
4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price of such series of Preferred Stock shall be made for any declared but unpaid dividends on such series of Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
4.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
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4.4 Adjustments to Conversion Price for Diluting Issues.
4.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) Option shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(b) Series B Original Issue Date shall mean the date on which the first share of Series B Preferred Stock was issued.
(c) Convertible Securities shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.
(d) Additional Shares of Common Stock shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series B Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, Exempted Securities):
(i) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;
(ii) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6, 4.7 or 4.8;
(iii) shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Requisite Holders or that is in effect as of the date of the filing of the Amended and Restated Certificate of Incorporation;
(iv) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;
(v) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, real property lessors, or to other persons engaged in the business of making loans, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including the approval of at least three (3) of the Preferred Directors;
(vi) shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, acquisitions agreements, development, OEM, marketing or other similar agreements or
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strategic partnerships approved by the Board of Directors of the Corporation, including the approval of at least three (3) of the Preferred Directors;
(vii) shares of Common Stock, Options or Convertible Securities issued as acquisition consideration pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Requisite Holders;
(viii) shares of Common Stock issued or issuable in a Qualified Public Offering (as defined below);
(ix) shares of Common Stock, Options, Convertible Securities or other securities which are explicitly excluded by the affirmative vote of the Requisite Holders; and
(x) shares of Preferred Stock issued pursuant to the Purchase Agreement.
4.4.2 No Adjustment of Conversion Price. No adjustment in the Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Requisite Holders agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.
4.4.3 Deemed Issue of Additional Shares of Common Stock.
(a) If the Corporation at any time or from time to time after the Series B Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.
(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or
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Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series B Original Issue Date), are revised after the Series B Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price pursuant to the terms of Subsection 4.4.4, the Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise,
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conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
4.4.4 Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Series B Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issuance or deemed issuance, then the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:
CP2 = CP1 * (A + B) ÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
(i) CP2 shall mean the Conversion Price in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock;
(ii) CP1 shall mean the Conversion Price in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;
(iii) A shall mean the number of shares of Common Stock outstanding immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issuance or deemed issuance or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
(iv) B shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued or deemed issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and
(v) C shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5 Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issuance or deemed issuance of any Additional Shares of Common Stock shall be computed as follows:
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(a) Cash and Property: Such consideration shall:
(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;
(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and
(iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.
(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:
(i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
4.4.6 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).
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4.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series B Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series B Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
4.6 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series B Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.
4.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series B Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property
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and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.
4.8 Adjustment for Merger or Reorganization, etc. Subject to the provisions of Subsection 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.
4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Preferred Stock.
4.10 Notice of Record Date. In the event:
(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
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(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,
then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.
5. Mandatory Conversion.
5.1 Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public at a price of at least $4.23258 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $50,000,000 of gross proceeds to the Corporation and in connection with such offering the Common Stock is listed for trading on the Nasdaq Global Market or the New York Stock Exchange or another exchange or marketplace approved by the Board of Directors, including the approval of at least three (3) Preferred Directors (a Qualified Public Offering), or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Holders (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the Mandatory Conversion Time), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1. and (ii) such shares may not be reissued by the Corporation.
5.2 Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the
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Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.
6. Redemption. The Preferred Stock is not redeemable except in accordance with Subsection 2.3.2(b).
7. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.
8. Waiver. Except as otherwise set forth herein, any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of Preferred Stock by the affirmative written consent or vote of the Requisite Holders.
9. Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.
FIFTH: Subject to any additional vote required by this Amended and Restated Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.
SIXTH: Subject to any additional vote required by this Amended and Restated Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation. Each director shall be entitled to one vote on
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each matter presented to the Board of Directors; provided, however, that, so long as the holders of Preferred Stock are entitled to elect the Preferred Directors, the affirmative vote of at least three (3) of the Preferred Directors shall be required for the authorization by the Board of Directors of any of the matters set forth in Section 5.5 of the Amended and Restated Investors Rights Agreement, dated on or after the filing date of this Amended and Restated Certificate of Incorporation, by and among the Corporation and the other parties thereto, as such agreement may be amended from time to time.
SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
NINTH: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
TENTH: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.
Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not (a) adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification or (b) increase the liability of any director of the Corporation with respect to any acts or omissions of such director, officer or agent occurring prior to, such amendment, repeal or modification.
ELEVENTH: The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An Excluded Opportunity is any matter, transaction or interest
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that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are Covered Persons), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Persons capacity as a director of the Corporation while such Covered Person is performing services in such capacity. Any repeal or modification of this Article Eleventh will only be prospective and will not affect the rights under this Article Eleventh in effect at the time of the occurrence of any actions or omissions to act giving rise to liability. Notwithstanding anything to the contrary contained elsewhere in this Amended and Restated Certificate of Incorporation, the affirmative vote of the Requisite Holders will be required to amend or repeal, or to adopt any provisions inconsistent with, this Article Eleventh.
TWELFTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporations stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporations certificate of incorporation or bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article Twelfth shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Twelfth (including, without limitation, each portion of any sentence of this Article Twelfth containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
THIRTEENTH: Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by the Corporation, its officers and directors, the underwriters of any offering giving rise to such complaint, and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. Any person or entity purchasing or otherwise acquiring any interest in
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any security of the Corporation shall be deemed to have notice of and consented to this Article Thirteenth.
FOURTEENTH: For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Amended and Restated Certificate of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under this Amended and Restated Certificate of Incorporation), such repurchase may be made without regard to any preferential dividends arrears amount or preferential rights amount (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any preferential dividends arrears amount or preferential rights amount (as those terms are defined therein) shall be deemed to be zero (0).
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3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
4. That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporations Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
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IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 19th day of March, 2021.
By: |
/s/ Adam K. Simpson |
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Name: Adam K. Simpson |
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Title: President and Chief Executive Officer |
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CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Icosavax, Inc. (the Corporation), which originally filed its Certificate of Incorporation with the Secretary of State of Delaware on November 1, 2017 under the name IcosaVax, Inc. and is organized and existing under the General Corporation Law of the State of Delaware, hereby certifies as follows:
1. That the Board of Directors of said Corporation duly adopted resolutions proposing and declaring advisable the following amendments of the Amended and Restated Certificate of Incorporation (as amended, the Certificate) of said Corporation. The resolutions setting forth the proposed amendments are as follows:
RESOLVED, that the first two sentences of Article Fourth of the Certificate are hereby amended and restated in their entirety as follows:
The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 134,329,408 shares of Common Stock, par value $0.0001 per share (Common Stock), and (ii) 89,908,215 shares of Preferred Stock, par value $0.0001 per share (Preferred Stock).
Effective upon the filing of this Certificate of Amendment with the Secretary of State of the State of Delaware, a 1-for-4.1557 reverse stock split for each share of Common Stock outstanding or held in treasury immediately prior to such time shall automatically and without any action on the part of the holders thereof occur (the Reverse Stock Split). The par value of the Common Stock shall remain $0.0001 per share. This conversion shall apply to all shares of Common Stock. No fractional shares of Common Stock shall be issued upon the Reverse Stock Split or otherwise. In lieu of any fractional shares of Common Stock to which the stockholder would otherwise be entitled upon the Reverse Stock Split, the Company shall pay cash equal to such fraction multiplied by the then fair market value of the Common Stock as determined by the Corporations Board of Directors.
All certificates representing shares of Common Stock outstanding immediately prior to the filing of this Certificate of Amendment shall immediately after the filing of this Certificate of Amendment represent instead the number of shares of Common Stock as provided above. Notwithstanding the foregoing, any holder of Common Stock may (but shall not be required to) surrender his, her or its stock certificate or certificates to the Company, and upon such surrender the holder may request that the Company issue a certificate for the correct number of shares of Common Stock to which the holder is entitled under the provisions of this Certificate of Amendment. Shares of Common Stock that were outstanding prior to the filing of this Certificate of Amendment, and that are not outstanding after and as a result of the filing of this Certificate of Amendment, shall resume the status of authorized but unissued shares of Common Stock.
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.
2. That thereafter, pursuant to a resolution of the Board of Directors and in lieu of a meeting of stockholders, the stockholders gave their approval of said amendment by written consent in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.
3. That said amendment was duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.
4. That said amendment shall be executed, filed and recorded in accordance with Section 103 of the General Corporation Law of the State of Delaware.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, this Certificate of Amendment has been executed by a duly authorized officer of the Corporation on this 21st day of July, 2021.
By: |
/s/ Adam Simpson |
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Name: Adam Simpson |
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Title: Chief Executive Officer |
Exhibit 4.1
ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS# COMMON STOCK COMMON STOCK PO PAR VALUE $0.0001 MR ADD ADD ADD ADD 4 3 2 1 A BOX DESIGNATION SAMPLE Certificate Shares 505006, FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Icosavax, Inc. (hereinafter called the Company), transferable on the books of the Company in person or by Total DTC duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares Holder represented hereby, are issued and shall be held subject to all of the provisions of the Certificate of Number Certificate of Insurance ID Incorporation, as amended, and the By-Laws, as amended, of the Company (copies of which are on file with the Value Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Transaction Shares CUSIP/IDENTIFIER Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Numbers 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. DATED DD-MMM-YYYY AVAX, FACSIMILE SIGNATURE TO COME S I COUNTERSIGNED AND REGISTERED: CO POR N I R A C COMPUTERSHARE TRUST COMPANY, N.A. Numb/No 12345678901234512345678 CO TE 666 555 444 333 222 111 Denom. President TRANSFER AGENT AND REGISTRAR, XXXXXX 11/1/2017 Total. DEL RE FACSIMILE SIGNATURE TO COME AWA 7 00.1,000,000 XX 123456 XXXXXXXXXX X By Secretary AUTHORIZED SIGNATURE
ICOSAVAX, INC
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: | ||||||
TEN COM | - as tenants in common | UNIF GIFT MIN ACT | -.......................................Custodian.................................... | |||
(Cust) (Minor) | ||||||
TEN ENT | - as tenants by the entireties | under Uniform Gifts to Minors Act..................................... | ||||
(State) | ||||||
JT TEN | - as joint tenants with right of survivorship | UNIF TRF MIN ACT | -.....................................Custodian (until age.......................) | |||
and not as tenants in common | (Cust) | |||||
................under Uniform Transfers to Minors Act............... | ||||||
(Minor) (State) | ||||||
Additional abbreviations may also be used though not in the above list. |
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE | ||
For value received,________________________ hereby sell, assign and transfer unto |
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(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) | ||
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Shares | |
of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint | ||
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Attorney | |
to transfer the said stock on the books of the within-named Company with full power of substitution in the premises. |
Dated: __________________________________________ 20__________________
Signature:____________________________________________________________
Signature:_____________________________________________________________ |
Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15. |
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Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever. |
Exhibit 5.1
12670 High Bluff Drive, | ||||||||
San Diego, California 92130 | ||||||||
Tel: +1.858.523.5400 Fax: +1.858.523.5450 | ||||||||
www.lw.com | ||||||||
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FIRM / AFFILIATE OFFICES | |||||||
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July 22, 2021 | Düsseldorf | Rome | ||||||
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Icosavax, Inc. |
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Re: Registration Statement No. 333-257733; 11,500,000 shares of Common Stock, par value $0.0001 per share
Ladies and Gentlemen:
We have acted as special counsel to Icosavax, Inc., a Delaware corporation (the Company), in connection with the proposed issuance of up to 11,500,000 shares (including up to 1,500,000 shares subject to the underwriters option to purchase additional shares) of common stock, $0.0001 par value per share (the Shares). The Shares are included in a registration statement on Form S-1 under the Securities Act of 1933, as amended (the Act), filed with the Securities and Exchange Commission (the Commission) on July 7, 2021 (File No. 333-257733) (as amended, the Registration Statement). The term Shares shall include any additional shares of common stock registered by the Company pursuant to Rule 462(b) under the Act in connection with the offering contemplated by the Registration Statement. This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related Prospectus, other than as expressly stated herein with respect to the issue of the Shares.
As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. With your consent, we have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We are opining herein as to the General Corporation Law of the State of Delaware and we express no opinion with respect to any other laws.
Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, when the Shares shall have been duly registered on the books of the transfer agent and registrar therefor in the name or on behalf of the purchasers, and have been issued by the Company against payment therefor in the circumstances contemplated by the form of underwriting agreement most recently filed as an exhibit to the Registration Statement, the issue and sale of the Shares will have been duly authorized by all necessary corporate action of the Company, and the Shares will be validly issued, fully paid and nonassessable. In rendering the foregoing opinion, we have assumed that the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the General Corporation Law of the State of Delaware.
July 22, 2021
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This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading Legal Matters. We further consent to the incorporation by reference of this letter and consent into any registration statement filed pursuant to Rule 462(b) with respect to the Shares. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.
Very truly yours, |
/s/ Latham & Watkins LLP |
Exhibit 10.2
ICOSAVAX, INC.
2021 INCENTIVE AWARD PLAN
ARTICLE I.
PURPOSE
The Plans purpose is to enhance the Companys ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities and/or equity-linked compensatory opportunities. Capitalized terms used in the Plan are defined in Article XI.
ARTICLE II.
ELIGIBILITY
Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein.
ARTICLE III.
ADMINISTRATION AND DELEGATION
3.1 Administration. The Plan is administered by the Administrator. The Administrator has authority to determine which Service Providers receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions and reconcile inconsistencies in the Plan or any Award Agreement as it deems necessary or appropriate to administer the Plan and any Awards. The Administrators determinations under the Plan are in its sole discretion and will be final and binding on all persons having or claiming any interest in the Plan or any Award.
3.2 Appointment of Committees. To the extent Applicable Laws permit, the Board or the Administrator may delegate any or all of its powers under the Plan to one or more Committees or committees of officers of the Company or any of its Subsidiaries. The Board or the Administrator, as applicable, may rescind any such delegation, abolish any such committee or Committee and/or re-vest in itself any previously delegated authority at any time.
ARTICLE IV.
STOCK AVAILABLE FOR AWARDS
4.1 Number of Shares. Subject to adjustment under Article VIII and the terms of this Article IV, Awards may be made under the Plan covering up to the Overall Share Limit. As of the Plans effective date, the Company will cease granting awards under the Prior Plan; however, the Prior Plan Awards will remain subject to the terms of the Prior Plan. Shares issued under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares.
4.2 Share Recycling. If all or any part of an Award or a Prior Plan Award expires, lapses or is terminated, exchanged for or settled in cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award or Prior Plan Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award or Prior Plan Award, the unused Shares covered by the Award or Prior Plan Award will, as applicable, become
or again be available for Award grants under the Plan. Further, Shares delivered (either by actual delivery or attestation) to the Company by a Participant to satisfy the applicable exercise or purchase price of an Award or Prior Plan Award and/or to satisfy any applicable tax withholding obligation with respect to an Award or Prior Plan Award (including Shares retained by the Company from the Award or Prior Plan Award being exercised or purchased and/or creating the tax obligation) will, as applicable, become or again be available for Award grants under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not count against the Overall Share Limit.
4.3 Incentive Stock Option Limitations. Notwithstanding anything to the contrary herein, no more than 50,000,000 Shares may be issued pursuant to the exercise of Incentive Stock Options.
4.4 Substitute Awards. In connection with an entitys merger or consolidation with the Company or the Companys acquisition of an entitys property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees, Consultants or Directors prior to such acquisition or combination.
4.5 Non-Employee Director Compensation. Notwithstanding any provision to the contrary in the Plan, the Administrator may establish compensation for non-employee Directors from time to time, subject to the limitations in the Plan. The Administrator will from time to time determine the terms, conditions and amounts of all such non-employee Director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of Awards granted to a non-employee Director as compensation for services as a non-employee Director during any calendar year of the Company may not exceed $1,000,000 (increased to $1,500,000 in the calendar year of a non-employee Directors initial service as a non-employee director or any calendar year during which a non-employee Director serves as chairman of the Board or lead independent Director, which limits shall not apply to the compensation for any non-employee Director of the Company who serves in any capacity in addition to that of a non-employee Director for which he or she receives additional compensation or any compensation paid to any non-employee Director prior to the calendar year following the calendar year in which the Plans effective date occurs). The Administrator may make exceptions to this limit for individual non-employee Directors in extraordinary circumstances, as the Administrator may determine in its discretion, provided that the non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee Directors.
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ARTICLE V.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 General. The Administrator may grant Options or Stock Appreciation Rights to Service Providers subject to the limitations in the Plan, including any limitations in the Plan that apply to Incentive Stock Options. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value or a combination of the two as the Administrator may determine or provide in the Award Agreement.
5.2 Exercise Price. The Administrator will establish each Options and Stock Appreciation Rights exercise price and specify the exercise price in the Award Agreement. The exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option (subject to Section 5.6) or Stock Appreciation Right. Notwithstanding the foregoing, in the case of an Option or a Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Shares subject to such Option or Stock Appreciation Right, as applicable, may be less than the Fair Market Value per share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Sections 424 and 409A of the Code.
5.3 Duration. Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that, subject to Section 5.6, the term of an Option or Stock Appreciation Right will not exceed ten (10) years. Notwithstanding the foregoing and unless determined otherwise by the Company, to the extent permitted under Applicable Laws, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, violates the non-competition, non-solicitation, confidentiality or other similar restrictive covenant provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company or any of its Subsidiaries, the right of the Participant and the Participants transferees to exercise any Option or Stock Appreciation Right issued to the Participant shall terminate immediately upon such violation, unless the Company otherwise determines.
5.4 Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form the Administrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (i) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (ii) as specified in Section 9.5 for any applicable taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.
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5.5 Payment Upon Exercise. Subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, the exercise price of an Option must be paid by:
(a) cash, wire transfer of immediately available funds or by check payable to the order of the Company, provided that the Company may limit the use of one of the foregoing payment forms if one or more of the payment forms below is permitted;
(b) if there is a public market for Shares at the time of exercise, unless the Company otherwise determines, (A) delivery (including electronically or telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price, or (B) the Participants delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount is paid to the Company at such time as may be required by the Administrator;
(c) to the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their fair market value;
(d) to the extent permitted by the Administrator, surrendering Shares then issuable upon the Options exercise valued at their fair market value on the exercise date;
(e) to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration; or
(f) to the extent permitted by the Company, any combination of the above payment forms approved by the Administrator.
5.6 Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Options grant date, and the term of the Option will not exceed five (5) years. All Incentive Stock Options will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within (i) two (2) years from the grant date of the Option or (ii) one (1) year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an incentive stock option under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an incentive stock option under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Non-Qualified Stock Option. The foregoing terms shall be incorporated into any Award Agreement evidencing an Option intended to be an Incentive Stock Option to the extent necessary to cause such Award to so qualify.
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ARTICLE VI.
RESTRICTED STOCK; RESTRICTED STOCK UNITS
6.1 General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to the Companys right to repurchase all or part of such Shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such Shares) if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant to Service Providers Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement.
6.2 Restricted Stock.
(a) Dividends. Participants holding Shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such Shares, unless the Administrator provides otherwise in the Award Agreement. In addition, unless the Administrator provides otherwise, if any dividends or distributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the Shares or other property will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. Notwithstanding anything to the contrary herein, unless otherwise determined by the Administrator, with respect to any award of Restricted Stock, dividends which are paid to holders of Common Stock prior to vesting shall only be paid out to a Participant holding such Restricted Stock to the extent that the vesting conditions are subsequently satisfied. All such dividend payments will be made no later than March 15 of the calendar year following the calendar year in which the right to the dividend payment becomes nonforfeitable.
(b) Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of Shares of Restricted Stock, together with a stock power endorsed in blank.
6.3 Restricted Stock Units.
(a) Settlement. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participants election, in a manner intended to comply with Section 409A.
(b) Stockholder Rights. A Participant will have no rights of a stockholder with respect to Shares subject to any Restricted Stock Unit unless and until the Shares are delivered in settlement of the Restricted Stock Unit.
ARTICLE VII.
OTHER STOCK OR CASH BASED AWARDS; DIVIDEND EQUIVALENTS
7.1 Other Stock or Cash Based Awards. Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in the future and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines.
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7.2 Dividend Equivalents. A grant of Restricted Stock Units or Other Stock or Cash Based Award may provide a Participant with the right to receive Dividend Equivalents, and no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Award with to which the Dividend Equivalents are paid and subject to other terms and conditions as set forth in the Award Agreement. Notwithstanding anything to the contrary herein, unless otherwise determined by the Administrator, Dividend Equivalents with respect to an Award shall only be paid out to a Participant to the extent that the vesting conditions are subsequently satisfied. All such Dividend Equivalent payments will be made no later than March 15 of the calendar year following the calendar year in which the right to the Dividend Equivalent payment becomes nonforfeitable, unless determined otherwise by the Administrator or unless deferred in a manner intended to comply with Section 409A.
ARTICLE VIII.
ADJUSTMENTS FOR CHANGES IN COMMON STOCK
AND CERTAIN OTHER EVENTS
8.1 Equity Restructuring(a) . In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, the Administrator will equitably adjust each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Awards exercise price or grant price (if applicable), granting new Awards to Participants, and making a cash payment to Participants. The adjustments provided under this Section 8.1 will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.
8.2 Corporate Transactions. In the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change), is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Laws or accounting principles:
(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participants rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained
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upon the exercise or settlement of the vested portion of such Award or realization of the Participants rights, in any case, is equal to or less than zero, then the Award may be terminated without payment; provided, further, that Awards held by members of the Board will be settled in Shares on or immediately prior to the applicable event if the Administrator takes action under this clause (a);
(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;
(c) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator;
(d) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV on the maximum number and kind of shares which may be issued) and/or in the terms and conditions of (including the grant or exercise price or applicable performance goals), and the criteria included in, outstanding Awards;
(e) To replace such Award with other rights or property selected by the Administrator; and/or
(f) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
8.3 Effect of Non-Assumption in a Change in Control. Notwithstanding the provisions of Section 8.2, if a Change in Control occurs and a Participants Awards are not continued, converted, assumed, or replaced with a substantially similar award by (a) the Company, or (b) a successor entity or its parent or subsidiary (an Assumption), and provided that the Participant has not had a Termination of Service, then, immediately prior to the Change in Control, such Awards shall become fully vested, exercisable and/or payable, as applicable, and all forfeiture, repurchase and other restrictions on such Awards shall lapse, in which case, such Awards shall be canceled upon the consummation of the Change in Control in exchange for the right to receive the Change in Control consideration payable to other holders of Common Stock (i) which may be on such terms and conditions as apply generally to holders of Common Stock under the Change in Control documents (including, without limitation, any escrow, earn-out or other deferred consideration provisions) or such other terms and conditions as the Administrator may provide, and (ii) determined by reference to the number of Shares subject to such Awards and net of any applicable exercise price; provided that to the extent that any Awards constitute nonqualified deferred compensation that may not be paid upon the Change in Control under Section 409A without the imposition of taxes thereon under Section 409A, the timing of such payments shall be governed by the applicable Award Agreement (subject to any deferred consideration provisions applicable under the Change in Control documents); and provided, further, that if the amount to which a Participant would be entitled upon the settlement or exercise of such Award at the time of the Change in Control is equal to or less than zero, then such Award may be terminated without payment. An Award will be considered replaced with a comparable award if the Award is exchanged for an amount of cash or other property with a value equal to the amount that could have been obtained upon the settlement of such Award in such Change in Control (as determined by the Administrator), even if such cash or other property payable with respect to the unvested portion of such Award remains subject to similar vesting provisions following such Change in Control. Notwithstanding the foregoing, the Administrator will have full and final authority to determine whether an Assumption of an Award has occurred in connection with a Change in Control.
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8.4 Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the Share price, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to sixty (60) days before or after such transaction.
8.5 General. Except as expressly provided in the Plan or the Administrators action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8.1 or the Administrators action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Awards grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Companys right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Companys capital structure or its business, (ii) any merger, consolidation dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under this Article VIII.
ARTICLE IX.
GENERAL PROVISIONS APPLICABLE TO AWARDS
9.1 Transferability. Except as the Administrator may determine or provide in an Award Agreement or otherwise for Awards other than Incentive Stock Options, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except for certain Designated Beneficiary designations, by will or the laws of descent and distribution, or, subject to the Administrators consent, pursuant to a domestic relations order, and, during the life of the Participant, will be exercisable only by the Participant. Any permitted transfer of an Award hereunder shall be without consideration, except as required by Applicable Law. References to a Participant, to the extent relevant in the context, will include references to a Participants authorized transferee that the Administrator specifically approves.
9.2 Documentation. Each Award will be evidenced in an Award Agreement, which may be written or electronic, as the Administrator determines. Each Award may contain terms and conditions in addition to those set forth in the Plan.
9.3 Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
9.4 Termination of Status. The Administrator will determine how the disability, death, retirement, an authorized leave of absence or any other change or purported change in a Participants Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participants legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.
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9.5 Withholding. Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by Applicable Law to be withheld in connection with such Participants Awards by the date of the event creating the tax liability. The Company may deduct an amount sufficient to satisfy such tax obligations based on the applicable statutory withholding rates (or such other rate as may be determined by the Company after considering any accounting consequences or costs) from any payment of any kind otherwise due to a Participant. In the absence of a contrary determination by the Company (or, with respect to withholding pursuant to clause (ii) below with respect to Awards held by individuals subject to Section 16 of the Exchange Act, a contrary determination by the Administrator), all tax withholding obligations will be calculated based on the minimum applicable statutory withholding rates. Subject to Section 10.8 and any Company insider trading policy (including blackout periods), Participants may satisfy such tax obligations (i) in cash, by wire transfer of immediately available funds, by check made payable to the order of the Company, provided that the Company may limit the use of the foregoing payment forms if one or more of the payment forms below is permitted, (ii) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares delivered by attestation and Shares retained from the Award creating the tax obligation, valued at their fair market value on the date of delivery, (iii) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Company otherwise determines, (A) delivery (including electronically or telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to satisfy the tax obligations, or (B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by the Administrator, or (iv) to the extent permitted by the Company, any combination of the foregoing payment forms approved by the Administrator. Notwithstanding any other provision of the Plan, the number of Shares which may be so delivered or retained pursuant to clause (ii) of the immediately preceding sentence shall be limited to the number of Shares which have a fair market value on the date of delivery or retention no greater than the aggregate amount of such liabilities based on the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America); provided, however, to the extent such Shares were acquired by Participant from the Company as compensation, the Shares must have been held for the minimum period required by applicable accounting rules to avoid a charge to the Companys earnings for financial reporting purposes; provided, further, that, any such Shares delivered or retained shall be rounded up to the nearest whole Share to the extent rounding up to the nearest whole Share does not result in the liability classification of the applicable Award under generally accepted accounting principles in the United States of America. If any tax withholding obligation will be satisfied under clause (ii) above by the Companys retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participants behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participants acceptance of an Award under the Plan will constitute the Participants authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.
9.6 Amendment of Award; Repricing. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participants consent to such action will be required unless (i) the action, taking into account any related
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action, does not materially and adversely affect the Participants rights under the Award, or (ii) the change is permitted under Article VIII or pursuant to Section 10.6. Notwithstanding the foregoing or anything in the Plan to the contrary, the Administrator may, without the approval of the stockholders of the Company, reduce the exercise price per share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights that have an exercise price in excess of Fair Market Value in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per share that is less than the exercise price per share of the original Options or Stock Appreciation Rights.
9.7 Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Companys satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy any Applicable Laws. The Companys inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.
9.8 Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.
9.9 Cash Settlement. Without limiting the generality of any other provision of the Plan, the Administrator may provide, in an Award Agreement or subsequent to the grant of an Award, in its discretion, that any Award may be settled in cash, Shares or a combination thereof.
9.10 Broker-Assisted Sales9.11 . In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 9.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all Participants receive an average price; (c) the applicable Participant will be responsible for all brokers fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participants applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participants obligation.
ARTICLE X.
MISCELLANEOUS
10.1 No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company or any of its Subsidiaries. The Company and its Subsidiaries expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement or in the Plan.
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10.2 No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.
10.3 Effective Date and Term of Plan. Unless earlier terminated by the Board, the Plan will become effective on the Pricing Date and will remain in effect until the tenth anniversary of the earlier of (i) the date the Board adopted the Plan or (ii) the date the Companys stockholders approved the Plan, but Awards previously granted may extend beyond that date in accordance with the Plan. The Plan will be submitted for the approval of the Companys stockholders within twelve (12) months after the date of the Boards adoption of the Plan.
10.4 Amendment and Termination of Plan. The Administrator may amend, suspend or terminate the Plan at any time; provided that no amendment, other than an increase to the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participants consent. No Awards may be granted under the Plan during any suspension period or after the Plans termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.
10.5 Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
10.6 Section 409A.
(a) General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participants consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Awards grant date. The Company makes no representations or warranties as to an Awards tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 10.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant nonqualified deferred compensation subject to taxes, penalties or interest under Section 409A.
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(b) Separation from Service. If an Award constitutes nonqualified deferred compensation under Section 409A, any payment or settlement of such Award upon a termination of a Participants Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participants separation from service (within the meaning of Section 409A), whether such separation from service occurs upon or after the termination of the Participants Service Provider relationship. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a termination, termination of employment or like terms means a separation from service.
(c) Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of nonqualified deferred compensation required to be made under an Award to a specified employee (as defined under Section 409A and as the Administrator determines) due to his or her separation from service will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six (6)-month period immediately following such separation from service (or, if earlier, until the specified employees death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six (6)-month period or as soon as administratively practicable thereafter (without interest). Any payments of nonqualified deferred compensation under such Award payable more than six (6) months following the Participants separation from service will be paid at the time or times the payments are otherwise scheduled to be made. Furthermore, notwithstanding any contrary provision of the Plan or any Award Agreement, any payment of nonqualified deferred compensation under the Plan that may be made in installments shall be treated as a right to receive a series of separate and distinct payments.
10.7 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer, other employee or agent of the Company or any Subsidiary. The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plans administration or interpretation, against any cost or expense (including attorneys fees) or liability (including any sum paid in settlement of a claim with the Administrators approval) arising from any act or omission concerning this Plan unless arising from such persons own fraud or bad faith.
10.8 Lock-Up Period. The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to one hundred eighty (180) days following the effective date of a Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.
10.9 Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this section by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participants participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participants name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the Data).
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The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participants participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participants country, or elsewhere, and the Participants country may have different data privacy laws and protections than the recipients country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participants participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participants participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 10.9 in writing, without cost, by contacting the local human resources representative. If the Participant refuses or withdraws the consents in this Section 10.9, the Company may cancel Participants ability to participate in the Plan and, in the Administrators discretion, the Participant may forfeit any outstanding Awards. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.
10.10 Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.
10.11 Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan will not apply.
10.12 Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any states choice-of-law principles requiring the application of a jurisdictions laws other than the State of Delaware.
10.13 Claw-back Provisions. All Awards (including, without limitation, any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with Applicable Laws (including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder) as and to the extent set forth in such claw-back policy or the Award Agreement.
10.14 Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plans text, rather than such titles or headings, will control.
10.15 Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.
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10.16 Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except as expressly provided in writing in such other plan or an agreement thereunder.
ARTICLE XI.
DEFINITIONS
As used in the Plan, the following words and phrases will have the following meanings:
11.1 Administrator means the Board or a Committee to the extent that the Boards powers or authority under the Plan have been delegated to such Committee.
11.2 Applicable Laws means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.
11.3 Award means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Dividend Equivalents, or Other Stock or Cash Based Awards.
11.4 Award Agreement means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.
11.5 Board means the Board of Directors of the Company.
11.6 Cause means (i) if a Participant is a party to a written employment, severance or consulting agreement with the Company or any of its Subsidiaries or an Award Agreement in which the term cause is defined (a Relevant Agreement), Cause as defined in the Relevant Agreement, and (ii) if no Relevant Agreement exists, (A) the Administrators determination that the Participant failed to substantially perform the Participants duties (other than a failure resulting from the Participants Disability); (B) the Administrators determination that the Participant failed to carry out, or comply with any lawful and reasonable directive of the Board or the Participants immediate supervisor; (C) the Participants unauthorized use or disclosure of confidential information or trade secrets of the Company or any of its Subsidiaries or any material breach of a written agreement between the Participant and the Company; (D) the occurrence of any act or omission by the Participant that could reasonably be expected to result in (or has resulted in) the Participants conviction, plea of no contest, plea of nolo contendere, or imposition of un-adjudicated probation for any felony or indictable offense or crime involving moral turpitude; (E) the Participants unlawful use (including being under the influence) or possession of illegal drugs on the premises of the Company or any of its Subsidiaries or while performing the Participants duties and responsibilities for the Company or any of its Subsidiaries; or (F) the Participants commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against the Company or any of its Subsidiaries.
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11.7 Change in Control means and includes each of the following:
(a) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (c) below) whereby any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an employee benefit plan maintained by the Company or any of its Subsidiaries or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Companys securities outstanding immediately after such acquisition; or
(b) During any period of two (2) consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c)) whose election by the Board or nomination for election by the Companys stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two (2)-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Companys assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) which results in the Companys voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Companys assets or otherwise succeeds to the business of the Company (the Company or such person, the Successor Entity)) directly or indirectly, at least a majority of the combined voting power of the Successor Entitys outstanding voting securities immediately after the transaction, and
(ii) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b) or (c) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a change in control event, as defined in Treasury Regulation Section 1.409A-3(i)(5).
The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a change in control event as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
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11.8 Code means the U.S. Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
11.9 Committee means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent Applicable Laws permit. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a non-employee director within the meaning of Rule 16b-3; however, a Committee members failure to qualify as a non-employee director within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
11.10 Common Stock means the common stock of the Company.
11.11 Company means Icosavax, Inc., a Delaware corporation, or any successor.
11.12 Consultant means any person, including any consultant or advisor, that is not an Employee and that engaged by the Company or any of its Subsidiaries to render services to such entity, in each case that can be granted an Award that is eligible to be registered on a Form S-8 Registration Statement.
11.13 Designated Beneficiary means the beneficiary or beneficiaries the Participant designates, in a manner the Administrator determines, to receive amounts due or exercise the Participants rights if the Participant dies or becomes incapacitated. Without a Participants effective designation, Designated Beneficiary will mean the Participants estate.
11.14 Director means a Board member.
11.15 Disability means a permanent and total disability under Section 22(e)(3) of the Code, as amended.
11.16 Dividend Equivalents means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares.
11.17 Employee means any employee of the Company or its Subsidiaries.
11.18 Equity Restructuring means a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities of the Company) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
11.19 Exchange Act means the U.S. Securities Exchange Act of 1934, as amended.
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11.20 Fair Market Value means, as of any date, the value of a Share of Common Stock determined as follows: (a) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (b) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (c) in the absence of an established market for the Common Stock, the Administrator may determine the Fair Market Value in its discretion. Notwithstanding the foregoing, with respect to any Award granted on the Pricing Date, the Fair Market Value shall mean the initial public offering price of a Share as set forth in the Companys final prospectus relating to its initial public offering filed with the Securities and Exchange Commission.
11.21 Good Reason means (a) a change in the Participants position with the Company (or its subsidiary employing the Participant) that materially reduces the Participants authority, duties or responsibilities, (b) a material diminution in the Participants level of base compensation, except in connection with a general reduction in the base compensation of the Companys personnel with similar status and responsibilities or (c) a relocation of the Participants place of employment by more than 50 miles, provided that such change, reduction or relocation is effected by the Company (or its subsidiary employing the Participant) without the Participants consent. Notwithstanding the foregoing, Good Reason shall only exist if Participant shall have provided the Company with written notice within sixty (60) days of the initial occurrence of any of the foregoing events or conditions, and the Company or any successor or affiliate fails to eliminate the conditions constituting Good Reason within thirty (30) days after receipt of written notice of such event or condition from Participant. Participants resignation from employment with the Company for Good Reason must occur within six (6) months following the initial occurrence of one of the foregoing events or conditions. Notwithstanding the foregoing, if Participant is a party to a written employment or consulting agreement with the Company (or its subsidiary) in which the term good reason is defined, then Good Reason shall be as such term is defined in the applicable written employment or consulting agreement.
11.22 Greater Than 10% Stockholder means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code, respectively.
11.23 Incentive Stock Option means an Option intended to qualify as an incentive stock option as defined in Section 422 of the Code.
11.24 Non-Qualified Stock Option means an Option, or portion thereof, not intended or not qualifying as an Incentive Stock Option.
11.25 Option means an option to purchase Shares, which will either be an Incentive Stock Option or a Non-Qualified Stock Option.
11.26 Other Stock or Cash Based Awards means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property awarded to a Participant under Article VII.
11.27 Overall Share Limit means the sum of (i) 4,600,000 Shares; (ii) any shares of Common Stock which, as of the effective date of the Plan, remain available for issuance under the Prior Plan; (iii) any shares of Common Stock which are subject to Prior Plan Awards which become available for issuance under the Plan pursuant to Article IV; and (iv) an annual increase on the first day of each calendar year beginning January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (A) 5% of the aggregate number of shares of Common Stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of Shares as is determined by the Board.
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11.28 Participant means a Service Provider who has been granted an Award.
11.29 Performance Criteria mean the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for a performance period, which may include the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human capital management (including diversity and inclusion); supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the Companys performance or the performance of a Subsidiary, division, business segment or business unit of the Company or a Subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies.
11.30 Plan means this 2021 Incentive Award Plan.
11.31 Pricing Date means the date upon which the Companys Registration Statement on Form S-1 filed with the Securities and Exchange Commission relating to the registered underwritten public offering of shares of Common Stock becomes effective.
11.32 Prior Plan means the Icosavax, Inc. 2017 Equity Incentive Plan.
11.33 Prior Plan Award means an award outstanding under the Prior Plan as of the Pricing Date.
11.34 Restricted Stock means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.
11.35 Restricted Stock Unit means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.
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11.36 Rule 16b-3 means Rule 16b-3 promulgated under the Exchange Act.
11.37 Section 409A means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.
11.38 Securities Act means the U.S. Securities Act of 1933, as amended.
11.39 Service Provider means an Employee, Consultant or Director.
11.40 Shares means shares of Common Stock.
11.41 Stock Appreciation Right means a stock appreciation right granted under Article V.
11.42 Subsidiary means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
11.43 Substitute Awards means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
11.44 Termination of Service means the date the Participant ceases to be a Service Provider.
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ICOSAVAX, INC.
2021 INCENTIVE AWARD PLAN
STOCK OPTION GRANT NOTICE
Capitalized terms not specifically defined in this Stock Option Grant Notice (the Grant Notice) have the meanings given to them in the 2021 Incentive Award Plan (as amended from time to time, the Plan) of Icosavax, Inc. (the Company).
The Company hereby grants to the participant listed below (Participant) the stock option described in this Grant Notice (the Option), subject to the terms and conditions of the Plan and the Stock Option Agreement attached hereto as Exhibit A (the Agreement), both of which are incorporated into this Grant Notice by reference.
Participant: | [Insert Participant Name] | |
Grant Date: | [Insert Grant Date] | |
Exercise Price per Share: | [Insert Exercise Price] | |
Shares Subject to the Option: | [Insert Number of Options] | |
Final Expiration Date: | [Insert Tenth Anniversary of Grant Date] | |
Vesting Commencement Date: | [Insert Vesting Commencement Date] | |
Vesting Schedule: | [Insert Vesting Schedule] | |
Type of Option (select one): |
☐ Incentive Stock Option
☐ Non-Qualified Stock Option |
If the Company uses an electronic capitalization table system (such as E*Trade, Shareworks or Carta) and the fields in this Grant Notice are blank or the information is otherwise provided in a different format electronically, the blank fields and other information will be deemed to come from the electronic capitalization system and is considered part of this Grant Notice.
By accepting (whether in writing, electronically or otherwise, including an acceptance through an electronic capitalization table system used by the Company) the Option, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has received a copy of the prospectus for the Plan, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
ICOSAVAX, INC. | PARTICIPANT | |||||||
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EXHIBIT A
STOCK OPTION AGREEMENT
Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
ARTICLE I.
GENERAL
1.1 Grant of Option. The Company has granted to Participant the Option effective as of the grant date set forth in the Grant Notice (the Grant Date).
1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
ARTICLE II.
PERIOD OF EXERCISABILITY
2.1 Commencement of Exercisability. The Option will vest and become exercisable according to the vesting schedule in the Grant Notice (the Vesting Schedule), except that any fraction of a Share as to which the Option would be vested or exercisable will be accumulated and will vest and become exercisable only when a whole Share has accumulated. The Option will not be exercisable with respect to fractional Shares. Notwithstanding anything in the Grant Notice, the Plan or this Agreement to the contrary, unless the Administrator otherwise determines, the Option will immediately expire and be forfeited as to any portion that is not vested and exercisable as of Participants Termination of Service for any reason.
2.2 Duration of Exercisability. The Vesting Schedule is cumulative. Any portion of the Option which vests and becomes exercisable will remain vested and exercisable until the Option expires. The Option will be forfeited immediately upon its expiration.
2.3 Expiration of Option. Subject to Section 5.3 of the Plan, the Option may not be exercised to any extent by anyone after, and will expire on, the first of the following to occur:
(a) The final expiration date in the Grant Notice, which will in no event be more than ten (10) years from the Grant Date;
(b) If this Option is designated as an Incentive Stock Option and Participant, at the time the Option was granted, was a Greater Than 10% Stockholder, the expiration of five (5) years from the Grant Date;
(c) Except as the Administrator may otherwise approve, the expiration of three (3) months from the date of Participants Termination of Service, unless Participants Termination of Service is for Cause or by reason of Participants death or Disability;
(d) Except as the Administrator may otherwise approve, the expiration of one (1) year from the date of Participants Termination of Service by reason of Participants death or Disability;
(e) Except as the Administrator may otherwise approve, the date of Participants Termination of Service for Cause; and
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(f) Except as otherwise provided in clauses (c) or (d) above, with respect to any unvested portion of the Option, the date that is thirty (30) days following Participants Termination of Service by reason of Participants death or Disability, or such shorter period as may be determined by the Administrator.
ARTICLE III.
EXERCISE OF OPTION
3.1 Person Eligible to Exercise. During Participants lifetime, only Participant may exercise the Option, unless it has been disposed of, with the consent of the Administrator, pursuant to a domestic relations order. After Participants death, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 2.3 hereof, be exercised by Participants Designated Beneficiary or by any person empowered to do so under the deceased Participants will or under the then applicable laws of descent and distribution.
3.2 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretarys office, or such other place as may be determined by the Administrator, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 2.3, except that the Option may only be exercised for whole Shares:
(a) An exercise notice in such form as is prescribed by the Administrator, which may be an electronic form (the Exercise Notice); and
(b) Subject to Section 5.5 of the Plan, full payment for the Shares with respect to which the Option or portion thereof is exercised, which payment may be made by Participant, by:
(i) Cash, wire transfer of immediately available funds or check, payable to the order of the Company; or
(ii) With the consent of the Administrator, surrender to or withholding by the Company of a net number of vested Shares issuable upon the exercise of the Option valued at their fair market value; or
(iii) With the consent of the Administrator, delivery (either by actual delivery or attestation) of Shares owned by Participant valued at their fair market value; or
(iv) If there is a public market for the Shares at the time of exercise, unless the Company or the Administrator otherwise determines, through the (A) delivery (including electronically or telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price, or (B) delivery by Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price, provided in either case, that such amount is paid to the Company at such time as may be required by the Administrator; or
(v) With the consent of the Administrator, any other form of payment permitted under Section 5.5 of the Plan; or
(vi) Any combination of the above permitted forms of payment; and
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(c) Subject to Section 9.5 of the Plan, full payment for any applicable Tax Withholding Obligation (as defined below) as provided in Section 3.3 below; and
(d) In the event the Option or portion thereof will be exercised pursuant to Section 3.1 by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.
3.3 Taxes; Tax Withholding.
(a) The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the Option to Participant or his or her legal representative unless and until Participant or his or her legal representative will have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes required by Applicable Law to be withheld in connection with the vesting, exercise or settlement of the Option, the distribution of the Shares issuable with respect thereto, or any other taxable event related to the Option (the Tax Withholding Obligation). The Company will have the authority and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy any Tax Withholding Obligation, including, without limitation, the authority to deduct such amounts from other compensation payable to Participant by the Company.
(b) Unless Participant elects to satisfy the Tax Withholding Obligation by some other means in accordance with Section 9.5 of the Plan, the Company will have the right, but not the obligation, with respect to the Tax Withholding Obligation arising as a result of the vesting, exercise or settlement of the Option, to treat Participants failure to provide timely payment in accordance with Section 9.5 of the Plan as Participants election to satisfy the Tax Withholding Obligation by requesting the Company to withhold a net number of vested Shares otherwise issuable pursuant to the Option having a then-current fair market value not exceeding the amount necessary to satisfy the Tax Withholding Obligation (provided that if Participant is subject to Section 16 of the Exchange Act, any such action by the Company will require the approval of the Administrator).
(c) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Option, regardless of any action the Company or any Subsidiary takes with respect to any Tax Withholding Obligations that arise in connection with the Option. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the tax treatment to Participant in connection with the awarding, vesting or exercise of the Option or the subsequent sale of Shares. The Company and its Subsidiaries do not commit and are under no obligation to structure the Option to reduce or eliminate Participants tax liability.
(d) Participant represents to the Company that Participant has reviewed with Participants own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company and/or the Trustee or any of their agents.
ARTICLE IV.
OTHER PROVISIONS
4.1 Award Not Transferable; Other Restrictions. Without limiting the generality of any other provision hereof, the Award will be subject to the restrictions on transferability set forth in Section 9.1 of the Plan. Without limiting the generality of any other provision hereof, Participant hereby expressly acknowledges that Section 10.8 (Lock-Up Period) and Section 10.13 (Clawback Provisions) of the Plan are expressly incorporated into this Agreement and are applicable to the Shares issued pursuant to this Agreement.
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4.2 AdjustmentsB. . Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
4.3 Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Companys Secretary at the Companys principal office or the Secretarys then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant (or, if Participant is then deceased, to the person entitled to exercise the Option) at Participants last known mailing address, email address or facsimile number in the Companys personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
4.4 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.5 Conformity to Securities LawsC. . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Option will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended to the extent necessary to conform to such Applicable Laws or any such exemptive rule described in the preceding sentence.
4.6 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.7 Entire Agreement. The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. This Agreement may be amended by the Company in accordance with Section 9.6 of the Plan.
4.8 Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.9 Limitation on Participants Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to the Option, as and when exercised pursuant to the terms hereof.
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4.10 Rights as a Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book-entry form) will have been issued and recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). Except as otherwise provided herein, after such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to such Shares, including, without limitation, the right to receipt of dividends and distributions on such Shares.
4.11 Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.
4.12 Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Laws, each of which will be deemed an original and all of which together will constitute one instrument.
4.13 Governing Law. The provisions of the Plan and all Awards made thereunder, including the Option, will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
4.14 Incentive Stock Options. If the Option is designated as an Incentive Stock Option, the following provisions, in addition to the terms set forth in Section 5.6 of the Plan, will apply to the Option:
(a) Participant acknowledges that to the extent the aggregate fair market value of shares (determined as of the time the option with respect to the shares is granted) with respect to which stock options intended to qualify as incentive stock options under Section 422 of the Code, including the Option, are exercisable for the first time by Participant during any calendar year exceeds $100,000 or if for any other reason such stock options do not qualify or cease to qualify for treatment as incentive stock options under Section 422 of the Code, such stock options (including the Option) will be treated as non-qualified stock options. Participant further acknowledges that the rule set forth in the preceding sentence will be applied by taking the Option and other stock options into account in the order in which they were granted, as determined under Section 422(d) of the Code. Participant acknowledges that amendments or modifications made to the Option pursuant to the Plan that would cause the Option to become a Non-Qualified Stock Option will not materially or adversely affect Participants rights under the Option, and that any such amendment or modification will not require Participants consent. Participant also acknowledges that if the Option is exercised more than three (3) months after Participants Termination of Service as an Employee, other than by reason of death or Disability, the Option will be taxed as a Non-Qualified Stock Option. If the Option is an Incentive Stock Option and Participant is a Greater Than 10% Stockholder as of the Grant Date, the term of the Option will not exceed five (5) years from the Grant Date.
(b) Participant will give prompt written notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or other transfer is made (a) within two (2) years from the Grant Date or (b) within one (1) year after the transfer of such Shares to Participant. Such notice will specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer.
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ICOSAVAX, INC.
2021 INCENTIVE AWARD PLAN
RESTRICTED STOCK UNIT GRANT NOTICE
Capitalized terms not specifically defined in this Restricted Stock Unit Grant Notice (the Grant Notice) have the meanings given to them in the 2020 Incentive Award Plan (as amended from time to time, the Plan) of Icosavax, Inc. (the Company).
The Company hereby grants to the participant listed below (Participant) the Restricted Stock Units described in this Grant Notice (the RSUs), subject to the terms and conditions of the Plan and the Restricted Stock Unit Agreement attached hereto as Exhibit A (the Agreement), both of which are incorporated into this Grant Notice by reference.
Participant: | [Insert Participant Name] | |
Grant Date: | [Insert Grant Date] | |
Number of RSUs: | [Insert Number of RSUs] | |
Vesting Commencement Date: | [Insert Vesting Commencement Date] | |
Vesting Schedule: | [Insert Vesting Schedule] |
If the Company uses an electronic capitalization table system (such as E*Trade, Shareworks or Carta) and the fields in this Grant Notice are blank or the information is otherwise provided in a different format electronically, the blank fields and other information will be deemed to come from the electronic capitalization system and is considered part of this Grant Notice.
By accepting (whether in writing, electronically or otherwise, including an acceptance through an electronic capitalization table system used by the Company) the RSUs, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has received a copy of the prospectus for the Plan, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
ICOSAVAX, INC. | PARTICIPANT | |||||||
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EXHIBIT A
RESTRICTED STOCK UNIT AGREEMENT
Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
ARTICLE I.
GENERAL
1.1 Award of RSUs. The Company has granted the RSUs to Participant effective as of the grant date set forth in the Grant Notice (the Grant Date). Each RSU represents the right to receive one Share, as set forth in this Agreement. Participant will have no right to the distribution of any Shares until the time (if ever) the RSUs have vested.
1.2 Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
1.3 Unsecured Promise. The RSUs will at all times prior to settlement represent an unsecured Company obligation payable only from the Companys general assets.
ARTICLE II.
VESTING; FORFEITURE AND SETTLEMENT
2.1 Vesting; Forfeiture. The RSUs will vest according to the vesting schedule in the Grant Notice (the Vesting Schedule), except that any fraction of an RSU that would otherwise be vested will be accumulated and will vest only when a whole RSU has accumulated. Except as provided in the Grant Notice, in the event of Participants Termination of Service for any reason, all unvested RSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company. Unless and until the RSUs have vested in accordance with the Vesting Schedule set forth in the Grant Notice, Participant will have no right to any distribution with respect to such RSUs.
2.2 Settlement.
(a) RSUs will be paid in Shares as soon as administratively practicable after the vesting of the applicable RSU, but in no event more than sixty (60) days after the applicable vesting date. Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company reasonably determines would violate Applicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii)), provided the Company reasonably believes the delay will not result in the imposition of excise taxes under Section 409A.
(b) All distributions shall be made by the Company in the form of whole shares of Common Stock.
(c) Neither the time nor form of distribution of Shares with respect to the RSUs may be changed, except as may be permitted by the Administrator in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.
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ARTICLE III.
TAXATION AND TAX WITHHOLDING
3.1 Tax Withholding.
(a) The Company shall not be obligated to deliver any certificate representing Shares issuable with respect to the RSUs to Participant or his or her legal representative unless and until Participant or his or her legal representative will have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes required by Applicable Law to be withheld in connection with the vesting, exercise or settlement of the RSUs, the distribution of the Shares issuable with respect thereto, or any other taxable event related to the RSUs (the Tax Withholding Obligation). Subject to Section 9.5 of the Plan, the Company will have the authority and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy any Tax Withholding Obligation, including, without limitation, the authority to deduct such amounts from other compensation payable to Participant by the Company.
(b) Unless Participant elects to satisfy the Tax Withholding Obligation by some other means in accordance with Section 9.5 of the Plan, the Company will have the right, but not the obligation, with respect to the Tax Withholding Obligation arising as a result of the vesting, exercise or settlement of the RSUs, to treat Participants failure to provide timely payment in accordance with Section 9.5 of the Plan as Participants election to satisfy the Tax Withholding Obligation by requesting the Company to withhold a net number of vested Shares otherwise issuable pursuant to the RSUs having a then-current fair market value not exceeding the amount necessary to satisfy the Tax Withholding Obligation (provided that if Participant is subject to Section 16 of the Exchange Act, any such action by the Company will require the approval of the Administrator) in accordance with Section 9.5 of the Plan.
3.2 Participant Responsibility; No Company Liability. Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs, regardless of any action the Company or any Subsidiary takes with respect to any Tax Withholding Obligations that arise in connection with the RSUs. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the tax treatment to Participant in connection with the awarding, vesting or settlement of the RSUs or the subsequent sale of Shares. The Company and its Subsidiaries do not commit and are under no obligation to structure the RSUs to reduce or eliminate Participants tax liability.
3.3 Representation. Participant represents to the Company that Participant has reviewed with Participants own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.
ARTICLE IV.
OTHER PROVISIONS
4.1 Award Not Transferable; Other Restrictions. Without limiting the generality of any other provision hereof, the Award will be subject to the restrictions on transferability set forth in Section 9.1 of the Plan. Without limiting the generality of any other provision hereof, Participant hereby expressly acknowledges that Section 10.8 (Lock-Up Period) and Section 10.13 (Clawback Provisions) of the Plan are expressly incorporated into this Agreement and are applicable to the Shares issued pursuant to this Agreement.
4.2 Adjustments. Participant acknowledges that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
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4.3 Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Companys Secretary at the Companys principal office or the Secretarys then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participants last known mailing address, email address or facsimile number in the Companys personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
4.4 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.5 Conformity to Securities Laws. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the RSUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended to the extent necessary to conform to such Applicable Laws or any such exemptive rule described in the preceding sentence.
4.6 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.7 Entire Agreement. The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. This Agreement may be amended by the Company in accordance with Section 9.6 of the Plan.
4.8 Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
4.9 Limitation on Participants Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to the RSUs, as and when settled pursuant to the terms of this Agreement.
4.10 Rights as a Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book-entry form) will have been issued and recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). Except as otherwise provided herein, after such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to such Shares, including, without limitation, the right to receipt of dividends and distributions on such Shares.
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4.11 Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.
4.12 Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
4.12 Governing Law. The provisions of the Plan and all Awards made thereunder, including the RSUs, shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
4.13 Section 409A.
(a) Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Grant Date, Section 409A). The Administrator may, in its discretion, adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate to comply with the requirements of Section 409A.
(b) This Agreement is not intended to provide for any deferral of compensation subject to Section 409A of the Code, and, accordingly, the Shares issuable pursuant to the RSUs hereunder shall be distributed to Participant no later than the later of: (A) the fifteenth (15th) day of the third month following Participants first taxable year in which such RSUs are no longer subject to a substantial risk of forfeiture, and (B) the fifteenth (15th) day of the third month following first taxable year of the Company in which such RSUs are no longer subject to substantial risk of forfeiture, as determined in accordance with Section 409A and any Treasury Regulations and other guidance issued thereunder.
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Exhibit 10.3
ICOSAVAX, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I.
PURPOSE
The purpose of this Plan is to assist Eligible Employees of the Company and its Designated Subsidiaries in acquiring a stock ownership interest in the Company.
The Plan consists of two components: (i) the Section 423 Component and (ii) the Non-Section 423 Component. The Section 423 Component is intended to qualify as an employee stock purchase plan under Section 423 of the Code and shall be administered, interpreted and construed in a manner consistent with the requirements of Section 423 of the Code. The Non-Section 423 Component authorizes the grant of rights which need not qualify as rights granted pursuant to an employee stock purchase plan under Section 423 of the Code. Rights granted under the Non-Section 423 Component shall be granted pursuant to separate Offerings containing such sub-plans, appendices, rules or procedures as may be adopted by the Administrator and designed to achieve tax, securities laws or other objectives for Eligible Employees and Designated Subsidiaries but shall not be intended to qualify as an employee stock purchase plan under Section 423 of the Code. Except as otherwise determined by the Administrator or provided herein, the Non-Section 423 Component will operate and be administered in the same manner as the Section 423 Component. Offerings intended to be made under the Non-Section 423 Component will be designated as such by the Administrator at or prior to the time of such Offering.
For purposes of this Plan, the Administrator may designate separate Offerings under the Plan in which Eligible Employees will participate. The terms of these Offerings need not be identical, even if the dates of the applicable Offering Period(s) in each such Offering are identical, provided that the terms of participation are the same within each separate Offering under the Section 423 Component (as determined under Section 423 of the Code). Solely by way of example and without limiting the foregoing, the Company could, but shall not be required to, provide for simultaneous Offerings under the Section 423 Component and the Non-Section 423 Component of the Plan.
ARTICLE II.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise.
2.1 Administrator means the entity that conducts the general administration of the Plan as provided in Article XI.
2.2 Agent means the brokerage firm, bank or other financial institution, entity or person(s), if any, engaged, retained, appointed or authorized to act as the agent of the Company or an Employee with regard to the Plan.
2.3 Applicable Law means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which Shares are listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where rights under this Plan are granted.
2.4 Board means the Board of Directors of the Company.
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2.5 Code means the U.S. Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
2.6 Common Stock means common stock of the Company and such other securities of the Company that may be substituted therefore.
2.7 Company means Icosavax, Inc., a Delaware corporation, or any successor.
2.8 Compensation of an Eligible Employee means, unless otherwise determined by the Administrator, the gross base compensation or wages received by such Eligible Employee as compensation for services to the Company or any Designated Subsidiary, excluding overtime payments, sales commissions, incentive compensation, bonuses, expense reimbursements, income received in connection with any compensatory equity awards, fringe benefits and other special payments.
2.9 Designated Subsidiary means any Subsidiary designated by the Administrator in accordance with Section 11.2(b), such designation to specify whether such participation is in the Section 423 Component or Non-Section 423 Component. A Designated Subsidiary may participate in either the Section 423 Component or Non-Section 423 Component, but not both; provided that a Subsidiary that, for U.S. tax purposes, is disregarded from the Company or any Subsidiary that participates in the Section 423 Component shall automatically constitute a Designated Subsidiary that participates in the Section 423 Component.
2.10 Effective Date means the Pricing Date, provided that the Board has adopted the Plan prior to or on such date.
2.11 Eligible Employee means:
(a) An Employee who does not, immediately after any rights under this Plan are granted, own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of Shares and other securities of the Company, a Parent or a Subsidiary (as determined under Section 423(b)(3) of the Code). For purposes of the foregoing, the rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply in determining the stock ownership of an individual, and stock that an Employee may purchase under outstanding options shall be treated as stock owned by the Employee.
(b) Notwithstanding the foregoing, the Administrator may provide in an Offering Document that an Employee shall not be eligible to participate in an Offering Period under the Section 423 Component if: (i) such Employee is a highly compensated employee within the meaning of Section 423(b)(4)(D) of the Code; (ii) such Employee has not met a service requirement designated by the Administrator pursuant to Section 423(b)(4)(A) of the Code (which service requirement may not exceed two (2) years); (iii) such Employees customary employment is for twenty (20) hours per week or less; (iv) such Employees customary employment is for less than five (5) months in any calendar year; and/or (v) such Employee is a citizen or resident of a foreign jurisdiction and the grant of a right to purchase Shares under the Plan to such Employee would be prohibited under the laws of such foreign jurisdiction or the grant of a right to purchase Shares under the Plan to such Employee in compliance with the laws of such foreign jurisdiction would cause the Plan to violate the requirements of Section 423 of the Code, as determined by the Administrator in its sole discretion; provided, further, that any exclusion in clauses (i), (ii), (iii), (iv) or (v) shall be applied in an identical manner under each Offering Period to all Employees, in accordance with Treas. Reg. Section 1.423-2(e).
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(c) Further notwithstanding the foregoing, with respect to the Non-Section 423 Component, the first sentence in this definition shall apply in determining who is an Eligible Employee, except (i) the Administrator may limit eligibility further within the Company or a Designated Subsidiary so as to only designate some Employees of the Company or a Designated Subsidiary as Eligible Employees, and (ii) to the extent the restrictions in the first sentence in this definition are not consistent with applicable local laws, the applicable local laws shall control.
2.12 Employee means any individual who renders services to the Company or any Designated Subsidiary in the status of an employee, and, with respect to the Section 423 Component, a person who is an employee within the meaning of Section 3401(c) of the Code. For purposes of an individuals participation in, or other rights under the Plan, all determinations by the Company shall be final, binding and conclusive, notwithstanding that any court of law or governmental agency subsequently makes a contrary determination. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company or Designated Subsidiary and meeting the requirements of Treas. Reg. Section 1.421-1(h)(2). Where the period of leave exceeds three (3) months and the individuals right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the first day immediately following such three (3)-month period.
2.13 Enrollment Date means the first Trading Day of each Offering Period; provided that, the Enrollment Date for the Initial Offering Period shall be the Pricing Date.
2.14 Fair Market Value means, as of any date, the value of Shares determined as follows: (i) if the Shares are listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Shares as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Shares are not traded on a stock exchange but are quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (iii) without an established market for the Shares, the Administrator will determine the Fair Market Value in its discretion; or (iv) with respect to the Initial Offering Period, the Fair Market Value as specified in the Offering Document approved by the Administrator with respect to the Initial Offering Period.
2.15 Initial Offering Period means the period commencing on the Pricing Date and ending on the date set forth in the Offering Document approved by the Administrator with respect to the Initial Offering Period.
2.16 Non-Section 423 Component means those Offerings under the Plan, together with the sub-plans, appendices, rules or procedures, if any, adopted by the Administrator as a part of this Plan, in each case, pursuant to which rights to purchase Shares during an Offering Period may be granted to Eligible Employees that need not satisfy the requirements for rights to purchase Shares granted pursuant to an employee stock purchase plan that are set forth under Section 423 of the Code.
2.17 Offering means an offer under the Plan of a right to purchase Shares that may be exercised during an Offering Period as further described in Article IV hereof. Unless otherwise specified by the Administrator, each Offering to the Eligible Employees of the Company or a Designated Subsidiary shall be deemed a separate Offering, even if the dates and other terms of the applicable Offering Periods of each such Offering are identical, and the provisions of the Plan will separately apply to each Offering. To the extent permitted by Treas. Reg. Section 1.423-2(a)(1), the terms of each separate Offering under the Section 423 Component need not be identical, provided that the terms of the Section 423 Component and an Offering thereunder together satisfy Treas. Reg. Section 1.423-2(a)(2) and (a)(3).
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2.18 Offering Document has the meaning given to such term in Section 4.1.
2.19 Offering Period has the meaning given to such term in Section 4.1.
2.20 Parent means any corporation, other than the Company, in an unbroken chain of corporations ending with the Company if, at the time of the determination, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
2.21 Participant means any Eligible Employee who has executed a subscription agreement and been granted rights to purchase Shares pursuant to the Plan (or, with respect to the Initial Offering Period, those Participants specified in the Offering Document approved by the Administrator with respect to the Initial Offering Period).
2.22 Payday means the regular and recurring established day for payment of Compensation to an Employee of the Company or any Designated Subsidiary.
2.23 Plan means this 2021 Employee Stock Purchase Plan, including both the Section 423 Component and Non-Section 423 Component and any other sub-plans or appendices hereto, as amended from time to time.
2.24 Pricing Date means the date upon which the Companys Registration Statement on Form S-1 filed with the Securities and Exchange Commission relating to the underwritten public offering of shares of Common Stock becomes effective.
2.25 Purchase Date means the last Trading Day of each Purchase Period or such other date as determined by the Administrator and set forth in the Offering Document.
2.26 Purchase Period shall refer to one or more periods within an Offering Period, as designated in the applicable Offering Document; provided, however, that, in the event no Purchase Period is designated by the Administrator in the applicable Offering Document, the Purchase Period for each Offering Period covered by such Offering Document shall be the same as the applicable Offering Period.
2.27 Purchase Price means the purchase price designated by the Administrator in the applicable Offering Document (which purchase price, for purposes of the Section 423 Component, shall not be less than 85% of the Fair Market Value of a Share on the Enrollment Date or on the Purchase Date, whichever is lower); provided, however, that, in the event no purchase price is designated by the Administrator in the applicable Offering Document, the purchase price for the Offering Periods covered by such Offering Document shall be 85% of the Fair Market Value of a Share on the Enrollment Date or on the Purchase Date, whichever is lower; provided, further, that the Purchase Price may be adjusted by the Administrator pursuant to Article VIII and shall not be less than the par value of a Share.
2.28 Section 423 Component means those Offerings under the Plan, together with the sub-plans, appendices, rules or procedures, if any, adopted by the Administrator as a part of this Plan, in each case, pursuant to which rights to purchase Shares during an Offering Period may be granted to Eligible Employees that are intended to satisfy the requirements for rights to purchase Shares granted pursuant to an employee stock purchase plan that are set forth under Section 423 of the Code.
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2.29 Securities Act means the U.S. Securities Act of 1933, as amended.
2.30 Share means a share of Common Stock.
2.31 Subsidiary means any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company if, at the time of the determination, each of the corporations other than the last corporation in an unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain; provided, however, that a limited liability company or partnership may be treated as a Subsidiary to the extent either (a) such entity is treated as a disregarded entity under Treas. Reg. Section 301.7701-3(a) by reason of the Company or any other Subsidiary that is a corporation being the sole owner of such entity, or (b) such entity elects to be classified as a corporation under Treas. Reg. Section 301.7701-3(a) and such entity would otherwise qualify as a Subsidiary. In addition, with respect to the Non-Section 423 Component, Subsidiary shall include any corporate or non-corporate entity in which the Company has a direct or indirect equity interest or significant business relationship that constitutes a parent or subsidiary of the Company for purposes of Form S-8 of the Securities Act and whose employees are eligible to be offered securities registrable on Form S-8 of the Securities Act.
2.32 Trading Day means a day on which national stock exchanges in the United States are open for trading.
2.33 Treas. Reg. means U.S. Department of the Treasury regulations.
ARTICLE III.
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares. Subject to Article VIII, the aggregate number of Shares that may be issued pursuant to rights granted under the Plan shall be 400,000 Shares. In addition to the foregoing, subject to Article VIII, on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, the number of Shares available for issuance under the Plan shall be increased by that number of Shares equal to the lesser of (a) 1% of the aggregate number of shares of Common Stock of the Company outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of Shares as determined by the Board. If any right granted under the Plan shall for any reason terminate without having been exercised, the Shares not purchased under such right shall again become available for issuance under the Plan. Notwithstanding anything in this Section 3.1 to the contrary, the number of Shares that may be issued or transferred pursuant to the rights granted under the Section 423 Component of the Plan shall not exceed an aggregate of 15,000,000 Shares, subject to Article VIII.
3.2 Shares Distributed. Any Shares distributed pursuant to the Plan may consist, in whole or in part, of authorized and unissued Shares, treasury shares or Shares purchased on the open market.
ARTICLE IV.
OFFERING PERIODS; OFFERING DOCUMENTS; PURCHASE DATES
4.1 Offering Periods. The Administrator may from time to time grant or provide for the grant of rights to purchase Shares under the Plan to Eligible Employees during one or more periods (each, an Offering Period) selected by the Administrator. The terms and conditions applicable to each Offering Period shall be set forth in an Offering Document adopted by the Administrator, which Offering Document shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate and shall be incorporated by reference into and made part of the Plan and shall be attached hereto as part of the Plan. The Administrator shall establish in each Offering Document one or more Purchase Periods during such Offering Period during which rights granted under the Plan shall be exercised and purchases of Shares carried out during such Offering Period in accordance with such Offering Document and the Plan. The provisions of separate Offerings or Offering Periods under the Plan need not be identical.
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4.2 Offering Documents. Each Offering Document with respect to an Offering Period shall specify (through incorporation of the provisions of this Plan by reference or otherwise):
(a) the length of the Offering Period, which period shall not exceed twenty-seven (27) months;
(b) the length of the Purchase Period(s) within the Offering Period;
(c) the maximum number of Shares that may be purchased by any Eligible Employee during such Offering Period, which, in the absence of a contrary designation by the Administrator, shall be 100,000 Shares;
(d) in connection with each Offering Period that contains more than one Purchase Period, the maximum aggregate number of shares which may be purchased by any Eligible Employee during each Purchase Period, which, in the absence of a contrary designation by the Administrator, shall be 100,000 Shares; and
(e) such other provisions as the Administrator determines are appropriate, subject to the Plan.
ARTICLE V.
ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Any Eligible Employee who shall be employed by the Company or a Designated Subsidiary on a given Enrollment Date for an Offering Period shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of this Article V and, for the Section 423 Component, the limitations imposed by Section 423(b) of the Code.
5.2 Enrollment in Plan.
(a) Except as otherwise set forth in an Offering Document or determined by the Administrator, an Eligible Employee may become a Participant in the Plan for an Offering Period by delivering a subscription agreement to the Company by such time prior to the Enrollment Date for such Offering Period (or such other date specified in the Offering Document) designated by the Administrator and in such form as the Company provides.
(b) Except as otherwise determined by the Administrator, each subscription agreement shall designate a whole percentage of such Eligible Employees Compensation to be withheld by the Company or the Designated Subsidiary employing such Eligible Employee on each Payday during the Offering Period as payroll deductions under the Plan. The percentage of Compensation designated by an Eligible Employee may not be less than 1% and may not be more than the maximum percentage specified by the Administrator in the applicable Offering Document (which percentage shall be 20% in the absence of any such designation) as payroll deductions. The payroll deductions made for each Participant shall be credited to an account for such Participant under the Plan and shall be deposited with the general funds of the Company.
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(c) A Participant may increase or decrease the percentage of Compensation designated in his or her subscription agreement, subject to the limits of this Section 5.2, or may suspend his or her payroll deductions, at any time during an Offering Period; provided, however, that the Administrator may limit the number of changes a Participant may make to his or her payroll deduction elections during each Offering Period in the applicable Offering Document (and in the absence of any specific designation by the Administrator, a Participant shall be allowed to decrease (but not increase) his or her payroll deduction elections one time during each Offering Period). Any such change or suspension of payroll deductions shall be effective with the first full payroll period following five (5) business days after the Companys receipt of the new subscription agreement (or such shorter or longer period as may be specified by the Administrator in the applicable Offering Document). In the event a Participant suspends his or her payroll deductions, such Participants cumulative payroll deductions prior to the suspension shall remain in his or her account and shall be applied to the purchase of Shares on the next occurring Purchase Date and shall not be paid to such Participant unless he or she withdraws from participation in the Plan pursuant to Article VII.
(d) Except as otherwise set forth in an Offering Document or determined by the Administrator, a Participant may participate in the Plan only by means of payroll deduction and may not make contributions by lump sum payment for any Offering Period.
5.3 Payroll Deductions. Except as otherwise provided in the applicable Offering Document or determined by the Administrator, payroll deductions for a Participant shall commence on the first Payday following the Enrollment Date and shall end on the last Payday in the Offering Period to which the Participants authorization is applicable, unless sooner terminated by the Participant as provided in Article VII or suspended by the Participant or the Administrator as provided in Section 5.2 and Section 5.6, respectively. Notwithstanding any other provisions of the Plan to the contrary, in non-U.S. jurisdictions where participation in the Plan through payroll deductions is prohibited, the Administrator may provide that an Eligible Employee may elect to participate through contributions to the Participants account under the Plan in a form acceptable to the Administrator in lieu of or in addition to payroll deductions; provided, however, that, for any Offering under the Section 423 Component, the Administrator shall take into consideration any limitations under Section 423 of the Code when applying an alternative method of contribution.
5.4 Effect of Enrollment. A Participants completion of a subscription agreement will enroll such Participant in the Plan for each subsequent Offering Period on the terms contained therein until the Participant either submits a new subscription agreement, withdraws from participation under the Plan as provided in Article VII or otherwise becomes ineligible to participate in the Plan.
5.5 Limitation on Purchase of Shares. An Eligible Employee may be granted rights under the Section 423 Component only if such rights, together with any other rights granted to such Eligible Employee under employee stock purchase plans of the Company, any Parent or any Subsidiary, as specified by Section 423(b)(8) of the Code, do not permit such employees rights to purchase stock of the Company or any Parent or Subsidiary to accrue at a rate that exceeds $25,000 of the fair market value of such stock (determined as of the first day of the Offering Period during which such rights are granted) for each calendar year in which such rights are outstanding at any time. This limitation shall be applied in accordance with Section 423(b)(8) of the Code.
5.6 Suspension of Payroll Deductions. Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 5.5 (with respect to the Section 423 Component) or the other limitations set forth in this Plan, a Participants payroll deductions may be suspended by the Administrator at any time during an Offering Period. The balance of the amount credited to the account of each Participant that has not been applied to the purchase of Shares by reason of Section 423(b)(8) of the Code, Section 5.5 or the other limitations set forth in this Plan shall be paid to such Participant in one lump sum in cash as soon as reasonably practicable after the Purchase Date.
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5.7 Foreign Employees. In order to facilitate participation in the Plan, the Administrator may provide for such special terms applicable to Participants who are citizens or residents a foreign jurisdiction, or who are employed by a Designated Subsidiary outside of the United States, as the Administrator may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Except as permitted by Section 423 of the Code, with respect to the Section 423 Component, such special terms may not be more favorable than the terms of rights granted under the Section 423 Component to Eligible Employees who are residents of the United States. Such special terms may be set forth in an addendum to the Plan in the form of an appendix or sub-plan (which appendix or sub-plan may be designed to govern Offerings under the Section 423 Component or the Non-Section 423 Component, as determined by the Administrator). To the extent that the terms and conditions set forth in an appendix or sub-plan conflict with any provisions of the Plan, the provisions of the appendix or sub-plan shall govern. The adoption of any such appendix or sub-plan shall be pursuant to Section 11.2(g). Without limiting the foregoing, the Administrator is specifically authorized to adopt rules and procedures, with respect to Participants who are foreign nationals or employed in non-U.S. jurisdictions, regarding the exclusion of particular Subsidiaries from participation in the Plan, eligibility to participate, the definition of Compensation, handling of payroll deductions or other contributions by Participants, payment of interest, conversion of local currency, data privacy security, payroll tax, withholding procedures, establishment of bank or trust accounts to hold payroll deductions or contributions.
5.8 Leave of Absence. During leaves of absence approved by the Company meeting the requirements of Treas. Reg. Section 1.421-1(h)(2) under the Code, a Participant may continue participation in the Plan by making cash payments to the Company on his or her normal Payday equal to the Participants authorized payroll deduction.
ARTICLE VI.
GRANT AND EXERCISE OF RIGHTS
6.1 Grant of Rights. On the Enrollment Date of each Offering Period, each Eligible Employee participating in such Offering Period shall be granted a right to purchase the maximum number of Shares specified under Section 4.2, subject to the limits in Section 5.5, and shall have the right to buy, on each Purchase Date during such Offering Period (at the applicable Purchase Price), such number of whole Shares as is determined by dividing (a) such Participants payroll deductions accumulated prior to such Purchase Date and retained in the Participants account as of the Purchase Date, by (b) the applicable Purchase Price (rounded down to the nearest Share). The right shall expire on the earliest of: (x) the last Purchase Date of the Offering Period, (y) the last day of the Offering Period, and (z) the date on which the Participant withdraws in accordance with Section 7.1 or Section 7.3.
6.2 Exercise of Rights. On each Purchase Date, each Participants accumulated payroll deductions and any other additional payments specifically provided for in the applicable Offering Document will be applied to the purchase of whole Shares, up to the maximum number of Shares permitted pursuant to the terms of the Plan and the applicable Offering Document, at the Purchase Price. No fractional Shares shall be issued upon the exercise of rights granted under the Plan, unless the Offering Document specifically provides otherwise. Any cash in lieu of fractional Shares remaining after the purchase of whole Shares upon exercise of a purchase right will be credited to a Participants account and carried forward and applied toward the purchase of whole Shares for the next following Offering Period, unless the Administrator provides that such amounts should be returned to the Participant in one lump sum payment in a subsequent payroll check. Shares issued pursuant to the Plan may be evidenced in such manner as the Administrator may determine and may be issued in certificated form or issued pursuant to book-entry procedures.
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6.3 Pro Rata Allocation of Shares. If the Administrator determines that, on a given Purchase Date, the number of Shares with respect to which rights are to be exercised may exceed (a) the number of Shares that were available for issuance under the Plan on the Enrollment Date of the applicable Offering Period, or (b) the number of Shares available for issuance under the Plan on such Purchase Date, the Administrator may in its sole discretion provide that the Company shall make a pro rata allocation of the Shares available for purchase on such Enrollment Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants for whom rights to purchase Shares are to be exercised pursuant to this Article VI on such Purchase Date, and shall either (i) continue all Offering Periods then in effect, or (ii) terminate any or all Offering Periods then in effect pursuant to Article IX. The Company may make pro rata allocation of the Shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional Shares for issuance under the Plan by the Companys stockholders subsequent to such Enrollment Date. The balance of the amount credited to the account of each Participant that has not been applied to the purchase of Shares shall be paid to such Participant in one lump sum in cash as soon as reasonably practicable after the Purchase Date or such earlier date as determined by the Administrator.
6.4 Withholding. At the time a Participants rights under the Plan are exercised, in whole or in part, or at the time some or all of the Shares issued under the Plan is disposed of, the Participant must make adequate provision for the Companys federal, state, or other tax withholding obligations, if any, that arise upon the exercise of the right or the disposition of the Shares. At any time, the Company may, but shall not be obligated to, withhold from the Participants compensation or Shares received pursuant to the Plan the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Shares by the Participant.
6.5 Conditions to Issuance of 6.6 Shares. The Company shall not be required to issue or deliver any certificate or certificates for, or make any book entries evidencing, Shares purchased upon the exercise of rights under the Plan prior to fulfillment of all of the following conditions: (a) the admission of such Shares to listing on all stock exchanges, if any, on which the Shares are then listed; (b) the completion of any registration or other qualification of such Shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, that the Administrator shall, in its absolute discretion, deem necessary or advisable; (c) the obtaining of any approval or other clearance from any state or federal governmental agency that the Administrator shall, in its absolute discretion, determine to be necessary or advisable; (d) the payment to the Company of all amounts that it is required to withhold under federal, state or local law upon exercise of the rights, if any; and (e) the lapse of such reasonable period of time following the exercise of the rights as the Administrator may from time to time establish for reasons of administrative convenience.
ARTICLE VII.
WITHDRAWAL; CESSATION OF ELIGIBILITY
7.1 Withdrawal. A Participant may withdraw all but not less than all of the payroll deductions credited to his or her account and not yet used to exercise his or her rights under the Plan at any time by giving written notice to the Company in a form acceptable to the Company no later than one (1) week prior to the end of the Offering Period (or such shorter or longer period as may be specified by the Administrator in the applicable Offering Document). All of the Participants payroll deductions credited to his or her account during an Offering Period shall be paid to such Participant as soon as reasonably practicable after receipt of notice of withdrawal and such Participants rights for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of Shares shall be made for such Offering Period. If a Participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the next Offering Period unless the Participant timely delivers to the Company a new subscription agreement.
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7.2 Future Participation. A Participants withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or a Designated Subsidiary or in subsequent Offering Periods that commence after the termination of the Offering Period from which the Participant withdraws.
7.3 Cessation of Eligibility. Upon a Participants ceasing to be an Eligible Employee for any reason, he or she shall be deemed to have elected to withdraw from the Plan pursuant to this Article VII and the payroll deductions credited to such Participants account during the Offering Period shall be paid to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 12.4, as soon as reasonably practicable, and such Participants rights for the Offering Period shall be automatically terminated. If a Participant transfers employment from the Company or any Designated Subsidiary participating in the Section 423 Component to any Designated Subsidiary participating in the Non-Section 423 Component, such transfer shall not be treated as a termination of employment, but the Participant shall immediately cease to participate in the Section 423 Component; however, any contributions made for the Offering Period in which such transfer occurs shall be transferred to the Non-Section 423 Component, and such Participant shall immediately join the then-current Offering under the Non-Section 423 Component upon the same terms and conditions in effect for the Participants participation in the Section 423 Component, except for such modifications otherwise applicable for Participants in such Offering. A Participant who transfers employment from any Designated Subsidiary participating in the Non-Section 423 Component to the Company or any Designated Subsidiary participating in the Section 423 Component shall not be treated as terminating the Participants employment and shall remain a Participant in the Non-Section 423 Component until the earlier of (i) the end of the current Offering Period under the Non-Section 423 Component or (ii) the Enrollment Date of the first Offering Period in which the Participant is eligible to participate following such transfer. Notwithstanding the foregoing, the Administrator may establish different rules to govern transfers of employment between entities participating in the Section 423 Component and the Non-Section 423 Component, consistent with the applicable requirements of Section 423 of the Code.
ARTICLE VIII.
ADJUSTMENTS UPON CHANGES IN SHARES
8.1 Changes in Capitalization. Subject to Section 8.3, in the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), change in control, reorganization, merger, amalgamation, consolidation, combination, repurchase, redemption, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event, as determined by the Administrator, affects the Shares such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any outstanding purchase rights under the Plan, the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (a) the aggregate number and type of Shares (or other securities or property) that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 and the limitations established in each Offering Document pursuant to Section 4.2 on the maximum number of Shares that may be purchased); (b) the class(es) and number of Shares and price per Share subject to outstanding rights; and (c) the Purchase Price with respect to any outstanding rights.
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8.2 Other Adjustments. Subject to Section 8.3, in the event of any transaction or event described in Section 8.1 or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in Applicable Law or accounting principles, the Administrator, in its discretion, and on such terms and conditions as it deems appropriate, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any right under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(a) To provide for either (i) termination of any outstanding right in exchange for an amount of cash, if any, equal to the amount that would have been obtained upon the exercise of such right had such right been currently exercisable or (ii) the replacement of such outstanding right with other rights or property selected by the Administrator in its sole discretion;
(b) To provide that the outstanding rights under the Plan shall be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar rights covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(c) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding rights under the Plan and/or in the terms and conditions of outstanding rights and rights that may be granted in the future;
(d) To provide that Participants accumulated payroll deductions may be used to purchase Shares prior to the next occurring Purchase Date on such date as the Administrator determines in its sole discretion and the Participants rights under the ongoing Offering Period(s) shall be terminated; and
(e) To provide that all outstanding rights shall terminate without being exercised.
8.3 No Adjustment Under Certain Circumstances. Unless determined otherwise by the Administrator, no adjustment or action described in this Article VIII or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Section 423 Component of the Plan to fail to satisfy the requirements of Section 423 of the Code.
8.4 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Administrator under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to outstanding rights under the Plan or the Purchase Price with respect to any outstanding rights.
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ARTICLE IX.
AMENDMENT, MODIFICATION AND TERMINATION
9.1 Amendment, Modification and Termination. The Administrator may amend, suspend or terminate the Plan at any time and from time to time; provided, however, that approval of the Companys stockholders shall be required to amend the Plan to: (a) increase the aggregate number, or change the type, of shares that may be sold pursuant to rights under the Plan under Section 3.1 (other than an adjustment as provided by Article VIII) or (b) change the corporations or classes of corporations whose employees may be granted rights under the Plan.
9.2 Certain Changes to Plan. Without stockholder consent and without regard to whether any Participant rights may be considered to have been adversely affected (and, with respect to the Section 423 Component of the Plan, after taking into account Section 423 of the Code), the Administrator shall be entitled to change or terminate the Offering Periods, limit the frequency and/or number of changes in the amount withheld from Compensation during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Companys processing of payroll withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Shares for each Participant properly correspond with amounts withheld from the Participants Compensation, and establish such other limitations or procedures as the Administrator determines in its sole discretion to be advisable that are consistent with the Plan.
9.3 Actions In the Event of Unfavorable Financial Accounting Consequences. In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:
(a) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;
(b) shortening any Offering Period so that the Offering Period ends on a new Purchase Date, including an Offering Period underway at the time of the Administrator action; and
(c) allocating Shares.
Such modifications or amendments shall not require stockholder approval or the consent of any Participant.
9.4 Payments Upon Termination of Plan. Upon termination of the Plan, the balance in each Participants Plan account shall be refunded as soon as practicable after such termination, without any interest thereon, or the Offering Period may be shortened so that the purchase of Shares occurs prior to the termination of the Plan.
ARTICLE X.
TERM OF PLAN
The Plan shall become effective on the Effective Date. The effectiveness of the Section 423 Component of the Plan shall be subject to approval of the Plan by the Companys stockholders within twelve (12) months following the date the Plan is first approved by the Board. No right may be granted under the Section 423 Component of the Plan prior to such stockholder approval. The Plan shall remain in effect until terminated under Section 9.1. No rights may be granted under the Plan during any period of suspension of the Plan or after termination of the Plan.
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ARTICLE XI.
ADMINISTRATION
11.1 Administrator. Unless otherwise determined by the Board, the Administrator of the Plan shall be the Compensation Committee of the Board (or another committee or a subcommittee of the Board to which the Board delegates administration of the Plan). The Board may at any time vest in the Board any authority or duties for administration of the Plan. The Administrator may delegate administrative tasks under the Plan to the services of an Agent or Employees to assist in the administration of the Plan, including establishing and maintaining an individual securities account under the Plan for each Participant.
11.2 Authority of Administrator. The Administrator shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
(a) To determine when and how rights to purchase Shares shall be granted and the provisions of each offering of such rights (which need not be identical).
(b) To designate from time to time which Subsidiaries of the Company shall be Designated Subsidiaries, which designation may be made without the approval of the stockholders of the Company.
(c) To impose a mandatory holding period pursuant to which Employees may not dispose of or transfer Shares purchased under the Plan for a period of time determined by the Administrator in its discretion.
(d) To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for its administration. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(e) To amend, suspend or terminate the Plan as provided in Article IX.
(f) Generally, to exercise such powers and to perform such acts as the Administrator deems necessary or expedient to promote the best interests of the Company and its Subsidiaries and to carry out the intent that the Plan be treated as an employee stock purchase plan within the meaning of Section 423 of the Code for the Section 423 Component.
(g) The Administrator may adopt sub-plans applicable to particular Designated Subsidiaries or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code. The rules of such sub-plans may take precedence over other provisions of this Plan, with the exception of Section 3.1 hereof, but unless otherwise superseded by the terms of such sub-plan, the provisions of this Plan shall govern the operation of such sub-plan.
11.3 Decisions Binding. The Administrators interpretation of the Plan, any rights granted pursuant to the Plan, any subscription agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
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ARTICLE XII.
MISCELLANEOUS
12.1 Restriction upon Assignment. A right granted under the Plan shall not be transferable other than by will or the applicable laws of descent and distribution, and is exercisable during the Participants lifetime only by the Participant. Except as provided in Section 12.4 hereof, a right under the Plan may not be exercised to any extent except by the Participant. The Company shall not recognize and shall be under no duty to recognize any assignment or alienation of the Participants interest in the Plan, the Participants rights under the Plan or any rights thereunder.
12.2 Rights as a Stockholder. With respect to Shares subject to a right granted under the Plan, a Participant shall not be deemed to be a stockholder of the Company, and the Participant shall not have any of the rights or privileges of a stockholder, until such Shares have been issued to the Participant or his or her nominee following exercise of the Participants rights under the Plan. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash securities, or other property) or distribution or other rights for which the record date occurs prior to the date of such issuance, except as otherwise expressly provided herein or as determined by the Administrator.
12.3 Interest. No interest shall accrue on the payroll deductions or contributions of a Participant under the Plan.
12.4 Designation of Beneficiary.
(a) A Participant may, in the manner determined by the Administrator, file a written designation of a beneficiary who is to receive any Shares and/or cash, if any, from the Participants account under the Plan in the event of such Participants death subsequent to a Purchase Date on which the Participants rights are exercised but prior to delivery to such Participant of such Shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participants account under the Plan in the event of such Participants death prior to exercise of the Participants rights under the Plan. If the Participant is married and resides in a community property state, a designation of a person other than the Participants spouse as his or her beneficiary shall not be effective without the prior written consent of the Participants spouse.
(b) Such designation of beneficiary may be changed by the Participant at any time by written notice to the Company. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participants death, the Company shall deliver such Shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
12.5 Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
12.6 Equal Rights and Privileges. Subject to Section 5.7, all Eligible Employees will have equal rights and privileges under the Section 423 Component so that the Section 423 Component of this Plan qualifies as an employee stock purchase plan within the meaning of Section 423 of the Code. Subject to Section 5.7, any provision of the Section 423 Component that is inconsistent with Section 423 of the Code will, without further act or amendment by the Company, the Board or the Administrator, be reformed to comply with the equal rights and privileges requirement of Section 423 of the Code. Eligible Employees participating in the Non-Section 423 Component need not have the same rights and privileges as other Eligible Employees participating in the Non-Section 423 Component or as Eligible Employees participating in the Section 423 Component.
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12.7 Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.
12.8 Reports. Statements of account shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of Shares purchased and the remaining cash balance, if any.
12.9 No Employment Rights. Nothing in the Plan shall be construed to give any person (including any Eligible Employee or Participant) the right to remain in the employ of the Company or any Parent or Subsidiary or affect the right of the Company or any Parent or Subsidiary to terminate the employment of any person (including any Eligible Employee or Participant) at any time, with or without cause.
12.10 Notice of Disposition of Shares. Each Participant shall give prompt notice to the Company of any disposition or other transfer of any Shares purchased upon exercise of a right under the Section 423 Component of the Plan if such disposition or transfer is made: (a) within two (2) years from the Enrollment Date of the Offering Period in which the Shares were purchased or (b) within one (1) year after the Purchase Date on which such Shares were purchased. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.
12.11 Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and enforced in accordance with the laws of the State of Delaware, disregarding any states choice of law principles requiring the application of a jurisdictions laws other than the State of Delaware.
12.12 Electronic Forms. To the extent permitted by Applicable Law and in the discretion of the Administrator, an Eligible Employee may submit any form or notice as set forth herein by means of an electronic form approved by the Administrator. Before the commencement of an Offering Period, the Administrator shall prescribe the time limits within which any such electronic form shall be submitted to the Administrator with respect to such Offering Period in order to be a valid election.
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Exhibit 10.4
ICOSAVAX, INC.
NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM
Non-employee members of the board of directors (the Board) of Icosavax, Inc. (the Company) shall receive cash and equity compensation as set forth in this Non-Employee Director Compensation Program (this Program). The cash and equity compensation described in this Program shall be paid or be made, as applicable, automatically and without further action of the Board, to each member of the Board who is not an employee of the Company or any parent or subsidiary of the Company (each, a Non-Employee Director) who is entitled to receive such cash or equity compensation, unless such Non-Employee Director declines the receipt of such cash or equity compensation by written notice to the Company and subject to any limits on non-employee director compensation set forth in the Equity Plan (as defined below). This Program shall remain in effect until it is revised or rescinded by further action of the Board. This Program may be amended, modified or terminated by the Board at any time in its sole discretion. The terms and conditions of this Program shall supersede any prior cash and/or equity compensation arrangements for service as a member of the Board between the Company and any of its Non-Employee Directors, except for equity compensation previously granted to a Non-Employee Director. This Program shall become effective on the date of the effectiveness of the Companys Registration Statement on Form S-1 relating to the initial public offering of the Companys common stock (the Effective Date).
CASH COMPENSATION
The schedule of annual retainers (the Annual Retainers) for the Non-Employee Directors is as follows:
Position |
Amount | |||
Base Board Retainer |
$ | 35,000 | ||
Chairman of the Board |
$ | 100,000 | ||
|
(in lieu of Base
Board Retainer |
) |
||
Chair of Audit Committee |
$ | 15,000 | ||
Chair of Compensation Committee |
$ | 10,000 | ||
Chair of Nominating and Corporate Governance Committee |
$ | 8,000 | ||
Member of Audit Committee (non-Chair) |
$ | 7,500 | ||
Member of Compensation Committee (non-Chair) |
$ | 5,000 | ||
Member of Nominating and Corporate Governance Committee (non-Chair) |
$ | 4,000 |
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For the avoidance of doubt, the Annual Retainers in the table above are additive and a Non-Employee Director shall be eligible to earn an Annual Retainer for each position in which he or she serves. The Annual Retainers shall be earned on a quarterly basis based on a calendar quarter and shall be paid in cash by the Company in arrears not later than the fifteenth day following the end of each calendar quarter. In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable position, for an entire calendar quarter, the Annual Retainer paid to such Non-Employee Director shall be prorated for the portion of such calendar quarter actually served as a Non-Employee Director, or in such position, as applicable. In addition, the Annual Retainers will be prorated for the first calendar quarter in which the Effective Date occurs, which proration will be based on the number of days of the calendar quarter remaining in such quarter after the Effective Date. The Board may adopt a program that allows Non-Employee Directors to defer Annual Retainers.
EQUITY COMPENSATION
Each Non-Employee Director shall be granted the equity awards described below, which equity awards shall be granted under and subject to the terms and provisions of the Companys 2021 Incentive Award Plan or any other applicable Company equity incentive plan then-maintained by the Company (the Equity Plan), and shall be subject to an equity award agreement in substantially the form previously approved by the Board for use under the Equity Plan. All applicable terms of the Equity Plan apply to this Program as if fully set forth herein, and all grants of equity awards hereby are subject in all respects to the terms of the Equity Plan and the applicable equity award agreement.
A. Initial Awards. Each Non-Employee Director who is initially elected or appointed to the Board following the Effective Date shall be automatically granted (1) stock options to purchase 25,500 shares of the Companys common stock (an Initial Option Award), and (2) 8,500 restricted stock units (an Initial RSU Award), in each case under the Equity Plan on the date of such initial election or appointment. The awards described in this Section shall be referred to as Initial Awards.
B. Annual Awards. A Non-Employee Director who (1) is serving on the Board as of the date of any annual meeting of the Companys stockholders following the Effective Date, and (2) will continue to serve as a Non-Employee Director immediately following such meeting, shall be automatically granted (x) stock options to purchase 12,750 shares of the Companys common stock (an Annual Option Award), and (y) 4,250 restricted stock units (an Annual RSU Award), in each case under the Equity Plan on the date of such annual meeting. The awards described in this Section shall be referred to as Annual Awards. For the avoidance of doubt, a Non-Employee Director elected for the first time to the Board at an annual meeting of the Companys stockholders shall only receive Initial Awards in connection with such election, and shall not receive any Annual Awards on the date of such meeting as well. In addition, in the event of an adjournment or postponement of any annual meeting following the time such meeting commences, the date of the annual meeting for purposes of this clause (B) shall be the date on which the business to be conducted at the annual meeting is concluded.
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Notwithstanding the foregoing, a Non-Employee Director shall have served as a Non-Employee Director for at least (6) months as of the date of any annual meeting to receive Annual Awards, unless otherwise determined by the Board; in which case, the Board may determine to grant such Non-Employee Director Annual Awards or Prorated Annual Awards (as defined below). Prorated Annual Awards means the product determined by multiplying (1) the Annual Awards, by (2) a fraction, the numerator of which is equal to (x) 365 minus (y) the number of days that elapsed from the date of the annual meeting of the Companys stockholders preceding the Non-Employee Directors date of initial election or appointment to the date of such initial election or appointment, and the denominator of which is 365.
C. Terms of Awards Granted to Non-Employee Directors.
1. Vesting. Each Initial Option Award shall vest and become exercisable in substantially equal monthly installments over the three (3) years beginning on the date of the Non-Employee Directors election or appointment to the Board, subject to the Non-Employee Director continuing in service on the Board through each such vesting date. Each Initial RSU Award shall vest and become exercisable in three substantially equal annual installments on each of the first three (3) anniversaries of the date of the Non-Employee Directors election or appointment to the Board, subject to the Non-Employee Director continuing in service on the Board through each such vesting date. Each Annual Option Award shall vest and/or become exercisable in substantially equal monthly installments over the twelve (12) months following the date of grant of such Annual Option Award (or, in the event the next annual meeting of the Companys stockholders occurs prior to the first anniversary of the date of grant of such Annual Option Award, any remaining unvested portion of the Annual Option Award will vest on the date of such annual meeting of the Companys stockholders), subject to the Non-Employee Director continuing in service on the Board through the applicable vesting date. Each Annual RSU Award shall vest and/or become exercisable at the earlier of (x) the first anniversary of the date of grant of such Annual RSU Award or (y) the date of the next annual meeting of the Companys stockholders, subject to the Non-Employee Director continuing in service on the Board through the applicable vesting date.
2. Forfeiture. Unless the Board otherwise determines, any portion of an Initial Award or Annual Award which is unvested at the time of a Non-Employee Directors termination of service on the Board as a Non-Employee Director shall be immediately forfeited upon such termination of service and shall not thereafter become vested. All of a Non-Employee Directors Initial Awards and Annual Awards shall vest in full immediately prior to the occurrence of a Change in Control (as defined in the Equity Plan), to the extent outstanding at such time.
3. Reimbursements. The Company shall reimburse each Non-Employee Director for all reasonable, documented, out-of-pocket travel and other business expenses incurred by such Non-Employee Director in the performance of his or her duties to the Company in accordance with the Companys applicable expense reimbursement policies and procedures as in effect from time to time.
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Exhibit 10.12
ICOSAVAX, INC.
July 22, 2021
Adam Simpson
c/o Icosavax, Inc.
Re: |
Employment Letter Agreement |
Dear Adam:
This amended and restated employment letter agreement (this Agreement) amends and restates that certain employment letter agreement, dated August 15, 2019, as amended and restated by that certain employment letter agreement, dated May 11, 2020, as amended by that certain amendment dated February 10, 2021 (together, the Prior Agreement), by and between Icosavax, Inc. (the Company) and you (also referred to herein as Employee and together, the Parties). This Agreement sets forth the terms of your continued employment with the Company, effective as of the closing of the Companys initial public offering (IPO). In consideration of the mutual promises herein contained, the Parties agree as follows:
1. Position. Employee will continue to serve in the position of Chief Executive Officer. Employee will continue to report to the Companys Board of Directors (the Board), and shall be responsible for the duties customarily associated with this position and such other duties assigned by the Company. Employee will work remotely. Employee will be employed on a full-time basis. Employee will also serve as a member of the Board.
2. Base Salary and Employee Benefits.
(a) Salary. Employees base salary will be $550,000.00 per year (the Base Salary), less payroll deductions and withholdings, paid on the Companys normal payroll schedule.
(b) Benefits. During his employment, Employee will be eligible to participate in the standard benefits plans offered to similarly situated employees by the Company from time to time, subject to plan terms and generally applicable Company policies. A full description of these benefits will be available upon request. Employee will be eligible to accrue vacation or paid time off in accordance with the Companys policies as in effect from time to time. The Company may change compensation and benefits from time to time in its discretion.
(c) Expenses. All reasonable business expenses that are documented by Employee and incurred in the ordinary course of business will be reimbursed in accordance with the Companys standard policies and procedures.
3. Annual Bonus. Employee will be eligible to earn an annual performance bonus of up to fifty percent (50%) of Employees Base Salary rate (the Annual Bonus) for performance at targeted levels. The Annual Bonus will be based upon an assessment by the Board of Employees performance and the Companys attainment of written targeted goals as set by the Board in its sole discretion. Bonus payments, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether Employee has earned an Annual Bonus, and the amount of any such bonus, based on the achievement of such goals. No amount of the Annual Bonus is guaranteed, and Employee must be an employee on the Annual Bonus payment date to be eligible to receive an Annual Bonus; except as provided in Section 5 below, no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year after the applicable bonus year.
4. At-Will Employment Relationship. Employee may terminate his employment with the Company at any time and for any reason whatsoever simply by notifying the Company. Likewise, the Company may terminate Employees employment at any time, with or without cause or advance notice. Employees employment at-will status can only be modified in a written agreement signed by Employee and by an officer of the Company.
5. Severance Benefits. If, at any time, the Company terminates Employees employment without Cause or Employee resigns for Good Reason (either such termination referred to as a Qualifying Termination), provided such termination or resignation also constitutes a Separation from Service (as defined below), then subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below) and Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following severance benefits (the Severance Benefits):
(a) Cash Severance. Upon a Qualifying Termination, the Company will pay Employee, as cash severance (i) Employees Base Salary in effect as of Employees Separation from Service date for the Severance Period, less applicable payroll deductions and withholdings (the Base Severance), plus (ii) (A) in the event such Qualifying Termination does not occur during the Change in Control Period, an amount equal to Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs, prorated to reflect the portion of the year that has elapsed prior to the date of Employees Separation from Service date, or (B) in the event such Qualifying Termination does occur during the Change in Control Period, an amount equal to one hundred fifty percent (150%) multiplied by Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs (the Bonus Severance, and with the Base Severance, the Severance).
Except in the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in installments in the form of continuation of Employees Base Salary payments over the Severance Period, paid on the Companys ordinary payroll dates, commencing on the sixtieth (60th) day following Employees Separation from Service date. The first such installment shall be for any accrued Base Salary for the sixty (60)-day period preceding such initial payment date. All salary continuation payments thereafter, if any, shall be made on the Companys regular payroll dates.
In the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
Any Bonus Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
(b) COBRA Severance. As additional severance, in the event of Employees Qualifying Termination, the Company will continue to pay the cost of Employees health care coverage in effect at the time of Employees Separation from Service for the Severance Period (the COBRA Coverage Period), either under the Companys regular health plan (if permitted) or by paying Employees COBRA premiums (the COBRA Severance). The Companys obligation to pay the COBRA Severance on Employees behalf will cease if Employee obtains health care coverage from another source (e.g., a new employer or spouses benefit plan), unless otherwise prohibited by applicable law. Employee must notify
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the Company within two (2) weeks if Employee obtains coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which Employee would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), or if the Company otherwise elects, in its sole discretion, the Company shall in lieu thereof provide to Employee a taxable monthly payment in an amount equal to the monthly COBRA premium that Employee would be required to pay to continue Employees group health coverage in effect on the date of Employees termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Employee elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Employee obtains other coverage or (y) the last day of applicable COBRA Coverage Period.
6. Accelerated Vesting. Subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below) and, other than with respect to clause (a)(ii) below, Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following accelerated vesting (the Accelerated Vesting):
(a) Existing Stock Awards. With respect to Employees then-unvested Stock Awards granted prior to the date of the closing of the transactions contemplated by the Series A Preferred Stock Purchase Agreement, dated as of August 15, 2019, by and among the Company and the Purchasers named therein (the Transaction Closing Date and such awards, the Existing Stock Awards):
(i) In the event of Employees Qualifying Termination, then all such Existing Stock Awards shall be deemed vested effective immediately prior to such termination;
(ii) In the event of a Change in Control, then fifty percent (50%) of Employees then-unvested Existing Stock Awards shall be deemed vested effective immediately prior to such Change in Control; and
(iii) In the event of Employees termination of employment due to death or Disability, then all Employees then-unvested Existing Stock Awards shall be deemed vested effective immediately prior to such termination.
(b) New Stock Awards. With respect to Employees then-unvested Stock Awards granted on or after the Transaction Closing Date (the New Stock Awards):
(i) With respect to all New Stock Awards granted prior to the date of this Agreement, (A) in the event of Employees Qualifying Termination prior to a Change in Control or more than eighteen (18) months following a Change in Control, then such number of Employees New Stock Awards granted prior to the date of this Agreement shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the twelve (12) months following Employees date of termination had Employee remained in employed by the Company during such period; and (B) in the event of Employees Qualifying Termination within eighteen (18) months following a Change in Control, then all of Employees New Stock Awards granted prior to the date of this Agreement will vest effective upon the date of termination; and
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(ii) With respect to all New Stock Awards granted on or after the date of this Agreement, (A) in the event of Employees Qualifying Termination not occurring during the Change in Control Period, then such number of Employees New Stock Awards granted on or after the date of this Agreement shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the twelve (12) months following Employees date of termination had Employee remained in employed by the Company during such period, and (B) in the event of Employees Qualifying Termination during the Change in Control Period, then all of Employees New Stock Awards granted on or after the date of this Agreement shall vest effective upon the later of (A) the date of termination or (B) the date of the Change in Control.
(c) Interaction with New Stock Award Agreements. Except to the extent an award agreement governing a New Stock Award granted to Employee specifically provides for the treatment of such New Stock Award in the event of any of the acceleration events described in clauses (a) and (b) above and provides that its terms shall supersede the provisions of this Section 6, in which case the terms of such award agreement shall govern, the foregoing Accelerated Vesting provisions are deemed to be a part of each New Stock Award and to amend and supersede any less favorable provision in any agreement or plan regarding such New Stock Award (however, for the avoidance of doubt, if any New Stock Award is subject to more favorable vesting than the Accelerated Vesting pursuant to any agreement or plan regarding such New Stock Award, such more favorable provisions shall continue to apply and shall not be limited by the Accelerated Vesting).
(d) Interaction with Existing Stock Award Agreements The foregoing Accelerated Vesting provisions are deemed to be a part of each Existing Stock Award and to amend and supersede any provision in any agreement or plan regarding such Existing Stock Award, even if such Accelerated Vesting provisions are less favorable. In the event of any conflict between the foregoing Accelerated Vesting provisions and the terms of any Existing Stock Award, the Accelerated Vesting provisions shall apply. Notwithstanding the foregoing, the Accelerated Vesting shall be in addition to, and not in any way in limitation of, the accelerated vesting provisions set forth in that certain Restricted Stock Purchase Agreement dated as of December 11, 2017, between the Company and The Adam K. and Maria M. Simpson Family Trust DTD 04/27/07, as amended from time to time, pursuant to which the Founders Shares were issued to Employee.
7. Resignation Without Good Reason; Termination for Cause; Death or Disability. If, at any time, Employee resigns his employment with the Company without Good Reason, or the Company terminates Employees employment for Cause, or Employees employment with the Company terminates for any reason not entitling Employee to the Severance Benefits or Accelerated Vesting pursuant to Sections 5 and 6 above, including (other than with respect to the Accelerated Vesting) as a result of Employees death or disability, then Employee will receive his Base Salary accrued through his last day of employment. Under these circumstances, Employee will not be entitled to any other form of compensation from the Company, including any Severance Benefits or Accelerated Vesting, other than Employees rights to the vested portion of Employees Stock Awards and any other rights to which Employee is entitled under the Companys benefit programs or applicable law. In addition, Employee shall resign from any and all positions Employee holds with the Company, with such resignations to be effective no later than the date of Employees employment termination (or such other date requested or permitted by the Board).
8. Conditions to Receipt of Severance Benefits and Accelerated Vesting. Prior to and as a condition to Employees, or Employees estate or legal representative, as applicable, receipt of the Severance Benefits or Accelerated Vesting described above, Employee, or Employees estate or legal representative, as applicable, shall timely execute and deliver to the Company a release of claims in favor of and in a form acceptable to the Company (the Release) and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within sixty (60) days following Employees Separation from Service date.
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9. Compliance with Section 409A. It is intended that the Severance Benefits and Accelerated Vesting set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code (Section 409A, together with any state law of similar effect, Section 409A) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), Employees right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits or Accelerated Vesting constitute deferred compensation under Section 409A and Employee is, on the date of Employees Separation from Service, a specified employee of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of the Severance Benefits and Accelerated Vesting shall be delayed until the earliest of: (a) the date that is six (6) months and one (1) day after Employees Separation from Service date, (b) the date of Employees death, or (c) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this Section 9 shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein. No interest shall be due on any amounts so deferred. The Severance Benefits and Accelerated Vesting are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly. Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Employees taxable year following the taxable year in which Employee incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Employee, and Employees right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit. For purposes of this Agreement, all references to Employees termination of employment shall mean Employees Separation from Service.
10. Section 280G Treatment.
(a) In the event that any payment or benefit received or to be received by Employee pursuant to the terms of any plan, arrangement or agreement (including any payment or benefit received in connection with a change of control or the termination of Employees employment) (all such payments and benefits being hereinafter referred to as the Total Payments) would be subject (in whole or part) to the excise tax (the Excise Tax) imposed under Section 4999 of the Code, then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to Employee that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment
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with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code; provided, in case of clauses (B), (C) and (D), that reduction of any payments or benefits attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee on an after-tax basis and, to the extent economically equivalent payments or benefits are subject to reduction, in a pro rata manner.
(b) All determinations regarding the application of this Section 280G Treatment section shall be made by an independent accounting firm or consulting group with nationally recognized standing and substantial expertise and experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax retained by the Company prior to the date of the applicable change in control (the 280G Firm). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments shall be taken into account which, in the written opinion of the 280G Firm, (A) does not constitute a parachute payment within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, or (B) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, (ii) no portion of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and in such manner as not to constitute a payment within the meaning of Section 280G(b) of the Code shall be taken into account, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. All determinations related to the calculations to be performed pursuant to this Section 280G Treatment section shall be done by the 280G Firm.
(c) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Employee and the Company within fifteen (15) days after notification from either the Company or Employee that Employee may receive payments which may be parachute payments. Employee and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne solely by the Company.
11. Withholding Taxes. All amounts payable to Employee will be subject to reduction to reflect applicable withholding and payroll taxes.
12. Compliance with Confidential Information and Inventions Agreement and Company Policies. In the performance of services for the Company, Employee will be expected to abide by Company rules and policies. Employee and the Company have entered into a Confidential Information and Inventions Assignment Agreement attached hereto as Exhibit A which prohibits unauthorized use or disclosure of the Companys proprietary information, among other obligations. Employee agrees to perform each and every obligation of Employee therein contained. Any references in Employees Confidential Information and Inventions Assignment Agreement to the Prior Agreement shall be deemed to be amended to refer to this
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Agreement. Notwithstanding the foregoing or in the Confidential Information and Inventions Assignment Agreement, pursuant to 18 U.S.C. Section 1833(b), Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (a) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13. Protection of Third Party Information. In Employees work for the Company, Employee will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom Employee has an obligation of confidentiality. Rather, Employee will be expected to use only that information which is generally known and used by persons with training and experience comparable to his own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. Employee agrees that Employee will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom Employee has an obligation of confidentiality. Employee hereby represents that he has disclosed to the Company any contract he has signed that may restrict his activities on behalf of the Company.
14. Return of Company Property. Upon the termination of Employees employment with the Company for any reason, as a precondition to the receipt of the Accelerated Vesting, within five (5) days after Employees Separation from Service date (or earlier if requested by the Company), Employee will return to the Company all Company documents (and all copies thereof) and other Company property within their possession, custody or control, including but not limited to Company files, notes, financial and operational information, customer lists and contact information, investor and finance source lists and contract information, product information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including but not limited to computers, facsimile machines, mobile telephones, tablets, handheld devices and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part and in any medium). Employee shall deliver to the Board a signed statement certifying compliance with this Section 14 prior to the receipt of the Accelerated Vesting.
15. Exclusive Services. Employee shall at all times faithfully, industriously and to the best of Employees ability, experience and talent perform to the satisfaction of the Board all of the duties that may be assigned to Employee hereunder. Subject to the terms of the Confidential Information and Inventions Assignment Agreement, this shall not preclude Employee from devoting time to personal and family investments or serving on community and civic boards, participating in industry associations, or engaging in other business or public activities (including providing consulting services to other entities, being employed by other entities and/or serving on the board of other entities), provided such activities do not interfere with the duties to the Company, as determined in good faith by the Board. Notwithstanding the foregoing, during Employees employment by the Company, except on behalf of the Company, Employee will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by Employee to compete with the Company (or is planning or preparing to compete with the Company) in the fields of respiratory syncytial virus and cytomegalovirus or any other vaccine indications then in development by the Company, anywhere in the world; provided, however, that Employee may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange. If the Board determines Employee is in breach of this Section 15, and provided such breach is not cured within thirty (30) days of written notification of such breach from the Board, then the Company may terminate Employees employment for Cause.
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16. Dispute Resolution. To ensure the rapid and economical resolution of disputes that may arise in connection with Employees service or employment with the Company, Employee and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Employees service or employment with the Company, or the termination of such service or employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in the city of the Companys then principal place of business in the United States conducted by JAMS or its successor, under the then applicable JAMS Arbitration Rules and Procedures for Employment Disputes (available at http://www.jamsadr.com/rules-employment-arbitration/). Employee acknowledges that by agreeing to this arbitration procedure, he waives the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. Employee will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrators essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Employee or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS arbitration fees in excess of the administrative fees that Employee would be required to pay if the dispute were decided in a court of law. The parties agree this arbitration agreement does not extend to claims for workers compensation or unemployment benefits, or any other claims, that Employee cannot, as a matter of applicable law, be required to arbitrate, nor does it preclude Employee from initiating a complaint before the Equal Employment Opportunity Commission or any other governmental agency, but if any such complaint is not resolved before the agency any action for money damages shall be submitted to arbitration pursuant to this paragraph. Nothing in this Agreement is intended to prevent any party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
17. Miscellaneous. This Agreement, together with the Confidential Information and Inventions Assignment Agreement and the other agreements referenced herein, forms the complete and exclusive statement governing Employees employment with the Company. It supersedes any other agreements or promises made to Employee by anyone, whether oral or written, including, without limitation, the Prior Agreement. Changes in the terms of Employees employment, other than those changes expressly reserved to the Companys or the Boards discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of Employee and the Company, and inure to the benefit of Employee and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This Agreement shall be construed and enforced in accordance with the laws of the State of Washington without regard to conflicts of law principles. Any ambiguity in this Agreement shall not be construed against any party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic signatures shall be equivalent to original signatures.
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18. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) Cause shall mean the occurrence of any of the following events, in each instance that has a material adverse impact on the Company or any successor or affiliate thereof as determined by the Board in its reasonable discretion: (a) Employees conviction of, or plea of guilty or no contest to, any non-vehicular felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (b) Employees commission of, or participation in, a fraud or act of dishonesty or other illegal act against the Company that has a demonstrable adverse impact on the Company or any successor or affiliate thereof; (c) Employees intentional material violation of any contract or agreement between Employee and the Company or any material Company policy or of any statutory duty owed to the Company; (d) Employees intentional, unauthorized use or disclosure of the Companys confidential information or trade secrets; (e) Employees gross misconduct; or (f) Employees ongoing and repeated failure or refusal to perform or neglect of Employees duties as required by this Agreement or Employees ongoing and repeated failure or refusal to comply with the lawful instructions given to Employee by the Board, which failure, refusal or neglect continues for thirty (30) days following Employees receipt of written notice from the Board stating with specificity the nature of such failure, refusal or neglect; provided that it is understood that this clause (f) shall not permit the Company to terminate Employees employment for Cause solely because of (i) Employees failure to meet specified performance objectives or achieve a specific result or outcome, or (ii) Companys dissatisfaction with the quality of services provided by Employee in the good faith performance of Employees duties to the Company; provided, that, with respect to (c), (d), (e) and (f) above, Cause will be triggered after Employee has received written notification of such failure from the Board, which, if curable, remains uncured after thirty (30) days written notice from the Board. Employee shall be provided an opportunity to be heard prior to the final decision to terminate Employees employment hereunder for such Cause, and any determination of Cause by the Board or the Company will be made in good faith.
(b) Change in Control shall have the meaning given to such term in the Companys 2021 Incentive Award Plan. Notwithstanding the foregoing, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit that constitutes nonqualified deferred compensation, the transaction or event constituting the Change in Control must also constitute a change in control event (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such payment or benefit , to the extent required by Section 409A.
(c) Change in Control Period shall mean the period commencing sixty (60) days prior to and ending eighteen (18) months following a Change in Control.
(d) Founders Shares shall mean those shares issued to Employee pursuant to that certain Restricted Stock Purchase Agreement dated as of December 11, 2017, between the Company and The Adam K. and Maria M. Simpson Family Trust DTD 04/27/07, as amended from time to time.
(e) Good Reason shall mean any of the following actions taken without Cause by the Company or a successor corporation or entity without Employees consent: (a) material reduction of Employees base compensation (and Employee and the Company agree that any diminution of ten percent (10%) or more shall be considered material for this purpose, regardless of whether such diminution occurs due to a single reduction or a series of reductions in Employees base compensation), other than to the extent the base compensation of all of the executive officers of the Company are concurrently reduced by the same or greater percentage; (b) material reduction in Employees authority, duties or responsibilities, including a requirement that Employee report to a corporate officer instead of the Board (or, following a Change in Control, the board of directors (or similar governing body) of the ultimate parent company of the surviving entity in such Change in Control that has at least one class of publicly traded securities listed
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on a national stock exchange); (c) relocation of the principal place at which Employee is required to provide services to the Company or Employees principal place of employment that results in an increase in Employees one-way driving distance by more than fifty (50) miles from Employees then current principal place of business or residence, as applicable; and (d) any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Employee under this Agreement. In order to resign for Good Reason, Employee must provide written notice of the event giving rise to Good Reason to the Company within ninety (90) days after the condition arises, allow the Company thirty (30) days to cure such condition, and if the Company fails to cure the condition within such period, then Employees resignation from all positions Employee then holds with the Company must be effective not later than ninety (90) days after the end of the Companys cure period.
(f) Separation from Service shall mean a separation from service as such term is defined in Treasury Regulation Section 1.409A-1(h).
(g) Severance Period shall mean (i) if Employees Qualifying Termination does not occur during the Change in Control Period, twelve (12) months, and (ii) if Employees Qualifying Termination occurs during the Change in Control Period, eighteen (18) months.
(h) Stock Awards shall mean means all stock options, restricted stock and such other awards granted pursuant to the Companys stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof, including the Founders Shares.
(Signature Page Follows)
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Sincerely, | ||
ICOSAVAX, INC. | ||
By: |
/s/ Cassia Cearley |
|
Cassia Cearley, Chief Business Officer | ||
ACKNOWLEDGED AND AGREED: | ||
/s/ Adam K. Simpson |
||
Adam K. Simpson |
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Exhibit 10.13
ICOSAVAX, INC.
July 22, 2021
Douglas Holtzman
c/o Icosavax, Inc.
Re: |
Employment Letter Agreement |
Dear Douglas:
This amended and restated employment letter agreement (this Agreement) amends and restates that certain employment letter agreement, dated August 15, 2019 (the Prior Agreement), by and between Icosavax, Inc. (the Company) and you (also referred to herein as Employee and together, the Parties). This Agreement sets forth the terms of your continued employment with the Company, effective as of the closing of the Companys initial public offering (IPO). In consideration of the mutual promises herein contained, the Parties agree as follows:
1. Position. Employee will continue to serve in the position of Chief Scientific Officer. Employee will continue to report to the Companys Chief Executive Officer, and shall be responsible for the duties customarily associated with this position and such other duties assigned by the Company. Employee will work at the Companys facility located at Seattle, Washington. Of course, the Company may change Employees position, duties, and work location from time to time in its discretion. Employee will be employed on a full-time basis. This is an exempt position.
2. Base Salary and Employee Benefits.
(a) Salary. Employees base salary will be $400,000.00 per year (the Base Salary), less payroll deductions and withholdings, paid on the Companys normal payroll schedule.
(b) Benefits. During his employment, Employee will be eligible to participate in the standard benefits plans offered to similarly situated employees by the Company from time to time, subject to plan terms and generally applicable Company policies. A full description of these benefits will be available upon request. Employee will be eligible to accrue vacation or paid time off in accordance with the Companys policies as in effect from time to time. The Company may change compensation and benefits from time to time in its discretion.
(c) Expenses. All reasonable business expenses that are documented by Employee and incurred in the ordinary course of business will be reimbursed in accordance with the Companys standard policies and procedures.
3. Annual Bonus. During his employment, Employee will be eligible to earn an annual performance bonus of up to forty percent (40%) of Employees Base Salary rate (the Annual Bonus) for performance at targeted levels. The Annual Bonus will be based upon an assessment by the Board of Directors of the Company (the Board) of Employees performance and the Companys attainment of written targeted goals as set by the Board in its sole discretion. Bonus payments, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether Employee has earned an Annual Bonus, and the amount of any such bonus, based on the achievement of such goals. No amount of the Annual Bonus is guaranteed, and Employee must be an employee on the Annual Bonus payment date to be eligible to receive an Annual Bonus; except as provided in Section 5 below, no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year after the applicable bonus year.
4. At-Will Employment Relationship. Employee may terminate his employment with the Company at any time and for any reason whatsoever simply by notifying the Company. Likewise, the Company may terminate Employees employment at any time, with or without cause or advance notice. Employees employment at-will status can only be modified in a written agreement signed by Employee and by an officer of the Company.
5. Severance Benefits. If, at any time, the Company terminates Employees employment without Cause or Employee resigns for Good Reason (either such termination referred to as a Qualifying Termination), provided such termination or resignation also constitutes a Separation from Service (as defined below), then subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below) and Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following severance benefits (the Severance Benefits):
(a) Cash Severance. Upon a Qualifying Termination, the Company will pay Employee, as cash severance (i) Employees Base Salary in effect as of Employees Separation from Service date for the Severance Period, less applicable payroll deductions and withholdings (the Base Severance), plus (ii) (A) in the event such Qualifying Termination does not occur during the Change in Control Period, an amount equal to Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs, prorated to reflect the portion of the year that has elapsed prior to the date of Employees Separation from Service date, or (B) in the event such Qualifying Termination does occur during the Change in Control Period, an amount equal to one hundred percent (100%) multiplied by Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs (the Bonus Severance, and with the Base Severance, the Severance).
Except in the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in installments in the form of continuation of Employees Base Salary payments over the Severance Period, paid on the Companys ordinary payroll dates, commencing on the sixtieth (60th) day following Employees Separation from Service date. The first such installment shall be for any accrued Base Salary for the sixty (60)-day period preceding such initial payment date. All salary continuation payments thereafter, if any, shall be made on the Companys regular payroll dates.
In the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
Any Bonus Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
(b) COBRA Severance. As additional severance, in the event of Employees Qualifying Termination, the Company will continue to pay the cost of Employees health care coverage in effect at the time of Employees Separation from Service for the Severance Period (the COBRA Coverage Period), either under the Companys regular health plan (if permitted) or by paying Employees COBRA premiums (the COBRA Severance). The Companys obligation to pay the COBRA Severance on Employees behalf will cease if Employee obtains health care coverage from another source (e.g., a new employer or spouses benefit plan), unless otherwise prohibited by applicable law. Employee must notify
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the Company within two (2) weeks if Employee obtains coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which Employee would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), or if the Company otherwise elects, in its sole discretion, the Company shall in lieu thereof provide to Employee a taxable monthly payment in an amount equal to the monthly COBRA premium that Employee would be required to pay to continue Employees group health coverage in effect on the date of Employees termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Employee elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Employee obtains other coverage or (y) the last day of applicable COBRA Coverage Period.
6. Accelerated Vesting. Subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below), Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following accelerated vesting (the Accelerated Vesting):
(a) Existing Stock Awards. With respect to all Stock Awards granted prior to the date of this Agreement (the Existing Stock Awards):
(i) In the event of Employees Qualifying Termination prior to a Change in Control or more than eighteen (18) months following a Change in Control, then such number of Employees Existing Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination that occurs within eighteen (18) months following a Change in Control, then all of Employees Existing Stock Awards shall be deemed vested immediately prior to such termination.
(b) New Stock Awards. With respect to Employees Stock Awards granted on or after the date of this Agreement (the New Stock Awards):
(i) In the event of Employees Qualifying Termination not occurring during the Change in Control Period, then such number of Employees New Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination during the Change in Control Period, then all of Employees New Stock Awards shall vest effective upon the later of (A) the date of termination or (B) the date of the Change in Control.
(c) Interaction with Stock Award Agreements. Except to the extent an award agreement governing a Stock Award granted to Employee specifically provides for the treatment of such Stock Award in the event of any of the acceleration events described in clauses (a) and (b) above and provides that its terms shall supersede the provisions of this Section 6, in which case the terms of such award agreement shall govern, the foregoing Accelerated Vesting provisions are deemed to be a part of each Stock Award and to amend and supersede any less favorable provision in any agreement or plan
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regarding such Stock Award (and, for the avoidance of doubt, if any Stock Award is subject to more favorable vesting than the Accelerated Vesting pursuant to any agreement or plan regarding such Stock Award, such more favorable provisions shall continue to apply and shall not be limited by the Accelerated Vesting). Notwithstanding the foregoing, the Accelerated Vesting shall be in addition to, and not in any way in limitation of, the accelerated vesting provisions set forth in that certain Restricted Stock Purchase Agreement dated as of December 14, 2017, between the Company and Douglas A. Holtzman, as amended from time to time, pursuant to which the Founders Shares were issued to Employee.
7. Resignation Without Good Reason; Termination for Cause; Death or Disability. If, at any time, Employee resigns his employment with the Company without Good Reason, or the Company terminates Employees employment for Cause, or Employees employment with the Company terminates for any reason not entitling Employee to the Severance Benefits or Accelerated Vesting pursuant to Sections 5 and 6 above, including as a result of Employees death or disability, then Employee will receive his Base Salary accrued through his last day of employment. Under these circumstances, Employee will not be entitled to any other form of compensation from the Company, including any Severance Benefits or Accelerated Vesting, other than Employees rights to the vested portion of Employees Stock Awards and any other rights to which Employee is entitled under the Companys benefit programs or applicable law. In addition, Employee shall resign from any and all positions Employee holds with the Company, with such resignations to be effective no later than the date of Employees employment termination (or such other date requested or permitted by the Board).
8. Conditions to Receipt of Severance Benefits and Accelerated Vesting. Prior to and as a condition to Employees receipt of the Severance Benefits or Accelerated Vesting described above, Employee shall timely execute and deliver to the Company a release of claims in favor of and in a form acceptable to the Company (the Release) and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within sixty (60) days following Employees Separation from Service date.
9. Compliance with Section 409A. It is intended that the Severance Benefits and Accelerated Vesting set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code (Section 409A, together with any state law of similar effect, Section 409A) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), Employees right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits or Accelerated Vesting constitute deferred compensation under Section 409A and Employee is, on the date of Employees Separation from Service, a specified employee of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of the Severance Benefits and Accelerated Vesting shall be delayed until the earliest of: (a) the date that is six (6) months and one (1) day after Employees Separation from Service date, (b) the date of Employees death, or (c) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this Section 9 shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein. No interest shall be due on any amounts so deferred. The Severance Benefits and Accelerated Vesting are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under
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Section 409A, and any ambiguities herein shall be interpreted accordingly. Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Employees taxable year following the taxable year in which Employee incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Employee, and Employees right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit. For purposes of this Agreement, all references to Employees termination of employment shall mean Employees Separation from Service.
10. Section 280G Treatment.
(a) In the event that any payment or benefit received or to be received by Employee pursuant to the terms of any plan, arrangement or agreement (including any payment or benefit received in connection with a change of control or the termination of Employees employment) (all such payments and benefits being hereinafter referred to as the Total Payments) would be subject (in whole or part) to the excise tax (the Excise Tax) imposed under Section 4999 of the Code, then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to Employee that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code; provided, in case of clauses (B), (C) and (D), that reduction of any payments or benefits attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee on an after-tax basis and, to the extent economically equivalent payments or benefits are subject to reduction, in a pro rata manner.
(b) All determinations regarding the application of this Section 280G Treatment section shall be made by an independent accounting firm or consulting group with nationally recognized standing and substantial expertise and experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax retained by the Company prior to the date of the applicable change in control (the 280G Firm). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments shall be taken into account which, in the written opinion of the 280G Firm, (A) does not constitute a parachute payment within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, or (B) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount
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(as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, (ii) no portion of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and in such manner as not to constitute a payment within the meaning of Section 280G(b) of the Code shall be taken into account, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. All determinations related to the calculations to be performed pursuant to this Section 280G Treatment section shall be done by the 280G Firm.
(c) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Employee and the Company within fifteen (15) days after notification from either the Company or Employee that Employee may receive payments which may be parachute payments. Employee and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne solely by the Company.
11. Withholding Taxes. All amounts payable to Employee will be subject to reduction to reflect applicable withholding and payroll taxes.
12. Compliance with Confidential Information and Inventions Agreement and Company Policies. In the performance of services for the Company, Employee will be expected to abide by Company rules and policies. Employee and the Company have entered into a Confidential Information and Inventions Assignment Agreement (the Confidential Information and Inventions Assignment Agreement), attached hereto as Exhibit A, which prohibits unauthorized use or disclosure of the Companys proprietary information, among other obligations. Employee agrees to perform each and every obligation of Employee therein contained. Any references in Employees Confidential Information and Inventions Assignment Agreement to the Prior Agreement shall be deemed to be amended to refer to this Agreement. Notwithstanding the foregoing or in the Confidential Information and Inventions Assignment Agreement, pursuant to 18 U.S.C. Section 1833(b), Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (a) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13. Protection of Third Party Information. In Employees work for the Company, Employee will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom Employee has an obligation of confidentiality. Rather, Employee will be expected to use only that information which is generally known and used by persons with training and experience comparable to his own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. Employee agrees that Employee will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom Employee has an obligation of confidentiality. Employee hereby represents that he has disclosed to the Company any contract he has signed that may restrict his activities on behalf of the Company.
14. Return of Company Property. Upon the termination of Employees employment with the Company for any reason, Employee will return to the Company all Company documents (and all copies thereof) and other Company property within their possession, custody or control, including but not limited to Company files, notes, financial and operational information, customer lists and contact information,
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investor and finance source lists and contract information, product information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including but not limited to computers, facsimile machines, mobile telephones, tablets, handheld devices and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part and in any medium). Employee shall deliver to the Company, upon request, a signed statement certifying compliance with this Section 14.
15. Exclusive Services. Employee shall at all times faithfully, industriously and to the best of Employees ability, experience and talent perform to the satisfaction of the Board all of the duties that may be assigned to Employee hereunder and shall devote substantially all of his productive time and efforts to the performance of such duties. Subject to the terms of the Confidential Information and Inventions Assignment Agreement, this shall not preclude Employee from devoting time to personal and family investments or serving on community and civic boards, or participating in industry associations, provided such activities do not interfere with the duties to the Company, as determined in good faith by the Board. Employee agrees that he will not join any boards, other than community and civic boards (which do not interfere with Employees duties to the Company), without the prior approval of the Company. The Company may require termination of Employees participation in other business or public activities if the Company, in its sole discretion, determines that such activities compromise or threaten to compromise the Companys business interests or conflict with Employees duties to the Company. During Employees employment by the Company, except on behalf of the Company, Employee will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by Employee to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world; provided, however, that Employee may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange. If the Board determines Employee is in breach of this Section 15, and provided such breach is not cured within thirty (30) days of written notification of such breach from the Board, then the Company may terminate Employees employment for Cause.
16. Dispute Resolution. To ensure the rapid and economical resolution of disputes that may arise in connection with Employees service or employment with the Company, Employee and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Employees service or employment with the Company, or the termination of such service or employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in the city of the Companys then principal place of business in the United States conducted by JAMS or its successor, under the then applicable JAMS Arbitration Rules and Procedures for Employment Disputes (available at http://www.jamsadr.com/rules-employment-arbitration/). Employee acknowledges that by agreeing to this arbitration procedure, he waives the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. Employee will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrators essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Employee or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS arbitration fees in excess of the administrative fees that Employee
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would be required to pay if the dispute were decided in a court of law. The parties agree this arbitration agreement does not extend to claims for workers compensation or unemployment benefits, or any other claims, that Employee cannot, as a matter of applicable law, be required to arbitrate, nor does it preclude Employee from initiating a complaint before the Equal Employment Opportunity Commission or any other governmental agency, but if any such complaint is not resolved before the agency any action for money damages shall be submitted to arbitration pursuant to this paragraph. Nothing in this Agreement is intended to prevent any party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
17. Miscellaneous. This Agreement, together with the Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement governing Employees employment with the Company. It supersedes any other agreements or promises made to Employee by anyone, whether oral or written, including, without limitation, the Prior Agreement. Changes in the terms of Employees employment, other than those changes expressly reserved to the Companys or the Boards discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of Employee and the Company, and inure to the benefit of Employee and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This Agreement shall be construed and enforced in accordance with the laws of the State of Washington without regard to conflicts of law principles. Any ambiguity in this Agreement shall not be construed against any party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic signatures shall be equivalent to original signatures.
18. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) Cause shall mean the occurrence of any of the following events, in each instance that has a material adverse impact on the Company or any successor or affiliate thereof as determined by the Chief Executive Officer in its reasonable discretion: (a) Employees conviction of, or plea of guilty or no contest to, any non-vehicular felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (b) Employees commission of, or participation in, a fraud or act of dishonesty or other illegal act against the Company that has a demonstrable adverse impact on the Company or any successor or affiliate thereof; (c) Employees intentional, material violation of any contract or agreement between Employee and the Company or any material Company policy or of any statutory duty owed to the Company; (d) Employees intentional unauthorized use or disclosure of the Companys confidential information or trade secrets; (e) Employees gross misconduct; or (f) Employees ongoing and repeated failure or refusal to perform or neglect of Employees duties as required by this Agreement or Employees ongoing and repeated failure or refusal to comply with the lawful instructions given to Employee by the Chief Executive Officer, which failure, refusal or neglect continues for thirty (30) days following Employees receipt of written notice from the Chief Executive Officer stating with specificity the nature of such failure, refusal or neglect; provided that it is understood that this clause (f) shall not permit the Company to terminate Employees employment for Cause solely because of (i) Employees failure to meet specified performance objectives or achieve a specific result or outcome, or (ii) Companys dissatisfaction with the quality of services provided by Employee in the good faith performance of Employees duties to the Company; provided, that, with respect to (c),(d), (e) and (f) above, Cause will be triggered after Employee has received written notification of such failure from the Chief Executive Officer, which, if curable, remains uncured after thirty (30) days written notice from the Chief Executive Officer. Employee shall be provided an opportunity to be heard prior to the final decision to terminate Employees employment hereunder for such Cause, and any determination of Cause by the Chief Executive Officer or the Company will be made in good faith.
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(b) Change in Control shall have the meaning given to such term in the Companys 2021 Incentive Award Plan. Notwithstanding the foregoing, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit that constitutes nonqualified deferred compensation, the transaction or event constituting the Change in Control must also constitute a change in control event (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such payment or benefit, to the extent required by Section 409A.
(c) Change in Control Period shall mean the period commencing sixty (60) days prior to and ending eighteen (18) months following a Change in Control.
(d) Founders Shares shall mean those shares issued to Employee pursuant to that certain Restricted Stock Purchase Agreement dated as of December 14, 2017, between the Company and Douglas A. Holtzman, as amended from time to time.
(e) Good Reason shall mean any of the following actions taken without Cause by the Company or a successor corporation or entity without Employees consent: (a) material reduction of Employees base compensation (and Employee and the Company agree that any diminution of ten percent (10%) or more shall be considered material for this purpose, regardless of whether such diminution occurs due to a single reduction or a series of reductions in Employees base compensation), other than to the extent the base compensation of all of the executive officers of the Company are concurrently reduced by the same or greater percentage; (b) material reduction in Employees authority, duties or responsibilities, provided, however, that a change in Employees job position or title shall not be deemed a material reduction unless Employees new authority, duties or responsibilities are materially reduced from the prior authority, duties or responsibilities; or (c) relocation of the principal place at which Employee is required to provide services to the Company or Employees principal place of employment that results in an increase in Employees one-way driving distance by more than fifty (50) miles from Employees then current principal place of business or residence, as applicable; and (d) any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Employee under this Agreement In order to resign for Good Reason, Employee must provide written notice of the event giving rise to Good Reason to the Company within ninety (90) days after the condition arises, allow the Company thirty (30) days to cure such condition, and if the Company fails to cure the condition within such period, then Employees resignation from all positions Employee then holds with the Company must be effective not later than ninety (90) days after the end of the Companys cure period.
(f) Separation from Service shall mean a separation from service as such term is defined in Treasury Regulation Section 1.409A-1(h).
(g) Severance Period shall mean (i) if Employees Qualifying Termination does not occur during the Change in Control Period, nine (9) months, and (ii) if Employees Qualifying Termination occurs during the Change in Control Period, twelve (12) months.
(h) Stock Awards shall mean means all stock options, restricted stock and such other awards granted pursuant to the Companys stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof, including the Founders Shares.
(Signature Page Follows)
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Sincerely, | ||
ICOSAVAX, INC. | ||
By: |
/s/ Adam K. Simpson |
|
Adam K. Simpson, Chief Executive Officer | ||
ACKNOWLEDGED AND AGREED: | ||
/s/ Douglas Holtzman |
||
Douglas Holtzman |
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Exhibit 10.14
ICOSAVAX, INC.
July 22, 2021
Niranjan Kanesa-Thasan
c/o Icosavax, Inc.
Re: |
Employment Letter Agreement |
Dear Niranjan:
This amended and restated employment letter agreement (this Agreement) amends and restates that certain employment letter agreement, dated August 15, 2019, as amended by that certain amendment dated January 1, 2020, as further amended by that certain amendment dated April 1, 2020 (together, the Prior Agreement), by and between Icosavax, Inc. (the Company) and you (also referred to herein as Employee and together, the Parties). This Agreement sets forth the terms of your continued employment with the Company, effective as of the closing of the Companys initial public offering (IPO). In consideration of the mutual promises herein contained, the Parties agree as follows:
1. Position. Employee will continue to serve in the position of Chief Medical Officer. Employee will continue to report to the Companys Chief Executive Officer, and shall be responsible for the duties customarily associated with this position and such other duties assigned by the Company. Employee shall perform a majority of such services remotely from Lexington, Massachusetts and periodically at the Companys facility located at Seattle, Washington. Of course, the Company may change Employees position, duties, and work location from time to time in its discretion. Employee will be employed on a full-time basis. This is an exempt position.
2. Base Salary and Employee Benefits.
(a) Salary. Employees base salary will be $440,000.00 per year (the Base Salary), less payroll deductions and withholdings, paid on the Companys normal payroll schedule.
(b) Benefits. During his employment, Employee will be eligible to participate in the standard benefits plans offered to similarly situated employees by the Company from time to time, subject to plan terms and generally applicable Company policies. A full description of these benefits will be available upon request. Employee will be eligible to accrue vacation or paid time off in accordance with the Companys policies as in effect from time to time. The Company may change compensation and benefits from time to time in its discretion.
(c) Expenses. All reasonable business expenses that are documented by Employee and incurred in the ordinary course of business will be reimbursed in accordance with the Companys standard policies and procedures.
3. Annual Bonus. During his employment, Employee will be eligible to earn an annual performance bonus of up to forty percent (40%) of Employees Base Salary rate (the Annual Bonus) for performance at targeted levels. The Annual Bonus will be based upon an assessment by the Board of Directors of the Company (the Board) of Employees performance and the Companys attainment of written targeted goals as set by the Board in its sole discretion. Bonus payments, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether Employee has earned an Annual Bonus, and the amount of any such bonus, based on the achievement of such goals. No amount of the Annual Bonus is guaranteed, and Employee must be an employee on the Annual Bonus payment date to be eligible to receive an Annual Bonus; except as provided in Section 5 below, no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year after the applicable bonus year.
4. At-Will Employment Relationship. Employee may terminate his employment with the Company at any time and for any reason whatsoever simply by notifying the Company. Likewise, the Company may terminate Employees employment at any time, with or without cause or advance notice. Employees employment at-will status can only be modified in a written agreement signed by Employee and by an officer of the Company.
5. Severance Benefits. If, at any time, the Company terminates Employees employment without Cause or Employee resigns for Good Reason (either such termination referred to as a Qualifying Termination), provided such termination or resignation also constitutes a Separation from Service (as defined below), then subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below) and Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following severance benefits (the Severance Benefits):
(a) Cash Severance. Upon a Qualifying Termination, the Company will pay Employee, as cash severance (i) Employees Base Salary in effect as of Employees Separation from Service date for the Severance Period, less applicable payroll deductions and withholdings (the Base Severance), plus (ii) (A) in the event such Qualifying Termination does not occur during the Change in Control Period, an amount equal to Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs, prorated to reflect the portion of the year that has elapsed prior to the date of Employees Separation from Service date, or (B) in the event such Qualifying Termination does occur during the Change in Control Period, an amount equal to one hundred percent (100%) multiplied by Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs (the Bonus Severance, and with the Base Severance, the Severance).
Except in the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in installments in the form of continuation of Employees Base Salary payments over the Severance Period, paid on the Companys ordinary payroll dates, commencing on the sixtieth (60th) day following Employees Separation from Service date. The first such installment shall be for any accrued Base Salary for the sixty (60)-day period preceding such initial payment date. All salary continuation payments thereafter, if any, shall be made on the Companys regular payroll dates.
In the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
Any Bonus Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
(b) COBRA Severance. As additional severance, in the event of Employees Qualifying Termination, the Company will continue to pay the cost of Employees health care coverage in effect at the time of Employees Separation from Service for the Severance Period (the COBRA Coverage Period), either under the Companys regular health plan (if permitted) or by paying Employees COBRA premiums (the COBRA Severance). The Companys obligation to pay the COBRA Severance on Employees behalf will cease if Employee obtains health care coverage from another source (e.g., a new
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employer or spouses benefit plan), unless otherwise prohibited by applicable law. Employee must notify the Company within two (2) weeks if Employee obtains coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which Employee would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), or if the Company otherwise elects, in its sole discretion, the Company shall in lieu thereof provide to Employee a taxable monthly payment in an amount equal to the monthly COBRA premium that Employee would be required to pay to continue Employees group health coverage in effect on the date of Employees termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Employee elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Employee obtains other coverage or (y) the last day of applicable COBRA Coverage Period.
6. Accelerated Vesting. Subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below), Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following accelerated vesting (the Accelerated Vesting):
(a) Existing Stock Awards. With respect to all Stock Awards granted prior to the date of this Agreement (the Existing Stock Awards):
(i) In the event of Employees Qualifying Termination prior to a Change in Control or more than eighteen (18) months following a Change in Control, then such number of Employees Existing Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination that occurs within eighteen (18) months following a Change in Control, then all of Employees Existing Stock Awards shall be deemed vested immediately prior to such termination.
(b) New Stock Awards. With respect to Employees Stock Awards granted on or after the date of this Agreement (the New Stock Awards):
(i) In the event of Employees Qualifying Termination not occurring during the Change in Control Period, then such number of Employees New Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination during the Change in Control Period, then all of Employees New Stock Awards shall vest effective upon the later of (A) the date of termination or (B) the date of the Change in Control.
(c) Interaction with Stock Award Agreements. Except to the extent an award agreement governing a Stock Award granted to Employee specifically provides for the treatment of such Stock Award in the event of any of the acceleration events described in clauses (a) and (b) above and provides that its terms shall supersede the provisions of this Section 6, in which case the terms of such award agreement shall govern, the foregoing Accelerated Vesting provisions are deemed to be a part of
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each Stock Award and to amend and supersede any less favorable provision in any agreement or plan regarding such Stock Award (and, for the avoidance of doubt, if any Stock Award is subject to more favorable vesting than the Accelerated Vesting pursuant to any agreement or plan regarding such Stock Award, such more favorable provisions shall continue to apply and shall not be limited by the Accelerated Vesting). Notwithstanding the foregoing, with respect to any Stock Award granted prior to August 15, 2019, the foregoing Accelerated Vesting provisions are deemed to be a part of each such Stock Award and to amend and supersede any provision in any agreement or plan regarding such such Stock Award, even if such Accelerated Vesting provisions are less favorable.
7. Resignation Without Good Reason; Termination for Cause; Death or Disability. If, at any time, Employee resigns his employment with the Company without Good Reason, or the Company terminates Employees employment for Cause, or Employees employment with the Company terminates for any reason not entitling Employee to the Severance Benefits or Accelerated Vesting pursuant to Sections 5 and 6 above, including as a result of Employees death or disability, then Employee will receive his Base Salary accrued through his last day of employment. Under these circumstances, Employee will not be entitled to any other form of compensation from the Company, including any Severance Benefits or Accelerated Vesting, other than Employees rights to the vested portion of Employees Stock Awards and any other rights to which Employee is entitled under the Companys benefit programs or applicable law. In addition, Employee shall resign from any and all positions Employee holds with the Company, with such resignations to be effective no later than the date of Employees employment termination (or such other date requested or permitted by the Board).
8. Conditions to Receipt of Severance Benefits and Accelerated Vesting. Prior to and as a condition to Employees receipt of the Severance Benefits or Accelerated Vesting described above, Employee shall timely execute and deliver to the Company a release of claims in favor of and in a form acceptable to the Company (the Release) and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within sixty (60) days following Employees Separation from Service date.
9. Compliance with Section 409A. It is intended that the Severance Benefits and Accelerated Vesting set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code (Section 409A, together with any state law of similar effect, Section 409A) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), Employees right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits or Accelerated Vesting constitute deferred compensation under Section 409A and Employee is, on the date of Employees Separation from Service, a specified employee of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of the Severance Benefits and Accelerated Vesting shall be delayed until the earliest of: (a) the date that is six (6) months and one (1) day after Employees Separation from Service date, (b) the date of Employees death, or (c) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this Section 9 shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein. No interest shall be due on any amounts so deferred. The Severance Benefits and Accelerated Vesting are intended to qualify for an exemption from application of Section 409A or
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comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly. Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Employees taxable year following the taxable year in which Employee incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Employee, and Employees right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit. For purposes of this Agreement, all references to Employees termination of employment shall mean Employees Separation from Service.
10. Section 280G Treatment.
(a) In the event that any payment or benefit received or to be received by Employee pursuant to the terms of any plan, arrangement or agreement (including any payment or benefit received in connection with a change of control or the termination of Employees employment) (all such payments and benefits being hereinafter referred to as the Total Payments) would be subject (in whole or part) to the excise tax (the Excise Tax) imposed under Section 4999 of the Code, then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to Employee that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code; provided, in case of clauses (B), (C) and (D), that reduction of any payments or benefits attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee on an after-tax basis and, to the extent economically equivalent payments or benefits are subject to reduction, in a pro rata manner.
(b) All determinations regarding the application of this Section 280G Treatment section shall be made by an independent accounting firm or consulting group with nationally recognized standing and substantial expertise and experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax retained by the Company prior to the date of the applicable change in control (the 280G Firm). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments shall be taken into account which, in the written opinion of the 280G Firm, (A) does not constitute a parachute payment within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, or (B) constitutes reasonable compensation for services
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actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, (ii) no portion of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and in such manner as not to constitute a payment within the meaning of Section 280G(b) of the Code shall be taken into account, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. All determinations related to the calculations to be performed pursuant to this Section 280G Treatment section shall be done by the 280G Firm.
(c) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Employee and the Company within fifteen (15) days after notification from either the Company or Employee that Employee may receive payments which may be parachute payments. Employee and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne solely by the Company.
11. Withholding Taxes. All amounts payable to Employee will be subject to reduction to reflect applicable withholding and payroll taxes.
12. Compliance with Confidential Information and Inventions Agreement and Company Policies. In the performance of services for the Company, Employee will be expected to abide by Company rules and policies. Employee and the Company have entered into a Confidential Information and Inventions Assignment Agreement (the Confidential Information and Inventions Assignment Agreement), attached hereto as Exhibit A, which prohibits unauthorized use or disclosure of the Companys proprietary information, among other obligations. Employee agrees to perform each and every obligation of Employee therein contained. Any references in Employees Confidential Information and Inventions Assignment Agreement to the Prior Agreement shall be deemed to be amended to refer to this Agreement. Notwithstanding the foregoing or in the Confidential Information and Inventions Assignment Agreement, pursuant to 18 U.S.C. Section 1833(b), Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (a) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13. Protection of Third Party Information. In Employees work for the Company, Employee will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom Employee has an obligation of confidentiality. Rather, Employee will be expected to use only that information which is generally known and used by persons with training and experience comparable to his own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. Employee agrees that Employee will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom Employee has an obligation of confidentiality. Employee hereby represents that he has disclosed to the Company any contract he has signed that may restrict his activities on behalf of the Company.
14. Return of Company Property. Upon the termination of Employees employment with the Company for any reason, Employee will return to the Company all Company documents (and all copies thereof) and other Company property within their possession, custody or control, including but not limited
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to Company files, notes, financial and operational information, customer lists and contact information, investor and finance source lists and contract information, product information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including but not limited to computers, facsimile machines, mobile telephones, tablets, handheld devices and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part and in any medium). Employee shall deliver to the Company, upon request, a signed statement certifying compliance with this Section 14.
15. Exclusive Services. Employee shall at all times faithfully, industriously and to the best of Employees ability, experience and talent perform to the satisfaction of the Board all of the duties that may be assigned to Employee hereunder and shall devote substantially all of his productive time and efforts to the performance of such duties. Subject to the terms of the Confidential Information and Inventions Assignment Agreement, this shall not preclude Employee from devoting time to personal and family investments or serving on community and civic boards, or participating in industry associations, provided such activities do not interfere with the duties to the Company, as determined in good faith by the Board. Employee agrees that he will not join any boards, other than community and civic boards (which do not interfere with Employees duties to the Company), without the prior approval of the Company. The Company may require termination of Employees participation in other business or public activities if the Company, in its sole discretion, determines that such activities compromise or threaten to compromise the Companys business interests or conflict with Employees duties to the Company. During Employees employment by the Company, except on behalf of the Company, Employee will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by Employee to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world; provided, however, that Employee may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange. If the Board determines Employee is in breach of this Section 15, and provided such breach is not cured within thirty (30) days of written notification of such breach from the Board, then the Company may terminate Employees employment for Cause.
16. Dispute Resolution. To ensure the rapid and economical resolution of disputes that may arise in connection with Employees service or employment with the Company, Employee and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Employees service or employment with the Company, or the termination of such service or employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in the city of the Companys then principal place of business in the United States conducted by JAMS or its successor, under the then applicable JAMS Arbitration Rules and Procedures for Employment Disputes (available at http://www.jamsadr.com/rules-employment-arbitration/). Employee acknowledges that by agreeing to this arbitration procedure, he waives the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. Employee will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrators essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Employee or the Company would be entitled to seek in a court
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of law. The Company shall pay all JAMS arbitration fees in excess of the administrative fees that Employee would be required to pay if the dispute were decided in a court of law. The parties agree this arbitration agreement does not extend to claims for workers compensation or unemployment benefits, or any other claims, that Employee cannot, as a matter of applicable law, be required to arbitrate, nor does it preclude Employee from initiating a complaint before the Equal Employment Opportunity Commission or any other governmental agency, but if any such complaint is not resolved before the agency any action for money damages shall be submitted to arbitration pursuant to this paragraph. Nothing in this Agreement is intended to prevent any party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
17. Miscellaneous. This Agreement, together with the Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement governing Employees employment with the Company. It supersedes any other agreements or promises made to Employee by anyone, whether oral or written, including, without limitation, the Prior Agreement. Changes in the terms of Employees employment, other than those changes expressly reserved to the Companys or the Boards discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of Employee and the Company, and inure to the benefit of Employee and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This Agreement shall be construed and enforced in accordance with the laws of the State of Washington without regard to conflicts of law principles. Any ambiguity in this Agreement shall not be construed against any party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic signatures shall be equivalent to original signatures.
18. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) Cause shall mean the occurrence of any of the following events, in each instance that has a material adverse impact on the Company or any successor or affiliate thereof as determined by the Chief Executive Officer in its reasonable discretion: (a) Employees conviction of, or plea of guilty or no contest to, any non-vehicular felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (b) Employees commission of, or participation in, a fraud or act of dishonesty or other illegal act against the Company that has a demonstrable adverse impact on the Company or any successor or affiliate thereof; (c) Employees intentional, material violation of any contract or agreement between Employee and the Company or any material Company policy or of any statutory duty owed to the Company; (d) Employees intentional unauthorized use or disclosure of the Companys confidential information or trade secrets; (e) Employees gross misconduct; or (f) Employees ongoing and repeated failure or refusal to perform or neglect of Employees duties as required by this Agreement or Employees ongoing and repeated failure or refusal to comply with the lawful instructions given to Employee by the Chief Executive Officer, which failure, refusal or neglect continues for thirty (30) days following Employees receipt of written notice from the Chief Executive Officer stating with specificity the nature of such failure, refusal or neglect; provided that it is understood that this clause (f) shall not permit the Company to terminate Employees employment for Cause solely because of (i) Employees failure to meet specified performance objectives or achieve a specific result or outcome, or (ii) Companys dissatisfaction with the quality of services provided by Employee in the good faith performance of Employees duties to the Company; provided, that, with respect to (c),(d), (e) and (f) above, Cause
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will be triggered after Employee has received written notification of such failure from the Chief Executive Officer, which, if curable, remains uncured after thirty (30) days written notice from the Chief Executive Officer. Employee shall be provided an opportunity to be heard prior to the final decision to terminate Employees employment hereunder for such Cause, and any determination of Cause by the Chief Executive Officer or the Company will be made in good faith.
(b) Change in Control shall have the meaning given to such term in the Companys 2021 Incentive Award Plan. Notwithstanding the foregoing, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit that constitutes nonqualified deferred compensation, the transaction or event constituting the Change in Control must also constitute a change in control event (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such payment or benefit, to the extent required by Section 409A.
(c) Change in Control Period shall mean the period commencing sixty (60) days prior to and ending eighteen (18) months following a Change in Control.
(d) Good Reason shall mean any of the following actions taken without Cause by the Company or a successor corporation or entity without Employees consent: (a) material reduction of Employees base compensation (and Employee and the Company agree that any diminution of ten percent (10%) or more shall be considered material for this purpose, regardless of whether such diminution occurs due to a single reduction or a series of reductions in Employees base compensation), other than to the extent the base compensation of all of the executive officers of the Company are concurrently reduced by the same or greater percentage; (b) material reduction in Employees authority, duties or responsibilities, provided, however, that a change in Employees job position or title shall not be deemed a material reduction unless Employees new authority, duties or responsibilities are materially reduced from the prior authority, duties or responsibilities; (c) relocation of the principal place at which Employee is required to provide services to the Company or Employees principal place of employment that results in an increase in Employees one-way driving distance by more than fifty (50) miles from Employees then current principal place of business or residence, as applicable; and (d) any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Employee under this Agreement In order to resign for Good Reason, Employee must provide written notice of the event giving rise to Good Reason to the Company within ninety (90) days after the condition arises, allow the Company thirty (30) days to cure such condition, and if the Company fails to cure the condition within such period, then Employees resignation from all positions Employee then holds with the Company must be effective not later than ninety (90) days after the end of the Companys cure period.
(e) Separation from Service shall mean a separation from service as such term is defined in Treasury Regulation Section 1.409A-1(h).
(f) Severance Period shall mean (i) if Employees Qualifying Termination does not occur during the Change in Control Period, nine (9) months, and (ii) if Employees Qualifying Termination occurs during the Change in Control Period, twelve (12) months.
(g) Stock Awards shall mean means all stock options, restricted stock and such other awards granted pursuant to the Companys stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof.
(Signature Page Follows)
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Sincerely, | ||
ICOSAVAX, INC. | ||
By: | /s/ Adam K. Simpson | |
Adam K. Simpson, Chief Executive Officer |
ACKNOWLEDGED AND AGREED: |
/s/ Niranjan Kanesa-Thasan |
Niranjan Kanesa-Thasan |
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Exhibit 10.15
ICOSAVAX, INC.
July 22, 2021
Cassia Cearley
c/o Icosavax, Inc.
Re: Employment Letter Agreement
Dear Cassia:
This amended and restated employment letter agreement (this Agreement) amends and restates that certain employment letter agreement, dated October 30, 2019, as amended by that certain amendment dated February 8, 2021 (together, the Prior Agreement), by and between Icosavax, Inc. (the Company) and you (also referred to herein as Employee and together, the Parties). This Agreement sets forth the terms of your continued employment with the Company, effective as of the closing of the Companys initial public offering (IPO). In consideration of the mutual promises herein contained, the Parties agree as follows:
1. Position. Employee will continue to serve in the position of Chief Business Officer. Employee will continue to report to the Companys Chief Executive Officer, and shall be responsible for the duties customarily associated with this position and such other duties assigned by the Company. Employee will work at the Companys facility located at Seattle, Washington. Of course, the Company may change Employees position, duties, and work location from time to time in its discretion. Employee will be employed on a full-time basis. This is an exempt position.
2. Base Salary and Employee Benefits.
(a) Salary. Employees base salary will be $390,000.00 per year (the Base Salary), less payroll deductions and withholdings, paid on the Companys normal payroll schedule.
(b) Benefits. During her employment, Employee will be eligible to participate in the standard benefits plans offered to similarly situated employees by the Company from time to time, subject to plan terms and generally applicable Company policies. A full description of these benefits will be available upon request. Employee will be eligible to accrue vacation or paid time off in accordance with the Companys policies as in effect from time to time. The Company may change compensation and benefits from time to time in its discretion.
(c) Expenses. All reasonable business expenses that are documented by Employee and incurred in the ordinary course of business will be reimbursed in accordance with the Companys standard policies and procedures.
3. Annual Bonus. During her employment, Employee will be eligible to earn an annual performance bonus of up to forty percent (40%) of Employees Base Salary rate (the Annual Bonus) for performance at targeted levels. The Annual Bonus will be based upon an assessment by the Board of Directors of the Company (the Board) of Employees performance and the Companys attainment of written targeted goals as set by the Board in its sole discretion. Bonus payments, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether Employee has earned an Annual Bonus, and the amount of any such bonus, based on the achievement of such goals. No amount of the Annual Bonus is guaranteed, and Employee must be an employee on the Annual Bonus payment date to be eligible to receive an Annual Bonus; except as provided in Section 5 below, no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year after the applicable bonus year.
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4. At-Will Employment Relationship. Employee may terminate her employment with the Company at any time and for any reason whatsoever simply by notifying the Company. Likewise, the Company may terminate Employees employment at any time, with or without cause or advance notice. Employees employment at-will status can only be modified in a written agreement signed by Employee and by an officer of the Company.
5. Severance Benefits. If, at any time, the Company terminates Employees employment without Cause or Employee resigns for Good Reason (either such termination referred to as a Qualifying Termination), provided such termination or resignation also constitutes a Separation from Service (as defined below), then subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below) and Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following severance benefits (the Severance Benefits):
(a) Cash Severance. Upon a Qualifying Termination, the Company will pay Employee, as cash severance (i) Employees Base Salary in effect as of Employees Separation from Service date for the Severance Period, less applicable payroll deductions and withholdings (the Base Severance), plus (ii) (A) in the event such Qualifying Termination does not occur during the Change in Control Period, an amount equal to Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs, prorated to reflect the portion of the year that has elapsed prior to the date of Employees Separation from Service date, or (B) in the event such Qualifying Termination does occur during the Change in Control Period, an amount equal to one hundred percent (100%) multiplied by Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs (the Bonus Severance, and with the Base Severance, the Severance).
Except in the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in installments in the form of continuation of Employees Base Salary payments over the Severance Period, paid on the Companys ordinary payroll dates, commencing on the sixtieth (60th) day following Employees Separation from Service date. The first such installment shall be for any accrued Base Salary for the sixty (60)-day period preceding such initial payment date. All salary continuation payments thereafter, if any, shall be made on the Companys regular payroll dates.
In the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
Any Bonus Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
(b) COBRA Severance. As additional severance, in the event of Employees Qualifying Termination, the Company will continue to pay the cost of Employees health care coverage in effect at the time of Employees Separation from Service for the Severance Period (the COBRA Coverage Period), either under the Companys regular health plan (if permitted) or by paying Employees COBRA premiums (the COBRA Severance). The Companys obligation to pay the COBRA Severance on Employees behalf will cease if Employee obtains health care coverage from another source (e.g., a new employer or spouses benefit plan), unless otherwise prohibited by applicable law. Employee must notify
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the Company within two (2) weeks if Employee obtains coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which Employee would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), or if the Company otherwise elects, in its sole discretion, the Company shall in lieu thereof provide to Employee a taxable monthly payment in an amount equal to the monthly COBRA premium that Employee would be required to pay to continue Employees group health coverage in effect on the date of Employees termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Employee elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Employee obtains other coverage or (y) the last day of applicable COBRA Coverage Period.
6. Accelerated Vesting. Subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below), Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following accelerated vesting (the Accelerated Vesting):
(a) Existing Stock Awards. With respect to all Stock Awards granted prior to the date of this Agreement (the Existing Stock Awards):
(i) In the event of Employees Qualifying Termination prior to a Change in Control or more than eighteen (18) months following a Change in Control, then such number of Employees Existing Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination that occurs within eighteen (18) months following a Change in Control, then all of Employees Existing Stock Awards shall be deemed vested immediately prior to such termination.
(b) New Stock Awards. With respect to Employees Stock Awards granted on or after the date of this Agreement (the New Stock Awards):
(i) In the event of Employees Qualifying Termination not occurring during the Change in Control Period, then such number of Employees New Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination during the Change in Control Period, all of Employees New Stock Awards shall vest effective upon the later of (A) the date of termination or (B) the date of the Change in Control.
(c) Interaction with Stock Award Agreements. Except to the extent an award agreement governing a Stock Award granted to Employee specifically provides for the treatment of such Stock Award in the event of any of the acceleration events described in clauses (a) and (b) above and provides that its terms shall supersede the provisions of this Section 6, in which case the terms of such award agreement shall govern, the foregoing Accelerated Vesting provisions are deemed to be a part of each Stock Award and to amend and supersede any less favorable provision in any agreement or plan regarding such Stock Award (and, for the avoidance of doubt, if any Stock Award is subject to more favorable vesting than the Accelerated Vesting pursuant to any agreement or plan regarding such Stock Award, such more favorable provisions shall continue to apply and shall not be limited by the Accelerated Vesting).
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7. Resignation Without Good Reason; Termination for Cause; Death or Disability. If, at any time, Employee resigns her employment with the Company without Good Reason, or the Company terminates Employees employment for Cause, or Employees employment with the Company terminates for any reason not entitling Employee to the Severance Benefits or Accelerated Vesting pursuant to Sections 5 and 6 above, including as a result of Employees death or disability, then Employee will receive her Base Salary accrued through her last day of employment. Under these circumstances, Employee will not be entitled to any other form of compensation from the Company, including any Severance Benefits or Accelerated Vesting, other than Employees rights to the vested portion of Employees Stock Awards and any other rights to which Employee is entitled under the Companys benefit programs or applicable law. In addition, Employee shall resign from any and all positions Employee holds with the Company, with such resignations to be effective no later than the date of Employees employment termination (or such other date requested or permitted by the Board).
8. Conditions to Receipt of Severance Benefits and Accelerated Vesting. Prior to and as a condition to Employees receipt of the Severance Benefits or Accelerated Vesting described above, Employee shall timely execute and deliver to the Company a release of claims in favor of and in a form acceptable to the Company (the Release) and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within sixty (60) days following Employees Separation from Service date.
9. Compliance with Section 409A. It is intended that the Severance Benefits and Accelerated Vesting set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code (Section 409A, together with any state law of similar effect, Section 409A) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), Employees right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits or Accelerated Vesting constitute deferred compensation under Section 409A and Employee is, on the date of Employees Separation from Service, a specified employee of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of the Severance Benefits and Accelerated Vesting shall be delayed until the earliest of: (a) the date that is six (6) months and one (1) day after Employees Separation from Service date, (b) the date of Employees death, or (c) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this Section 9 shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein. No interest shall be due on any amounts so deferred. The Severance Benefits and Accelerated Vesting are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly. Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Employees taxable year following
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the taxable year in which Employee incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Employee, and Employees right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit. For purposes of this Agreement, all references to Employees termination of employment shall mean Employees Separation from Service.
10. Section 280G Treatment.
(a) In the event that any payment or benefit received or to be received by Employee pursuant to the terms of any plan, arrangement or agreement (including any payment or benefit received in connection with a change of control or the termination of Employees employment) (all such payments and benefits being hereinafter referred to as the Total Payments) would be subject (in whole or part) to the excise tax (the Excise Tax) imposed under Section 4999 of the Code, then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to Employee that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code; provided, in case of clauses (B), (C) and (D), that reduction of any payments or benefits attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee on an after-tax basis and, to the extent economically equivalent payments or benefits are subject to reduction, in a pro rata manner.
(b) All determinations regarding the application of this Section 280G Treatment section shall be made by an independent accounting firm or consulting group with nationally recognized standing and substantial expertise and experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax retained by the Company prior to the date of the applicable change in control (the 280G Firm). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments shall be taken into account which, in the written opinion of the 280G Firm, (A) does not constitute a parachute payment within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, or (B) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, (ii) no portion of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and in such manner as not to constitute a payment within the meaning of Section 280G(b) of the Code shall be taken into account, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. All determinations related to the calculations to be performed pursuant to this Section 280G Treatment section shall be done by the 280G Firm.
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(c) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Employee and the Company within fifteen (15) days after notification from either the Company or Employee that Employee may receive payments which may be parachute payments. Employee and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne solely by the Company.
11. Withholding Taxes. All amounts payable to Employee will be subject to reduction to reflect applicable withholding and payroll taxes.
12. Compliance with Confidential Information and Inventions Agreement and Company Policies. In the performance of services for the Company, Employee will be expected to abide by Company rules and policies. Employee and the Company have entered into a Confidential Information and Inventions Assignment Agreement (the Confidential Information and Inventions Assignment Agreement), attached hereto as Exhibit A, which prohibits unauthorized use or disclosure of the Companys proprietary information, among other obligations. Employee agrees to perform each and every obligation of Employee therein contained. Any references in Employees Confidential Information and Inventions Assignment Agreement to the Prior Agreement shall be deemed to be amended to refer to this Agreement. Notwithstanding the foregoing or in the Confidential Information and Inventions Assignment Agreement, pursuant to 18 U.S.C. Section 1833(b), Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (a) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13. Protection of Third Party Information. In Employees work for the Company, Employee will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom Employee has an obligation of confidentiality. Rather, Employee will be expected to use only that information which is generally known and used by persons with training and experience comparable to her own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. Employee agrees that Employee will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom Employee has an obligation of confidentiality. Employee hereby represents that she has disclosed to the Company any contract she has signed that may restrict her activities on behalf of the Company.
14. Return of Company Property. Upon the termination of Employees employment with the Company for any reason, Employee will return to the Company all Company documents (and all copies thereof) and other Company property within their possession, custody or control, including but not limited to Company files, notes, financial and operational information, customer lists and contact information, investor and finance source lists and contract information, product information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel
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information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including but not limited to computers, facsimile machines, mobile telephones, tablets, handheld devices and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part and in any medium). Employee shall deliver to the Company, upon request, a signed statement certifying compliance with this Section 14.
15. Exclusive Services. Employee shall at all times faithfully, industriously and to the best of Employees ability, experience and talent perform to the satisfaction of the Board all of the duties that may be assigned to Employee hereunder and shall devote substantially all of her productive time and efforts to the performance of such duties. Subject to the terms of the Confidential Information and Inventions Assignment Agreement, this shall not preclude Employee from devoting time to personal and family investments or serving on community and civic boards, or participating in industry associations, provided such activities do not interfere with the duties to the Company, as determined in good faith by the Board. Employee agrees that she will not join any boards, other than community and civic boards (which do not interfere with Employees duties to the Company), without the prior approval of the Company. The Company may require termination of Employees participation in other business or public activities if the Company, in its sole discretion, determines that such activities compromise or threaten to compromise the Companys business interests or conflict with Employees duties to the Company. During Employees employment by the Company, except on behalf of the Company, Employee will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by Employee to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world; provided, however, that Employee may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange. If the Board determines Employee is in breach of this Section 15, and provided such breach is not cured within thirty (30) days of written notification of such breach from the Board, then the Company may terminate Employees employment for Cause.
16. Dispute Resolution. To ensure the rapid and economical resolution of disputes that may arise in connection with Employees service or employment with the Company, Employee and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Employees service or employment with the Company, or the termination of such service or employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in the city of the Companys then principal place of business in the United States conducted by JAMS or its successor, under the then applicable JAMS Arbitration Rules and Procedures for Employment Disputes (available at http://www.jamsadr.com/rules-employment-arbitration/). Employee acknowledges that by agreeing to this arbitration procedure, she waives the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. Employee will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrators essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Employee or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS arbitration fees in excess of the administrative fees that Employee would be required to pay if the dispute were decided in a court of law. The parties agree this arbitration agreement does not extend to claims for workers compensation or unemployment benefits, or any other claims, that Employee cannot, as a matter of applicable law, be required to arbitrate, nor does it preclude
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Employee from initiating a complaint before the Equal Employment Opportunity Commission or any other governmental agency, but if any such complaint is not resolved before the agency any action for money damages shall be submitted to arbitration pursuant to this paragraph. Nothing in this Agreement is intended to prevent any party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
17. Miscellaneous. This Agreement, together with the Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement governing Employees employment with the Company. It supersedes any other agreements or promises made to Employee by anyone, whether oral or written, including, without limitation, the Prior Agreement. Changes in the terms of Employees employment, other than those changes expressly reserved to the Companys or the Boards discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of Employee and the Company, and inure to the benefit of Employee and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This Agreement shall be construed and enforced in accordance with the laws of the State of Washington without regard to conflicts of law principles. Any ambiguity in this Agreement shall not be construed against any party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic signatures shall be equivalent to original signatures.
18. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) Cause shall mean the occurrence of any of the following events, in each instance that has a material adverse impact on the Company or any successor or affiliate thereof as determined by the Chief Executive Officer in its reasonable discretion: (a) Employees conviction of, or plea of guilty or no contest to, any non-vehicular felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (b) Employees commission of, or participation in, a fraud or act of dishonesty or other illegal act against the Company that has a demonstrable adverse impact on the Company or any successor or affiliate thereof; (c) Employees intentional, material violation of any contract or agreement between Employee and the Company or any material Company policy or of any statutory duty owed to the Company; (d) Employees intentional unauthorized use or disclosure of the Companys confidential information or trade secrets; (e) Employees gross misconduct; or (f) Employees ongoing and repeated failure or refusal to perform or neglect of Employees duties as required by this Agreement or Employees ongoing and repeated failure or refusal to comply with the lawful instructions given to Employee by the Chief Executive Officer, which failure, refusal or neglect continues for thirty (30) days following Employees receipt of written notice from the Chief Executive Officer stating with specificity the nature of such failure, refusal or neglect; provided that it is understood that this clause (f) shall not permit the Company to terminate Employees employment for Cause solely because of (i) Employees failure to meet specified performance objectives or achieve a specific result or outcome, or (ii) Companys dissatisfaction with the quality of services provided by Employee in the good faith performance of Employees duties to the Company; provided, that, with respect to (c),(d), (e) and (f) above, Cause will be triggered after Employee has received written notification of such failure from the Chief Executive Officer, which, if curable, remains uncured after thirty (30) days written notice from the Chief Executive Officer. Employee shall be provided an opportunity to be heard prior to the final decision to terminate Employees employment hereunder for such Cause, and any determination of Cause by the Chief Executive Officer or the Company will be made in good faith.
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(b) Change in Control shall have the meaning given to such term in the Companys 2021 Incentive Award Plan. Notwithstanding the foregoing, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit that constitutes nonqualified deferred compensation, the transaction or event constituting the Change in Control must also constitute a change in control event (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such payment or benefit, to the extent required by Section 409A.
(c) Change in Control Period shall mean the period commencing sixty (60) days prior to and ending eighteen (18) months following a Change in Control.
(d) Good Reason shall mean any of the following actions taken without Cause by the Company or a successor corporation or entity without Employees consent: (a) material reduction of Employees base compensation (and Employee and the Company agree that any diminution of ten percent (10%) or more shall be considered material for this purpose, regardless of whether such diminution occurs due to a single reduction or a series of reductions in Employees base compensation), other than to the extent the base compensation of all of the executive officers of the Company are concurrently reduced by the same or greater percentage; (b) material reduction in Employees authority, duties or responsibilities, provided, however, that a change in Employees job position or title shall not be deemed a material reduction unless Employees new authority, duties or responsibilities are materially reduced from the prior authority, duties or responsibilities; or (c) relocation of the principal place at which Employee is required to provide services to the Company or Employees principal place of employment that results in an increase in Employees one-way driving distance by more than fifty (50) miles from Employees then current principal place of business or residence, as applicable; and (d) any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Employee under this Agreement In order to resign for Good Reason, Employee must provide written notice of the event giving rise to Good Reason to the Company within ninety (90) days after the condition arises, allow the Company thirty (30) days to cure such condition, and if the Company fails to cure the condition within such period, then Employees resignation from all positions Employee then holds with the Company must be effective not later than ninety (90) days after the end of the Companys cure period.
(e) Separation from Service shall mean a separation from service as such term is defined in Treasury Regulation Section 1.409A-1(h).
(f) Severance Period shall mean (i) if Employees Qualifying Termination does not occur during the Change in Control Period, nine (9) months, and (ii) if Employees Qualifying Termination occurs during the Change in Control Period, twelve (12) months.
(g) Stock Awards shall mean means all stock options, restricted stock and such other awards granted pursuant to the Companys stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof.
(Signature Page Follows)
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Sincerely, | ||
ICOSAVAX, INC. | ||
By: |
/s/ Adam K. Simpson |
|
Adam K. Simpson, Chief Executive Officer | ||
ACKNOWLEDGED AND AGREED: | ||
/s/ Cassia Cearley |
||
Cassia Cearley |
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Exhibit 10.16
ICOSAVAX, INC.
July 22, 2021
Charles Richardson
c/o Icosavax, Inc.
Re: |
Employment Letter Agreement |
Dear Charles:
This amended and restated employment letter agreement (this Agreement) amends and restates that certain employment letter agreement, dated August 15 2019 (the Prior Agreement), by and between Icosavax, Inc. (the Company) and you (also referred to herein as Employee and together, the Parties). This Agreement sets forth the terms of your continued employment with the Company, effective as of the closing of the Companys initial public offering (IPO). In consideration of the mutual promises herein contained, the Parties agree as follows:
1. Position. Employee will continue to serve in the position Senior Vice President, Technical Operations. Employee will continue to report to the Companys Chief Executive Officer, and shall be responsible for the duties customarily associated with this position and such other duties assigned by the Company. Employee will work at the Companys facility located at Seattle, Washington. Of course, the Company may change Employees position, duties, and work location from time to time in its discretion. Employee will be employed on a full-time basis. This is an exempt position.
2. Base Salary and Employee Benefits.
(a) Salary. Employees base salary will be $360,000.00 per year (the Base Salary), less payroll deductions and withholdings, paid on the Companys normal payroll schedule.
(b) Benefits. During his employment, Employee will be eligible to participate in the standard benefits plans offered to similarly situated employees by the Company from time to time, subject to plan terms and generally applicable Company policies. A full description of these benefits will be available upon request. Employee will be eligible to accrue vacation or paid time off in accordance with the Companys policies as in effect from time to time. The Company may change compensation and benefits from time to time in its discretion.
(c) Expenses. All reasonable business expenses that are documented by Employee and incurred in the ordinary course of business will be reimbursed in accordance with the Companys standard policies and procedures.
3. Annual Bonus. During his employment, Employee will be eligible to earn an annual performance bonus of up to forty percent (40%) of Employees Base Salary rate (the Annual Bonus) for performance at targeted levels. The Annual Bonus will be based upon an assessment by the Board of Directors of the Company (the Board) of Employees performance and the Companys attainment of written targeted goals as set by the Board in its sole discretion. Bonus payments, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether Employee has earned an Annual Bonus, and the amount of any such bonus, based on the achievement of such goals. No amount of the Annual Bonus is guaranteed, and Employee must be an employee on the Annual Bonus payment date to be eligible to receive an Annual Bonus; except as provided in Section 5 below, no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year after the applicable bonus year.
4. At-Will Employment Relationship. Employee may terminate his employment with the Company at any time and for any reason whatsoever simply by notifying the Company. Likewise, the Company may terminate Employees employment at any time, with or without cause or advance notice. Employees employment at-will status can only be modified in a written agreement signed by Employee and by an officer of the Company.
5. Severance Benefits. If, at any time, the Company terminates Employees employment without Cause or Employee resigns for Good Reason (either such termination referred to as a Qualifying Termination), provided such termination or resignation also constitutes a Separation from Service (as defined below), then subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below) and Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following severance benefits (the Severance Benefits):
(a) Cash Severance. Upon a Qualifying Termination, the Company will pay Employee, as cash severance (i) Employees Base Salary in effect as of Employees Separation from Service date for the Severance Period, less applicable payroll deductions and withholdings (the Base Severance), plus (ii) (A) in the event such Qualifying Termination does not occur during the Change in Control Period, an amount equal to Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs, prorated to reflect the portion of the year that has elapsed prior to the date of Employees Separation from Service date, or (B) in the event such Qualifying Termination does occur during the Change in Control Period, an amount equal to one hundred percent (100%) multiplied by Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs (the Bonus Severance, and with the Base Severance, the Severance).
Except in the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in installments in the form of continuation of Employees Base Salary payments over the Severance Period, paid on the Companys ordinary payroll dates, commencing on the sixtieth (60th) day following Employees Separation from Service date. The first such installment shall be for any accrued Base Salary for the sixty (60)-day period preceding such initial payment date. All salary continuation payments thereafter, if any, shall be made on the Companys regular payroll dates.
In the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
Any Bonus Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
(b) COBRA Severance. As additional severance, in the event of Employees Qualifying Termination, the Company will continue to pay the cost of Employees health care coverage in effect at the time of Employees Separation from Service for the Severance Period (the COBRA Coverage Period), either under the Companys regular health plan (if permitted) or by paying Employees COBRA premiums (the COBRA Severance). The Companys obligation to pay the COBRA Severance on Employees behalf will cease if Employee obtains health care coverage from another source (e.g., a new employer or spouses benefit plan), unless otherwise prohibited by applicable law. Employee must notify
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the Company within two (2) weeks if Employee obtains coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which Employee would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), or if the Company otherwise elects, in its sole discretion, the Company shall in lieu thereof provide to Employee a taxable monthly payment in an amount equal to the monthly COBRA premium that Employee would be required to pay to continue Employees group health coverage in effect on the date of Employees termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Employee elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Employee obtains other coverage or (y) the last day of applicable COBRA Coverage Period.
6. Accelerated Vesting. Subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below), Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following accelerated vesting (the Accelerated Vesting):
(a) Existing Stock Awards. With respect to all Stock Awards granted prior to the date of this Agreement (the Existing Stock Awards):
(i) In the event of Employees Qualifying Termination prior to a Change in Control or more than eighteen (18) months following a Change in Control, then such number of Employees Existing Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination that occurs within eighteen (18) months following a Change in Control, then all of Employees Existing Stock Awards shall be deemed vested immediately prior to such termination.
(b) New Stock Awards. With respect to Employees Stock Awards granted on or after the date of this Agreement (the New Stock Awards):
(i) In the event of Employees Qualifying Termination not occurring during the Change in Control Period, then such number of Employees New Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination during the Change in Control Period, then all of Employees New Stock Awards shall vest effective upon the later of (A) the date of termination or (B) the date of the Change in Control.
(c) Interaction with Stock Award Agreements. Except to the extent an award agreement governing a Stock Award granted to Employee specifically provides for the treatment of such Stock Award in the event of any of the acceleration events described in clauses (a) and (b) above and provides that its terms shall supersede the provisions of this Section 6, in which case the terms of such award agreement shall govern, the foregoing Accelerated Vesting provisions are deemed to be a part of each Stock Award and to amend and supersede any less favorable provision in any agreement or plan
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regarding such Stock Award (and, for the avoidance of doubt, if any Stock Award is subject to more favorable vesting than the Accelerated Vesting pursuant to any agreement or plan regarding such Stock Award, such more favorable provisions shall continue to apply and shall not be limited by the Accelerated Vesting). Notwithstanding the foregoing, with respect to any Stock Award granted prior to August 15, 2019, the foregoing Accelerated Vesting provisions are deemed to be a part of each such Stock Award and to amend and supersede any provision in any agreement or plan regarding such such Stock Award, even if such Accelerated Vesting provisions are less favorable.
7. Resignation Without Good Reason; Termination for Cause; Death or Disability. If, at any time, Employee resigns his employment with the Company without Good Reason, or the Company terminates Employees employment for Cause, or Employees employment with the Company terminates for any reason not entitling Employee to the Severance Benefits or Accelerated Vesting pursuant to Sections 5 and 6 above, including as a result of Employees death or disability, then Employee will receive his Base Salary accrued through his last day of employment. Under these circumstances, Employee will not be entitled to any other form of compensation from the Company, including any Severance Benefits or Accelerated Vesting, other than Employees rights to the vested portion of Employees Stock Awards and any other rights to which Employee is entitled under the Companys benefit programs or applicable law. In addition, Employee shall resign from any and all positions Employee holds with the Company, with such resignations to be effective no later than the date of Employees employment termination (or such other date requested or permitted by the Board).
8. Conditions to Receipt of Severance Benefits and Accelerated Vesting. Prior to and as a condition to Employees receipt of the Severance Benefits or Accelerated Vesting described above, Employee shall timely execute and deliver to the Company a release of claims in favor of and in a form acceptable to the Company (the Release) and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within sixty (60) days following Employees Separation from Service date.
9. Compliance with Section 409A. It is intended that the Severance Benefits and Accelerated Vesting set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code (Section 409A, together with any state law of similar effect, Section 409A) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), Employees right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits or Accelerated Vesting constitute deferred compensation under Section 409A and Employee is, on the date of Employees Separation from Service, a specified employee of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of the Severance Benefits and Accelerated Vesting shall be delayed until the earliest of: (a) the date that is six (6) months and one (1) day after Employees Separation from Service date, (b) the date of Employees death, or (c) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this Section 9 shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein. No interest shall be due on any amounts so deferred. The Severance Benefits and Accelerated Vesting are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under
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Section 409A, and any ambiguities herein shall be interpreted accordingly. Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Employees taxable year following the taxable year in which Employee incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Employee, and Employees right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit. For purposes of this Agreement, all references to Employees termination of employment shall mean Employees Separation from Service.
10. Section 280G Treatment.
(a) In the event that any payment or benefit received or to be received by Employee pursuant to the terms of any plan, arrangement or agreement (including any payment or benefit received in connection with a change of control or the termination of Employees employment) (all such payments and benefits being hereinafter referred to as the Total Payments) would be subject (in whole or part) to the excise tax (the Excise Tax) imposed under Section 4999 of the Code, then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to Employee that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code; provided, in case of clauses (B), (C) and (D), that reduction of any payments or benefits attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee on an after-tax basis and, to the extent economically equivalent payments or benefits are subject to reduction, in a pro rata manner.
(b) All determinations regarding the application of this Section 280G Treatment section shall be made by an independent accounting firm or consulting group with nationally recognized standing and substantial expertise and experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax retained by the Company prior to the date of the applicable change in control (the 280G Firm). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments shall be taken into account which, in the written opinion of the 280G Firm, (A) does not constitute a parachute payment within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, or (B) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount
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(as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, (ii) no portion of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and in such manner as not to constitute a payment within the meaning of Section 280G(b) of the Code shall be taken into account, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. All determinations related to the calculations to be performed pursuant to this Section 280G Treatment section shall be done by the 280G Firm.
(c) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Employee and the Company within fifteen (15) days after notification from either the Company or Employee that Employee may receive payments which may be parachute payments. Employee and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne solely by the Company.
11. Withholding Taxes. All amounts payable to Employee will be subject to reduction to reflect applicable withholding and payroll taxes.
12. Compliance with Confidential Information and Inventions Agreement and Company Policies. In the performance of services for the Company, Employee will be expected to abide by Company rules and policies. Employee and the Company have entered into a Confidential Information and Inventions Assignment Agreement (the Confidential Information and Inventions Assignment Agreement), attached hereto as Exhibit A, which prohibits unauthorized use or disclosure of the Companys proprietary information, among other obligations. Employee agrees to perform each and every obligation of Employee therein contained. Any references in Employees Confidential Information and Inventions Assignment Agreement to the Prior Agreement shall be deemed to be amended to refer to this Agreement. Notwithstanding the foregoing or in the Confidential Information and Inventions Assignment Agreement, pursuant to 18 U.S.C. Section 1833(b), Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (a) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13. Protection of Third Party Information. In Employees work for the Company, Employee will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom Employee has an obligation of confidentiality. Rather, Employee will be expected to use only that information which is generally known and used by persons with training and experience comparable to his own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. Employee agrees that Employee will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom Employee has an obligation of confidentiality. Employee hereby represents that he has disclosed to the Company any contract he has signed that may restrict his activities on behalf of the Company.
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14. Return of Company Property. Upon the termination of Employees employment with the Company for any reason, Employee will return to the Company all Company documents (and all copies thereof) and other Company property within their possession, custody or control, including but not limited to Company files, notes, financial and operational information, customer lists and contact information, investor and finance source lists and contract information, product information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including but not limited to computers, facsimile machines, mobile telephones, tablets, handheld devices and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part and in any medium). Employee shall deliver to the Company, upon request, a signed statement certifying compliance with this Section 14.
15. Exclusive Services. Employee shall at all times faithfully, industriously and to the best of Employees ability, experience and talent perform to the satisfaction of the Board all of the duties that may be assigned to Employee hereunder and shall devote substantially all of his productive time and efforts to the performance of such duties. Subject to the terms of the Confidential Information and Inventions Assignment Agreement, this shall not preclude Employee from devoting time to (i) performing services (A) for the San Diego Zoo regarding vaccinations for wild animals and (B) regarding the NIH adjuvant BAA contract with the University of Maryland for approximately five (5) hours per month, (ii) personal and family investments, (iii) serving on community and civic boards, or (iv) participating in industry associations, provided such activities do not interfere with the duties to the Company, as determined in good faith by the Board. Employee agrees that he will not join any boards, other than community and civic boards (which do not interfere with Employees duties to the Company), without the prior approval of the Company. The Company may require termination of Employees participation in other business or public activities if the Company, in its sole discretion, determines that such activities compromise or threaten to compromise the Companys business interests or conflict with Employees duties to the Company. Except as otherwise provided in this Agreement, during Employees employment by the Company, except on behalf of the Company, Employee will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by Employee to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world; provided, however, that Employee may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange. If the Board determines Employee is in breach of this Section 15, and provided such breach is not cured within thirty (30) days of written notification of such breach from the Board, then the Company may terminate Employees employment for Cause.
16. Dispute Resolution. To ensure the rapid and economical resolution of disputes that may arise in connection with Employees service or employment with the Company, Employee and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Employees service or employment with the Company, or the termination of such service or employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in the city of the Companys then principal place of business in the United States conducted by JAMS or its successor, under the then applicable JAMS Arbitration Rules and Procedures for Employment Disputes (available at http://www.jamsadr.com/rules-employment-arbitration/). Employee acknowledges that by agreeing to this arbitration procedure, he waives the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. Employee will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the
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award, and the arbitrators essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Employee or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS arbitration fees in excess of the administrative fees that Employee would be required to pay if the dispute were decided in a court of law. The parties agree this arbitration agreement does not extend to claims for workers compensation or unemployment benefits, or any other claims, that Employee cannot, as a matter of applicable law, be required to arbitrate, nor does it preclude Employee from initiating a complaint before the Equal Employment Opportunity Commission or any other governmental agency, but if any such complaint is not resolved before the agency any action for money damages shall be submitted to arbitration pursuant to this paragraph. Nothing in this Agreement is intended to prevent any party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
17. Miscellaneous. This Agreement, together with the Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement governing Employees employment with the Company. It supersedes any other agreements or promises made to Employee by anyone, whether oral or written, including, without limitation, the Prior Agreement. Changes in the terms of Employees employment, other than those changes expressly reserved to the Companys or the Boards discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of Employee and the Company, and inure to the benefit of Employee and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This Agreement shall be construed and enforced in accordance with the laws of the State of Washington without regard to conflicts of law principles. Any ambiguity in this Agreement shall not be construed against any party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic signatures shall be equivalent to original signatures.
18. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) Cause shall mean the occurrence of any of the following events, in each instance that has a material adverse impact on the Company or any successor or affiliate thereof as determined by the Chief Executive Officer in its reasonable discretion: (a) Employees conviction of, or plea of guilty or no contest to, any non-vehicular felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (b) Employees commission of, or participation in, a fraud or act of dishonesty or other illegal act against the Company that has a demonstrable adverse impact on the Company or any successor or affiliate thereof; (c) Employees intentional, material violation of any contract or agreement between Employee and the Company or any material Company policy or of any statutory duty owed to the Company; (d) Employees intentional unauthorized use or disclosure of the Companys confidential information or trade secrets; (e) Employees gross misconduct; or (f) Employees ongoing and repeated failure or refusal to perform or neglect of Employees duties as required by this Agreement or Employees ongoing and repeated failure or refusal to comply with the lawful instructions given to Employee by the Chief Executive Officer, which failure, refusal or neglect continues for thirty (30) days following Employees receipt of written notice from the Chief Executive Officer stating with specificity the nature of such failure, refusal or neglect; provided that it is understood that this clause (f) shall not permit the Company to terminate Employees employment for Cause solely because of (i) Employees failure to meet specified performance objectives or achieve a specific result or outcome, or (ii)
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Companys dissatisfaction with the quality of services provided by Employee in the good faith performance of Employees duties to the Company; provided, that, with respect to (c),(d), (e) and (f) above, Cause will be triggered after Employee has received written notification of such failure from the Chief Executive Officer, which, if curable, remains uncured after thirty (30) days written notice from the Chief Executive Officer. Employee shall be provided an opportunity to be heard prior to the final decision to terminate Employees employment hereunder for such Cause, and any determination of Cause by the Chief Executive Officer or the Company will be made in good faith.
(b) Change in Control shall have the meaning given to such term in the Companys 2021 Incentive Award Plan. Notwithstanding the foregoing, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit that constitutes nonqualified deferred compensation, the transaction or event constituting the Change in Control must also constitute a change in control event (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such payment or benefit, to the extent required by Section 409A.
(c) Change in Control Period shall mean the period commencing sixty (60) days prior to and ending eighteen (18) months following a Change in Control.
(d) Good Reason shall mean any of the following actions taken without Cause by the Company or a successor corporation or entity without Employees consent: (a) material reduction of Employees base compensation (and Employee and the Company agree that any diminution of ten percent (10%) or more shall be considered material for this purpose, regardless of whether such diminution occurs due to a single reduction or a series of reductions in Employees base compensation), other than to the extent the base compensation of all of the executive officers of the Company are concurrently reduced by the same or greater percentage; (b) material reduction in Employees authority, duties or responsibilities, provided, however, that a change in Employees job position or title shall not be deemed a material reduction unless Employees new authority, duties or responsibilities are materially reduced from the prior authority, duties or responsibilities; or (c) relocation of the principal place at which Employee is required to provide services to the Company or Employees principal place of employment that results in an increase in Employees one-way driving distance by more than fifty (50) miles from Employees then current principal place of business or residence, as applicable; and (d) any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Employee under this Agreement In order to resign for Good Reason, Employee must provide written notice of the event giving rise to Good Reason to the Company within ninety (90) days after the condition arises, allow the Company thirty (30) days to cure such condition, and if the Company fails to cure the condition within such period, then Employees resignation from all positions Employee then holds with the Company must be effective not later than ninety (90) days after the end of the Companys cure period.
(e) Separation from Service shall mean a separation from service as such term is defined in Treasury Regulation Section 1.409A-1(h).
(f) Severance Period shall mean (i) if Employees Qualifying Termination does not occur during the Change in Control Period, nine (9) months, and (ii) if Employees Qualifying Termination occurs during the Change in Control Period, twelve (12) months.
(g) Stock Awards shall mean means all stock options, restricted stock and such other awards granted pursuant to the Companys stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof.
(Signature Page Follows)
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Sincerely, | ||
ICOSAVAX, INC. | ||
By: |
/s/ Adam K. Simpson |
|
Adam K. Simpson, Chief Executive Officer | ||
ACKNOWLEDGED AND AGREED: | ||
/s/ Charles Richardson |
||
Charles Richardson |
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Exhibit 10.17
ICOSAVAX, INC.
July 22, 2021
Thomas J. Russo
c/o Icosavax, Inc.
Re: |
Employment Letter Agreement |
Dear Thomas:
This amended and restated employment letter agreement (this Agreement) amends and restates that certain employment letter agreement, dated May 25, 2021 (the Prior Agreement), by and between Icosavax, Inc. (the Company) and you (also referred to herein as Employee and together, the Parties). This Agreement sets forth the terms of your continued employment with the Company, effective as of the closing of the Companys initial public offering (IPO). In consideration of the mutual promises herein contained, the Parties agree as follows:
1. Position. Employee will continue to serve in the position of Chief Financial Officer. Employee will continue to report to the Companys Chief Executive Officer, and shall be responsible for the duties customarily associated with this position and such other duties assigned by the Company. Employee will perform the majority of services remotely from his home in the San Francisco Bay Area, California, but will periodically travel the Companys facility located at Seattle, Washington as reasonably required in connection with his services. Of course, the Company may change Employees position, duties, and work location from time to time in its discretion. Employee will be employed on a full-time basis. This is an exempt position.
2. Base Salary and Employee Benefits.
(a) Salary. Employees base salary will be $420,000.00 per year (the Base Salary), less payroll deductions and withholdings, paid on the Companys normal payroll schedule.
(b) Benefits. During his employment, Employee will be eligible to participate in the standard benefits plans offered to similarly situated employees by the Company from time to time, subject to plan terms and generally applicable Company policies. A full description of these benefits will be available upon request. Employee will be eligible to accrue vacation or paid time off in accordance with the Companys policies as in effect from time to time. The Company may change compensation and benefits from time to time in its discretion.
(c) Expenses. All reasonable business expenses that are documented by Employee and incurred in the ordinary course of business will be reimbursed in accordance with the Companys standard policies and procedures.
3. Annual Bonus. During his employment, Employee will be eligible to earn an annual performance bonus of up to forty percent (40%) of Employees Base Salary rate (the Annual Bonus) for performance at targeted levels. The Annual Bonus will be based upon an assessment by the Board of Directors of the Company (the Board) of Employees performance and the Companys attainment of written targeted goals as set by the Board in its sole discretion. Bonus payments, if any, will be subject to applicable payroll deductions and withholdings. Following the close of each calendar year, the Board will determine whether Employee has earned an Annual Bonus, and the amount of any such bonus, based on the achievement of such goals. No amount of the Annual Bonus is guaranteed, and Employee must be an
employee on the Annual Bonus payment date to be eligible to receive an Annual Bonus; except as provided in Section 5 below, no partial or prorated bonuses will be provided. The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year after the applicable bonus year. Employees Annual Bonus for 2021 will be prorated to reflect the portion of the year during which he is employed by the Company.
4. At-Will Employment Relationship. Employee may terminate his employment with the Company at any time and for any reason whatsoever simply by notifying the Company. Likewise, the Company may terminate Employees employment at any time, with or without cause or advance notice. Employees employment at-will status can only be modified in a written agreement signed by Employee and by an officer of the Company.
5. Severance Benefits. If, at any time, the Company terminates Employees employment without Cause or Employee resigns for Good Reason (either such termination referred to as a Qualifying Termination), provided such termination or resignation also constitutes a Separation from Service (as defined below), then subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below) and Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following severance benefits (the Severance Benefits):
(a) Cash Severance. Upon a Qualifying Termination, the Company will pay Employee, as cash severance (i) Employees Base Salary in effect as of Employees Separation from Service date for the Severance Period, less applicable payroll deductions and withholdings (the Base Severance), plus (ii) (A) in the event such Qualifying Termination does not occur during the Change in Control Period, an amount equal to Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs, prorated to reflect the portion of the year that has elapsed prior to the date of Employees Separation from Service date, or (B) in the event such Qualifying Termination does occur during the Change in Control Period, an amount equal to one hundred percent (100%) multiplied by Employees target Annual Bonus for the year in which Employees Qualifying Termination occurs (the Bonus Severance, and with the Base Severance, the Severance).
Except in the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in installments in the form of continuation of Employees Base Salary payments over the Severance Period, paid on the Companys ordinary payroll dates, commencing on the sixtieth (60th) day following Employees Separation from Service date. The first such installment shall be for any accrued Base Salary for the sixty (60)-day period preceding such initial payment date. All salary continuation payments thereafter, if any, shall be made on the Companys regular payroll dates.
In the case of a Qualifying Termination that occurs within eighteen (18) months following a Change in Control, the Base Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
Any Bonus Severance will be paid in a lump sum on the sixtieth (60th) day following Employees Separation from Service date.
(b) COBRA Severance. As additional severance, in the event of Employees Qualifying Termination, the Company will continue to pay the cost of Employees health care coverage in effect at the time of Employees Separation from Service for the Severance Period (the COBRA Coverage Period), either under the Companys regular health plan (if permitted) or by paying Employees COBRA premiums (the COBRA Severance). The Companys obligation to pay the COBRA Severance on
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Employees behalf will cease if Employee obtains health care coverage from another source (e.g., a new employer or spouses benefit plan), unless otherwise prohibited by applicable law. Employee must notify the Company within two (2) weeks if Employee obtains coverage from a new source. This payment of COBRA Severance by the Company would not expand or extend the maximum period of COBRA coverage to which Employee would otherwise be entitled under applicable law. Notwithstanding the above, if the Company determines in its sole discretion that it cannot provide the foregoing COBRA Severance without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), or if the Company otherwise elects, in its sole discretion, the Company shall in lieu thereof provide to Employee a taxable monthly payment in an amount equal to the monthly COBRA premium that Employee would be required to pay to continue Employees group health coverage in effect on the date of Employees termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Employee elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Employee obtains other coverage or (y) the last day of applicable COBRA Coverage Period.
6. Accelerated Vesting. Subject to Sections 8, 9 and 10 below, Employees continued compliance with the terms of this Agreement (including without limitation Section 12 below), Employees resignation from any and all positions Employee may hold with the Company, to be effective no later than Employees Separation from Service date (or such other date requested or permitted by the Board), the Company will provide Employee with the following accelerated vesting (the Accelerated Vesting):
(a) Existing Stock Awards. With respect to all Stock Awards granted prior to the date of this Agreement (the Existing Stock Awards):
(i) In the event of Employees Qualifying Termination prior to a Change in Control or more than eighteen (18) months following a Change in Control, then such number of Employees Existing Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination that occurs within eighteen (18) months following a Change in Control, then all of Employees Existing Stock Awards shall be deemed vested immediately prior to such termination.
(b) New Stock Awards. With respect to Employees Stock Awards granted on or after the date of this Agreement (the New Stock Awards):
(i) In the event of Employees Qualifying Termination not occurring during the Change in Control Period, then such number of Employees New Stock Awards shall be deemed vested effective immediately prior to such termination as would have vested by their terms during the nine (9) months following Employees date of termination had Employee remained employed by the Company during such period; and
(ii) In the event of Employees Qualifying Termination during the Change in Control Period, all of Employees New Stock Awards shall vest effective upon the later of (A) the date of termination or (B) the date of the Change in Control.
(c) Interaction with Stock Award Agreements. Except to the extent an award agreement governing a Stock Award granted to Employee specifically provides for the treatment of such Stock Award in the event of any of the acceleration events described in clauses (a) and (b) above and provides that its terms shall supersede the provisions of this Section 6, in which case the terms of such
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award agreement shall govern, the foregoing Accelerated Vesting provisions are deemed to be a part of each Stock Award and to amend and supersede any less favorable provision in any agreement or plan regarding such Stock Award (and, for the avoidance of doubt, if any Stock Award is subject to more favorable vesting than the Accelerated Vesting pursuant to any agreement or plan regarding such Stock Award, such more favorable provisions shall continue to apply and shall not be limited by the Accelerated Vesting).
7. Resignation Without Good Reason; Termination for Cause; Death or Disability. If, at any time, Employee resigns his employment with the Company without Good Reason, or the Company terminates Employees employment for Cause, or Employees employment with the Company terminates for any reason not entitling Employee to the Severance Benefits or Accelerated Vesting pursuant to Sections 5 and 6 above, including as a result of Employees death or disability, then Employee will receive his Base Salary accrued through his last day of employment. Under these circumstances, Employee will not be entitled to any other form of compensation from the Company, including any Severance Benefits or Accelerated Vesting, other than Employees rights to the vested portion of Employees Stock Awards and any other rights to which Employee is entitled under the Companys benefit programs or applicable law. In addition, Employee shall resign from any and all positions Employee holds with the Company, with such resignations to be effective no later than the date of Employees employment termination (or such other date requested or permitted by the Board).
8. Conditions to Receipt of Severance Benefits and Accelerated Vesting. Prior to and as a condition to Employees receipt of the Severance Benefits or Accelerated Vesting described above, Employee shall timely execute and deliver to the Company a release of claims in favor of and in a form acceptable to the Company (the Release) and allow the Release to become effective according to its terms (by not invoking any legal right to revoke it) within sixty (60) days following Employees Separation from Service date.
9. Compliance with Section 409A. It is intended that the Severance Benefits and Accelerated Vesting set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code (Section 409A, together with any state law of similar effect, Section 409A) provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations 1.409A-2(b)(2)(iii)), Employees right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits or Accelerated Vesting constitute deferred compensation under Section 409A and Employee is, on the date of Employees Separation from Service, a specified employee of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of adverse personal tax consequences under Section 409A, the timing of the Severance Benefits and Accelerated Vesting shall be delayed until the earliest of: (a) the date that is six (6) months and one (1) day after Employees Separation from Service date, (b) the date of Employees death, or (c) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments or benefits deferred pursuant to this Section 9 shall be paid in a lump sum or provided in full by the Company (or the successor entity thereto, as applicable), and any remaining payments due shall be paid as otherwise provided herein. No interest shall be due on any amounts so deferred. The Severance Benefits and Accelerated Vesting are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly. Any reimbursement of expenses
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or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Employees taxable year following the taxable year in which Employee incurred the expenses. The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Employee, and Employees right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit. For purposes of this Agreement, all references to Employees termination of employment shall mean Employees Separation from Service.
10. Section 280G Treatment.
(a) In the event that any payment or benefit received or to be received by Employee pursuant to the terms of any plan, arrangement or agreement (including any payment or benefit received in connection with a change of control or the termination of Employees employment) (all such payments and benefits being hereinafter referred to as the Total Payments) would be subject (in whole or part) to the excise tax (the Excise Tax) imposed under Section 4999 of the Code, then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to Employee that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to the Companys common stock that is exempt from Section 409A of the Code; provided, in case of clauses (B), (C) and (D), that reduction of any payments or benefits attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee on an after-tax basis and, to the extent economically equivalent payments or benefits are subject to reduction, in a pro rata manner.
(b) All determinations regarding the application of this Section 280G Treatment section shall be made by an independent accounting firm or consulting group with nationally recognized standing and substantial expertise and experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax retained by the Company prior to the date of the applicable change in control (the 280G Firm). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments shall be taken into account which, in the written opinion of the 280G Firm, (A) does not constitute a parachute payment within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, or (B) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, (ii) no portion
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of the Total Payments the receipt or enjoyment of which Employee shall have waived at such time and in such manner as not to constitute a payment within the meaning of Section 280G(b) of the Code shall be taken into account, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. All determinations related to the calculations to be performed pursuant to this Section 280G Treatment section shall be done by the 280G Firm.
(c) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Employee and the Company within fifteen (15) days after notification from either the Company or Employee that Employee may receive payments which may be parachute payments. Employee and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne solely by the Company.
11. Withholding Taxes. All amounts payable to Employee will be subject to reduction to reflect applicable withholding and payroll taxes.
12. Compliance with Confidential Information and Inventions Agreement and Company Policies. In the performance of services for the Company, Employee will be expected to abide by Company rules and policies. Employee and the Company have entered into a Confidential Information and Inventions Assignment Agreement (the Confidential Information and Inventions Assignment Agreement), attached hereto as Exhibit A, which prohibits unauthorized use or disclosure of the Companys proprietary information, among other obligations. Employee agrees to perform each and every obligation of Employee therein contained. Any references in Employees Confidential Information and Inventions Assignment Agreement to the Prior Agreement shall be deemed to be amended to refer to this Agreement. Notwithstanding the foregoing or in the Confidential Information and Inventions Assignment Agreement, pursuant to 18 U.S.C. Section 1833(b), Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (a) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13. Protection of Third Party Information. In Employees work for the Company, Employee will be expected not to use or disclose any confidential information, including trade secrets, of any former employer or other person to whom Employee has an obligation of confidentiality. Rather, Employee will be expected to use only that information which is generally known and used by persons with training and experience comparable to his own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company. Employee agrees that Employee will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom Employee has an obligation of confidentiality. Employee hereby represents that he has disclosed to the Company any contract he has signed that may restrict his activities on behalf of the Company.
14. Return of Company Property. Upon the termination of Employees employment with the Company for any reason, Employee will return to the Company all Company documents (and all copies thereof) and other Company property within their possession, custody or control, including but not limited to Company files, notes, financial and operational information, customer lists and contact information, investor and finance source lists and contract information, product information, research and development
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information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including but not limited to computers, facsimile machines, mobile telephones, tablets, handheld devices and servers), credit cards, entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part and in any medium). Employee shall deliver to the Company, upon request, a signed statement certifying compliance with this Section 14.
15. Exclusive Services. Employee shall at all times faithfully, industriously and to the best of Employees ability, experience and talent perform to the satisfaction of the Board all of the duties that may be assigned to Employee hereunder and shall devote substantially all of his productive time and efforts to the performance of such duties. Subject to the terms of the Confidential Information and Inventions Assignment Agreement, this shall not preclude Employee from devoting time to personal and family investments or serving on community and civic boards, or participating in industry associations, provided such activities do not interfere with the duties to the Company, as determined in good faith by the Board. Employee agrees that he will not join any boards, other than community and civic boards (which do not interfere with Employees duties to the Company), without the prior approval of the Company. The Company may require termination of Employees participation in other business or public activities if the Company, in its sole discretion, determines that such activities compromise or threaten to compromise the Companys business interests or conflict with Employees duties to the Company. During Employees employment by the Company, except on behalf of the Company, Employee will not directly or indirectly serve as an officer, director, stockholder, employee, partner, proprietor, investor, joint venturer, associate, representative or consultant of any other person, corporation, firm, partnership or other entity whatsoever known by Employee to compete with the Company (or is planning or preparing to compete with the Company), anywhere in the world; provided, however, that Employee may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange. If the Board determines Employee is in breach of this Section 15, and provided such breach is not cured within thirty (30) days of written notification of such breach from the Board, then the Company may terminate Employees employment for Cause.
16. Dispute Resolution. To ensure the rapid and economical resolution of disputes that may arise in connection with Employees service or employment with the Company, Employee and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Employees service or employment with the Company, or the termination of such service or employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in the city of the Companys then principal place of business in the United States conducted by JAMS or its successor, under the then applicable JAMS Arbitration Rules and Procedures for Employment Disputes (available at http://www.jamsadr.com/rules-employment-arbitration/). Employee acknowledges that by agreeing to this arbitration procedure, he waives the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. Employee will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrators essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Employee or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS arbitration fees in excess of the administrative fees that Employee would be required to pay if the dispute were decided in a court of law. The parties agree this arbitration
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agreement does not extend to claims for workers compensation or unemployment benefits, or any other claims, that Employee cannot, as a matter of applicable law, be required to arbitrate, nor does it preclude Employee from initiating a complaint before the Equal Employment Opportunity Commission or any other governmental agency, but if any such complaint is not resolved before the agency any action for money damages shall be submitted to arbitration pursuant to this paragraph. Nothing in this Agreement is intended to prevent any party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
17. Miscellaneous. This Agreement, together with the Confidential Information and Inventions Assignment Agreement, forms the complete and exclusive statement governing Employees employment with the Company. It supersedes any other agreements or promises made to Employee by anyone, whether oral or written, including, without limitation, the Prior Agreement. Changes in the terms of Employees employment, other than those changes expressly reserved to the Companys or the Boards discretion in this Agreement, require a written modification approved by the Company and signed by a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of Employee and the Company, and inure to the benefit of Employee and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. This Agreement shall be construed and enforced in accordance with the laws of the State of California without regard to conflicts of law principles. Any ambiguity in this Agreement shall not be construed against any party as the drafter. Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder. This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic signatures shall be equivalent to original signatures.
18. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) Cause shall mean the occurrence of any of the following events, in each instance that has a material adverse impact on the Company or any successor or affiliate thereof as determined by the Chief Executive Officer in its reasonable discretion: (a) Employees conviction of, or plea of guilty or no contest to, any non-vehicular felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (b) Employees commission of, or participation in, a fraud or act of dishonesty or other illegal act against the Company that has a demonstrable adverse impact on the Company or any successor or affiliate thereof; (c) Employees intentional, material violation of any contract or agreement between Employee and the Company or any material Company policy or of any statutory duty owed to the Company; (d) Employees intentional unauthorized use or disclosure of the Companys confidential information or trade secrets; (e) Employees gross misconduct; or (f) Employees ongoing and repeated failure or refusal to perform or neglect of Employees duties as required by this Agreement or Employees ongoing and repeated failure or refusal to comply with the lawful instructions given to Employee by the Chief Executive Officer, which failure, refusal or neglect continues for thirty (30) days following Employees receipt of written notice from the Chief Executive Officer stating with specificity the nature of such failure, refusal or neglect; provided that it is understood that this clause (f) shall not permit the Company to terminate Employees employment for Cause solely because of (i) Employees failure to meet specified performance objectives or achieve a specific result or outcome, or (ii) Companys dissatisfaction with the quality of services provided by Employee in the good faith performance of Employees duties to the Company; provided, that, with respect to (c),(d), (e) and (f) above, Cause will be triggered after Employee has received written notification of such failure from the Chief Executive Officer, which, if curable, remains uncured after thirty (30) days written notice from the Chief Executive Officer. Employee shall be provided an opportunity to be heard prior to the final decision to terminate Employees employment hereunder for such Cause, and any determination of Cause by the Chief Executive Officer or the Company will be made in good faith.
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(b) Change in Control shall have the meaning given to such term in the Companys 2021 Incentive Award Plan. Notwithstanding the foregoing, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit that constitutes nonqualified deferred compensation, the transaction or event constituting the Change in Control must also constitute a change in control event (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such payment or benefit, to the extent required by Section 409A.
(c) Change in Control Period shall mean the period commencing sixty (60) days prior to and ending eighteen (18) months following a Change in Control.
(d) Good Reason shall mean any of the following actions taken without Cause by the Company or a successor corporation or entity without Employees consent: (a) material reduction of Employees base compensation (and Employee and the Company agree that any diminution of ten percent (10%) or more shall be considered material for this purpose, regardless of whether such diminution occurs due to a single reduction or a series of reductions in Employees base compensation), other than to the extent the base compensation of all of the executive officers of the Company are concurrently reduced by the same or greater percentage; (b) material reduction in Employees authority, duties or responsibilities, provided, however, that a change in Employees job position or title shall not be deemed a material reduction unless Employees new authority, duties or responsibilities are materially reduced from the prior authority, duties or responsibilities; (c) relocation of the principal place at which Employee is required to provide services to the Company or Employees principal place of employment that results in an increase in Employees one-way driving distance by more than fifty (50) miles from Employees then current principal place of business or residence, as applicable; (d) any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Employee under this Agreement In order to resign for Good Reason, Employee must provide written notice of the event giving rise to Good Reason to the Company within ninety (90) days after the condition arises, allow the Company thirty (30) days to cure such condition, and if the Company fails to cure the condition within such period, then Employees resignation from all positions Employee then holds with the Company must be effective not later than ninety (90) days after the end of the Companys cure period.
(e) Separation from Service shall mean a separation from service as such term is defined in Treasury Regulation Section 1.409A-1(h).
(f) Severance Period shall mean (i) if Employees Qualifying Termination does not occur during the Change in Control Period, nine (9) months, and (ii) if Employees Qualifying Termination occurs during the Change in Control Period, twelve (12) months.
(g) Stock Awards shall mean means all stock options, restricted stock and such other awards granted pursuant to the Companys stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof.
(Signature Page Follows)
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Sincerely, | ||
ICOSAVAX, INC. | ||
By: |
/s/ Adam K. Simpson |
|
Adam K. Simpson, Chief Executive Officer | ||
ACKNOWLEDGED AND AGREED: | ||
/s/ Thomas J. Russo |
||
Thomas J. Russo |
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our report dated May 14, 2021 (except for Note 11(f), as to which the date is July 22, 2021) in the Registration Statement (Form S-1 No.333-257733) and related Prospectus of Icosavax, Inc. for the registration of 11,500,000 shares of its common stock.
/s/ Ernst & Young LLP
July 22, 2021
Seattle, Washington
Exhibit 24.2
POWER OF ATTORNEY
I, the undersigned director of Icosavax, Inc., hereby severally constitute and appoint Adam Simpson and Thomas Russo, CFA, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Ann M. Veneman | Director | July 22, 2021 | ||
Ann M. Veneman |