Item 1.  Business

Overview

We are a clinical-stage immuno-oncology company and a leader in the field of neoantigen-targeted therapies, dedicated to transforming the treatment of cancer by directing the immune system towards neoantigens. Genetic mutations, which are a hallmark of cancer, can result in specific immune targets called neoantigens. The presence of neoantigens in cancer cells and their absence in normal cells makes them compelling, untapped targets for cancer therapy. By directing the immune system towards these targets, we believe our neoantigen-targeted therapies will offer a new level of patient and tumor specificity in the field of cancer immunotherapy that will drive a strong risk-benefit profile to dramatically improve patient outcomes.

We aim to lead a paradigm shift in the treatment of cancer patients towards an era of truly personal immuno-oncology therapies. Our founders have done pioneering work in immuno-oncology, including work that resulted in a class of immunotherapy known as checkpoint inhibitors, which aim to reactivate the immune system to kill cancer cells. Checkpoint inhibitors have demonstrated potent efficacy in cancers with higher rates of genetic mutations, or mutational burden, which provide a greater diversity of neoantigen targets. However, even in these tumor types, the majority of patients do not respond to treatment. Our development strategy leverages multiple neoantigen modalities, including vaccines and T cell therapies, to maximize the potential reach of our therapies. By directing the immune system against neoantigen targets, our vaccines have the potential to improve patient outcomes across both checkpoint-responsive and unresponsive disease, and our T cell therapies have the potential to unlock the potency of cell therapies in solid tumors.

NEO-PV-01, our personal neoantigen vaccine, is custom-designed and manufactured based on the unique mutational fingerprint of each individual patient. This technology was developed based on more than a decade of work by our founders at the Dana-Farber Cancer Institute, or the DFCI, and the Broad Institute of MIT and Harvard, or the Broad, which culminated in an initial clinical trial reported in  Nature  in July 2017. This trial demonstrated the ability of a personal neoantigen vaccine to generate highly specific immune responses in six patients with stage III/IV melanoma treated in the adjuvant setting, with all six patients disease-free at a median of 20 months after initiating vaccination. NEO-PV-01 is currently being evaluated in multiple Phase 1b clinical trials. The clinical data we presented in October and November 2018 from our Phase 1b clinical trial in combination with nivolumab in metastatic melanoma, non-small cell lung cancer and bladder cancer demonstrates that the therapy has been well-tolerated and has been able to direct the immune system against neoantigens in advanced metastatic disease. Furthermore, we have observed both evidence of immune pressure on tumors and of tumor cell killing. We believe these findings provide emerging proof of mechanism and will potentially lead to us correlating baseline disease characteristics and mechanism of action with clinical response as the study matures.

NEO-PTC-01, our personal neoantigen T cell therapy, consists of multiple T cell populations that are generated to target each individual patient's unique set of neoantigens. Data presented at the Society for Immunotherapy of Cancer meeting in November 2018, as well as our ongoing research, give us added confidence that we can reliably generate multiple enriched neoantigen-specific T cell populations that are capable of killing tumor cells. We believe NEO-PTC-01 has several significant advantages that could overcome the challenges of other cell therapies in the solid tumor setting. To this end, we are focusing the initial clinical development of NEO-PTC-01 in solid tumors for patients who are refractory to checkpoint inhibitors. We expect to file a clinical trial application, or CTA, in Europe in the second half of 2019 to evaluate NEO-PTC-01 in the solid tumor setting.

In parallel to our personal therapies, we are advancing additional therapies that use a precision medicine approach. These include multiple neoantigen-targeted therapies that direct the immune system towards prevalent mutations that are shared across patients in specific tumor types. We intend to develop product candidates targeting shared neoantigens using both vaccine and T cell modalities. Our first product candidate using this approach, NEO-SV-01, is a neoantigen vaccine for the treatment of a genetically defined subset of estrogen-receptor-positive, or ER ⁺ , breast cancer, for which we expect to file an Investigational New Drug Application, or IND, in the first half of 2019. We continue to make significant progress with respect to our precision T cell approach and have assembled libraries of high-quality T cell receptors, or TCRs, against various shared neoantigens across common human leukocyte antigens, or HLAs.

Our product candidate pipeline is generated using our proprietary neoantigen platform, which continuously improves as our product candidates generate data. This platform comprises three key elements: our Real-time Epitope Computation for ONcology, or RECON, bioinformatics engine; our deep capabilities in peptide chemistry; and our combined T cell biology and immune-monitoring expertise. At the core of our neoantigen platform is RECON, which uses a proprietary combination of algorithms designed to predict the most therapeutically-relevant neoantigen targets associated with each patient's tumor. As detailed in our February 2017 paper in Immunity, our approach to bioinformatics uses a proprietary allele-specific, or mono-allelic, approach that allows us to predict neoantigens that are presented by specific alleles relevant for each patient. Using this approach and with our growing proteomic database of greater than 1.2 million unique HLA bound peptides, we have generated high quality data sets

that have resulted in positive predictive values greater than 50%, exceeding standard approaches by greater than ten times when using a recall-based measurement of performance. We intend to strengthen our leading position in bioinformatics and identification of therapeutic neoantigens by using data generated from our ongoing and future clinical trials, coupled with our machine learning expertise, to continue to refine RECON's neoantigen prediction algorithms.

We have strategically chosen to utilize immunogenically-designed peptides for neoantigen targeting in our product candidates in order to directly replicate the body's natural immune processes. Peptides have demonstrated broad immunogenicity and safety and we believe this choice reduces both complexity and risk within our platform. From inception, we have also been focused on the unique supply chain requirements of our personal neoantigen therapies. Accordingly, we have developed automated peptide manufacturing capabilities that we believe provide advantages in both turnaround times and manufacturing costs for our product candidates.

Our Approaches and Product Candidates

We are leveraging our neoantigen platform and over a decade of insights from our founders to develop neoantigen-targeted therapies that use two distinct approaches, NEON / ONE and NEON / SELECT. These approaches focus on targeting a prioritized set of what we believe are the most therapeutically-relevant neoantigens. In NEON / ONE, these neoantigens are specific to each individual. In NEON / SELECT, these neoantigens are shared across subsets of patients or tumor types. We are applying these two approaches to develop neoantigen-targeting product candidates using multiple treatment modalities. The following summarizes the current status of our product development pipeline:

Our NEON / ONE Approach

NEO-PV-01, our personal neoantigen vaccine

NEO-PV-01, our most advanced product candidate, is a personal neoantigen vaccine. The neoantigen-targeting peptides in NEO-PV-01 are intended to generate an immune response that trains each patient's immune system to target his or her individual tumor's particular neoantigens and kill the cancer cells. We have generated emerging proof of mechanism of NEO-PV-01 in NT-001, our ongoing Phase 1b open-label clinical trial evaluating a combination of NEO-PV-01 with nivolumab (marketed as Opdivo) in patients with metastatic melanoma, non-small cell lung cancer or bladder cancer. Beyond NT-001, we have initiated NT-002, a Phase 1b clinical trial evaluating a combination of NEO-PV-01 with pembrolizumab (marketed as Keytruda) and chemotherapy in patients with non-small cell lung cancer, and NT-003, a Phase 1b clinical trial evaluating NEO-PV-01 and nivolumab in combination with other agents in first-line patients with advanced or metastatic melanoma. We are also planning an additional clinical trial, referred to as NT-004, evaluating NEO-PV-01 in the monotherapy setting and look forward to sharing the indication

we will target in this trial in 2019. Our exploratory clinical trials are designed to enable us to efficiently determine the optimal patient populations, rational combinations and treatment protocols for use in late-stage clinical development of NEO-PV-01.

NEO-PTC-01, our personal neoantigen T cell therapy

NEO-PTC-01 is a personal neoantigen T cell therapy that consists of multiple T cell populations targeting what we predict to be the most therapeutically-relevant neoantigens from each patient's tumor. T cells are a type of white blood cell that play a central role in the immune system, including both detecting and killing cancer cells. NEO-PTC-01 uses T cells from the periphery of each patient that we then specifically prime, activate and expand to generate a therapy that specifically targets that patient's personal neoantigens. We believe that NEO-PTC-01 will allow us to drive a robust and persistent anti-tumor response and could be applicable across a broad range of both hematological and solid tumors. NEO-PTC-01 is currently in preclinical development and we plan to file a CTA in Europe in the second half of 2019 to evaluate NEO-PTC-01 in solid tumors in patients that are refractory to checkpoint inhibitors.

Our NEON / SELECT Approach

NEON / SELECT is our precision medicine approach to neoantigen-targeted therapies. We are seeking to discover, validate and develop therapies directed towards shared neoantigens, which are neoantigen targets that are shared across subsets of patients or tumor types. Our proprietary shared neoantigen targets have the potential to be used in multiple treatment modalities, including vaccines and TCR based T cell therapies. Our first product candidate under our NEON / SELECT approach is NEO-SV-01, a vaccine targeting a prevalent mutation in a subset of ER ⁺  breast cancer, which is currently in preclinical development with an IND filing expected in the first half of 2019. We believe NEO-SV-01 has the potential to be used across disease stages in combination with hormonal, chemotherapy or targeted therapies. We continue to make significant progress with respect to our precision T cell approach and have assembled libraries of high-quality TCRs against various shared neoantigens across common HLAs.

Our Strategy

To fulfill our mission, we are developing neoantigen-targeted therapies that we believe have the potential to lead a paradigm shift in the treatment of cancer patients. Key elements of our strategy include:

Our Neoantigen Platform

We have pioneered a proprietary neoantigen platform that we are using to develop neoantigen-targeted therapies. We believe that directing the immune system towards neoantigen targets is fundamental to driving effective cancer immunotherapies. Accordingly, our platform seeks to identify and harness the most therapeutically relevant neoantigens present within each patient's tumor.

Our platform comprises three key elements that form an iterative feedback loop: our RECON bioinformatics engine, which is designed to predict the most therapeutically-relevant neoantigen targets; our deep capabilities in peptide chemistry and manufacturing; and our combined T cell biology and immune-monitoring expertise. We are using our platform to develop product candidates across several neoantigen-targeting therapeutic modalities, including both vaccines and T cell therapies, using two distinct approaches:

Overview of Our Neoantigen Platform, Treatment Approaches and Treatment Modalities 

Neoantigen Selection: Our RECON Bioinformatics Engine

At the core of our neoantigen platform is our RECON bioinformatics engine, which is designed to predict the most therapeutically-relevant neoantigen targets associated with each patient's tumor. Effective prediction is critical because, although many mutations within a patient's tumor will lead to the production of a mutated protein, not all mutated proteins lead to suitable therapeutic neoantigen targets.

RECON uses a number of inputs from each patient, including DNA sequences from samples of tumor and normal tissue, RNA sequences from tumor samples, and the patient's specific MHC allele profile. RECON processes data from these inputs using a proprietary combination of algorithms in order to produce a prioritized list of neoantigen-targeting peptides that we then manufacture for use in our product candidates. These algorithms seek to:

We believe we have built RECON as a leading neoantigen bioinformatics engine. By further leveraging the combination of leading-edge proteomics and machine learning expertise, we intend to strengthen our leadership position in identifying neoantigens. Importantly, refining predictions of therapeutic relevance of neoantigens will incorporate immunogenicity data generated from our ongoing and future clinical trials for each RECON predicted neoantigen. As a result, both proteomic and clinical data will continue to refine RECON's neoantigen prediction algorithms in an iterative manner.

RECON predictions of neoantigens, which uses somatic mutations that are accurately and robustly characterized as the starting point, recapitulates the key events in this pathway, including protein cleavage, antigen-HLA binding and T cell reactivity. Factors such as quantification of RNA expression of antigens are used in multiple steps in immunogen identification and design.

Identification of Mutations :     We believe that achieving a combination of high sensitivity and specificity is critical in identifying genetic mutations upon which to base neoantigen predictions. We use a proprietary combination of mutation detection algorithms, known as a mutation calling ensemble, to identify candidate mutations present within a patient's tumor by comparing the patient's normal DNA and tumor DNA sequences. Using this proprietary approach, we have demonstrated a consistently lower rate of false positive errors while maintaining sensitivity when compared to the use of a single mutation detection algorithm.

Prediction of Neoantigen-MHC Presentation :     We use a novel approach to predict which mutations lead to neoantigens that will bind to and be presented by MHC on the surface of a patient's cancer cells. Conventionally, neoantigen prediction is conducted using publicly available algorithms that are trained using limited datasets derived predominantly from  in vitro  binding assays. The utility of these assays to develop binding predictors is limited due to low throughput and does not incorporate critical insights into how peptides are processed. Later generations of algorithms use mass spectrometry techniques to isolate and sequence peptides from multiple MHC alleles. While these approaches have made advances in predicting neoantigen-MHC binding over in vitro  binding assays, the utility of this multi-allelic mass spectrometry approach is limited because these algorithms are unable to discern which peptides are presented by each MHC allele. Further, requiring the use of a predictive algorithm to assign each peptide to an allele is a process that can result in a significant error rate. While these approaches have some utility, we believe, they lack adequate precision and depth across a wide enough range of alleles to have adequate clinical utility.

Overview of Data Sources for Neoantigen-MHC Presentation Prediction 

In contrast, as shown in the diagram above, we use a proprietary allele-specific approach that leverages our mono-allelic MHC proteomic datasets. This approach allows us to predict neoantigens that are presented by specific MHC alleles relevant for each patient. We generated our mono-allelic datasets using a novel mass spectrometry-based method for profiling MHC-bound peptides that are presented by a single Class I or Class II MHC allele. The foundation for our approach to generating mono-allelic Class I MHC ligand datasets was published in  Immunity  in February 2017. Using our datasets, we have developed unique MHC allele-specific algorithms that provide far greater predictive accuracy, and lower false discovery rates, than standard approaches. We can also use this methodology to systematically investigate Class I and II MHC alleles to enable broad coverage of alleles across geographic populations and ethnic groups. We have already achieved greater than 90% population coverage in the United States for Class I MHC alleles (HLA-A, B and C), with significant progress on Class II. We believe these enhancements will enable us to develop more effective neoantigen-targeted therapies. Using this approach and with our growing proteomic database of greater than 1.2 million unique HLA bound peptides, we have generated high quality data sets that have resulted in positive predictive values greater than 50%. The performance of RECON to predict antigen-HLA binding exceeds that of standard approaches, such as netMHCPan, by greater than ten times when using a recall-based measurement of performance.

Our next-generation algorithms using mono-allelic data for Class I MHC alleles have now been deployed in our ongoing clinical trials. We continue to make significant progress in developing a Class II predictor.

The figure below provides an overview of the neoantigen presentation pathway. In addition to mono-allelic mass spectrometry-based HLA-antigen presentation predictions, RECON predictions of neoantigens recapitulates other key events in this pathway. For example, we have also developed a proprietary algorithm designed to predict how proteins are processed into peptides and how this process influences which peptides can be presented by MHC. Factors such as quantification of RNA expression of antigens are used in multiple steps in immunogen identification and design.

Overview of Neon's RECON Bioinformatics Engine 

Selection of the Most Therapeutically-Relevant Neoantigens :     In our effort to select the most therapeutically-relevant neoantigens, in addition to the factors described above, we incorporate a number of additional filters and algorithms applied to RECON-identified neoantigens that account for several biological and pharmacological factors, as well as manufacturing considerations. These include prioritizing based on predictions of T cell reactivity. Also, features of each mutation, such as tumor cell clonality help identify the most immunogenic HLA bound antigens. Further, RECON uses algorithms to design peptides optimized for efficient processing by the immune system and manufacturability. Finally, there are manufacturing considerations in the final design of peptides that go into NEO-PV-01.

We currently use RECON for neoantigen identification that is trained using our mono-allelic mass spectrometry data for Class I MHC epitopes in our ongoing clinical trials for NEO-PV-01. Through intensive immune monitoring of epitope immunogenicity in our clinical studies, we are able to improve the quality of RECON's predictions over time by understanding the immune response to each epitope. We also continue to make significant progress in developing a Class II predictor.

Neoantigen Production: Harnessing the Power of Peptide Chemistry

Our platform uses peptides for neoantigen targeting to induce and expand immune responses in patients, either via  in vivo  or  ex vivo  approaches. The body's immune system has evolved to recognize peptides. We have strategically chosen to utilize peptides in order to directly replicate the body's natural immune processes, where peptides are presented on cells via MHC to prime an immune response. Our approach of using peptides may also provide a number of pharmacological benefits, including:

We have built significant expertise in peptide chemistry and its application in a personal manufacturing setting. We utilize a proprietary design approach that optimizes processing, resulting in over one log increase in MHC presentation. In addition to their pharmacological benefits, peptides have predictable chemistry and can be rapidly synthesized using programmable instruments,

allowing for straightforward and efficient automated manufacturing and manufacturing cost advantages. We have developed automated peptide manufacturing capabilities that we believe will provide rapid turnaround times and today we can achieve a turnaround time from receipt of biopsy to GMP release of eight weeks with our current supply chain for NEO-PV-01. We plan to drive additional process improvements, which we expect will further compress our turnaround time.

Neoantigen Immunogenicity: Inducing and Monitoring Neoantigen T Cell Responses

Fundamental to our platform is our ability to elicit neoantigen-specific immune responses, both  in vivo  and  ex vivo , and to evaluate these responses in patients. It is therefore vital for us to understand how T cell responses can be induced and expanded to target neoantigens and to monitor the immune system response in treated patients.

We have developed a proprietary method for  ex vivo  T cell stimulation, which we call NEO-STIM, that allows us to generate  de novo  and memory immune responses in the laboratory. We are utilizing this capability in several aspects of our neoantigen platform, including to:

We have also developed extensive in-house immune-monitoring capabilities that allow us to interrogate the immune state of a patient before, during and after each therapeutic intervention. We evaluate multiple components of the immune system, including different types of immune cells and important classes of cytokines, in both the periphery and the tumor. To evaluate immune responses, we use a range of cutting-edge techniques, including rapid UV-exchange MHC multimers developed by one of our founders, Ton Schumacher, which allow us to analyze neoantigen-specific CD8 ⁺ T cells, TCR sequencing to determine the distribution of neoantigen-specific T cells, single cell sequencing and multi-channel flow cytometry. We complement the use of these monitoring techniques with the use of other more common immune-monitoring techniques such as ELISpot assays and immunohistochemistry. Together, these techniques allow us to generate comprehensive immunological data from our clinical trials and to correlate them with our analysis of the tumor both before and after treatment. We expect to use these data to make ongoing improvements to RECON's neoantigen selection and prioritization algorithms, identify biomarkers that can help predict which patients will be responsive to therapy, further enhance clinical development strategies and inform generational improvements to our product candidate portfolio.

Our Approaches and Product Candidates

NEON / ONE Approach

NEON / ONE is our personal medicine approach to neoantigen-targeted therapy. Using NEON / ONE, we are developing therapies that are tailored to each patient's specific set of tumor neoantigens. We are currently developing NEON / ONE product candidates using two modalities, personal neoantigen vaccines and personal neoantigen T cell therapies. We believe our NEON / ONE approach will be effective across tumors that are both responsive and unresponsive to checkpoint inhibitor therapy.

As shown in the graphic below, both of our NEON / ONE treatment modalities leverage our neoantigen platform, including RECON and our personal peptide manufacturing capabilities.

NEON / ONE: Personal Medicine Approach 

NEON / ONE Personal Neoantigen Vaccine Program: NEO-PV-01

Overview

NEO-PV-01, our most advanced product candidate, is a personal neoantigen vaccine that is currently being evaluated in three Phase 1b open-label clinical trials.

NEO-PV-01 is custom-designed and manufactured for each individual patient through a series of steps that include tumor biopsy, sequencing of biopsied tumor tissue and normal patient tissue, peptide selection via RECON and personal peptide manufacturing. We combine up to 20 of these individually selected peptides with a proprietary formulation to construct a unique vaccine for each patient. We administer the vaccine in conjunction with poly-ICLC, an adjuvant that helps to augment the immune response to the neoantigen peptides. The neoantigen-targeting peptides in NEO-PV-01 are intended to generate an anti-tumor immune response that directs patients' T cells to target their individual tumor's particular neoantigens and kill the cancer cells.

Product Development Rationale

We are initially focusing the development of NEO-PV-01 in melanoma, non-small cell lung cancer and bladder cancer because these cancers typically have a higher mutational burden, which provide a greater diversity of neoantigens that we can use as therapeutic targets.

Checkpoint inhibitors are approved for melanoma, non-small cell lung cancer and bladder cancer, among others, and have dramatically changed the therapeutic landscape with significantly improved response rates of up to 30 to 40% in melanoma, 20% in non-small cell lung cancer and 20% in bladder cancer, as described in the FDA-approved prescribing information for nivolumab (marketed as Opdivo), pembrolizumab (marketed as Keytruda) and atezolizumab (marketed as Tecentriq). However, despite these successes, the overwhelming majority of patients do not respond or do not have durable responses to checkpoint therapy. We believe neoantigen targets are critical for an anti-tumor immune response and are the primary driver of the efficacy of checkpoint inhibitor therapy. We also believe that a combination of NEO-PV-01 with checkpoint inhibitor therapy has the potential to deepen and broaden a patient's anti-tumor immune response, resulting in improved clinical benefit. Although we are initially focused on these three indications, we expect to conduct subsequent clinical trials in patients with other types of cancers.

We are conducting a number of exploratory clinical trials that will evaluate NEO-PV-01 in combination with immunotherapies and other complementary therapies. We believe this approach will allow us to efficiently determine the optimal therapies for use in combination with NEO-PV-01 and to refine our perspectives on late-stage clinical development. We also intend to use data generated by these initial clinical trials to continue to refine our RECON neoantigen prediction algorithms.

NEO-PV-01 was developed based on the foundational work of our founders at the DFCI and the Broad. This research supported neoantigens as immune targets, the importance of neoantigens for anti-tumor immune responses and the feasibility of directing the immune system towards neoantigens using a personal neoantigen vaccine.

Phase 1 Clinical Trial of NeoVax in Adjuvant Melanoma

NeoVax, a predecessor to NEO-PV-01, was administered in an investigator-initiated, open-label Phase 1 clinical trial to six patients who first underwent surgical resection of their tumors. This trial was conducted by the DFCI. In this trial, four patients had previously untreated stage IIIb or IIIc melanoma and two patients had previously untreated stage IV melanoma with secondary malignant growths, or metastasis, observed in their lungs. The patients were dosed with NeoVax according to a vaccination schedule that consisted of five priming doses over a four-week period and two subsequent booster doses at two-month intervals. The primary objective of this trial was to evaluate the safety of NeoVax, while the secondary endpoint was to evaluate the clinical efficacy of NeoVax in the adjuvant setting. The results of this trial were published in  Nature  in July 2017.

While not powered to evaluate clinical efficacy of the vaccine, this trial provides encouraging evidence of the clinical benefit of a personal neoantigen vaccine and the potential for synergy with checkpoint inhibitor therapy. The key efficacy results from the trial are summarized below and presented in the following graphic:

Summary of Clinical Results from Patients 1 through 6 with Stage III or IV Melanoma
Following Resection (adapted from  Ott et al., Nature 2017 ) 

Comprehensive immune monitoring was conducted on all patients to characterize the extent and nature of the vaccine-induced immune response before, during and after vaccination. In all patients, immune responses to the neoantigen-targeting peptides contained in NeoVax were undetectable prior to vaccination. Following vaccination,  ex vivo  neoantigen-specific immune responses were observed in all patients. In total, over 70% of the peptides used in the vaccines induced an immune response, with significantly more CD4 ⁺ T cell responses as compared to CD8 ⁺  T cell responses. Both CD4 ⁺ and CD8 ⁺ T cell responses were evident at the earliest sampling timepoint and were sustained over time. The following graph presents the observed changes in interferon gamma, or IFNγ, a measure of immune response, in CD8 ⁺ T cells pre- and post-vaccination across several of the patients, demonstrating no detectable immune responses prior to vaccine therapy and significant responses observable after 16 weeks of vaccine.

T Cell Stimulation Against  De Novo  Targets Maximal Epitope Responses
(adapted from  Ott et al., Nature 2017 ) 

To assess the durability of the vaccine-induced immune response, immune-monitoring was performed on patients 2 and 6, the two patients who entered the trial with stage IV melanoma and whose disease recurred. Both of these patients were observed to have CD4 ⁺ and CD8 ⁺ T cell responses following vaccination. Several of these responses were observed to increase up to one year after treatment with pembrolizumab, suggesting that a synergistically increased immune response arose from the combination of pembrolizumab and the neoantigen vaccination.

In order for a vaccine to demonstrate clinical efficacy, we believe that the vaccine-induced T cell response must be both specific, meaning that the T cells will need to distinguish between a mutant peptide and its corresponding wild-type peptide, and functional, meaning that T cells produce cytokines that can kill the tumor cells. In all patients in this trial, both CD4 ⁺ and CD8 ⁺ T cells demonstrated specificity for the mutant peptide, and functionality with the expression of multiple cytokines such as IFNγ, tumor necrosis factor, or TNF, and interleukin-2, or IL-2, in response to stimulation with neoantigens.

We also believe that clinical efficacy will require that vaccine-induced T cells directly recognize a tumor. To measure this recognition, T cells collected after vaccine therapy, but prior to pembrolizumab therapy, were co-incubated with tumor samples from the same patient. In assays conducted in patients 2 and 6, these T cells secreted the cytokine IFNγ in response to the tumor, but not in response to a different patient's melanoma sample or a negative control. This suggests that vaccine-induced T cells were able to directly recognize tumor samples from the same patient.

All six patients in this trial who commenced vaccine treatment completed the full series of five priming and two booster doses of vaccine. In all patients, the vaccine was well tolerated, with only mild or moderate, referred to as Grade 1 or Grade 2, adverse events observed consisting of mild flu-like symptoms, injection site reactions, rash and fatigue.

We believe the key conclusions that may be drawn from the NeoVax trial are as follows:

From NeoVax to NEO-PV-01

The results of the Phase 1 clinical trial of NeoVax demonstrated the importance of neoantigens for anti-tumor immune responses and the feasibility of directing the immune system towards neoantigens using a personal neoantigen vaccine. This work provided a foundation for further evaluation of a personal neoantigen vaccine approach in more advanced cancer settings and in combination with checkpoint inhibitor therapy. NEO-PV-01 is the result of refinements to multiple elements of NeoVax from the initial whole exome sequencing of the tumor to custom peptide manufacturing. Importantly, we design NEO-PV-01 for each individual patient using RECON for neoantigen selection, building upon the publicly available algorithms used to select the neoantigen-targeting peptides used in NeoVax. In addition, we have built an industrialized manufacturing process and supply chain that is more customizable and scalable than the process used to make NeoVax.

NT-001: Phase 1b Clinical Trial of NEO-PV-01 in the Metastatic Setting

We are currently evaluating NEO-PV-01 in NT-001, an exploratory, single-arm, Phase 1b open-label clinical trial designed to study the feasibility, safety, efficacy and immunogenicity of NEO-PV-01 dosed in combination with nivolumab (marketed as Opdivo), an anti-PD-1 checkpoint therapy, in patients with advanced or metastatic disease, a patient population where neoantigen-specific immune responses have been limited to date. While the results from the NeoVax clinical trial suggested the ability of a neoantigen vaccine to generate a robust immune response in the adjuvant setting, our NT-001 clinical trial is designed to evaluate the immunogenicity of NEO-PV-01 in metastatic disease settings, where patient outcomes are generally less favorable. Our NT-001 clinical trial is enrolling patients with advanced or metastatic melanoma, smoking-associated non-small cell lung cancer or bladder cancer who have received no more than one prior systemic treatment for metastatic disease. We have selected these indications because they generally have high mutational burden and provide an opportunity to further explore synergies with checkpoint therapy.

We filed an IND with the FDA for NEO-PV-01 in June 2016 and subsequently initiated our NT-001 Phase 1b clinical trial in August 2016, in collaboration with Bristol-Myers Squibb Company, with a target of 45 vaccinated patients at ten clinical trial sites across the United States. We completed patient enrollment for the NT-001 trial in the second quarter of 2018. The objective of this study is to evaluate the safety and immunogenicity of NEO-PV-01 in the metastatic setting. The primary endpoint of this trial is to evaluate the safety of administering NEO-PV-01 in combination with nivolumab, the secondary endpoint is to evaluate the clinical efficacy of the combination over two years of follow-up, and the exploratory endpoint is to characterize the immune response and to correlate this immune response with clinical endpoints. We expect to report 52-week results from our NT-001 Phase 1b clinical trial later in 2019.

In our NT-001 clinical trial, patients undergo an initial tumor biopsy and then begin 12 weeks of treatment with nivolumab. Patients then receive subcutaneous vaccination with NEO-PV-01 with a target of commencing treatment during week 12, with the dosing schedule including a three-week priming phase followed by two subsequent monthly boosters. Treatment with nivolumab continues throughout the trial. In addition, throughout the trial, patients are studied extensively for both peripheral and intratumor immune responses, while also being followed radiographically. The following graphic illustrates the design of NT-001:

NT-001: Personal Vaccine in Late-Stage Disease in Combination with Nivolumab 

Note: Opdivo is the brand name for nivolumab. Nivolumab is often shortened to nivo.

NT-001 Data as of August 31, 2018

As of August 31, 2018, NEO-PV-01 dosing had been initiated in 54 patients, with 34 patients having completed the full vaccination course, 25 patients remaining in the course of vaccination and eleven patients through the 52-week clinical endpoint.

While this trial and analysis of trial data remain ongoing, the preliminary results from this trial demonstrate that the combination therapy was well-tolerated and was able to direct the immune system against neoantigens in advanced metastatic disease. In immune analyses performed on nine patients, including patients from all three tumor types, we observed that NEO-PV-01 induced neoantigen-specific immune responses. Further, we observed evidence of immune pressure on the tumor in the form of both epitope spreading and decreased tumor cellularity in biopsies obtained following treatment. We will continue to evaluate clinical endpoints as the study matures and look to correlate mechanism of action with clinical response. As of August 31, 2018, 12 of 16 melanoma patients, seven of 11 non-small cell lung cancer patients and six of seven bladder cancer patients who had received the NEO-PV-01 vaccine as part of the NT-001 trial remain on nivolumab. We believe these observations provide emerging proof of mechanism for NEO-PV-01.

Patient Demographics

The figure below summarizes the baseline characteristics of the 34 patients who had received the full course of vaccine as of August 31, 2018. Many of these patients were enrolled with metastatic disease that has spread to one or more internal organ, as is typical for a Phase 1 clinical trial.

Safety

In the 54 patients who had received at least one vaccine dose, we had not observed any vaccine-related serious adverse events, or SAEs, as of August 31, 2018. We did observe Grade 1-2 adverse events, or AEs, which were transient and self-limited. Common AEs include injection site reactions, fatigue and influenza-like illness. The following table shows the treatment-related AEs as of August 31, 2018:

Immune and Clinical Results

In evaluating immune and clinical results in the NT-001 trial, we sought to answer the following five key questions:

The following is our analysis of the answers to these questions as of August 31, 2018:

We have performed immune analyses in multiple patients across all three tumor types. Through these analyses, we observed that NEO-PV-01 vaccination induced  de novo  immune responses to 56% of immunizing peptides. These neoantigen-specific immune responses were observed following vaccination and were rarely present following nivolumab monotherapy. In terms of T cell subtypes, 49% of epitopes generated CD4 ⁺ and 31% generated CD8 ⁺ responses.

Specificity of the vaccine-induced immune response was evaluated by testing reactivity of neoantigen-specific immune cells against both mutant and wild-type peptides. Eighty-seven percent of positive responses tested were specific to the mutant epitope and did not recognize or react to the corresponding wild-type epitope.

The figure below shows immune responses against vaccine peptides observed in patients pre-treatment, following 12 weeks of nivolumab monotherapy and after treatment with NEO-PV-01 and nivolumab. These data demonstrated that neoantigen immune responses were generated consistently after vaccination with NEO-PV-01, but were rarely seen following nivolumab monotherapy or pre-treatment.

The table below shows key immune metrics across neoantigen vaccine trials. Both Ott  et al. , reporting on the administration of NeoVax, and Sahin  et al.  were published in  Nature  in July 2017 and studied therapies with peptide and RNA vaccine modalities, respectively, in the adjuvant melanoma setting. In contrast, our NT-001 clinical trial is in the metastatic melanoma, non-small cell lung cancer and bladder cancer settings, where stimulating an immune response is generally believed to be more challenging. Despite this, as the table below shows, we are observing similar immune responses generating CD8 ⁺ and CD4 ⁺ T cells compared to both of these trials from the adjuvant setting, regardless of vaccine modality. In addition, every patient from NT-001 who we had assessed when we presented data from NT-001 in October and November 2018 had displayed immune responses measurable in direct  ex vivo  ELISpot assays.

Another key metric to assess is that of durability of the immune response. In the data we presented in October and November 2018, we reported that we had observed immune responses, as measured by ELISpot, that were durable through to Week 52 in four out of six patients assessed. This suggests that NEO-PV-01 dose and schedule can lead to durable immune responses up to six months post-vaccination.

To test whether vaccine induced T cells infiltrate the tumor we performed TCR sequencing from peripheral and tumor samples. As shown in the figure below, mutant specific T cells for the neoantigen RICTOR, from patient M1, were single cell sequenced and the TCR sequences obtained were compared to the TCR sequences observed in the tumor biopsies. One of the three TCRs, labeled TCR3 in the figure below, that was found in the periphery was also found only in the post vaccination biopsy, indicating infiltration of the tumor with vaccine-induced T cells.

To evaluate whether vaccine-induced T cells are functional, we tested for functionality TCR3, which was found only in a study subject's post vaccination tumor biopsy. In this test, if TCR3 is functional, it would lead to the production of IL-2, a marker for T cell function, when the TCR interacted with the neoantigen peptide in the correct context. As shown in the figure below, IL-2 secretion was seen only when stimulated with the mutant neoantigen RICTOR peptide and not with either the wild-type RICTOR peptide or no peptide, demonstrating that TCR3 is functional and highly specific to the mutant form of the RICTOR peptide.

In the context of vaccines, epitope spreading, which is the broadening of an immune response to new antigens that are not components of the vaccine, is a marker of tumor cell killing. As illustrated in the figure below, T cells can destroy tumors, which results in the release of neoantigens. These neoantigens can be taken up by dendritic cells, which then interface with T cells, educating them to recognize and kill cancer cells bearing these neoantigen targets. This has the potential to trigger a catalytic cycle, where further tumor destruction results in further neoantigen release, thereby educating T cells against a new set of neoantigens.

The Epitope Spread Mechanism: Catalytic Cycle

At the time we presented this data at the Society of Immunotherapy of Cancer 2018 meeting, we had evaluated 10 patients for the presence of epitope spreading. In eight of these 10 patients, we observed vaccine-induced immune responses that spread to additional neoantigen targets not included in the vaccine, suggesting vaccine-induced immune pressure on the tumor. Of note, we did not observe epitope spreading responses to these neoantigens following nivolumab monotherapy.

The two figures below show epitope spread observed in one patient in the clinical trial, referred to as Patient M1. Patient M1 is a 56 year-old female with metastatic melanoma who received NEO-PV-01 in combination with nivolumab in the NT-001 clinical trial as first-line therapy for her metastatic disease. Following an initial diagnosis of melanoma in 2006, she was evaluated for abdominal pain in 2016 and found to have a right hepatic lobe lesion confirmed to be malignant melanoma. She was enrolled in NT-001 several months later. We observed epitope spread responses to neoantigen peptides that were not included in NEO-PV-01 (i.e., non-vaccinating peptides), which we believe were generated through T cell destruction of tumor cells. Shown in the figure at the lower left is a direct  ex vivo  ELISpot assay, without stimulation, where groups of mutant genes were used to test for T cell reactivity as evidenced by IFNγ secretion. Of four groups of mutant genes tested, two groups proved to be reactive to this  ex vivo  assay. No responses were observed before treatment, nor after 12 weeks of nivolumab therapy. We did, however, observe reactivity following 12 weeks of NEO-PV-01 and nivolumab therapy. The figure at the lower right shows T cell responses against individual neoantigen peptides, two of which were potent enough to be observed in  ex vivo  assays, and an additional three responses were observable following five-day stimulation. Thus, in total, responses to five epitope spread peptides were detected out of a total of 15 used in the original  ex vivo  assay.

In the data we presented in October and November 2018, we noted that we had observed this phenomenon of epitope spread in eight of 10 patients tested. Of note, the timing of epitope spread has been consistently observable only after NEO-PV-01 vaccination, as we have not observed epitope spread in patients either pre-treatment or following 12 weeks of nivolumab monotherapy.

Example of Epitope Spreading Post-Vaccination 

We observed further evidence of immune pressure and tumor cell death as evidenced by tumor cellularity changes in sequential tumor biopsies. In 12 patients evaluated when we presented data from NT-001 in October and November 2018, we analyzed serial biopsies for histologic changes in tumor cellularity, looking at biopsies performed at baseline (pre-treatment), following treatment with nivolumab and following treatment with NEO-PV-01 in combination with nivolumab. In seven of 11 evaluable patients, there was no histologic evidence of tumor observed in tumor tissue following treatment with NEO-PV-01 in combination with nivolumab, and in the 12th patient, the tumor was inaccessible for biopsy.

The table below and at left shows the percent of tumor observable via standard hematoxylin and eosin, or H&E, staining of biopsy cores, as determined by histology. The figure below and at right presents examples from a patient using H&E and S100 staining of cells. S100 is a protein found in melanocytes and dark staining indicates the presence of melanoma cells. Moving from pre-treatment to nivolumab monotherapy and then to NEO-PV-01 in combination with nivolumab, the H&E stains show progressive darkening as melanoma tumor cells die and their melanin gets taken up by surrounding cells such as macrophages. The S100 stain, a specific marker for melanoma cells, shows progressively decreased staining as the number of melanoma tumor cells become increasingly scarce over the course of therapy.

Histologic Changes in Post-Vaccine Biopsies Suggest Immune Pressure on Tumors

We continue to evaluate the correlation between immune response and clinical outcome and anticipate presenting this data in the future as this clinical trial matures.

Clinical Status

The figures below present the clinical status of all 34 patients who had completed dosing of NEO-PV-01 as of August 31, 2018. This includes 16 melanoma, 11 non-small cell lung cancer and seven bladder cancer patients. Among patients who had completed NE0-PV-01 dosing as of August 31, 2018, 25 of the 34 (or 74%) patients remained on nivolumab monotherapy, including 12 of the 16 (or 75%) enrolled melanoma patients, of whom 11 of 14 (or 79%) remained on nivolumab through 52 weeks.

Radiographic responses after completion of dosing of NEO-PV-01 were assessed using RECIST 1.1. Among patients without a documented response to nivolumab monotherapy, three out of eight (or 38%) of melanoma patients and two out of eight (or 25%) of non-small cell lung cancer patients demonstrate a response following vaccination. In addition, two post-vaccine partial responses were observed in the melanoma cohort after week 36 of treatment. In addition, a single melanoma patient who demonstrated a partial response prior to receiving the NEO-PV-01 vaccine showed a complete response after receiving the vaccine.

Given that NT-001 is an ongoing single-arm Phase 1b trial, limited conclusions about the effects of NEO-PV-01 treatment alone can be made regarding patient outcomes. We will perform expanded assessments of treatment effect with expanded monitoring and we will use additional data to assess treatment duration, changes in tumor size after vaccination and expanded analyses of tumor responses observed at week 36 and beyond. We expect approximately 45 patients will complete NEO-PV-01 therapy, approximately half of whom we anticipate will be melanoma patients.

The following figure shows the measured tumor burden changes during therapy for the melanoma cohort of NT-001:

The following figure shows the measured tumor burden changes during therapy for the non-small cell lung cancer cohort of NT-001:

The following figure shows the measured tumor burden changes during therapy for the bladder cancer cohort of NT-001:

Summary of Key Findings from NT-001 as of August 31, 2018

Further Development Plans for NEO-PV-01

The objective of our clinical development plan is to explore NEO-PV-01 in multiple exploratory clinical trials to enable a clear path to registration. Based on our learnings from both the NeoVax and NT-001 trials, we have designed a series of additional trials to determine the optimal patient populations, rational combinations and treatment protocols for NEO-PV-01.

NEO-PV-01: Clinical Development Strategy

NT-002: Phase 1b Clinical Trial of NEO-PV-01 in Metastatic Non-Small Cell Lung Cancer

We initiated NT-002 in the second quarter of 2018, in collaboration with Merck. This is a Phase 1b trial that will initially involve 15 patients with a possibility for expansion. In this trial, we are evaluating a combination of NEO-PV-01 with pembrolizumab (marketed as Keytruda) and chemotherapy in patients with untreated advanced or metastatic non-squamous non-small cell lung cancer. The objectives of this trial are to evaluate the safety, tolerability and preliminary efficacy of NEO-PV-01 in combination with chemotherapy and pembrolizumab in the metastatic setting. We will follow study subjects over a two-year disease monitoring period to assess efficacy at various time points, which will allow more complete assessments of progression free survival and changes in tumor responses after receiving the vaccine. As an exploratory endpoint, this trial will also assess immune responses following vaccination. We will conduct these assessments by evaluating neoantigen-specific immune responses in peripheral blood and tumor tissue, characterization of vaccine-induced cascading immune response through epitope spread and other markers of immune response.

In our NT-002 clinical trial, patients undergo an initial tumor biopsy and then begin 12 weeks of treatment with pembrolizumab and chemotherapy. Patients then receive subcutaneous vaccination with NEO-PV-01 beginning during week 12. Treatment with pembrolizumab continues throughout the trial. The regimen of pembrolizumab and chemotherapy was the subject of a plenary session at the American Association for Cancer Research (AACR) in 2018 and has demonstrated improved overall survival in patients with frontline lung cancer versus chemotherapy alone. We believe the combination of chemotherapy and pembrolizumab will enhance the activity of NEO-PV-01 in metastatic lung cancer. Specifically, the combination of chemotherapy with anti-PD-1 therapy presents the opportunity to allow more patients to be dosed with a personal vaccine prior to disease progression. In addition, there is evidence that chemotherapy may have a favorable effect on the tumor microenvironment for anti-tumor immune responses , which we believe may occur through a number of mechanisms, including reduction of suppressive cell types such as myeloid-derived suppressor cells.

NT-003: Phase 1b Clinical Trial of NEO-PV-01 in Metastatic Melanoma Combinations

We initiated NT-003 in the fourth quarter of 2018. This is a Phase 1b trial that will evaluate NEO-PV-01 and nivolumab in combination with other agents such as Apexigen’s CD40 agonist or a CTLA-4 antagonist. As part of this clinical trial, we will also evaluate alternative NEO-PV-01 dosing schedules. The primary objective for this trial is to evaluate the safety of these novel combinations and vaccine dosing schedules. The inclusion of small comparator arms, including nivolumab treatment without NEO-PV-01, will provide controls for evaluating the impact on both peripheral and intra-tumoral immune responses. We believe additional agents may increase the power of the neoantigen immune response induced by NEO-PV-01. CD40 agonists have been shown to enhance antigen presentation, resulting in improved magnitude and quality of T cell responses. Both preclinical and clinical work of one of our founders, Nobel Prize winner Jim Allison, has demonstrated that CTLA-4 antagonism enhances the priming of  de novo  immune responses and increases T cell infiltration into the tumor, while also impairing T regulatory cells. We believe that these provide rational combinations to further enhance the NEO-PV-01-induced neoantigen immune response and drive further clinical benefit.

NT-004: Clinical Trial in an Earlier Disease Setting

NT-004 will explore NEO-PV-01 in an earlier disease setting, building on the encouraging results from the NeoVax trial in treatment of high-risk adjuvant melanoma.

Our existing IND for NEO-PV-01 covers our ongoing NT-001, NT-002 and NT-003 clinical trials and will cover our planned NT-004 clinical trial.

NEON / ONE Personal Neoantigen T Cell Therapy Program: NEO-PTC-01

Overview

NEO-PTC-01, is a personal neoantigen T cell therapy consisting of multiple T cell populations targeting what we believe to be the most therapeutically-relevant neoantigens from each patient's tumor. NEO-PTC-01 is currently in preclinical development, and we plan to file a CTA in Europe in the second half of 2019 to evaluate NEO-PTC-01 in the solid tumor setting in patients that are refractory to checkpoint inhibitors.

NEO-PTC-01 leverages our neoantigen platform, including RECON and our personal peptide manufacturing capabilities, to individually select and manufacture a set of neoantigen-targeting peptides for each patient. We then leverage these custom-manufactured peptides in our proprietary  ex vivo  co-culture process, NEO-STIM, to prime, activate and expand autologous neoantigen-specific T cells specific for each patient's personal set of neoantigens. We believe that this approach will allow us to specifically target each patient's individual tumor with T cells that can drive a robust and persistent anti-tumor response. The graphic below outlines the process that we will employ for NEO-PTC-01.

Product Development Rationale

We believe that NEO-PTC-01 has the potential to unlock the potency of cell-based therapies in solid tumors. This stands in contrast to approved T cell therapies that have been limited to hematological cancers to date.

Adoptive T cell therapies, particularly chimeric antigen receptor T cells, or CAR-Ts, have demonstrated potent efficacy in the treatment of certain hematological cancers. These therapies use genetically-engineered constructs inserted into T cells that allows for the recognition and killing of cancer cells expressing certain cell surface targets, such as the B-lymphocyte antigens CD19 and BCMA. However, CAR-T approaches are currently restricted to single targets and treatment with CAR-T therapies has been observed to come with a significant toxicity profile.

Steven Rosenberg and his colleagues at the National Cancer Institute have demonstrated the potential of neoantigen-specific T cell therapies in the case studies of two patients enrolled in an ongoing Phase 2 clinical trial that characterized tumor infiltrating lymphocytes. A case study published in  Science  in May 2014 discusses the results of treatment of one female patient with metastatic cholangiocarcinoma with expanded autologous tumor T cells specific towards a mutation in the gene Erbb2IP. In this case, a cell therapy was prepared containing a 95% pure population of CD4 ⁺ T cells targeting this specific Erbb2IP mutation. Treatment with this therapy was associated with tumor regression two months later, with a maximum tumor size reduction of 30% observed at seven months post-treatment and disease stabilization for 13 months. A case study published in  The New England Journal of Medicine  in December 2016 discusses the results of treatment of one female patient with colorectal cancer with CD8 ⁺ T cells targeting the G12D point mutation in the KRAS oncogene. Treatment with this T cell population was associated with tumor regression 40 days later and disease control for nine months. In the case of this patient, the T cell therapy had no reported adverse effects and the patient was discharged from the hospital two weeks following therapy.

We believe that NEO-PTC-01’s T cell therapy approach has several key advantages that overcome the challenges of other cell therapy approaches, including:

Preclinical Development

We are developing NEO-PTC-01 in collaboration with the Netherlands Cancer Institute, which is an academic research and treatment center with leading expertise in T cell biology and treatments. We presented preclinical data relating to NEO-PTC-01 at the Society of Immunotherapy of Cancer 2018 meeting, highlighting the proof of feasibility of our NEO-STIM induction protocol. Through this data, we demonstrated, reproducibly across multiple patient samples, the ability to generate multiple CD8 ⁺ and CD4 ⁺ T cell populations in each patient sample from the memory and naïve compartment. These T cells were highly functional and were specific for mutant neoantigens. In addition, these cells were capable of in vitro cell killing.

Our NEO-STIM induction protocol generates a polyclonal population of T cells. Once generated, we deeply characterize this cell product to understand the specificity and functionality of the induced cells. Data analyzed from a melanoma patient shows that NEO-STIM can induce CD8 ⁺ T cell responses towards patient-specific neoantigens in autologous patient peripheral blood mononuclear cells, or PBMCs. Specifically, in this patient, as the charts below and to the left illustrate, a pre-existing memory response was expanded 16-fold, from 4.5% of CD8 ⁺ T cells to 72.1% of CD8 ⁺ T cells being specific for the selected neoantigen. Additionally, as the charts below and to the right illustrate, we induced two CD8 ⁺ T cell responses from the naïve compartment, generating 6.5% and 13.4% of CD8 ⁺ T cells, respectively. Finally, in this patient, we induced three neoantigen specific CD4 ⁺ T cell responses as well.

Since the infusion of polyfunctional T cells has been associated with better efficacy in vivo and long-term persistence (Appay et al., Nature Medicine , 2008), we characterized the induced CD8 ⁺ and CD4 ⁺ T cells in more detail for their functionality. As demonstrated in the charts below, upon re-challenge with mutant peptide loaded dendritic cells, neoantigen-specific T cells exhibited one, two and/or three of the following functions: IFNγ, TNFα or CD107a.

Finally, we set out to study the ability of the induced CD8 ⁺ T cells to kill tumor targets that process and present the neoantigen of interest. A375 tumor cell lines were stably transduced with the HLA restriction element, as well as the neoantigen of interest. Subsequently and as demonstrated in the charts below, we performed a 6-hour co-culture with the induced T cells. We determined that the neoantigen specific CD8 ⁺ T cells upregulated CD107a and the tumor targets expressed active caspase 3 (an early apoptotic marker) upon co-culture.

In summary, our development activities confirm that the patient-specific neoantigens that were predicted through our RECON bioinformatics engine are immunogenic based on the induction of multiple neoantigen-specific CD8 ⁺ and CD4 ⁺ T cell responses. Further, the presence at the end of the NEO-STIM process of multiple enriched neoantigen-specific T cell populations (both memory and de novo ) demonstrates our potential to generate new T cell responses and, as a result, cancer immunotherapies that may be effective to treat cancer patients.

Clinical Development Plan

We are focusing the initial clinical development of NEO-PTC-01 in solid tumors where we believe we can generate  de novo  neoantigen T cell populations  ex vivo . We plan to file a CTA in Europe in the second half of 2019 to evaluate NEO-PTC-01 in the solid tumor setting in patients that are refractory to checkpoint inhibitors. The primary objectives of this trial will be to

evaluate the safety and feasibility of administering NEO-PTC-01 to patients. Additional objectives will be to evaluate immunogenicity and clinical efficacy.

Based on the data from this first exploratory trial, we will decide how to best proceed with further clinical development of NEO-PTC-01, including expanding to other tumor types and potential development in the United States.

NEON / SELECT Approach

Overview

NEON / SELECT is our precision medicine approach to neoantigen-targeted therapy. While most neoantigen targets are specific to an individual patient's tumor, there are prevalent neoantigens that are shared across subsets of patients or tumor types, known as shared neoantigens. Using NEON / SELECT, we intend to develop multiple therapies directed towards these shared neoantigen targets using several therapeutic modalities, including both vaccines and T cell therapies. We believe that our NEON / SELECT approach could be complementary to our NEON / ONE personal therapies by providing readily available therapies that can be used in patients identified as having the relevant shared genetic mutation.

NEON / SELECT Process

Our NEON / SELECT targets were identified using our bioinformatics capabilities, including RECON, to interrogate large genomic databases to discover a set of proprietary shared neoantigen targets across certain patient populations within major tumor types. This discovery work began under the direction of our founder, Nir Hacohen, at the Broad and continues today at Neon.

We are currently completing a comprehensive validation of our prevalent shared neoantigen targets using the following assessments:

We have completed the validation of our first targets and plan to develop multiple NEON / SELECT vaccine product candidates targeting different shared neoantigens. In addition, we continue to make significant progress with respect to our precision T cell approach and have assembled libraries of high-quality T-cell receptors, TCRs, against various shared neoantigens across common HLAs. We plan to explore the potential development of our neoantigen-specific TCRs into multiple TCR-based T cell therapies, potentially in collaboration with external partners who would provide complementary technical capabilities.

NEO-SV-01: Breast Neoantigen Vaccine

Our first NEON / SELECT product candidate is NEO-SV-01, an off-the-shelf peptide vaccine targeting a prevalent mutation in a subset of ER ⁺  breast cancer. The target mutation for NEO-SV-01 occurs in approximately 5 to 10% of ER ⁺  breast cancer. We believe NEO-SV-01 has the potential to be used across disease stages in combination with hormonal, chemotherapy or targeted

therapies. We have completed target validation and are currently performing preclinical product development work to support an IND submission in the first half of 2019.

In our preclinical validation work, we discovered and validated multiple neoantigen targets derived from this mutation. We have demonstrated that these neoantigen targets can both bind to multiple MHC molecule types, be processed and presented on the cell surface and can robustly induce both CD8 ⁺ T cell and CD4 ⁺ T cell responses  in vitro . Furthermore, these induced neoantigen-specific T cells can recognize cells expressing our target mutation and demonstrate cytotoxic functionality.

The chart below and on the left shows the result of a flow cytometry assay. Following the NEO-STIM process using peptides specific for our target breast cancer mutation in healthy donors, CD8 ⁺ T cells showed positive specificity to peptides on three common HLAs. The chart below and in the middle shows the result of a biological assay in which the CD8 ⁺ T cells specific for the breast neoantigen on HLA 1 were tested for ability to recognize the cognate endogenously processed and presented epitope on a target cell line. The CD8 ⁺ T cells show positive functionality by secretion of IFNγ, a cytokine indicating general T cell activity, and CD107a, a marker for the cytotoxic capability of the T cells. The target tumor cells showed upregulation of active caspase 3, an early marker of cell death. The charts below and on the right show CD4 ⁺ T cells induced using the NEO-STIM process, where de novo T cell populations were induced, secreting TNFa and IFNγ upon stimulation of neoantigen peptide.

CD8 ⁺ and CD4 ⁺ Induction of Breast Neoantigen Specific T cells & Functionality

Based on this data, we have designed a proprietary set of peptides around our validated target neoantigens that we believe we have optimized to maximize potential CD8 ⁺ and CD4 ⁺ immunogenicity in patients. We plan to administer these peptides to patients as a multivalent vaccine in conjunction with poly-ICLC, an adjuvant that helps to augment the immune response to the neoantigen peptides.

Manufacturing

We have deliberately chosen synthetic peptides as a modality for our NEO-PV-01 personal neoantigen vaccine and our NEO-SV-01 shared neoantigen vaccine. Synthetic peptides have several manufacturing advantages, including the use of predictable chemistry; availability of programmable, automated peptide synthesizers; scalability of manufacturing; and a rapid turnaround time. Synthetic peptides also do not require special biohazard safety procedures and do not require handling of live biological vectors such as viruses or bacteria. In addition, synthetic peptides do not require the use of delivery technologies such as liposomal particles, which increase manufacturing complexity. We have invested in manufacturing capabilities to supply current Good Manufacturing Practice, or cGMP, product for our clinical programs.

Our in-house peptide chemistry and process development capabilities have allowed us to establish robust manufacturing methods. We have made significant advances in our manufacturing methods since the NeoVax clinical trial, in which DFCI's average manufacturing time for NeoVax from receipt of biopsy for sequencing to cGMP release was 16 weeks. After the implementation of numerous process improvements, we have demonstrated that we can achieve a turnaround time from receipt of biopsy to cGMP release of eight weeks with our current supply chain for NEO-PV-01 and we plan to drive additional process improvements which we expect will further compress our turnaround time as we progress towards commercialization.

Currently, we outsource our manufacturing to a third party, where we own and control proprietary methods and intellectual property regarding peptide manufacturing. As our development programs expand and we build new process efficiencies, we expect to continually evaluate this strategy with the objective of satisfying demand for registration trials and, if approved, the manufacture, sale and distribution of commercial products. We will be focusing on more efficient and scalable manufacturing, which we believe will lead to a commercially attractive cost of goods when operating at commercial scale.

We receive material from our contract manufacturing organizations, or CMOs, for preclinical testing. We receive clinical supply material manufactured in compliance with cGMP, and we conduct audits before and during the trial, in cooperation with a CMO, to ensure compliance with the mutually agreed process descriptions and cGMP regulations.

Our use of single-source suppliers of raw materials, components, key processes and finished goods exposes us to several risks, including disruptions in supply, price increases or late deliveries. As a result, we continually evaluate our supplier relationships.

Competition

The biotechnology and pharmaceutical industries, and the immunotherapy subsector in particular, are characterized by rapid evolution of technologies, fierce competition and strong defense of intellectual property. While we believe that our product candidates, discovery programs, technology, knowledge, experience and scientific resources provide us with competitive advantages, we face competition from major pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions, among others.

Any product candidates that we successfully develop and commercialize will compete with currently approved therapies and new therapies that may become available in the future. Key product features that would affect our ability to effectively compete with other therapeutics include the efficacy, safety and convenience of our products.

Many of the companies against which we may compete have significantly greater financial resources and expertise than we do in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products. In addition to fully-integrated biopharmaceutical companies and immunotherapy-focused oncology companies, we directly compete with a number of neoantigen vaccine companies, including Aduro Biotech, Inc., Advaxis, Inc., Agenus Inc., BioNTech AG, Genocea Biosciences, Inc., Gritstone Oncology Inc., ISA Pharmaceuticals, B.V., Moderna Therapeutics, Inc., Vaccibody AS and ZIOPHARM Oncology, Inc. In addition we directly compete with a number of neoantigen T cell companies, including Achilles Therapeutics Limited, Adaptimmune Therapeutics plc, Adicet Bio, Inc., AgenTus Therapeutics, Inc., BioNTech AG, bluebird bio, Inc., Celgene Corporation, Gilead Sciences, Inc., Gritstone Oncology, Inc., Immatics Biotechnologies GmbH, IMV Inc., Iovance Biotherapeutics, Inc., Lion TCR Pte. Ltd., Medigene AG, Nouscom AG, PACT Pharma, Inc., Regeneron Pharmaceuticals, Inc., Zelluna Immunotherapy AS and ZIOPHARM Oncology, Inc. Smaller or early-stage companies, including immunotherapy-focused and neoantigen-focused therapeutics companies, may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our products. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

Intellectual Property

Our success depends in part upon our ability to protect our core technology and intellectual property. To protect our intellectual property rights, we rely on patents, trademarks, copyrights and trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements. Our intellectual property is critical to our business and we strive to protect it through a variety of approaches, including by obtaining and maintaining patent protection in the United States and internationally for our product candidates, novel biological discoveries, new targets and applications, and other inventions that are important to our business. For our product candidates, we generally intend to pursue patent protection covering compositions of matter, methods of making and methods of use, including combination therapies.

As we continue the development of our product candidates, we intend to identify additional means of obtaining patent protection that would potentially enhance commercial success, including through claims covering additional methods of use and biomarkers and complementary diagnostic and/or companion diagnostic related claims.

The patent positions of biotechnology 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 after issuance. Consequently, we may not obtain or maintain adequate patent protection for any of our product candidates. As of December 31, 2018, our patent portfolio included at least one issued U.S. patent with claims directed to methods of preparing therapeutic compositions, at least 30 pending U.S. provisional or non-provisional patent applications, at least 11 foreign patents with claims directed to methods of preparing therapeutic compositions and compositions of matter, and at least 134 pending foreign patent applications, which patents and patent applications we owned or exclusively licensed. The claims of these owned or in-licensed patents and patent applications are directed toward various aspects of our product candidates and research programs, including claims related to compositions of matter, methods of use, drug product formulations, combination therapies, methods of manufacture, manufacturing precursors and methods of identifying active compounds. These owned patent applications, if issued, are expected to expire between 2037 and 2039, and these in-licensed patents and patent applications, if issued, are expected to expire on various dates from 2031 through 2039, in each case without taking into account any possible patent term adjustments or extensions.

Within our patent portfolio, as of December 31, 2018, we had an exclusive license from the DFCI , the Broad, and The General Hospital Corporation d/b/a Massachusetts General Hospital, or MGH, pursuant to our amended license agreement with the Broad, or the Broad Agreement, to at least one issued U.S. patent, at least eight pending U.S. provisional or non-provisional patent applications, at least 11 foreign patents, and at least 69 pending foreign patent applications that include claims directed to NEO-PV-01, such as compositions of matter, combination therapies, formulations, manufacturing processes, manufacturing precursors or uses thereof. These in-licensed patents and patent applications, if issued, are expected to expire on various dates from 2031 through 2037, without taking into account any possible patent term adjustment or extensions.

Within our patent portfolio, as of December 31, 2018, we had exclusive licenses pursuant to the Broad Agreement and others to at least three pending U.S. provisional or U.S. non-provisional patent applications, at least eight foreign patents, and at least four pending foreign patent applications that include claims directed to NEO-PTC-01, such as compositions of matter, formulations, manufacturing processes, manufacturing precursors or uses thereof. These in-licensed patents and patent applications, if issued, are expected to expire on various dates from 2031 through 2039, in each case without taking into account any possible patent term adjustment or extensions.

Within our patent portfolio, as of December 31, 2018, we owned at least six pending U.S. provisional or U.S. non-provisional patent applications and at least 33 pending foreign patent application, and had an exclusive license pursuant to the Broad Agreement, to at least one pending U.S. non-provisional patent application and at least 28 pending foreign patent applications that include claims directed to NEON / SELECT (including our NEO-SV-01 product candidate), such as compositions of matter, formulations, manufacturing processes, manufacturing precursors or uses thereof. These owned patent applications, if issued, are expected to expire between 2037 and 2039, and these in-licensed patents and patent applications, if issued, are expected to expire in 2036, in each case without taking into account any possible patent term adjustment or extensions.

We also have agreements with Stichting Sanquin Bloedvoorziening, the Netherlands Cancer Institute, Oncovir and other third parties under which we have rights to certain intellectual property, such as patents or patent applications.

We cannot predict whether the patent applications we pursue will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide any proprietary protection from competitors. Even if our pending patent applications are granted as issued patents, those patents, as well as any patents we license from third parties now or in the future, may be challenged, circumvented or invalidated by third parties.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application. In the United States, the patent term of a patent that covers an FDA-approved drug or biologic may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug or biologic is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug or biologic may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug or biologic. In the future, if our products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We plan to seek patent term extensions to any of our issued patents in any jurisdiction where these are available, however there is no guarantee that the applicable authorities, including FDA

in the United States, will agree with our assessment of whether these extensions should be granted, and if granted, the length of these extensions.

In addition to our reliance on patent protection for our inventions, product candidates and research programs, we also rely on trade secret protection for our confidential and proprietary information. For example, significant elements of our products, including aspects of sample preparation, methods of manufacturing, cell culturing conditions, computational-biological algorithms and related processes and software, are based on unpatented trade secrets that are not publicly disclosed. Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. As a result, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual or entity during the course of the party's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived of by the individual that are related to our current or planned business or research and development or are made during normal working hours on our premises or using our equipment or proprietary information are our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary technology by third parties. We have also adopted policies and conduct training that provides guidance on our expectations and our advice for best practices in protecting our trade secrets.

License Agreement with the Broad Institute, Inc.

On November 13, 2015, we entered into the Broad Agreement with the Broad and, in January and November 2018, we entered into amendments to the Broad Agreement. Under the Broad Agreement, we have been granted an exclusive worldwide license to certain intellectual property rights owned or controlled by the Broad, DFCI and MGH to develop and commercialize any diagnostic, prognostic, preventative or therapeutic product for humans, including any neoantigen vaccine product. In particular, we have been granted both exclusive and non-exclusive licenses to a patent portfolio comprised of 12 patent families, including certain granted patents and pending patent applications in the United States and foreign jurisdictions.

Pursuant to the terms of the Broad Agreement, we have also been granted (i) a non-exclusive license under each institution's respective interest in certain of its patent rights to exploit the licensed products in the field in the territory during the term of the license and (ii) a non-exclusive license under each institution's licensed know-how, to exploit any diagnostic, prognostic, preventative or therapeutic product in the field in the territory during the term of the license. We are also entitled to sublicense the rights granted to us under the Broad Agreement. In connection with the Broad Agreement, we have also entered into a non-exclusive software license with the Broad under which we license certain object and source codes for several software programs.

These licenses and rights are subject to certain limitations and retained rights, including field restrictions.

As consideration for the license, we paid the Broad a non-refundable license fee of $75,000. As additional consideration for the license, we must pay the Broad immaterial annual license maintenance fees and up to $12.6 million in developmental milestone payments and could be obligated to make up to $97.5 million in payments upon the achievement of specified sales milestones. We are also required to pay tiered royalties of low to mid single-digit percentages on net sales of products covered by the license, as well as between 10% to 30% of any consideration received by us from a sublicensee in consideration for a sublicense, which percentage is based on certain events set forth in the Broad Agreement. As partial consideration for the license, we reimbursed the Broad for $0.6 million of past patent expenses and issued 60,000 shares of our restricted common stock to each of the Broad, DFCI and MGH. We also agreed to reimburse the Broad for future patent expenses related to the in-licensed patents and patent applications. No development or commercial milestones have been achieved to date under the Broad Agreement. The royalty term will terminate on the later of (i) the expiration date of the last valid claim within the licensed patent rights and (ii) the 10th anniversary date of the first commercial sale of a product incorporating the licensed patent rights.

Either we, or the institutions party thereto, may terminate the Broad Agreement if the other party commits a material breach of the agreement and fails to cure that breach within 105 days (or 45 days in the case of our failure to make any payment or in the case of our breach of our diligence obligations) after written notice is provided, or, in the case of the Broad, upon our bankruptcy, insolvency, dissolution or winding up, or upon us bringing patent challenges relating to any patent families. In addition, we may terminate the Broad Agreement for convenience as it relates to certain patent families upon up to 120 days' prior written notice to the Broad. Upon expiration of the Broad Agreement, we will have a worldwide, perpetual, irrevocable, sublicensable license to the intellectual property previously covered by the Broad Agreement.

Government Regulation

Government authorities in the United States at the federal, state and local level and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products, such as NEO-PV-01, NEO-PTC-01, NEO-SV-01 and any of our future product candidates. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. Biological Product Development

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations and biologics under the FDCA, the Public Health Service Act, or PHSA, and their implementing regulations. Both drugs and biologics are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-market may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA's refusal to approve pending applications, withdrawal of an approval or license revocation, a clinical hold, untitled or warning letters, product recalls or market withdrawals, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

NEO-PV-01, NEO-PTC-01 and any future product candidates must be approved by the FDA through a Biologics License Application, or BLA, process before they may be legally marketed in the United States. The process generally involves the following:

The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for NEO-PV-01, NEO-PTC-01 and any future product candidates will be granted on a timely basis, or at all.

Preclinical Studies and IND

Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases, to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies.

An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational product to humans, and must become effective before human clinical trials may begin. Some long-term preclinical testing may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA unless, before that time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In that case, the IND sponsor and the FDA must resolve any

outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor's control, in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative, and must monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.

A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a BLA. The FDA will accept a well-designed and well-conducted foreign clinical study not conducted under an IND if the study was conducted in accordance with GCP requirements, and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, which may overlap.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a BLA.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies or animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated check points based on access to certain data from the trial. Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug or biologic, as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength, quality 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 candidates do not undergo unacceptable deterioration over their shelf life.

FDA Review Process

Following completion of the clinical trials, data are analyzed to assess whether the investigational product is safe and effective for the proposed indicated use or uses. The results of preclinical studies and clinical trials are then submitted to the FDA as part of a BLA, along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant data. The BLA is a request for approval to market the biologic for one or more specified indications and must contain proof of safety, purity and potency for the biologic. The application may include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product's use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic may be marketed in the United States.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

The FDA reviews all submitted BLAs before it accepts them for filing, and may request additional information rather than accept a BLA for filing. The FDA must make a decision on accepting a BLA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing date to complete its initial review of an original BLA and respond to the applicant, and six months from the filing date of an original BLA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and the review process is often extended by FDA requests for additional information or clarification.

Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA also may audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers those recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. After the FDA evaluates a BLA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the biologic with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the BLA identified by the FDA. The Complete Response Letter may require additional clinical data, additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if an applicant submits the requested data and information, the FDA may decide that the BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than an applicant does.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States for this type of disease or condition will be recovered from sales of the product.

Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited

circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety or providing a major contribution to patient care or in instances of drug supply issues. Competitors, however, may receive approval of either a different product for the same indication or the same product for a different indication but that could be used off-label in the orphan indication. Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do for the same product, as defined by the FDA, for the same indication we are seeking approval, or if our product is determined to be contained within the scope of the competitor's product for the same indication or disease. If one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity. Orphan drug status in the European Union has similar, but not identical, requirements and benefits.

Expedited Development and Review Programs

The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria. Specifically, new drugs and biologics are eligible for fast track designation if they are intended to treat a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor can request the FDA to designate the product for fast track status any time before receiving BLA approval, but ideally no later than the pre-BLA meeting. In addition to other benefits, such as the ability to engage in more frequent interactions with the FDA, the FDA may initiate review of sections of a fast track drug’s BLA before the application is complete. This rolling review is available if the applicant provides, and the FDA approves, a schedule for the submission of each portion of the BLA and the applicant pays the applicable user fee. However, the FDA's time period goal for reviewing an application does not begin until the last section of the BLA is submitted. Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

Any product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug or biologic designated for priority review in an effort to facilitate the review.

A product may also be eligible for accelerated approval, if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies. In addition, it must demonstrate 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, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. If the FDA concludes that a drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it will require those post-marketing restrictions that it deems necessary to assure safe use of the product.

Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. The benefits of breakthrough therapy designation include the same benefits as fast track designation, plus intensive guidance from the FDA to ensure an efficient drug development program.

Fast track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process.

Pediatric Information

Under the Pediatric Research Equity Act, or PREA, as amended, a BLA or supplement to a BLA must contain data to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. A sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration must submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if

changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials and/or other clinical development programs.

Post-marketing Requirements

Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping activities, reporting of adverse experiences, complying with promotion and advertising requirements, which include restrictions on promoting products for unapproved uses or patient populations (known as "off-label use") and limitations on industry-sponsored scientific and educational activities. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote off-label uses. Prescription biologic promotional materials must be submitted to the FDA in conjunction with their first use. Further, if there are any modifications to the biologic, including changes in indications, labeling or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or BLA supplement, which may require the development of additional data or preclinical studies and clinical trials.

The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS and the FDA will not approve the BLA without an approved REMS. A REMS 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. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures, including a REMS, or the conduct of post-marketing studies to assess a newly discovered safety issue.

FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP regulations. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved biologics 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 requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to cGMP regulations, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved BLA, including recall.

Other Regulatory Matters

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, including the Centers for Medicare & Medicaid Services, or CMS, other divisions of the Department of Health and Human Services, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments and governmental agencies.

Other Healthcare Laws

Healthcare providers, physicians, and third-party payors will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our future arrangements with third-party payors, healthcare providers and physicians may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any drugs for which we obtain marketing approval. In the United States, these laws include, without limitation, state and federal anti-kickback, false claims, physician transparency, and patient data privacy and security laws and regulations, including but not limited to those described below.

administrative civil money penalties and exclusion from participation in federal healthcare programs. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. It is possible that governmental authorities will conclude that our business practices do 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 related governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, additional oversight and reporting obligations if we become subject to a corporate integrity agreement or similar settlement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to similar actions, penalties and sanctions.

Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company's attention from its business.

Current and Future Healthcare Reform Legislation

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

The ACA, for example, contains provisions that subject biological products to potential competition by lower-cost biosimilars and may reduce the profitability of drug products through increased rebates for drugs reimbursed by Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. With the President Trump administration and current Congress, there will likely be additional administrative or legislative changes, including modification, repeal, or replacement of all, or certain provisions of, the ACA, which may impact reimbursement for drugs and biologics. On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Further, each chamber of Congress has put forth multiple bills, and may do so again this year, designed to repeal or repeal and replace portions of the ACA, or replace it with a Medicare-for All style federally funded insurance plan.

While Congress has not passed repeal legislation, the Tax Reform Act includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole." Congress may consider other legislation to repeal and replace elements of the ACA. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

Additionally, other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted:

under federal health care programs. At the same time, HHS also proposed to create a new safe harbor to protect point-of-sale discounts that drug manufacturers provide directly to patients, and adds another safe harbor to protect certain administrative fees paid by manufacturers to PBMs. If this proposal is adopted, in whole or in part, it could affect the pricing and reimbursement for any products for which we receive approval in the future.

Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed and enacted bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. In addition, the United States government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs to limit the growth of government paid health care costs. For example, the United States government has passed legislation requiring pharmaceutical manufacturers to provide rebates and discounts to certain entities and governmental payors to participate in federal healthcare programs. Further, Congress and the current administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs, and the current administration recently released a "Blueprint", or plan, to reduce the cost of drugs. The current administrations' Blueprint contains certain measures that the U.S. Department of Health and Human Services is already working to implement. For example, in September 2018, CMS announced that it will allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January 1, 2019, and in October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs and biological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biological product. Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Individual states in the United States have also been increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Packaging and Distribution in the United States

If our products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

The failure to comply with any of these laws or regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, exclusion from federal healthcare programs, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts, including government contracts. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

Other U.S. Environmental, Health and Safety Laws and Regulations

We may be subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

We maintain workers' compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

U.S. Patent-Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of NEO-PV-01, NEO-PTC-01 and any future product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit restoration of the patent term of up to five years as compensation for patent term lost during product development and FDA regulatory review process. Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product's approval date. The patent-term restoration period is generally one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. PTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.

An abbreviated approval pathway for biological products shown to be similar to, or interchangeable with, an FDA-licensed reference biological product was created by the Biologics Price Competition and Innovation Act of 2009, or BPCI Act. This amendment to the PHSA, in part, attempts to minimize duplicative testing. Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the product and the reference product in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the reference product 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 biological product without such alternation or switch.

A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product. "First licensure" typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity, or potency.

Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing regulatory exclusivity periods. This six-month exclusivity may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued "Written Request" for such a trial.

European Union Drug Development

In the European Union, or EU, our future products also may be subject to extensive regulatory requirements. As in the United States, medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has been obtained.

Similar to the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls. Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the EU clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the EU, the EU Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the member state regimes. Under the current regime, before a clinical trial can be initiated it must be approved in each of the EU countries where the trial is to be conducted by two distinct bodies: the National Competent Authority, or NCA, and one or more Ethics

Committees, or ECs. Under the current regime all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial must be reported to the NCA and ECs of the Member State where they occurred.

The EU clinical trials legislation currently is undergoing a transition process mainly aimed at harmonizing and streamlining clinical trial authorization, simplifying adverse event reporting procedures, improving the supervision of clinical trials and increasing their transparency. Recently enacted Clinical Trials Regulation EU No 536/2014 ensures that the rules for conducting clinical trials in the EU will be identical.

European Union Drug Marketing

Much like the Anti-Kickback Statue prohibition in the United States, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of European Union Member States, such as the U.K. Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.

Payments made to physicians in certain EU Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician's employer, his or her competent professional organization and/or the regulatory authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

European Union Drug Review and Approval

In the European Economic Area, or EEA, which is comprised of the 28 Member States of the EU (and Norway), Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations.

Under these procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

European Union New Chemical Entity Exclusivity

In the EU, new chemical entities, sometimes referred to as new active substances, qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. The data exclusivity, if granted, prevents regulatory authorities in the EU from referencing the innovator's data to assess a generic application for eight years, after which generic marketing authorization can be submitted, and the innovator's data may be referenced, but not approved for two years. The overall 10-year period will be extended to a maximum of 11 years if, during the first eight years of those 10 years, the marketing authorization

holder obtains an authorization for one or more new therapeutic indications that, during the scientific evaluation prior to their authorization, are determined to bring a significant clinical benefit in comparison with currently approved therapies.

European Union Orphan Designation and Exclusivity

In the EU, the EMA's Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU community (or where it is unlikely that the development of the medicine would generate sufficient return to justify the investment) and for which no satisfactory method of diagnosis, prevention or treatment has been authorized (or, if a method exists, the product would be a significant benefit to those affected).

In the EU, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following medicinal product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

European Data Collection

The collection and use of personal health data in the European Union are governed by the provisions of the Data Protection Directive, and, as of May 2018, the General Data Protection Regulation, or GDPR. This directive imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the security and confidentiality of the personal data. The Data Protection Directive and GDPR also impose strict rules on the transfer of personal data out of the EU to the United States. Failure to comply with the requirements of the Data Protection Directive, the GDPR, and the related national data protection laws of the EU Member States may result in fines and other administrative penalties. The GDPR introduces new data protection requirements in the EU and substantial fines for breaches of the data protection rules. The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process, including in respect of clinical trials, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. This may be onerous and adversely affect our business, financial condition, results of operations and prospects.

Rest of the World Regulation

For other countries outside of the EU and the United States, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. Additionally, the clinical trials must be conducted in accordance with GCP requirements and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Additional Laws and Regulations Governing International Operations

If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The FCPA prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, we will need to dedicate additional

resources to complying with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The U.S. Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA's accounting provisions.

Reimbursement

Sales of our products will depend, in part, on the extent to which our products, if approved, will be covered by third-party payors, such as government health programs, commercial insurers and managed healthcare organizations, as well as the level of reimbursement such that those third-party payors provide for our products. Patients and providers are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products in which our products are used. In the United States, no uniform policy of coverage and reimbursement for drugs or biological products exists, and one payor's determination to provide coverage and adequate reimbursement for a product does not assure that other payors will make a similar determination. Accordingly, decisions regarding the extent of coverage and amount of reimbursement to be provided for any of our products candidates, if approved, will be made on a payor-by-payor basis. As a result, the coverage determination process may be a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer's outpatient drugs furnished to Medicaid patients. The ACA made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers' rebate liability by raising the minimum basic Medicaid rebate on most branded prescription drugs from 15.1% of average manufacturer price, or AMP, to 23.1% of AMP and adding a new rebate calculation for "line extensions" (i.e., new formulations, such as extended release formulations) of solid oral dosage forms of branded products, creating a new method by which rebates owed by are calculated for drugs that are inhaled, infused, instilled, implanted or injected, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP. The ACA also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization and by enlarging the population potentially eligible for Medicaid drug benefits. Pricing and rebate programs must also comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, established the Medicare Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of outpatient prescription drugs. Unlike Medicare Part A and B, Part D coverage is not standardized. While all Medicare drug plans must give at least a standard level of coverage set by Medicare, Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan likely will be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.

For a drug product to receive federal reimbursement under the Medicaid or Medicare Part B programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. As of 2010, the ACA expanded the types of entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of children's hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase. However, on December 27, 2018, the District Court for the District of Columbia invalidated a recent reimbursement formula change under the 340B program. The 340B program imposes ceilings on prices that drug manufacturers can charge for medications sold to certain health care facilities. It is unclear how this decision could affect covered hospitals who might purchase our products in the future, and affect the rates we may charge such facilities for our approved products.

As noted above, the marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. An increasing emphasis on cost containment measures in the United States has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

These laws, and future state and federal healthcare reform measures may be adopted in the future, any of which may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

In addition, in most foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing and reimbursement vary widely from country to country. For example, the EU provides options for its Member States to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Reference pricing used by various EU Member States and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. A member state 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. In some countries, we may be required to conduct a clinical study or other studies that compare the cost-effectiveness of any of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the United States and, generally, prices tend to be significantly lower. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries.

Employees

As of December 31, 2018, we had 102 full-time employees, 41 of whom have Ph.D. or M.D. degrees and 86 of whom are engaged in research and development activities. As of December 31, 2018, we had no part-time employees. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Corporate History and Trademarks

We were incorporated under the laws of the State of Delaware in October 2013 under our previous name, Onco3, Inc. Our executive offices are located at 40 Erie Street, Suite 110, Cambridge, MA 02139, and our telephone number is (617) 337-4701. Our website address is www.neontherapeutics.com. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website as part of this prospectus.

We view our operations and measure our business as one reportable segment. All of the Company's tangible assets are held in the United States. Refer to Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for additional information.

We are the owner of the NEON THERAPEUTICS, RECON, and NEO-STIM trademarks, as well as certain other trademarks, including design versions of some of these trademarks.  The symbols ™ and ® are not used in connection with the presentation of these trademarks in this report and their absence does not indicate a lack of trademark rights.  Certain other trademarks used in this report are the property of third-party trademark owners and may be presented with or without trademark references.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge on our website located at www.neontherapeutics.com as soon as reasonably practicable after they are filed with or furnished to the SEC. These reports are also available at the SEC’s Internet website at www.sec.gov.

A copy of our Corporate Governance Guidelines, Code of Conduct and Business Ethics and the charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are posted on our website, www.neontherapeutics.com, under the heading “Investors.”