UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2022
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number: 000-30171
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(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(510 ) 970-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant based upon the closing sale price of the common stock on June 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter), as reported on the Nasdaq Global Select Market was $632,920,753 . For purposes of this calculation, directors and executive officers of the registrant have been deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 17, 2023, a total of 168,483,317 shares of common stock, $0.01 par value per share were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements contained in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to our future events, including our anticipated operations, research, development, manufacturing and commercialization activities, clinical trials, operating results and financial condition. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, statements about:
•our strategy;
•anticipated research and development of product candidates and potential commercialization of any resulting approved products;
•the initiation, scope, rate of progress, enrollment, dosing, anticipated results and timing of our preclinical studies and clinical trials and those of our collaborators or strategic partners;
•the therapeutic and commercial potential of our product candidates, including the durability of therapeutic effects;
•the therapeutic and commercial potential of technologies used by us in our product candidates, including our gene therapy and cell therapy technologies, zinc finger, or ZF, technology platform, zinc finger nucleases, or ZF nucleases, and zinc finger transcriptional regulators, or ZF-TRs, which include zinc finger repressors, or ZF-Rs, and zinc finger activators, or ZF-As;
•our ability to establish and maintain collaborations and strategic partnerships and realize the expected benefits of such arrangements, including our ability to find a potential new collaboration partner for the BIVV003 program;
•anticipated revenues from existing and new collaborations and the timing thereof;
•our estimates regarding the impact of the COVID-19 pandemic on our business and operations and the business and operations of our collaborators, including clinical trials and manufacturing, and our ability to manage such impacts;
•our research and development and other expenses;
•our ability to obtain adequate preclinical and clinical supplies of our product candidates from current and potential new suppliers and manufacturers or from our own in-house manufacturing facilities;
•the ability of Sangamo and our collaborators and strategic partners to obtain and maintain regulatory approvals for product candidates and the timing and costs associated with obtaining regulatory approvals;
•our ability to comply with, and the impact of, regulatory requirements, obligations and restrictions on our business and operations;
•our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others, including our ability to obtain and maintain rights to the technologies required to develop and commercialize our product candidates;
•competitive developments, including the impact on our competitive position of rival products and product candidates and our ability to meet such competition;
•our estimates regarding the sufficiency of our cash resources and our expenses, capital requirements and need for additional financing, and our ability to obtain additional financing;
•conditions and events that raise doubt about our ability to continue as a going concern;
•our ability to manage the growth of our business;
•our projected operating and financial performance;
•our operational and legal risks; and
•our plans, objectives, expectations and intentions and any other statements that are not historical facts.
In some cases, you can identify forward-looking statements by use of future dates or by terms such as: “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” “will” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in greater detail under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10‑K. Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report on Form 10‑K.
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SUMMARY OF RISK FACTORS
Our business involves significant risks. Below is a summary of the material risks that our business faces, which makes an investment in our common stock speculative and risky. This summary does not address all these risks. These risks are more fully described below under the heading “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. Before making investment decisions regarding our common stock, you should carefully consider these risks. The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. In such event, the market price of our common stock could decline, and you could lose all or part of your investment. There are also additional risks not described below that are either not presently known to us or that we currently deem immaterial, and these additional risks could also materially impair our business, operations or market price of our common stock.
•We are a clinical-stage biotechnology company with no approved products or product revenues. Our success depends substantially on clinical trial results demonstrating safety and efficacy of our product candidates to the satisfaction of regulatory authorities. Obtaining positive clinical trial results and regulatory approvals is expensive, lengthy, challenging and unpredictable and may never occur for any product candidates.
•Success in research and preclinical studies or early clinical trial results may not be indicative of results obtained in later trials. Likewise, preliminary, initial or interim data from clinical trials may be materially different from final data.
•Many of our product candidates are based on novel ZF technologies that have yet to yield any approved commercially viable therapeutic products.
•We have incurred significant operating losses since inception and anticipate continued losses for the foreseeable future. We may never become profitable.
•We will need substantial additional funding to execute our operating plan and continue to operate as a going concern. We may be unable to raise additional capital on favorable terms, if at all, which would harm or preclude our ability to develop our technology and product candidates and could delay or terminate some or all of our programs. Future sales and issuances of equity securities could also result in substantial dilution to our stockholders.
•We rely heavily on collaborations with larger biopharmaceutical companies to generate revenues and develop, obtain regulatory approvals for and commercialize many of our product candidates. If conflicts arise with our collaborators or if the collaborations terminate for any reason, our revenues and product development efforts would be negatively impacted.
•Biotechnology and genomic medicine are highly competitive businesses. Our competitors may develop rival technologies and products that are superior to or are commercialized more quickly than our technologies and product candidates.
•Manufacturing genomic medicines is complex, expensive, highly regulated and risky. We currently rely heavily on third‑party manufacturers and have limited experience manufacturing products ourselves. Manufacturing challenges may result in unexpected costs, supply interruptions and harm and delay to our product development efforts.
•Even if we obtain regulatory approvals for our product candidates, our approved products may not gain market acceptance among physicians and patients and adequate coverage and reimbursement from third-party payors and may not demonstrate commercial viability.
•We may not be able to obtain, maintain and enforce necessary and desirable intellectual property protections for our technologies and product candidates in all desired jurisdictions, which could adversely affect the value of our technologies and our product development efforts and could increase the risks of costly, lengthy and distracting litigation with unpredictable results.
•Third parties, who may or may not be competitors, may allege that we are infringing, misappropriating, or otherwise practicing in an unauthorized manner their patents or other proprietary rights. Such allegations may result in infringement actions, other misappropriation actions or threats of such actions, all of which could increase the risks of costly, lengthy and distracting litigation with unpredictable results.
•Our success depends on hiring, integrating and retaining additional highly qualified skilled employees and retaining current key executives and employees, which may be challenging given that the competition for these individuals is intense.
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•The COVID-19 pandemic could continue to adversely impact our business and operations and the business and operations of our collaborators, manufacturers and other business partners. If such impacts become material, our revenues and product development efforts could be negatively impacted.
•The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of any investment in our common stock.
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PART I
ITEM 1 – BUSINESS
OVERVIEW
We are a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients and families afflicted with serious diseases. We plan to deliver on this mission through development of our clinical and preclinical product candidates, leveraging our novel science and our in-house manufacturing capabilities.
Our Product Candidates
Today, we are in the clinic with our first wave gene therapy and autologous cell therapy candidates. Our second wave long-term development strategy is to focus on leveraging our optimized zinc finger, or ZF, technology, a differentiated tool that we are using to develop genomic medicines, including autologous and allogeneic cell therapies and in vivo genome engineering therapies.
Our current clinical-stage product candidates are:
•Isaralgagene civaparvovec, also known as ST-920, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, is currently being evaluated in our Phase 1/2 STAAR clinical study, and we are progressing plans for a potential Phase 3 clinical trial;
•TX200, our wholly-owned Chimeric Antigen Receptor, or CAR, engineered regulatory T cell, or CAR-Treg, cell therapy product candidate for the prevention of immune-mediated rejection in HLA-A2 mismatched kidney transplantation, is currently being evaluated in our Phase 1/2 STEADFAST clinical study;
•Giroctocogene fitelparvovec, also known as SB-525, a gene therapy product candidate for the treatment of moderately severe to severe hemophilia A, is currently being evaluated in the registrational Phase 3 AFFINE clinical trial. We are developing giroctocogene fitelparvovec with our collaborator Pfizer Inc., or Pfizer; and
•BIVV003, our zinc finger nuclease, or ZF nuclease, gene-edited cell therapy product candidate for the treatment of sickle cell disease, or SCD, is currently being evaluated in our Phase 1/2 PRECIZN-1 clinical study. BIVV003 is a wholly-owned Sangamo program following the transition from Sanofi S.A., or Sanofi, to Sangamo in June 2022. As discussed below, we recently made the strategic decision to halt further material investments in the BIVV003 program beyond completion of the Phase 1/2 PRECIZN-1 study in order to prioritize deployment of resources to our Fabry and TX200 programs.
Our preclinical development is focused in two innovative priority areas: (i) CAR-Treg cell therapies for autoimmune disorders and (ii) genome engineering for neurological diseases. Indications for our preclinical programs include neurodevelopmental disorders, cancer, inflammatory bowel disease, or IBD, tauopathies and neurodegenerative diseases such as amyotrophic lateral sclerosis, or ALS, multiple sclerosis, or MS, and Huntington’s disease, some of which we are developing with our collaborators Biogen MA, Inc. and Biogen International GmbH, which we refer to together as Biogen, Novartis Institutes for BioMedical Research, Inc., or Novartis, Pfizer, Takeda Pharmaceutical Company Limited, or Takeda, and Kite Pharma, Inc.
Our multiple collaborations with biopharmaceutical companies bring us important financial and strategic benefits and reinforce the potential of our research and development efforts and our ZF technology platform. They leverage our collaborators’ therapeutic and clinical expertise and commercial resources with the goal to bring our medicines more rapidly to patients. We believe these collaborations reflect the value of our ZF technology platform and will potentially expand the addressable markets of our product candidates. To date, we have received approximately $815.0 million in upfront licensing fees, milestone payments and proceeds from sale of our common stock to collaborators and have the opportunity to earn up to $6.7 billion in potential future milestone payments from our collaborations, in addition to potential product royalties.
Our Novel Science
We are a leader in the research and development of zinc finger proteins, or ZFPs, which are abundantly occurring human proteins that have evolved to regulate the genome through interactions with DNA and regulatory proteins. We have developed and optimized a proprietary synthetic ZF technology platform with potential clinical utility in (i) genome editing and epigenetic regulation, which we refer to together as genome engineering, and (ii) gene-edited cell therapy, which we refer to as cell therapy.
Our strategy is to translate our differentiated and versatile ZF technology platform to product candidates with best- or first-in-class clinical potential. For example, ZFPs can be engineered to make ZF nucleases, which are proteins that can be used
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to edit genomes by specifically modifying DNA sequences by knocking in or knocking out select genes. ZFPs can also be engineered to make zinc finger transcriptional regulators, or ZF-TRs, which are proteins that can be used to regulate genomes by selectively increasing or decreasing gene expression.
In the process of developing these genome engineering technologies, we have additionally accrued significant scientific, manufacturing and development capabilities, as well as related know-how, that are broadly applicable to the field of gene therapy, which we have used to develop our gene therapy product candidates.
Finally, we have also leveraged our ZF technology platform and technologies obtained through acquisitions to become a leader in researching and developing CAR-Treg product candidates for the treatment of autoimmune and inflammatory diseases in broad patient populations, including kidney transplant rejection, MS and IBD. CAR-Tregs are considered to have enhanced suppressive function over polyclonal Tregs due to the antigen-specificity introduced by the CAR.
Our In-house Manufacturing
We believe that our in-house manufacturing capacity provides us a competitive advantage. We currently operate an adeno-associated virus, or AAV, manufacturing facility in our Brisbane, California headquarters and cell therapy manufacturing facilities in Brisbane, California and Valbonne, France. Our manufacturing strategy is to provide greater flexibility, quality and control by building a balanced and necessary capacity achieved through our in-house manufacturing and contract manufacturing organization, or CMO, partnerships, investing in manufacturing processes and analytics and developing a strong supply chain. Our CMOs enable this flexibility by providing us with access to AAV manufacturing capacity up to a 2000 liter bioreactor scale.
Business Updates
Isaralgagene civaparvovec - Fabry Disease
On February 22, 2023, we announced updated preliminary clinical data from our Phase 1/2 STAAR study evaluating isaralgagene civaparvovec, or ST-920, a wholly owned gene therapy product candidate for the treatment of Fabry disease, in advance of our presentation at the 19th Annual WORLDSymposium on February 24, 2023. A summary of the data is below. This announcement included data on the 13 patients treated with isaralgagene civaparvovec as of the cutoff date of October 20, 2022, including kidney biopsy data on two patients. Since the cutoff date, an additional four patients have been dosed in the Phase 1/2 STAAR study, resulting in a total of 17 patients dosed to date. A total of 20 sites are now active and recruiting. Progress in the study continues with additional male and female patients currently in screening.
The Phase 1/2 STAAR study expansion phase is ongoing and preparations for a potential Phase 3 clinical trial actively progress. A Phase 3 trial start is anticipated by the end of 2023, depending on regulatory interactions, and dosing of the first patient may occur as early as the first part of 2024. The completion of dosing in the Phase 1/2 expansion phase is expected by the end of 2023 and is not expected to be a gating factor for the commencement of the Phase 3 trial.
In December 2022, one patient in the study expansion phase experienced a Grade 3 serious adverse event, or SAE, of shoulder enthesopathy requiring hospitalization that occurred 14 days following infusion. The event has since fully resolved, and the patient remains enrolled in the study. The Principal Investigator and the Safety Monitoring Committee for the study assessed the SAE as possibly related to treatment, and the SAE was reported to regulatory authorities. The Safety Monitoring Committee has since determined that the study may proceed without modification, and this event was reported to other investigators for awareness.
Summary of Updated Preliminary Clinical Data from Phase 1/2 STAAR Study of Isaralgagene Civaparvovec Announced on February 22, 2023 in Advance of Presentation at 19th Annual WorldSymposium on February 24, 2023
•The STAAR study is an ongoing Phase 1/2 multicenter, open-label, dose-ranging clinical study designed to assess the safety and tolerability of a single infusion of isaralgagene civaparvovec in Fabry disease patients ≥ 18 years of age. Patients are infused intravenously with a single dose and followed for 52 weeks. A separate long-term follow-up study is underway to monitor the patients treated in this study for up to five years following treatment. The study design provides for at least two patients to be dosed in each dose cohort, with a potential expansion in each cohort. Patients who are on stable enzyme replacement therapy, or ERT, may withdraw ERT after treatment in a controlled and monitored fashion at the discretion of the patient and the investigator.
•The dose escalation phase includes males with classic Fabry disease. The subsequent study expansion phase, which commenced in the second half of 2022, will also treat females, as well as patients with more severe Fabry-associated cardiac or renal disease. The study’s primary endpoint is the incidence of treatment-emergent adverse events, or AEs. Additional safety evaluations include routine hematology, chemistry, and liver tests; vital sign monitoring; electrocardiogram; echocardiogram; serial alpha-fetoprotein testing and magnetic resonance imaging, or MRI, of the liver
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to monitor for potential formation of any liver mass. Secondary endpoints include change from baseline at specific time points over the one-year study period in alpha‑galactosidase A, or α‑Gal A, activity, globotriaosylceramide, or Gb3, and lyso‑Gb3 levels in plasma; frequency of ERT infusion; and changes in renal function and cardiac function (left ventricular mass) measured by cardiac MRI and rAAV2/6 vector clearance. Key exploratory endpoints include quality of life, Fabry symptoms and neuropathic pain scores; and immune response to AAV6 capsid and α‑Gal A.
•As of the October 20, 2022 cutoff date, 13 patients, ranging in age from 22 to 67 years, were treated with isaralgagene civaparvovec, nine in the dose escalation phase and four in the expansion phase of the study. Baseline characteristics of these 13 patients are shown in Table 1 below. In the dose escalation phase, two patients were dosed in Cohort 1 at the dose of 0.5x1013 vg/kg, two patients were dosed in Cohort 2 at the dose of 1x1013 vg/kg, three patients were dosed in Cohort 3 at the dose of 3x1013 vg/kg, and two patients were dosed in Cohort 4 at the dose of 5x1013 vg/kg. In the expansion phase, four patients were dosed at the dose of 5x1013 vg/kg, including one female patient in the cardiac cohort and three male patients in the α-Gal A Ab positive cohort. As of the October 20, 2022 cutoff date, the first treated patient had been followed for at least 26 months post dosing, and the most recently treated patient had been followed for two weeks post dosing.
•As of the October 20, 2022 cutoff date, isaralgagene civaparvovec continued to be generally well tolerated across all the dose cohorts in the 13 treated patients, and no prophylactic corticosteroids or other immune modulating agents had been administered. A summary of the treatment-related AEs reported as of the October 20, 2022 cutoff date is shown in Table 2 below. One patient in Cohort 1, two patients in Cohort 2, one patient in Cohort 3, two patients in Cohort 4 and four patients in the expansion phase exhibited treatment-related AEs for a total of 30 events, which were all graded as mild (Grade 1) or moderate (Grade 2). No treatment-related SAEs were reported. No gene therapy-related AEs were observed, including: no administration of corticosteroids for transaminase elevations, no clinically significant decreases in platelets and no cardiac events. One expansion phase patient experienced a Grade 1 allergic reaction that was treated with diphenhydramine.
•Results of plasma α-Gal A activity, as of the supplemental cutoff date of November 15, 2022 for α-Gal A activity, for the nine treated patients in the dose escalation phases and the four treated patients in the expansion phase are shown in Tables 3 and 4, and described in further detail, below. Sustained, elevated expression of α-Gal A activity was observed in thirteen patients for over two years for the longest treated patient as of the November 15, 2022 supplemental cutoff date.
•As of the November 15, 2022 supplemental cutoff date, the nine patients treated in the dose escalation phase sustained elevated α-Gal A activity ranging from 3.7-fold to 67.6-fold of mean normal as at the last date of measurement. For these patients, a rapid increase in α-Gal A activity was observed four to eight weeks after ST-920 dosing. ERT withdrawal was completed for all five patients who began the study on ERT, with continued supraphysiological levels of α-Gal A activity demonstrated following ERT withdrawal. None of these patients have required the resumption of ERT as of February 22, 2023. For naïve and pseudo-naïve patients in the dose escalation phase, Cohort 4 patients exhibited significantly higher levels of α-Gal A activity compared to those patients in lower dose cohorts. Elevated levels of α-Gal A activity were sustained in all of these patients as of the supplemental cutoff date.
•As of the November 15, 2022 supplemental cutoff date, the first three patients dosed in the expansion phase at the 5x1013 vg/kg dose exhibited a rapid increase in α-Gal A activity following dosing, sustained for up to 14 weeks as at the last date of measurement. The fourth patient had increased to within normal range at four weeks of dosing. The first female patient dosed in the study demonstrated a similar response profile to males as of the supplemental cutoff date.
•Results of globotriaosylsphingosine (lyso-Gb3) levels as of the October 20, 2022 cutoff date for the 13 treated patients are shown in Tables 5 and 6 below. Naïve and pseudo-naïve patients treated in the dose expansion and escalation phases with baseline lyso-Gb3 levels above 80 ng/mL experienced 40-65% reduction in levels. Naïve and pseudo-naïve patients with lower baseline lyso-Gb3 levels under 25 ng/mL who were treated with the 5x1013 vg/kg dose experienced reductions in lyso-Gb3 levels of 54%. Lyso-Gb3 continued to decrease in two patients as of the October 20, 2022 cutoff date. For those naïve and pseudo-naive patients in the lower dose levels (0.5x1013 vg/kg and 1x1013 vg/kg), lyso-Gb3 levels were stable for up to 25 months. For patients in the dose escalation phase who started the study on ERT, lyso-Gb3 levels following ERT withdrawal remained within the range of levels and variability normally observed in patients treated with ERT. In these participants, α-Gal A activity remained elevated, and no patient had experienced symptoms requiring the resumption of ERT as of the cutoff date. For the patient in the expansion phase who started the study on ERT, withdrawal of ERT had not yet been completed as of the October 20, 2022 cutoff date.
•Results of kidney biopsy and podocytes in urine as of the October 20, 2022 for patients 8 and 9 are shown in Tables 7 and 8 below. Globotriaosylceramide (Gb3) is a fatty substrate that accumulates in the cells of Fabry disease patients and can result in damage to multiple organs, including the kidneys, heart and central nervous system. As of the October 20, 2022 cutoff date, the kidney biopsy for patient 9 – who exhibited a high number of Gb3 inclusions and high plasma lyso-Gb3 levels at baseline – demonstrated a 78% clearance in Gb3 inclusions per peritubular capillary, or PTC, from an average of 8.7 inclusions per PTC at baseline to 1.9 inclusions per PTC at week 24. This assessment was made by two blinded pathologists who independently scored digital images of the sectioned kidney from baseline and six-month biopsies,
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adjudicated by a third independent pathologist. In addition, this patient exhibited a 77% reduction in urinary podocyte loss after six months. The kidney biopsy for patient 8 – who exhibited a lower number of Gb3 inclusions and lower levels of plasma lyso-Gb3 upon baseline – demonstrated stable PTC inclusions six-months post dosing, with an average of 3.5 inclusions per PTC at baseline and 3.7 inclusions per PTC at week 24. This patient also exhibited a 97% reduction in urinary podocyte loss after six months.
•A clinically meaningful and statistically significant increase was reported in mean general health scores measured across all patients treated in the dose escalation phase, as measured by the SF-36 general health survey, or the SF-36. The SF-36 is a well-validated and widely used generic questionnaire to comprehensively evaluate health related quality of life. The 36 items assess eight health-related domains (comprising physical function, physical role, bodily pain, general health, vitality, social function, emotional role, and mental health) that are summarized by the physical component score and the mental component score. Studies of cross-sectional differences between clinically defined patient groups have suggested a 3-to-5-point change on any SF-36 scale as a minimally clinically important difference, or MCID. As of the October 20, 2022 cutoff date, patients in the dose escalation phase demonstrated stable or improved general health scores, as measured by the SF-36. The average improvement from baseline for this domain score demonstrated a statistically significant [mean=19.6, 95% CL: [7.8, 31.4], p=0.0100 (paired t-test)] MCID change at week 52.
Table 1: Baseline Patient Characteristics
Data cut: October 20, 2022
FOS-MSSI Total Score Classification: Mild ≤18; Moderate (Mod) = 19-38; Severe >38
FOS-MSSI, Fabry Outcome Survey Mainz Severity Score Index, kg, kilogram; M, months; Max, Maximum; vg, viral genomes, W, weeks
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Table 2: Treatment-Related Adverse Events
Data cut: October 20, 2022
Length of follow-up ranged from 2 weeks to 26 months
vg/kg, vector genomes per kilogram of total body weight
Table 3: Expression of α-Gal A Activity in Dose Escalation Cohorts
Data cut: November 15, 2022
Plasma α-Gal A activity measured using 3-hour reaction time. Normal range determined in healthy males. Fold change from normal mean was calculated at last measured time point.
Long Term Follow-up Data: Data points > Study Day 365. α-Gal A, alpha galactosidase A; ERT, enzyme replacement therapy
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Table 4: Cohort 4 and Expansion Phase α -Gal A Activity
Data cut: November 15, 2022
Subject 13 (Expansion Phase): Week 6, 3.9 nmol/h/mL. α-Gal A activity measured using 3-hour reaction time. Normal range determined in healthy males.
Long Term Follow-up Data: Data points > Study Day 365. α-Gal A, alpha galactosidase A, ERT, enzyme replacement therapy
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Table 5: Lyso-Gb3 in Naïve and Pseudo-naïve Patients from Dose Escalation and Expansion Phases
Data cut: October 20, 2022
Lyso-Gb3 normal range determined in healthy males and females. Normal range for males and females combined 0.32 to 0.63 ng/mL.
Long Term Follow-up Data: Data points > Study Day 365. Lyso-Gb3, globotriaosylsphingosine
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Table 6: Lyso-Gb3 in ERT-treated Dose Escalation and Expansion Phase Patients
Data cut-off date: October 20, 2022
Participant 13: Week 2 34.5 ng/mL. Lyso-Gb3 normal range determined in healthy males and females. Normal range for males and females combined 0.32 to 0.63 ng/mL
Long Term Follow-up Data: Data points > Study Day 365. Lyso-Gb3, globotriaosylsphingosine; ERT, enzyme replacement therapy.
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Table 7: Patient 9 PTC Gb3 Inclusions and Podocytes in Urine
Data cut-off date: October 20, 2022
Podocyte quantification was performed via immunofluorescence with urine creatinine normalization. The Barisoni Lipid Inclusion Scoring System (BLISS) was used in a blinded manner by 3 independent pathologists to quantify PTC Gb3 inclusions. Lines above the bars indicate standard deviation.
α-Gal A, alpha-galactosidase A; ERT, enzyme replacement therapy; PTC, peritubular capillary; lyso-Gb3, globotriaosylsphingosine; Gb3, globotriaosylceramide
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Table 8: Patient 8 PTC Gb3 Inclusions and Podocytes in Urine
Data cut-off date: October 20, 2022
Podocyte quantification was performed via immunofluorescence with urine creatinine normalization. The Barisoni Lipid Inclusion Scoring System (BLISS) was used in a blinded manner by 3 independent pathologists to quantify PTC Gb3 inclusions. Lines above the bars indicate standard deviation.
α-Gal A, alpha-galactosidase A; ERT, enzyme replacement therapy; PTC, peritubular capillary; lyso-Gb3, globotriaosylsphingosine; Gb3, globotriaosylceramide
TX200 – HLA-A2 Mismatched Kidney Transplant Rejection
In March 2022, we dosed the first patient in our Phase 1/2 STEADFAST clinical study evaluating TX200, our wholly-owned autologous CAR-Treg cell therapy product candidate to prevent immune-mediated rejection in HLA‑A2 mismatched kidney transplantation from a living donor, with the second patient dosed in September 2022. The product candidate continues to be generally well tolerated in both patients. The third patient has received their kidney transplant and their personalized TX200 cell therapy has been manufactured, with dosing expected early in the second quarter of 2023. Dosing of this third patient would mark the completion of the first full cohort of the Phase 1/2 STEADFAST study. Manufacturing and clinical activities for the second cohort are progressing and dosing of the fourth patient is anticipated in the summer of 2023. Additional patients are in pre-screening for potential enrollment in the study. Opportunities to accelerate the dose escalation scheme are being explored with regulators.
Giroctocogene Fitelparvovec - Hemophilia A
In November 2021, following the observation of FVIII levels greater than 150% in some treated patients, we and Pfizer announced that Pfizer had voluntarily paused screening and dosing of additional patients in the Phase 3 AFFINE clinical trial of giroctocogene fitelparvovec, our investigational gene therapy for the treatment of moderately severe to severe hemophilia A, to implement a protocol amendment to provide clinical management guidance for elevated FVIII levels. Subsequently, on November 3, 2021, the U.S. Food and Drug Administration, or FDA, informed Pfizer that this trial had been placed on clinical hold while the protocol amendment and associated documents were reviewed. In March 2022, the FDA lifted the clinical hold.
In September 2022, the voluntary pause initiated by Pfizer was lifted and the trial re-opened recruitment and resumed enrollment. Dosing to support primary analysis resumed in November 2022 and is expected to be completed by the end of the
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first quarter of 2023. A pivotal readout is expected in the first half of 2024, with Pfizer anticipating a biologics license application, or BLA, submission in the second half of 2024.
AFFINE is a global Phase 3, open-label, multicenter, single arm trial evaluating the efficacy and safety of a single infusion of giroctocogene fitelparvovec in more than 60 adult (ages 18-64 years) male patients with moderately severe to severe hemophilia A. The primary endpoint is impact on ABR through 12 months following treatment with giroctocogene fitelparvovec, compared to ABR on FVIII replacement therapy collected in the Phase 3 lead-in study period. We and Pfizer anticipate pivotal data readouts for this trial to be based on a full analysis of all study participants, when the first 50 patients are twelve months past reaching a steady-state of FVIII expression.
We have the potential to earn up to $240 million in future clinical, regulatory and commercial milestone payments plus tiered, escalating royalties of 14% to 20% on potential future product sales if approved for commercial sale, subject to reduction due to patent expiration, entry of biosimilar products to the market and payment made under certain licenses for third‑party intellectual property.
In December 2022, we and Pfizer presented updated follow-up data from the Phase 1/2 Alta study of giroctocogene fitelparvovec. Eleven male patients participated in the study overall, with five patients in the 3e13-vg/kg highest dose cohort. See Table 9 below for baseline patient demographics.
As of the September 6, 2022 cutoff date, all patients had been followed for 153 to 263 weeks and all patients had completed at least 35 months of follow-up. As of the September 6, 2022 cutoff date, six of the eleven patients had experienced treatment-related AEs, including four of the five patients in the highest dose cohort. The most commonly reported treatment-related AEs included elevated liver enzymes and infusion-related reactions: increased alanine aminotransferase, or ALT (5/11 (45.5%) overall; 3/5 (60.0%) in the highest dose cohort), increased aspartate aminotransferase, or AST (3/11 (27.3%) overall; 2/5 (40.0%) in the highest dose cohort), pyrexia (3/11 (27.3%) overall; 3/5 (60.0%) in the highest dose cohort), and tachycardia (2/11 (18.2%) overall; 2/5 (40.0%) in the highest dose cohort). Treatment-related SAEs were reported in one patient in the highest dose cohort who experienced Grade 3 hypotension and fever with onset approximately six hours after giroctocogene fitelparvovec infusion; the events fully resolved with treatment and did not delay post-infusion discharge the next day. See Table 10 below for more details on treatment-related AEs. As of the September 6, 2022 cutoff date, no confirmed FVIII inhibitor development occurred, and no thrombotic events, neoplastic events, abnormal alfa-fetoprotein and/or liver masses were reported.
All five patients in the highest dose cohort demonstrated FVIII activity as shown in Table 11 below through week 156. Mean FVIII activity at week 156 was 25.5% of normal as measured by chromogenic clotting assay at the central laboratory. In this highest dose cohort, the annualized bleeding rate, meaning the number of all bleeding episodes starting three weeks after infusion divided by the observation period in years, was zero for the first year post-infusion and the mean overall annual bleeding rate throughout the total duration of follow-up was 1.2 as of the September 6, 2022 cutoff date. In this highest dose cohort, two patients experienced bleeding events necessitating treatment with exogenous FVIII: one patient experienced 17 bleeding events (8 traumatic, 5 spontaneous, 4 unknown), and one patient experienced one bleeding event in a target joint, circumstances unknown. No patients in this highest dose cohort had resumed prophylaxis as of the cutoff date. Additional follow-up is required to assess durability of therapeutic effect and other long-term effects of giroctocogene fitelparvovec, such as impact on overall patient liver health.
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Table 9: Baseline Patient Demographics by Giroctocogene Fitelparvovec Dose Cohort
Data cut: September 6, 2022, Max = Maximum, Min = Minimum, SD = Standard Deviation, vg = vector genomes
Table 10: Treatment-Related Adverse Events by Giroctocogene Fitelparvovec Dose Cohort
Data cut: September 6, 2022
(a) One patient experienced Grade 3 hypotension that was considered related to study drug and resolved with treatment
AE = Adverse Event, ALT = Alanine Transaminase, AST = Aspartate Aminotransferase, vg = vector genomes
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Table 11: FVIII Activity Levels (Measured with Chromogenic Assay) for Patients in the Giroctocogene Fitelparvovec Highest Dose Cohort (3e13 vg/kg, Cohort 4)
Latest available FVIII values from September 6, 2022 data cut, FVIII = Factor VIII, vg = vector genomes
BIVV003 - Sickle Cell Disease
In January 2022, we announced that Sanofi would be transitioning its rights and obligations related to BIVV003, our ZF nuclease gene-edited cell therapy product candidate for the treatment of SCD, to us. We and Sanofi collaborated on an orderly transition, which was completed in June 2022. See “—Product Candidates in Development—Proprietary Programs— BIVV003 - Sickle Cell Disease” for additional detail concerning this transition.
In December 2022, we presented updated preliminary proof-of-concept clinical data from our Phase 1/2 PRECIZN‑1 study evaluating BIVV003 at the 64th American Society for Hematology Annual Meeting and Exposition 2022, or ASH. A summary of the data is below.
Since presenting updated data at ASH in December 2022, we have progressed clinical and manufacturing activities in preparation for the dosing of patient 7 and have agreed with the FDA on a trial design for a potential Phase 3 trial and on required manufacturing processes. In addition, we have progressed additional manufacturing improvements which we believe have the potential to further strengthen clinical outcomes and reduce manufacturing costs in a potential Phase 3 trial.
We recently made the strategic decision to halt further material investments in the BIVV003 program beyond completion of the Phase 1/2 PRECIZN-1 study in order to prioritize deployment of resources to our Fabry and TX200 programs. We remain committed to completing the Phase 1/2 PRECIZN-1 study for BIVV003, and we expect to conclude the study using the funds already committed. We intend to launch a search for a potential collaboration partner who can progress this program to a potential Phase 3 trial.
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Summary of Updated Preliminary Safety, Tolerability and Efficacy Results from the Phase 1/2 PRECIZN-1 Study of BIVV003 Presented at ASH on December 10, 2022
•Eligible patients underwent mobilization and apheresis with plerixafor. Autologous hematopoietic stem and progenitor cells, or HSPCs, were transfected ex vivo with ZF nuclease messenger ribonucleic acid to manufacture BIVV003. A single intravenous infusion was administered at least 72 hours after pre-conditioning with busulfan. Patients were monitored for stem cell engraftment and hematopoietic recovery, AEs, clinical and laboratory hemolysis markers, total hemoglobin, or Hb, and fetal hemoglobin, or HbF, percentage of F cells and SCD-related events post‑BIVV003 infusion. Six patients achieved successful target yields of HSPCs. Five of the six patients achieving successful target yields of HSPCs had been infused with BIVV003 as of the September 30, 2022 cutoff date. Baseline characteristics of these five patients are shown in Table 12 below.
•The first four patients dosed received BIVV003 produced using the initial manufacturing process are referred to in Table 12 below as Group 1. Group 1 patients had been followed for up to 30 months post-infusion. The patient referred to in Table 12 below as Group 2 received BIVV003 manufactured using improved methods that had been shown in internal experiments to increase the number of long-term progenitor cells in the final product. As of the cutoff date, the first patient treated in Group 2, or Patient 5, had been followed for five months. A second patient in Group 2 was dosed after the September 30, 2022 cutoff date. Four of five patients in aggregate across both Groups 1 and 2 improved clinically since BIVV003 infusion through the September 30, 2022 cutoff date, as referenced in Table 13 below.
In Group 1:
•The effects of BIVV003 infusion on total Hb and HbF levels were maintained up to 30 months.
•Three of the four patients had stable engraftment of ZF nuclease-modified HSPCs, resulting in sustained elevated HbF levels greater than 30% and an absence of severe vaso-occlusive crisis, or VOCs, post-BIVV003 administration.
In Group 2:
•Patient 5 received BIVV003 manufactured using improved methods that had been shown in internal experiments to increase the number of long-term progenitor cells in the final product.
•The HbF level of 45% and total Hb of 12.4 g/dL at week 26 post-infusion for Patient 5 in the latest sample collected post cutoff date were greater than the levels observed in Group 1 at week 26.
•As of the September 30, 2022 cutoff date, BIVV003 was generally well tolerated, and most AEs reported in the screening, mobilization, apheresis and conditioning periods were SCD-related events. The investigator reported two SAEs of sickle cell anemia with a VOC as related to plerixafor, and one SAE of nausea as related to busulfan. Nearly half of the AEs reported after infusion of BIVV003 were related to busulfan. The investigator reported two SAEs of sickle cell anemia with a VOC nine months and 16 months after infusion in the one patient in Group 1 who had low HbF levels (11-14%). No other SCD-related SAEs were reported after infusion. No AEs related to BIVV003 were reported by the investigator or sponsor. See Table 14 below for VOCs reported before and after infusion of BIVV003.
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Table 12: Baseline Characteristics of First 5 Patients Dosed
VOC = vaso-occlusive crisis, ICF= informed consent form, RBC = red blood cell
Group 1 includes the first four patients dosed, who received BIVV003 produced using the initial manufacturing process.
Group 2 includes patient 5 who received BIVV003 manufactured using improved methods that have been shown in internal experiments to increase the number of long-term progenitor cells in the final product.
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Table 13: Total Hb and Hb Fractionation
Total hemoglobin and hemoglobin fractionation at screening and post-BIVV003 infusion over time.
HbA = adult hemoglobin, HbA2 = variant adult hemoglobin, HbF = fetal hemoglobin, HbS = sickle hemoglobin
LTS= Long-term follow-up study
(*) indicates the Hb value from local lab, since the central lab value was not collected
Group 1 includes the first four patients dosed, who received BIVV003 produced using the initial manufacturing process.
Group 2 includes patient 5 who received BIVV003 manufactured using improved methods that had been shown in internal experiments to increase the number of long-term progenitor cells in the final product.
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Table 14: Incidence of VOC After BIVV003 Infusion
Number of severe vaso-occlusive crises (VOCs) reported in the 24 months before signing the study informed consent form (ICF) and in the post-BIVV003 infusion period.
Red lines represent severe VOCs; two severe VOCs occurring in the same month appear as one red line
Group 1 includes the first four patients dosed, who received BIVV003 produced using the initial manufacturing process.
Group 2 includes patient 5 who received BIVV003 manufactured using improved methods that had been shown in internal experiments to increase the number of long-term progenitor cells in the final product.
OUR TECHNOLOGY
Our strategy is to translate our differentiated and versatile ZF technology platform to create product candidates with best- or first-in-class clinical potential. We believe that the versatility and flexibility of our technology platforms enable us to design therapeutic approaches to resolve the underlying genetic or cellular causes of disease, using whichever technology is best suited to deliver that treatment. Our current innovative areas of focus in preclinical studies include epigenetic regulation with our ZF technology platform in the central nervous system, or CNS, diseases and CAR-Treg cell therapy for autoimmune diseases.
ZFPs: Naturally Occurring Sequence Specific DNA Binding Proteins in Humans
ZFPs are naturally-occurring sequence-specific DNA-binding proteins in humans that recognize and bind to a specific DNA sequence within or near a particular gene and causes expression of that gene to be “turned on” (activated) or “turned off” (repressed). ZFPs are the most common class of such naturally-occurring proteins in a wide range of organisms from yeast to humans. Functional domains may be added to ZFPs that enable genome editing (with enzymes such as nucleases or integrases) or epigenetic regulation (with activators and repressors) at a specific genomic site determined by the ZFP DNA‑binding domain.
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Figure 1: Schematic of the two-domain structure of a zinc finger DNA-binding domain and its functional domain
Consistent with the structure of natural ZFPs, we take a modular approach to the design of the proteins that we engineer. The DNA-recognition part of our engineered proteins is typically composed of four to six zinc fingers. Each individual finger recognizes and binds to a three or four base-pair sequence of DNA and multiple fingers can be linked together to form a zinc finger array that recognizes longer stretches of DNA, thereby improving specificity. By modifying the amino acid sequence of ZFPs, we can engineer novel zinc finger arrays capable of recognizing the unique DNA sequences of a chosen genomic target.
Figure 2: Schematic of a ZFP and a zinc finger array composed of 6 ZFPs
The engineered DNA-binding zinc finger array is then linked to a functional domain. The DNA-binding zinc finger array brings this functional domain to the target of interest. Our ability to use our highly specific ZFPs to precisely target a DNA sequence to a gene of interest provides us with a range of genome editing and epigenetic regulation functionalities that can be applied to multiple cell types.
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Figure 3: Examples of genome engineering tools that can be offered by our ZF platform
Our engineered zinc fingers can be attached to a cleavage domain of a restriction endonuclease, an enzyme that cuts DNA, creating a ZF nuclease. When a pair of ZF nucleases binds DNA in the correct orientation and spacing, a cut is introduced into the DNA sequence between the ZF binding sites. DNA binding by both ZF nucleases is necessary for cleavage, and the two halves of the endonuclease must be present in the correct orientation to interact with one another in order to mediate DNA cleavage. This break in the DNA triggers a natural process of DNA repair within the cell. This endogenous DNA repair process may be harnessed to achieve one of several outcomes that may be therapeutically useful (Figure 2). If cells are treated with ZF nucleases alone, the repair process joins the two ends of the broken DNA together and frequently results in the loss (deletion) or addition (insertion) of a small amount of genetic material at the site of the break. These insertions and deletion events are collectively known as “indels.” These disrupt the target DNA sequence and result in the expression of a truncated or non-functional protein from the targeted gene, effectively “knocking out” the gene function. ZF nuclease-mediated genome editing can be used to disrupt genes that are involved in disease pathology. We are using ZF nuclease-mediated genome editing of the BCL11A erythroid specific enhancer, or ESE, in CD34 positive hematopoietic stem progenitor cells, or HSPCs, as the basis of a potential long-lasting and once only treatment for SCD (BIVV003).
In contrast, if cells with a mutation in a particular gene are treated not only with ZF nucleases, but also with an additional DNA sequence that encodes the correct gene sequence (referred to as a “donor” DNA) and with ZF nucleases that recognize and bind to sequences flanking the mutation, the cell’s repair machinery can use the donor DNA as a template to correct the mutated gene. This ZF nucleases-mediated gene correction enables the corrected gene to be expressed in its natural chromosomal context and may provide a novel approach for the precise repair of DNA sequence mutations responsible for certain monogenic diseases. In addition to providing a donor sequence that encodes a complete gene, a new copy of a gene can also be precisely added into the genome at a specific location. The ability to precisely place a gene-sized segment of DNA specifically into a pre-determined location in the genome broadens the range of mutations of a gene that can be corrected in a single step.
We are also evaluating ZF-transcription regulators, or ZF-TRs, which have the potential to regulate the expression of a target gene (Figure 4). ZF activators, or ZF-As, are created by attaching a zinc finger array to an activation domain with the aim of increasing the expression of a target gene relative to an untreated cell. Alternatively, ZF repressors, or ZF-Rs, are created by attaching a zinc finger array to a repression domain in order to down regulate or completely turn off a gene. ZF-Rs can also be designed to selectively repress expression of a mutant allele while allowing for the expression of the healthy allele. We have several preclinical programs evaluating the potential of ZF-Rs that have been designed to down regulate the expression of genes as potential treatments for CNS diseases, including a collaboration agreement with Biogen for tauopathies and Parkinson’s disease, a collaboration with Takeda, for Huntington’s disease and a collaboration with Pfizer for ALS. We also have a preclinical collaboration with Novartis evaluating the potential of ZF-As to upregulate expression of genes as a potential treatment for autism spectrum disorders and intellectual disability.
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Figure 4: ZF-TRs have the potential to regulate the expression of a target gene
Multiplex cell engineering with ZF-repressors
ZF-transcriptional regulators can also be used to repress several genes in a single cell. To this aim, we engineer several ZF-Rs. The degree of regulation is tunable, offering the possibility of partial to complete knockdown. Due to their compact size, multiple ZF-Rs can be combined in a single viral construct to achieve efficient multigene modulation in a single transduction event and without the need for double-strand breaks. Delivery by lentivirus leverages a well-established method and does not require major changes to existing manufacturing processes.
As proof of concept for this novel platform, we engineered primary human T cells using multiple ZF-Rs encoded in a single lentivirus with and without a CAR, to repress expression of several allogeneic engineering targets or checkpoint inhibitors. We demonstrated that ZF-Rs act with high efficiency and specificity on target genes of choice at both the RNA and the protein level.
We believe that the ZF-R platform may be an efficient alternative, or complement, to nuclease editing approaches in T cells, with the potential to significantly expand the options for the generation of optimized T cell products.
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Figure 5: Multiplex cell engineering with ZF-Rs
Engineering AAVs to target the Central Nervous System (CNS)
We are evaluating several potential routes of administration for our CNS-targeted investigational therapies, as delivery of genomic medicines to the CNS is a significant obstacle to developing potential therapies treating CNS disorders.
Figure 6: Potential routes of administration to target the central nervous system
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Several AAV serotypes, most notably AAV9, distribute to the brain but require high doses to achieve limited expression. We have developed a proprietary AAV capsid discovery platform, SIFTER™ (Selecting In vivo For Transduction and Expression of RNA), with the aim of engineering capsids with improved CNS transduction. We are applying SIFTER™ to screen tens of millions of unique capsids in order to identify certain capsids that mediate superior delivery to the CNS. Successive rounds of screening are conducted to find capsids that reproducibly demonstrate a desired therapeutic profile.
Figure 7: Sangamo's proprietary SITFER™ platform to develop novel AAV capsids targeting the CNS
In May 2022, our scientists presented results obtained with the SIFTER™ platform both for intravenous (IV) and cerebrospinal fluid (CSF) administration. This platform notably allowed us to identify new capsids exhibiting improved delivery relative to AAV9: STAC-102 and STAC-103 (STAC = Sangamo Therapeutics AAV Capsid).
Overall, we believe that improved AAV capsids with higher delivery efficiency and specificity for target tissues have strong potential to create safe and effective genomic medicines to treat CNS disorders.
Genome Engineering – Base editing
Our ZF platform can also be used to perform base editing, a novel approach in the genomic medicine space that allows for the conversion of a specific target DNA base into another DNA base without the need for double-stranded breaks. Base editing relies on the use of enzymes that can directly change the DNA sequence, such as a deaminase, which changes a specific base in a single strand of DNA.
We have developed a compact base editor architecture that can be targeted with high precision and specificity using ZFs, is small enough for packaging into relevant viral vectors, and achieves high levels of editing that are potentially suitable for therapeutic application.
Figure 8: Compact ZF base editing architecture
ZF-base editors are well-suited to knocking out multiple genes at once due to the reduced probability of chromosomal translocation events between simultaneous DNA double-strand breaks. Notably, the compact construct architecture of our ZF-base editors makes it possible to package all three components in a single AAV vector, suggesting potential therapeutic application in vivo.
ZF Platform Provides Opportunity to Develop a New Class of Human Therapeutics
We believe that our ZF platform provides a unique and proprietary basis for a broad new class of drugs that have differentiated technical advantages over small-molecule drugs, protein pharmaceuticals, RNA-based therapeutics, conventional gene therapy approaches and other gene and genome editing platforms, potentially enabling us to develop therapies that address a broad range of unmet medical needs. We notably believe that our ZF genomic medicines have the potential to transform treatment strategies for severe diseases from symptom management to lasting cures.
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We can generate highly specific ZF nucleases for genome editing and ZF-TRs for epigenetic regulation using a range of proprietary methods. We are developing delivery strategies to administer these therapeutics, including using mRNA, AAV, adenovirus, plasmid, lipid nanoparticles and direct injection into brain tissue or into the cerebrospinal fluid. As more genes and DNA sequences are linked to specific diseases, we believe that the clinical breadth and scope of our ZF therapeutic reagents will continue to expand.
CAR-Tregs Have Potential to Address Autoimmune and Inflammatory Diseases
A key area of focus in our preclinical pipeline is our CAR-Treg programs we are studying in autoimmune and inflammatory diseases. Tregs are a type of white blood cell and act as the key regulators of the immune system. Their natural role is to maintain immune homeostasis and prevent undesirable immune reactions to autoantigens (autoimmunity) or to antigens that are normally tolerated (food antigens, inhaled antigens, contact antigens and bacterial flora antigens). Tregs play the role of ‘peacekeepers’ containing other T cells before they become harmful to the organism, ensuring the immune system does not mistakenly attack healthy organs while still protecting the body from harm, e.g., from viruses and bacteria.
We are genetically re-programming Tregs ex vivo to add a CAR to give Tregs the ability to target a specific protein, called an antigen. CAR-Tregs are thus re-programmed to recognize and accumulate in specific tissues where the antigen is being expressed and an immune-mediated disorder is occurring. Our preclinical research shows that CAR-Tregs can inhibit overactive immune cells within the body. Moreover, they have the potential to induce long-term immune tolerance – a state of non-reactivity by the immune system to a particular auto-antigen. We aim to develop therapies that can induce and restore immune tolerance to address a wide range of inflammatory and autoimmune diseases.
CARs are composed of three main parts (see Figure 5):
•The extracellular section is composed of a single chain variable fragment, or scFv, typically derived from a monoclonal antibody and designed to recognize the target antigen, and a spacer or hinge to add spatial flexibility.
•The transmembrane domain anchors the CAR in the plasma membrane.
•The intracellular section, made of signaling and co-stimulatory domains, transmits an intracellular signal upon recognition of the antigen by the scFv.
Figure 9: Schematic of CAR-Treg cell recognizing antigen on tissue cell
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We carefully select the CAR target antigen for each autoimmune or inflammatory indication. Our CAR-Treg cells are designed to be active only at the site of inflammation, ensuring specific and selective action. For instance, for a CNS disease such as MS, we want to make sure that the target antigen is localized in the CNS. The target antigen may in some instances be linked to the disease etiology.
A major feature of Tregs is that they can act via multiple mechanisms to mediate suppression. Their mechanism of action can be mediated upon cell contact, through soluble factors, metabolism disruption and/or cytolysis.
•Following IV administration, CAR-Tregs are expected to migrate toward inflamed tissues due to Tregs’ natural ability to migrate towards inflammatory tissues.
•Subsequently, CAR-Treg are expected to bind to their specific antigen, leading to the proliferation and activation of CAR-Treg cells.
•This activation is expected to allow Tregs to exert their natural anti-inflammatory and immuno-suppressive activities, acting through multiple molecular and cellular targets.
Figure 10: Expected mechanism of action of CAR-Tregs
Our most advanced CAR-Treg product candidate, TX200, is being studied for the prevention of immune-mediated rejection following HLA-A2 mismatched kidney transplantation from a living donor. TX200 is an autologous CAR-Treg cell therapy product candidate. An autologous cell therapy is made using cells from the same person as the recipient of the cells, as shown on Figure 11.
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Figure 11: Schematic of our autologous CAR-Treg approach
In TX200, the patient’s Tregs are collected before transplant, genetically engineered with a CAR, and then injected back into the same patient. As a result of this detailed process, we expect dosing of patients will occur several months after their enrollment. The CAR in TX200 is designed to recognize the HLA-A2 protein present on the transplanted kidney.
The first two patients have been dosed in our STEADFAST Phase 1/2 clinical study, which we expect will help us understand how CAR-Tregs work in humans and may provide broader proof of concept for genetically modified cell therapy using Tregs.
We are convinced of the fundamental impact of our CAR-Treg approach and are initiating the next step with the goal of making the approach available to a larger group of patients. Accordingly, we are developing ZF nuclease-edited allogeneic Treg therapies. Allogeneic cell therapies are donor derived, made using cells from a different person to the recipient of the cells, as opposed to autologous cell therapies. We believe that allogeneic therapies may be the future of cell therapy and could overcome the challenges of autologous approaches such as scale and manufacturing. If we are able to demonstrate proof‑of‑concept of autologous TX200, we anticipate follow-on autologous and allogeneic programs. There is tremendous potential from there to go into many other large autoimmune indications such as rheumatoid arthritis or diabetes.
Gene Therapy Introduces Genes into a Patient’s Cells to Treat Genetic Diseases
In the process of developing our ZF technologies, we have refined our understanding of gene therapies. Gene therapy is the treatment of disease by delivery of a new gene into a patient’s cells to replace an incorrect or damaged gene. Most often, gene therapy works by introducing a corrected copy of a defective gene into the patient’s cells, without removing or modifying DNA. The goal of gene therapy is to treat, or potentially cure, a genetic disease by adding back a normal copy of the gene responsible for the disease.
In gene therapy, we can deliver a therapeutic gene by engineering a deactivated virus to deliver DNA for a human therapeutic protein rather than viral proteins. One virus that is commonly used in gene therapy is AAV. AAV is a naturally occurring virus that infects humans but is not known to cause disease. Engineered AAV has been used as a delivery method for gene therapy in many clinical trials in the United States and Europe and has been found thus far to be generally well-tolerated without major side effects. A gene encoding a therapeutic protein can be packaged into AAV and delivered to cells in tissues such as the liver, the eye, the brain or the heart. Once inside the cell, the gene is unpacked from the virus coat, or capsid, and
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can then enable that cell to make the therapeutic protein. AAV can be manufactured at a large enough scale for use as a human therapeutic.
Figure 12: Our gene therapy technology
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THERAPEUTIC PRODUCT CANDIDATES IN DEVELOPMENT
Proprietary Programs
Isaralgagene civaparvovec - Fabry Disease
Isaralgagene civaparvovec is our gene therapy product candidate being developed for the treatment of Fabry disease, a rare inherited metabolic disease. STAAR is an ongoing Phase 1/2 multicenter, open-label, dose-ranging clinical study designed to assess the safety and tolerability of a single infusion of isaralgagene civaparvovec in Fabry disease patients ≥ 18 years of age. Patients are infused intravenously with a single dose and followed for 52 weeks. A separate long-term follow-up study is underway to monitor the patients treated in this study for up to five years following treatment to further assess safety, durability
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and efficacy. The study design provides for at least two patients to be dosed in each dose cohort, with a potential expansion in each cohort. Patients who are on stable ERT, may withdraw ERT after treatment in a controlled and monitored fashion at the discretion of the patient and the investigator.
The dose escalation phase includes males with classic Fabry disease. The study has been subsequently expanded to treat females, as well as patients with Fabry-associated cardiac or renal disease. The study’s primary endpoint is the incidence of treatment-emergent adverse events. Additional safety evaluations include routine hematology, chemistry and liver tests; vital sign monitoring; electrocardiogram; echocardiogram; serial alpha-fetoprotein testing and magnetic resonance imaging, or MRI, of liver to monitor for potential formation of any liver mass. Secondary endpoints include change from baseline at specific time points over the one-year study period in α‑Gal A activity, Gb3 and lyso‑Gb3 levels in plasma; frequency of ERT infusion; changes in renal function and cardiac function (left ventricular mass) measured by cardiac MRI and rAAV2/6 vector clearance. Key exploratory endpoints include quality of life, Fabry symptoms and neuropathic pain scores; and immune response to AAV6 capsid and α‑Gal A.
The goal of the study is to abrogate the need for ERT with a recombinant AAV2/6 vector encoding cDNA for human α‑Gal A, resulting in long-term expression of α‑Gal A. As a liver-directed gene therapy, isaralgagene civaparvovec is designed to be delivered by a one-time IV infusion that does not require any preconditioning regimen for patients. We believe isaralgagene civaparvovec has the potential to deliver efficacy with preserved renal function and reduced cardiac morbidity and neuropathy.
For recent updates on isaralgagene civaparvovec, please see Business Updates above.
CAR-Treg Cell Therapy - TX200 - HLA-A2 Mismatched Kidney Transplant Rejection
TX200 is our autologous HLA-A2 specific CAR-Treg cell therapy product candidate that we have developed for the prevention of immune mediated rejection following HLA-A2 mismatched renal transplantation. We are currently evaluating TX200 in our Phase 1/2 STEADFAST clinical study. We believe the STEADFAST study will be critical for our understanding of CAR-Treg pharmacology and biology in patients as well as establishing process development and manufacturing know-how.
TX200 has been developed for patients with end-stage renal disease or ESRD, receiving a kidney transplant, where the recipient of the kidney is HLA-A2 negative and the donor is HLA-A2 positive. A kidney transplant is considered the best treatment option for ESRD, the last stage of chronic kidney disease, when a person’s kidneys are no longer working. HLA mismatch is the initial and most important barrier to successful transplantation after ABO blood types incompatibility, and approximately 21-26% of transplanted organs are HLA-A2 mismatched. In the case of an HLA-A2 positive kidney transplanted into an HLA-A2 negative patient, the recipient’s immune system can recognize this mismatch and, without long-term immunosuppressive medication, will attack the new kidney carrying the HLA-A2 protein, leading to graft rejection. A lifetime of immunosuppressive therapy is associated with significant morbidity and mortality, including the development of systemic infection, malignancy and cardiovascular disease, the leading cause of death in this patient population. Therefore, the induction of immunological tolerance defined a stable and acceptable graft function without the need for immunosuppression remains a key priority in this field of medicine.
TX200 is composed of autologous Treg cells engineered to express an HLA-A2 CAR, allowing them to localize to the renal graft and activate upon recognition of the HLA-A2 antigen. We believe that TX200 has the potential to prevent kidney rejection by binding to the HLA-A2 positive kidney and inducing immune tolerance.
Similar to other genetically engineered cell therapy approaches, patients undergo a leukapheresis procedure, from which their Treg cells are isolated and engineered then cryopreserved. The HLA-A2 negative patient subsequently undergoes transplantation surgery to receive a kidney from their HLA-A2 positive living donor. Following a recovery period, the transplant recipient receives their personalized TX200 drug candidate. As a result of this detailed process, we expect dosing of patients to occur several months after their enrollment.
Our goal is that TX200 establishes the foundation for a portfolio of CAR-Tregs for major autoimmune indications, such as autoimmune hepatitis, Crohn’s disease, neuromyelitis, rheumatoid arthritis, systemic sclerosis, type 1 diabetes mellitus and ulcerative colitis. We believe that allogeneic therapies may be the future of cell therapy and could overcome the challenges of autologous approaches such as scale and manufacturing. If we are able to demonstrate proof-of-concept of autologous TX200, we expect to continue to advance other autologous and allogeneic follow-on indications that are currently in preclinical development.
For recent updates on TX200, please see Business Updates above.
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BIVV003 - Sickle Cell Disease
We are currently evaluating BIVV003, our ZF nuclease gene-edited cell therapy product candidate for SCD in the Phase 1/2 PRECIZN-1 study.
BIVV003 involves genome editing of a patient’s own hematopoietic stem progenitor cells using non-viral delivery of our ZF nuclease technology designed to induce the synthesis of fetal hemoglobin. This is achieved by gene-edited knock out of the erythroid specific enhancer of the BCL11a gene, which encodes a strong repressor of the gamma globin gene. In SCD, increased fetal hemoglobin synthesis may provide the patient with functional hemoglobin and help down regulate the abnormal sickle hemoglobin that results in painful sickle cell crises and other disease features.
Figure 1: Our ZF cell therapy approach to treat SCD
In January 2022, we announced that we and Sanofi would be transitioning its rights and obligations related to BIVV003 back to us as of June 28, 2022, or the Termination Date. We and Sanofi collaborated on an orderly transition, which was completed and a termination and transition agreement was executed by the parties on September 6, 2022, pursuant to which Sanofi granted to Sangamo exclusive, worldwide, fully paid, royalty-free, perpetual, irrevocable licenses, with the right to grant sublicenses through multiple tiers, to certain of its intellectual property, to develop, manufacture, have manufactured, use, sell, offer to sell, import and otherwise commercialize BIVV003. We agreed to take on responsibilities for all clinical trials related to BIVV003, including completion of the ongoing clinical trial and the related long-term follow-up study. We also assumed all regulatory responsibilities related to BIVV003. Sanofi transferred and assigned to us documentation, materials, and contracts with third parties related to BIVV003, and granted us the right to use certain Sanofi-owned or leased equipment related to BIVV003.
For recent updates on BIVV003, please see Business Updates above.
CAR-Treg Cell Therapy - IBD
We continue to advance preclinical development of our wholly-owned CAR-Treg program to treat IBD. IBD covers debilitating disorders that involve chronic inflammation of the digestive tract, including ulcerative colitis and Crohn’s disease. Our product candidate to treat IBD is composed of autologous Treg cells engineered to express a CAR designed to recognize an antigen relevant to IBD, so that it allows resulting CAR-Treg cells to localize and activate in the gut.
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Figure 2: Our IL23R CAR-Treg candidate for Crohn’s disease
CAR-Treg Cell Therapy - MS
We continue to advance preclinical development of our wholly-owned CAR-Treg program to treat MS, an autoimmune disease of the CNS. Similar to our IBD program, our product candidate to treat MS is composed of autologous Treg cells engineered to express a CAR designed to recognize an antigen relevant to MS, so that resulting CAR-Tregs can localize and activate in the CNS.
Genome Engineering - Prion Disease
We continue to advance our wholly-owned preclinical genome engineering program in prion disease, a fatal and incurable neurodegenerative disease caused by the misfolding of the prion protein encoded by the gene PRNP.
Misfolded prion protein may potentially cause other normally folded copies of prion to misfold. This may lead to a large pool of aggregated proteins that can act like a chain reaction leading to the misfolding, aggregation and spreading of further misfolded prion.
Figure 3: Misfolded prion protein aggregation chain reaction
This process is acutely toxic to neurons, and our aim is to remove a portion of prion protein from neurons to protect them from the toxicity of the misfolded prion protein. We think that this may prevent the spread and propagation of misfolded prion, and may therefore slow or halt neurodegeneration and disease progression.
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To address prion disease, we are developing ZF-Rs which target the PRNP gene and have a repressor domain as their functional domain.
Figure 4: Our approach in prion disease using ZF-Rs
We presented the first preclinical data from this program at the Prion Conference in September 2022. We showed that our ZF-Rs specifically repressed mouse prion in vitro and in vivo, and extended survival in these inoculated mice. Overall, we believe that these early-stage preclinical data support the further development of AAV-delivered ZF-Rs for the potential treatment of prion disease, including acquired, inherited and sporadic forms.
By the end of 2023, we expect to share new data from our next wholly-owned CNS epigenetic regulation program. By the end of 2024, we anticipate submitting two new IND applications from our second wave CAR-Treg and CNS programs.
Partnered Programs
Giroctocogene Fitelparvovec - Hemophilia A
We and Pfizer continue to develop giroctocogene fitelparvovec, or SB-525. Under our collaboration agreement with Pfizer, we conducted the Phase 1/2 Alta clinical study and certain manufacturing activities, while Pfizer is responsible for subsequent worldwide development, manufacturing, marketing and commercialization, including the Phase 3 AFFINE clinical trial.
AFFINE is a global Phase 3, open-label, multicenter, single arm trial evaluating the efficacy and safety of a single infusion of giroctocogene fitelparvovec in more than 60 adult (ages 18-64 years) male patients with moderately severe to severe hemophilia A. The primary endpoint is impact on annual bleed rate, or ABR, through 12 months following treatment with giroctocogene fitelparvovec, compared to ABR on FVIII replacement therapy collected in the Phase 3 lead-in study period.
Based on initial results from the Alta study, the FDA granted regenerative medicine advanced therapy, or RMAT, designation to giroctocogene fitelparvovec. RMAT designation is granted to regenerative medicine therapies intended to treat, modify, reverse, or cure a serious condition, for which preliminary clinical evidence indicates that the medicine has the potential to address an unmet medical need. The RMAT designation includes all the benefits of the fast track and breakthrough therapy designation programs, including early interactions with the FDA. The FDA also granted giroctocogene fitelparvovec Orphan Drug and Fast Track designation, and the European Medicines Agency, or EMA, granted it Orphan Medicinal Product designation.
For recent updates on giroctocogene fitelparvovec, please see Business Updates above.
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KITE-037 - Cancer
We and Kite Pharma, Inc., or Kite, a wholly-owned subsidiary of Gilead Sciences, Inc., continue to develop cell therapies to treat cancer using our research to design ZF nucleases and viral vectors to disrupt and insert select genes in T cells and natural killer cells, or NK-cells, including the insertion of genes that encode CARs, T cell receptors, or TCRs, and NK-cell receptors, or NKRs, directed to mutually agreed targets. Kite is responsible for all clinical development, manufacturing, marketing and commercialization. In May 2021, we announced that as part of its recent portfolio review, Kite made a decision not to submit an investigational new drug application, or IND, for KITE-037 at that time. The development program for KITE-037 remains active, and we and Kite continue to work towards the development of one or more new product candidates.
ST-501 - Tauopathies, ST-502 - Synucleinopathies and Type 1 Myotonic Dystrophy (DM1)
We and Biogen continue to develop preclinical genome engineering therapies, including our ST-501 product candidate to treat tauopathies, our ST-502 product candidate to treat synucleinopathies including Parkinson’s disease and a product candidate targeting DM1, a neuromuscular disease. Biogen has also selected an undisclosed fourth neurological disease gene target under our collaboration agreement, and we have begun early research activities on therapies addressing this target. Under our collaboration agreement with Biogen, it has exclusive rights to nominate up to eight additional targets over a target selection period of five years. This collaboration leverages ZF transcriptional regulators to aim to modulate the expression of key genes involved in neurological diseases.
In March 2021, we published preclinical data in Science Advances, showing that tau-targeted ZF-transcriptional repressors selectively reduced tau messenger RNA and proteins by 50% to 80% out to 11 months without detectable off-target events.
In the first half of 2021, we presented preclinical data at the 15th International Conference on Alzheimer’s and Parkinson’s Diseases (AD/PD) and at the American Society of Gene & Cell Therapy (ASGCT) Annual Meeting, showing that alpha synuclein-targeted ZF-transcriptional repressors could significantly repress human alpha synuclein and were well tolerated in vivo.
Genome Engineering - Autism Spectrum Disorder and Neurodevelopmental Disorders
We and Novartis continue to develop preclinical genome engineering therapies for three neurodevelopmental targets, including genes linked to autism spectrum disorder and intellectual disability. The collaboration leverages our ZF‑transcriptional regulators to aim to upregulate the expression of key genes involved in neurodevelopmental disorders.
Genome Engineering - ALS and Frontotemporal Lobar Degeneration
We and Pfizer have a collaboration agreement to develop preclinical genome engineering product candidates that use allele-specific ZF‑transcriptional regulators to treat ALS and frontotemporal lobar degeneration, or FTLD, linked to mutations in the C9ORF72 gene. The most frequent genetic cause of ALS is the expansion of hexanucleotide repeats, or G4C2 repeats, in the first intron of the C9ORF72 gene. Our approach is to design ZF repressors to repress specifically pathogenic gene expression from the disease allele, while preserving expression of the healthy allele.
In September 2020, we completed our research obligations associated with this collaboration, which required us to identify, characterize and preclinically develop ZF‑Rs satisfying pre-agreed criteria. Pfizer is now responsible for subsequent research and development activities as well as subsequent development, manufacturing, marketing and commercialization.
In May 2021, we presented preclinical data at the ASGCT Annual Meeting, showing that ZF‑Rs were capable of selectively repressing the expression of both disease sense and antisense isoforms over a wide dose range while preserving the expression of normal isoform in patient‑derived neural cells. No detectable off-target gene regulation was observed.
Takeda – Huntington’s Disease
We and Takeda continue to develop potential preclinical genome engineering product candidates to treat Huntington’s Disease that use a ZF-R designed to differentially down regulate the mutated disease-causing huntingtin gene, or HTT gene, while preserving the expression of the normal version of the gene.
For more information on the collaborations underlying these partnered programs, see “—Collaborations” below.
Legacy Clinical Research Programs
We have stopped development of the following clinical research programs. We continue to perform the appropriate long-term follow-up and closeout activities of the legacy studies in accordance with the study protocols.
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ST-400 - Beta Thalassemia
In November 2021, we and Sanofi announced that we made a business decision to cease development of the beta thalassemia indication in order to focus resources on the SCD program. Five patients were dosed in the Phase 1/2 Thales study, an open-label, single arm clinical study to evaluate the safety and efficacy of ST-400. Results were last presented at American Society for Hematology Annual Meeting and Exposition 2021.
SB-728 - Human Immunodeficiency Virus, or HIV
SB-728 was one of the first clinical candidates to use an early generation of our ZF nuclease-mediated genome editing technology. We conducted several clinical studies evaluating SB-728, demonstrating the safety of the platform and showing immune responses from a subset of patients, however the studies did not meet our clinical expectations and we have stopped development in HIV.
SB-318 - MPS I, SB-913 - MPS II, and SB-FIX - Hemophilia B
We have stopped development of SB-318, SB-913, and SB-FIX, genome editing product candidates for the treatment of MPS I, MPS II, and hemophilia B, respectively.
COLLABORATIONS
We have entered into strategic collaborations with larger biopharmaceutical companies for several of our therapeutic programs and other partnerships for several non-therapeutic applications of our technology. We will continue to pursue further collaborations when appropriate to fund internal research and development activities and to assist in product development, manufacturing, regulatory approval and commercialization. Decisions to collaborate or not will be based on review of our internal resources, institutional knowledge and commercial considerations.
Novartis
In July 2020, we entered into a collaboration and license agreement with Novartis for the research, development and commercialization of gene regulation therapies to treat three neurodevelopmental disorders. Under the agreement, we granted to Novartis an exclusive, royalty bearing and worldwide license, under our relevant patents and know-how, to develop, manufacture and commercialize certain of our ZF-transcriptional regulators targeted to three undisclosed genes that are associated with neurodevelopmental disorders, including autism spectrum disorder and intellectual disability. We perform early research activities over the collaboration period for each gene target and manufacture the ZF-transcriptional regulators required for such research, costs of which are funded by Novartis. Novartis is responsible for additional research activities, IND-enabling studies, clinical development, regulatory approvals, manufacturing of preclinical, clinical and approved products, and global commercialization. Subject to certain exceptions set forth in the agreement, we are prohibited from developing, manufacturing or commercializing any therapeutic product targeting any of the three genes that are the subject of the collaboration. Novartis also has the option to license certain of our proprietary AAVs for the sole purpose of developing, manufacturing and commercializing licensed products arising from the collaboration.
Under the agreement, Novartis paid us a $75.0 million upfront license fee payment in August 2020. In addition, we are eligible to earn from Novartis up to $420.0 million in development milestones and up to $300.0 million in commercial milestones. We are also eligible to earn from Novartis tiered high single-digit to sub-teen double-digit royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments are subject to reduction due to patent expiration, loss of market exclusivity and payments made under certain licenses for third-party intellectual property. The agreement continues, on a product-by-product and country-by-country basis, until the expiration of the applicable royalty term. Novartis has the right to terminate the agreement, in its entirety or on a target-by-target basis, for any reason after a specified notice period. Each party has the right to terminate the agreement on account of the other party’s bankruptcy or material, uncured breach.
Biogen
In February 2020, we entered into a global licensing collaboration agreement with Biogen for the research, development and commercialization of gene regulation therapies for the treatment of neurological diseases which became effective in April 2020. Our collaboration aims to leverage our proprietary ZF technology delivered via AAV to modulate expression of key genes involved in neurological diseases. Concurrently with the execution of the collaboration agreement, we also entered into a stock purchase agreement with Biogen MA, Inc., pursuant to which Biogen MA, Inc. purchased 24,420,157 shares of our common stock, or the Biogen Shares, for an aggregate purchase price of $225.0 million.
Under the collaboration agreement, Biogen paid us an upfront license fee payment of $125.0 million. We are also eligible to earn research, development, regulatory and commercial milestone payments that could total up to approximately $2.4 billion if Biogen selects all of the targets allowed under the agreement and all the specified milestones set forth in the agreement
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are achieved, which includes up to $925.0 million in pre-approval milestone payments and up to $1.5 billion in first commercial sale and other sales-based milestone payments. In addition, we are also eligible to receive tiered high single-digit to sub-teen royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
Under the collaboration agreement, we granted to Biogen an exclusive, royalty bearing and worldwide license, under our relevant patents and know-how, to develop, manufacture and commercialize certain ZF and/or AAV-based products directed to certain neurological disease gene targets selected by Biogen. Biogen has already selected four of these: our ST-501 product candidate to treat tauopathies, our ST-502 product candidate to treat synucleinopathies including Parkinson’s disease, a third product candidate targeting DM1, a neuromuscular disease, and a fourth undisclosed neurological disease gene target. Biogen has exclusive rights to nominate up to seven additional targets over the remainder of the five-year period from the effective date of the collaboration agreement (i.e., through April 2025). For each gene target selected by Biogen, we perform early research activities, costs for which are shared by the companies, aimed at the development of the combination of proprietary CNS delivery vectors and ZF-TRs (or potential other ZF products) targeting therapeutically relevant genes. Biogen has assumed responsibility and costs for the IND-enabling studies, clinical development, related regulatory interactions, and global commercialization. We are primarily responsible for manufacturing activities for the initial clinical trials for the first three products of the collaboration and plan to leverage our in-house manufacturing capacity, where appropriate, which is currently in development. Biogen is responsible for manufacturing activities beyond the first clinical trial for each of the first three products. Our research activities for any targets will be performed over the period not to exceed seven years from the effective date of the collaboration agreement (i.e., through April 2027). Subject to certain exceptions set forth in the collaboration agreement, we are prohibited from developing, manufacturing or commercializing any therapeutic product directed to the targets selected by Biogen.
The collaboration agreement continues, on a product-by-product and country-by-country basis, until the expiration of all applicable royalty terms. Biogen has the right to terminate the collaboration agreement, in its entirety or on target-by-target basis, for any reason after a specified notice period, and also has the right to replace up to eight targets. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach. In addition, we may terminate the collaboration agreement if Biogen challenges any patents licensed by us to Biogen.
Pursuant to the terms of the stock purchase agreement, Biogen has agreed not to, without our prior written consent and subject to specified conditions and exceptions, directly or indirectly acquire shares of our outstanding common stock, seek or propose a tender or exchange offer or merger between the parties, solicit proxies or consents with respect to any matter, or undertake other specified actions related to the potential acquisition of additional equity interests in us. Such standstill restrictions expire on the earlier of the three-year anniversary of the effectiveness of the collaboration agreement and the date that Biogen beneficially owns less than 5% of our common stock.
The stock purchase agreement also provides that, subject to certain limitations, upon Biogen’s request, we must register for resale any of the Biogen Shares on a registration statement to be filed with the SEC, until such time as all remaining Biogen Shares may be sold pursuant to Rule 144 promulgated under the Securities Act during any 90-day period.
Kite
In February 2018, we entered into a collaboration and license agreement with Kite, which became effective in April 2018 and was amended and restated in September 2019, for the research, development and commercialization of engineered cell therapies for cancer. Kite is responsible for all clinical development and commercialization of any resulting products.
Subject to the terms of this agreement, we granted Kite an exclusive, royalty-bearing, worldwide, sublicensable license, under our relevant patents and know-how, to develop, manufacture and commercialize, for the purpose of treating cancer, specific cell therapy products that may result from the research program and that are engineered ex vivo using selected ZF nuclease and final vectors (i.e., AAVs, RVVs) developed under the research program, to express CARs, TCRs or NKRs directed to candidate targets.
During the research program term and subject to certain exceptions, except pursuant to this agreement, we are prohibited from researching, developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a target expressed on or in a human cancer cell. After the research program term concludes and subject to certain exceptions, except pursuant to this agreement, we are prohibited from developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a candidate target.
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We received a $150.0 million upfront payment from Kite when the agreement became effective in April 2018. In addition, Kite reimburses our direct costs to conduct the joint research program, and Kite is responsible for all subsequent development, manufacturing and commercialization of any licensed products. We are also eligible to earn contingent development- and sales-based milestone payments that could total up to $3.0 billion if all the specified milestones set forth in this agreement are achieved. Of this amount, approximately $1.3 billion relates to the achievement of specified research, clinical development, regulatory and first commercial sale milestones, and approximately $1.8 billion relates to the achievement of specified sales-based milestones if annual worldwide net sales of licensed products reach specified levels. Each development- and sales-based milestone payment is payable (i) only once for each licensed product, regardless of the number of times that the associated milestone event is achieved by such licensed product, and (ii) only for the first 10 times that the associated milestone event is achieved, regardless of the number of licensed products that may achieve such milestone event. In addition, we are entitled to receive escalating, tiered royalty payments with a percentage in the single digits based on potential future annual worldwide net sales of licensed products. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
Kite has the right to terminate this agreement, in its entirety or on a per licensed product or per candidate target basis, for any reason after a specified notice period. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach.
Pfizer
We have two separate collaboration agreements with Pfizer:
Giroctocogene Fitelparvovec Collaboration
In May 2017, we entered into an exclusive, global collaboration and license agreement with Pfizer for the research, development and commercialization of giroctocogene fitelparvovec, also known as SB-525, our gene therapy product candidate for hemophilia A, and closely related products, which we amended in December 2019.
Under this agreement, we were responsible for conducting the Phase 1/2 clinical study and certain manufacturing activities for giroctocogene fitelparvovec, while Pfizer is responsible for subsequent worldwide development, manufacturing, marketing and commercialization of giroctocogene fitelparvovec. We may also collaborate in the research and development of additional AAV-based gene therapy products for hemophilia A.
We received an upfront license fee of $70.0 million, achieved a $25.0 million milestone in December 2019 upon completion of the transfer of the IND for giroctocogene fitelparvovec to Pfizer, and achieved a $30.0 million milestone in October 2020 upon the dosing of the first patient in our pivotal Phase 3 AFFINE trial. We are eligible to earn further development milestone payments on the achievement of specified clinical development, intellectual property, regulatory and first commercial sale milestones for giroctocogene fitelparvovec and potentially other products. The total amount of potential clinical development, intellectual property, regulatory, and first commercial sale milestone payments, assuming the achievement of all specified milestones in this agreement, is $475.0 million, which includes up to $300.0 million for giroctocogene fitelparvovec and up to $175.0 million for other products that may be developed under the agreement, subject to reduction on account of payments made under certain licenses for third‑party intellectual property. In addition, Pfizer agreed to pay us royalties for each potential licensed product developed under the agreement that are 14% - 20% of the annual worldwide net sales of such product and are subject to reduction due to patent expiration, entry of biosimilar products to the market and payment made under certain licenses for third‑party intellectual property.
Subject to the terms of the agreement, we granted Pfizer an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, to use certain technology controlled by us for the purpose of developing, manufacturing and commercializing giroctocogene fitelparvovec and related products. Pfizer granted us a non-exclusive, worldwide, royalty free, fully paid license, with the right to grant sublicenses, to use certain manufacturing technology developed under the agreement and controlled by Pfizer to manufacture our products that utilize the AAV delivery system. During a specified period, neither we nor Pfizer are permitted to clinically develop or commercialize, outside of the collaboration, certain AAV-based gene therapy products for hemophilia A.
Unless earlier terminated, the agreement has a term that continues, on a per product and per country basis, until the later of (i) the expiration of patent claims that cover the product in a country, (ii) the expiration of regulatory exclusivity for a product in a country, and (iii) 15 years after the first commercial sale of a product in a country. Pfizer has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. Upon termination for any reason, the license granted by us to Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec and related products automatically terminate. Upon termination by us for cause or by Pfizer in any country or countries, Pfizer is
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required to automatically grant us an exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec in the terminated country or countries.
C9ORF72 Collaboration
In December 2017, we entered into a separate exclusive, global collaboration and license agreement with Pfizer for the development and commercialization of potential gene therapy products that use ZF-transcriptional regulators to treat ALS and FTLD linked to mutations of the C9ORF72 gene. Pursuant to this agreement, we agreed to work with Pfizer on a research program to identify, characterize and preclinically develop ZF-transcriptional repressors that bind to and specifically reduce expression of the mutant form of the C9ORF72 gene.
We received a $12.0 million upfront payment from Pfizer and achieved a $5.0 million milestone payment in September 2020 associated with the completion of all of our research activities for the C9ORF72 collaboration. We are eligible to earn up to $60.0 million in development milestone payments from Pfizer contingent on the achievement of specified preclinical development, clinical development and first commercial sale milestones, and up to $90.0 million commercial milestone payments if annual worldwide net sales of the licensed products reach specified levels. In addition, Pfizer will pay us royalties of 14% - 20% of the annual worldwide net sales of the licensed products. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third‑party intellectual property. Each party is responsible for the cost of its performance of the research program. Pfizer is operationally and financially responsible for subsequent development, manufacturing and commercialization of the licensed products.
Subject to the terms of the agreement, we granted Pfizer an exclusive, worldwide, royalty-bearing, license under our relevant patents and know-how to develop, manufacture and commercialize gene therapy products that use resulting ZF-transcriptional regulators that satisfy pre-agreed criteria. During a specified period, neither we nor Pfizer will be permitted to research, develop, manufacture or commercialize outside of the collaboration any ZFPs that specifically bind to the C9ORF72 gene.
Unless earlier terminated, the agreement has a term that continues, on a per licensed product and per country basis, until the later of (i) the expiration of patent claims that cover the licensed product in a country, (ii) the expiration of regulatory exclusivity for a licensed product in a country, and (iii) 15 years after the first commercial sale of a licensed product in a major market country. Pfizer has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. The agreement will also terminate if we are unable to identify any lead candidates for development within a specified period of time or if Pfizer elects not to advance a lead candidate beyond a certain development milestone within a specified period of time. Upon termination for any reason, the license granted by us to Pfizer to develop, manufacture and commercialize licensed products under the agreement will automatically terminate. Upon termination by us for cause or by Pfizer without cause for any licensed product or licensed products in any country or countries, we will have the right to negotiate with Pfizer to obtain a non-exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize the licensed product or licensed products in the terminated country or countries.
Following termination by us for Pfizer’s material breach, either party will not be permitted to research, develop, manufacture or commercialize ZFPs that specifically bind to the C9ORF72 gene for a period of time.
Sanofi
In January 2014, we entered into an exclusive worldwide collaboration and license agreement, or the 2014 Collaboration Agreement to develop therapeutics for hemoglobinopathies, focused on beta thalassemia and SCD. The 2014 Collaboration Agreement was originally signed with Biogen MA, Inc., who subsequently assigned it to Bioverativ Inc., which was later acquired by Sanofi. Under the 2014 Collaboration Agreement, we were originally jointly conducting two research programs: a beta thalassemia program, which was discontinued in the third quarter of 2021, and the SCD program, which resulted in the development of SAR445136 (now known as BIVV003), a ZFN, gene-edited cell therapy product candidate for the treatment of SCD. In December 2021, Sanofi notified us of its termination for convenience, effective as of the June 28, 2022 Termination Date, of the 2014 Collaboration Agreement. A Termination and Transition Agreement was executed by the parties on September 6, 2022, pursuant to which Sanofi granted us exclusive, worldwide, fully paid, royalty-free, perpetual, irrevocable licenses, with the right to grant sublicenses through multiple tiers, to certain of its intellectual property, to develop, manufacture, have manufactured, use, sell, offer for sale, import and otherwise commercialize BIVV003, the product candidate in development under the SCD program. We have agreed to take on responsibilities for all clinical trials related to BIVV003, including completion of the ongoing clinical trial and the related long-term follow-up study. We also assumed all regulatory responsibilities related to BIVV003. Sanofi transferred and assigned to us documentation, materials and contracts with third parties related to BIVV003, and the right to use certain Sanofi-owned or leased equipment related to BIVV003.
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Sanofi has also agreed to reimburse the costs of conducting the ongoing clinical trial of BIVV003 and the costs of the long-term follow-up study through December 31, 2023, up to $7.0 million. In addition, should we elect not to continue the development of BIVV003 past December 31, 2023, Sanofi will become obligated to reimburse us for the costs of the long-term follow-up study incurred after 2023, up to $5.3 million. Sanofi’s reimbursement obligations will terminate upon certain triggering events, including if we enter into a contract with a third party for collaboration, partnership, sale, licensing, or divestiture of BIVV003, or if the FDA permits early closure of the clinical trial and/or the long-term follow-up study.
Takeda
In January 2012, we entered into a collaboration and license agreement with Shire International GmbH, a wholly-owned subsidiary of Takeda, which we amended and restated in September 2015, to research, develop and commercialize human therapeutics and diagnostics for monogenic diseases based on our ZF technology. We received an upfront license fee of $13.0 million in 2012 and achieved a $1.0 million milestone in 2014. Pursuant to the amended and restated agreement, Takeda has an exclusive, worldwide license to ZF therapeutics for treating Huntington’s disease.
Under the amended and restated agreement, Takeda has full control over, and full responsibility for the costs of, the Huntington’s disease program, subject to certain obligations, including the obligation to retain us to perform ZF design, optimization and assessment services and to reimburse us for the costs of such services. Takeda does not have any milestone payment obligations but is required to pay single digit percentage royalties to us, up to a specified maximum cap, on the commercial sales of ZF therapeutic products for Huntington’s disease. During the term of the amended and restated agreement, we are not permitted to research, develop or commercialize, outside of the agreement, certain products that target the HTT gene.
Under the amended and restated agreement, we have full control over, and full responsibility for the costs of, the hemophilia A and B programs returned to us by Takeda, subject to certain diligence obligations. We also granted Takeda a right of first negotiation to obtain a license to such programs under certain circumstances. Should we proceed to commercialize the specific hemophilia A and B programs returned to us by Takeda, we will be required to pay single digit percentage royalties to Takeda, up to a specified maximum cap, on commercial sales of therapeutic products from the programs returned to us. We do not have any obligations under the amended and restated agreement to make milestone payments to Takeda.
The amended and restated agreement may be terminated by (i) us or Takeda, in whole or in part, for the uncured material breach of the other party, (ii) us or Takeda for the bankruptcy or other insolvency proceeding of the other party and (iii) Takeda, in its entirety, effective upon at least 90 days’ advance written notice.
Other Partnerships
In addition to our partnerships for the development of human therapeutic applications, we have also licensed our technology in several other areas, such as plant agriculture and research reagents, including the production of transgenic animals and cell-line engineering. These license partners include Corteva AgriScience, formerly known as Dow AgroSciences LLC, or DAS, Sigma-Aldrich Corporation (now MilliporeSigma in the United States and Merck KGaA outside the United States), Genentech, Inc., Open Monoclonal Technology, Inc. (now Ligand Pharmaceuticals Inc.) and F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.
INTELLECTUAL PROPERTY
Patents, trade secrets, know-how and licensed technologies are important to our business. Our strategy includes filing, obtaining, maintaining, licensing, and when necessary, defending our patents and patent applications to protect technologies, inventions, and improvements to inventions that we consider important for the research, development, and commercialization of our technologies and our product candidates. We have filed numerous patent applications with the U.S. Patent and Trademark Office, or USPTO, and with patent offices in multiple foreign jurisdictions. Our proprietary intellectual property includes methods relating to the design of zinc finger proteins, Transcription Activator-Like Effector, or TALE, proteins and Clustered Regularly Interspaced Short Palindromic Repeats, or CRISPR/Cas, editing systems, therapeutic applications of genome editing technology, Treg cell therapy platforms, and viral vector delivery platforms, enabling technologies related to our platform and the use of genome editing across a variety of applications. We rely on a combination of patents, copyrights, trademarks, proprietary know-how, continuing technological innovations and trade secret protections, as well as confidentiality agreements, materials transfer agreements, research agreements and licensing agreements, to establish and protect our proprietary rights.
In-licensed Technology
We have exclusively licensed in relevant fields certain intellectual property directed to the design, selection, and use of ZFPs, ZF nucleases and ZF-transcriptional repressors for genome editing and epigenetic regulation from numerous academic institutions. Although no individual in-license is material to our overall protection of our ZFP and ZF nuclease platforms, we believe that these in-licenses, in combination with our own know-how, patent applications and patents, protect us from unauthorized third parties who might try to copy or use our products or technologies.
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In addition, with respect to our cell therapy products, our subsidiary, Sangamo France, has a license agreement with the University of British Columbia pursuant to which it exclusively licensed in relevant fields the right to the CAR for use in our TX200 product candidate. This license includes one patent family, which is expected to expire in September 2038, absent any patent term adjustment, or PTA, patent term extension, or PTE, or disclaimers.
Our Intellectual Property
In addition to our in-licensed patent portfolio, we have numerous issued patents and pending patent applications comprising approximately 170 patent families that are directed to the design, compositions and uses of ZFPs, ZF nucleases, ZF-transcriptional repressors, TALE proteins and CRISPR/Cas editing systems, Treg cell therapy platforms, viral vector delivery platforms, and other technologies related to our programs.
Given our over two-decade history with zinc finger technology, some of the earliest zinc finger patents in our portfolio began expiring in 2015. However, we have continued to build on this patent portfolio and have been issued additional patents and have applications pending that provide protection for our ZF technology. Additionally, patents that may be issued from our pending applications will extend the patent exclusivity of our patent estate.
We believe that our in-licensed and our owned patents and patent applications, in combination with our know-how and trade secrets, in the aggregate, will provide us with substantial protection of and exclusivity around the commercial development of our gene therapy, cell therapy and genome engineering programs. In this regard, patents issued to us, applied for by us, or exclusively and non-exclusively licensed to us, cover our commercially relevant technologies, including the following types of inventions, processes and products:
•ZFP and ZF nuclease design, engineered nucleases, and compositions (multiple patents issued with expected expiration dates ranging from 2029 to 2036), absent any PTA, PTE or disclaimers): These patents cover inventions including DNA target site selection, zinc finger binding domain design, nuclease domain design, linker design, DNA nickases, ZFP libraries databases and methods of construction, as well as methods to increase zinc finger binding specificity (see, e.g., US9982245, US10066242, US10113207);
•ZFP Therapeutics (multiple patents issued with expected expiration dates ranging from 2028 to 2031, absent any PTA, PTE or disclaimers): These patents cover inventions including methods relating to activation and inhibition of endogenous genes, identification of accessible regions within chromatin, including treatment of Huntington’s disease, HIV, cancer therapeutics, modulation of cardiac contractility and methods to regulate the glucocorticoid receptor (see, e.g., US9943565);
•Nuclease Therapeutics (multiple patents issued with expected expiration dates ranging from 2031 to 2036, absent any PTA, PTE or disclaimers): These patents cover inventions including treatments for HIV, beta thalassemia and SCD, hemophilia inherited metabolic diseases, genome editing, Parkinson’s Disease, regulation of the expression of PD1; Immunomodulatory therapeutics; Cystic Fibrosis; CNS disease; Severe combined immunodeficiency, Modified T cells, including HLA knock out and methods of editing stem cells (see, e.g., US9877988, US9963715, US10072066, US10081661, US10143760); and
•Non-Therapeutic Applications of ZFPs and Nucleases (multiple patents issued with expected expiration dates ranging from 2028 to 2035, absent any PTA, PTE or disclaimers): These patents cover inventions including identification of regulatory sequences, analysis of gene regulation, structure and biological function, methods of agricultural biotechnology, methods of altering cellular differentiation state, development of cell lines for improved protein production, methods of transgenic animal development, engineering of stem cells, methods of genome editing (see, e.g., US9890395).
The patent positions of biopharmaceutical companies, including our patent position, are uncertain and involve complex legal and factual questions for which important legal tenets are largely unresolved and are subject to administrative, judicial, and regulatory interpretation and refinement. Obtaining, maintaining, and enforcing patent protection in the United States and other countries remains uncertain and depends, in part, upon decisions of the patent offices, courts, administrative bodies and lawmakers in these countries. It is also possible that we may develop proprietary products or technologies in the future that are not patentable. Patent applications may not result in the issuance of patents and the coverage claimed in a patent application may be significantly reduced before a patent is issued. It is possible that, under certain circumstances, patent applications will be rejected and we subsequently abandon them. It is possible that we may decide that an issued patent or pending patent application may provide us with little or no competitive advantage in view of its associated costs, in which case we may abandon or allow to lapse such patent or patent applications. Although we have filed for patents on some aspects of our technology, we cannot provide assurances that patents will be issued as a result of these pending applications or that any patent that has been or may be issued will be upheld. It is possible that our current patents, or patents which we may later acquire, may be successfully challenged, invalidated in whole or in part, or deemed unenforceable. The laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States.
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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business. We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. Ultimately, patent protection must be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In some countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
In the future, third parties may assert patent, copyright, trademark, and other intellectual property rights to technologies that are important to our business. The outcome following any potential legal assertions of infringement, invalidity and unenforceability is unpredictable. Any claims asserting that our products infringe or may infringe proprietary rights of third parties, if determined adversely to us, could significantly harm our business. See “Risk Factors—Risks Relating to Our Intellectual Property.”
COMPETITION
We and our biopharmaceutical collaborators are leaders in the research and development of gene therapies, cell therapies and genome engineering therapies using ZF DNA-binding proteins.
We are aware of several other companies focused on other methods for editing genes and regulating gene expression and a limited number of commercial and academic groups pursuing the development of ZF genome engineering technologies. The fields of gene therapy, cell therapy and genome engineering are highly competitive, and we expect competition to persist and intensify in the future from a number of different sources, including other biopharmaceutical companies; academic and research institutions; and government agencies that will seek to develop ZFs as well as technologies that will compete with our ZF technology platform, such as TALE proteins and the CRISPR-Cas editing system.
Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval or commercializing competitive products before we do. If we commence commercial product sales, we may be competing against companies with greater marketing, sales, distribution and manufacturing capabilities, areas in which we have limited or no experience. In
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addition, any product candidate that we successfully develop may compete with existing products that have long histories of safe and effective use.
Although we are in the clinical development phase of operations and have no current therapeutic product sales, we believe the following companies, products and/or technologies may potentially be competitive with our technology or our product candidates under development:
•Protein pharmaceuticals under development at pharmaceutical and biotechnology companies such as F. Hoffman-LaRoche Ltd., Protalix Biotherapeutics, Inc., Sanofi S.A. and numerous other biopharmaceutical firms.
•Gene therapy companies developing gene-based products in clinical trials such as BioMarin Pharmaceutical, Inc., F. Hoffman-LaRoche Ltd. through their wholly-owned subsidiary Spark Therapeutics, Freeline Therapeutics Holdings plc and 4D Molecular Therapeutics, Inc. and numerous other gene therapy companies.
•Cell therapy companies developing cell-based products, including Abata Therapeutics, Inc., Allogene Therapeutics, Inc., AZTherapies, Inc., Beam Therapeutics, Inc., Bluebird bio, Inc., Cellectis S.A., Cellenkos, Inc., Cova Therapeutics, Inc., CRISPR Therapeutics AG, Editas Medicines, Inc., GentiBio, Inc., Graphite Bio, Inc., Kyverna, Inc., Precision BioSciences, Inc., Sonoma Biotherapeutics, Inc., TeraImmune, Inc., Quell Therapeutics, Inc., Vertex Pharmaceuticals and numerous other cell therapy companies.
•Nuclease and base editing technologies under development for therapeutic applications of genome modification including companies such as Caribou Biosciences, Inc., CRISPR Therapeutics AG, Editas Medicine, Inc., Intellia Therapeutics, Inc. and Beam Therapeutics developing the CRISPR/Cas editing system, Cellectis S.A. developing TALE nucleases and meganucleases, bluebird bio, Inc. developing Homing Endonucleases and MegaTALs and Precision BioSciences, Inc. developing meganucleases and numerous other gene editing companies.
•Antisense therapeutics and RNA interference technology, including RNAi and microRNA, which are technologies that may compete with ours in the development of novel therapeutic products acting through the regulation of gene expression. These technologies are being developed by several companies including Alnylam Pharmaceuticals, Inc., Ionis Pharmaceuticals, Inc., Moderna, Inc., Regulus Therapeutics Inc., Voyager Therapeutics, Inc., Wave Life Sciences, Inc. and numerous other companies.
•Small molecules in development by pharmaceutical companies such as Biogen, Inc., Pfizer, Inc.,Vertex Pharmaceuticals, Inc. and numerous other companies.
We expect to face intense competition from other companies for collaborative arrangements with biopharmaceutical companies, for establishing relationships with academic and research institutions, for licenses to proprietary technology and for subjects in our clinical trials of treatments for rare diseases. These competitors, either alone or with their collaborative partners, may succeed in developing technologies or products that are more effective or less costly than ours.
Our ability to compete successfully will depend, in part, on our ability to:
•develop safe, efficacious and commercially attractive proprietary products;
•obtain access to gene transfer technology on commercially reasonable terms;
•obtain required regulatory approvals;
•obtain reimbursement for our products in approved indications;
•attract and retain qualified scientific and product development personnel;
•enter into collaborative and strategic partnerships with others, including our competitors, to develop our technology and product candidates;
•obtain and enforce patents, licenses or other proprietary protection for our products and technologies;
•formulate, manufacture, market and sell any product that we develop;
•develop and maintain products that reach the market first and are technologically superior to or are of lower cost than other products in the market; and
•recruit subjects into our clinical trials in a timely fashion.
MANUFACTURING
We currently rely heavily on CMOs to produce our preclinical and clinical product candidates in accordance with FDA and EMA mandated regulations, also known as current Good Manufacturing Practices, or cGMPs. We employ a technical operations staff in the areas of process development, analytical development, quality control, quality assurance, supply chain,
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project management, and manufacturing to facilitate appropriate oversight of our CMOs, support of our regulatory filings and execution of clinical trials.
We believe that in-house manufacturing capability can provide a competitive advantage. To this end, we have commenced AAV cGMP manufacturing in our Brisbane, California facility designed to manufacture Phase 1/2 clinical study supplies for our gene therapy pipeline. We have also completed cell therapy manufacturing qualification runs in Brisbane, California and initiated qualification activities for cell therapy manufacturing in our Valbonne, France facility.
We intend to continue to rely on CMOs for the manufacture of our product candidates for any Phase 3 clinical trials, and if approved, for commercial supply. We believe this balanced approach to manufacturing, investing in internal capacity and capabilities while strengthening our commitment with external capacity, will enable us to meet our anticipated pipeline needs.
We currently leverage three distinct manufacturing platforms: AAV vector production for our genome engineering and gene therapy product candidates, HSPC modification for some of our cell therapy product candidates and engineered T cell therapies. We use a commercial scale baculovirus manufacturing platform to manufacture AAV vectors for genome editing and gene therapy, with each AAV vector packaging a different transgene specific to the target indication or ZF nuclease. The manufacturing process for our HSPC cell therapy product candidates utilizes the patient’s own HSPCs. These HSPCs are transfected using mRNA to produce ZF nucleases that target specific DNA sites, resulting in modified HSPCs. The third platform utilizes our ZF nuclease technology to transform CAR-Tregs for autologous and allogeneic cell therapies. We believe we have capabilities to manufacture regulatory T cells in therapeutic quantities to be used to treat inflammatory and autoimmune disorders.
GOVERNMENT REGULATION
We operate within the heavily regulated biopharmaceutical industry and much of our operations, including nonclinical and clinical trials, development, manufacturing, commercialization, marketing and reimbursement are subject to regulatory approvals. Relevant regulatory authorities include, but are not limited to, the FDA, the EMA, the European Commission, national competent authorities of the European Union, or EU, Member States and the UK Medicines and Healthcare Products Regulatory Agency, or MHRA.
Product Regulation
In the United States, the FDA regulates biologic products including gene therapy and human cellular therapy products under the Federal Food, Drug, and Cosmetic Act, or the FDCA, the Public Health Service Act, or the PHSA, and regulations and guidance implementing these laws. The FDCA, PHSA and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving biologic products. Applications to the FDA are required before conducting human clinical testing of biologic products. FDA approval also must be obtained before marketing of biologic products. In the EU, approval from the competent authorities of EU Member States must be obtained before commencing clinical trials. In addition, medicinal products can only be marketed if a marketing authorization, or MA, from the competent regulatory agencies has been obtained.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes, regulations and applicable guidance require the expenditure of substantial time and financial resources and we may not be able to obtain the required regulatory approvals.
U.S. Biologic Products Development Process
Our product candidates must be approved by the FDA before they may be legally marketed in the United States. The process required by the FDA before a biologic product candidate may be marketed in the United States generally involves the following:
•completion of preclinical laboratory tests and in vivo studies in accordance with the FDA’s current Good Laboratory Practice, or GLP, regulations and applicable requirements for the humane use of laboratory animals or other applicable regulations;
•submission to the FDA of an IND application, which allows human clinical trials to begin unless FDA objects within 30 days;
•approval by an independent institutional review board, or IRB, reviewing each clinical site before each clinical trial may be initiated;
•performance of adequate and well-controlled human clinical trials according to the FDA’s Good Clinical Practice, or GCP, regulations, and any additional requirements for the protection of human research subjects and their
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health information, to establish the safety and efficacy of the proposed biologic product candidate for its intended use;
•preparation and submission to the FDA of a BLA for marketing approval that includes substantial evidence of safety and efficacy from results of nonclinical testing and clinical trials and payment of user fees, if applicable;
•review of the product by an FDA advisory committee, if applicable;
•satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biologic product candidate is produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the biologic product candidate’s identity, safety, strength, quality, potency and purity;
•potential FDA inspection of the nonclinical and clinical trial sites that generated the data in support of the BLA; and
•FDA review and approval, or licensure, of the BLA.
Before testing any biologic product candidate in humans, including a gene therapy product candidate, the product candidate must undergo preclinical testing. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as in vivo studies to assess the potential safety and activity of the product candidate and to establish a rationale for therapeutic use. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs.
Concurrent with clinical trials, companies usually must complete additional preclinical testing, that may include animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
Human gene transfer protocols are subject to the FDA’s oversight and other clinical trial regulations, and oversight at the local level as set forth in National Institutes of Health, or NIH, Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA. However, many companies and other institutions, not otherwise subject to the NIH Guidelines, voluntarily follow them.
The clinical trial sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA also may impose clinical holds on a biologic product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such studies.
EU Drug Development Process
Similar to the United States, the various phases of preclinical and clinical research in the EU are subject to significant regulatory controls. Certain preclinical (also termed “non-clinical”) data is required in order to enable clinical trials and later be used in dossier for a marketing authorization application, or MAA. All studies should be conducted in accordance with GLP and all applicable EMA, European Commission and European Pharmacopoeia guidelines related to preclinical studies, including guidance on quality, non-clinical and clinical aspects of medicinal products containing genetically modified cells.
The requisite amount of preclinical data enables the design of a clinical trial, from Phase 1 (first-in-human clinical trials) through to Phases 2 and 3, which are quality, safety and efficacy studies. Similar restrictions and requirements apply as in the United States regarding preclinical data to support trials using viral vectors. The preclinical tests should establish parameters such as toxicity, pharmacodynamics and pharmacokinetic properties, as well as the quality of the gene therapy medicinal products. Due to the particular nature of gene therapy medicinal products, it is recognized that it may not always be possible for
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the non-clinical safety studies to be in conformity with the principles of GLP and a proper justification should be submitted where a pivotal non-clinical safety study has not been conducted under GLP rules.
Clinical studies are crucial to obtaining the required data and the requirements governing the conduct of clinical trials are further analyzed below.
All medicinal products and advanced therapy medicinal products, or ATMPs, must be manufactured in accordance with the guidelines on GMP and in a GMP licensed facility, which can be subject to GMP inspections.
Human Clinical Trials
Clinical trials involve the administration of the biologic product candidate to patients under the supervision of qualified investigators which generally are physicians not employed by, or under, the control of the trial sponsor. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent.
Further, each clinical trial must be reviewed and approved by an IRB at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers items such as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject, or their legal representative, reviews and approves the study protocol, and must monitor the clinical trial until completed.
Human clinical trials typically are conducted in three sequential phases that may overlap or be combined:
•Phase 1. The biologic product candidate initially is introduced into a small number of human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early understanding of its effectiveness. Phase 1 clinical trials of gene and cell therapies are typically conducted in patients rather than healthy volunteers.
•Phase 2. The biologic product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
•Phase 3. Phase 3 clinical trials are commonly referred to as “pivotal” studies, which typically denotes a study which presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to approve a biologic product. In Phase 3 studies, the biologic product candidate is administered to an expanded patient population, generally at multiple geographically dispersed clinical trial sites in adequate and well-controlled clinical trials to generate sufficient data to statistically confirm the efficacy and safety of the product for approval. These clinical trials are intended to establish the overall risk/benefit ratio of the product candidate and provide an adequate basis for product labeling.
Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. Sometimes approval for a product is conditional upon the completion of post-marketing clinical studies.
During all phases of clinical development, regulatory agencies (such as the FDA, the EMA, national competent authorities of EU Member States and other comparable regulatory agencies) require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA.
Written IND safety reports must be promptly submitted to the FDA and the investigators for: serious and unexpected adverse events; any findings from other trials, in vivo laboratory tests or in vitro testing that suggest a significant risk for human subjects; or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life‑threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information.
The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable safety risk. Similarly, an
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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 biologic product candidate has been associated with unexpected serious harm to patients.
The FDA usually recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for up to a 15-year period.
In the EU, clinical trials are governed by the Clinical Trials Regulation (EU) No 536/2014, or the CTR, which entered into application on January 31, 2022. The CTR is intended to harmonize and streamline clinical trial authorizations, simplify adverse-event reporting procedures, improve the supervision of clinical trials and increase clinical trial transparency. Specifically, the CTR, which is directly applicable in all EU Member States, introduces a streamlined application procedure through a single-entry point, the Clinical Trials Information System, or CTIS, which is a single set of documents to be prepared and submitted for the application, as well as simplified reporting procedures for clinical trial sponsors. A harmonized procedure for the assessment of applications for clinical trials has been introduced and is divided into two parts. Part I assessment is led by the competent authorities of a reference Member State selected by the trial sponsor and relates to clinical trial aspects that are considered to be scientifically harmonized across EU Member States. This assessment is then submitted to the competent authorities of all the concerned Member States in which the trial is to be conducted for their review. Part II is assessed separately by the competent authorities and ethics committees in each concerned EU Member State. Individual EU Member States retain the power to authorize the conduct of clinical trials in their territory. The extent to which ongoing clinical trials will be governed by the CTR will depend on the duration of the individual clinical trial. If a clinical trial continues for more than three years after January 31, 2022, the CTR will begin to apply to the clinical trial after expiry of this three-year period. The CTR will apply to clinical trials from an earlier date if the clinical trial has already transitioned to the CTR framework.
If the medicinal product is considered to be a genetically modified organism, or GMO, then GMO approval may also be required from the national GMO competent authorities of EU Member States. There is no harmonization between EU Member States regarding the approach to and timelines of GMO approval, which may result in diverging requirements between EU Member States. In addition, the submission of applications for approval of GMOs to national competent authorities of EU Member States is not made in tandem with applications for the approval of clinical trials that must be submitted via CTIS. As a result, sponsors of clinical trials that include GMOs requiring separate approval cannot benefit from submission of a single application dossier for the approval of a clinical trial and the subsequent synchronized response from EU Member States. This may impact study initiation in a given country.
The conduct of clinical trials should follow the approved clinical trial protocol, informed consents requirements, including patient informed consents, procedures and controls designed and approved for such studies, accepted standard medical and scientific research procedures and be conducted in accordance with the relevant principles of GCP and all applicable laws and regulations. Gene therapy medicinal products are in addition subject to the rules of GCP for ATMPs, which outline specific additional safeguards and requirements. Record retention requirements are increased for ATMPs as there are relevant long-term follow-up and human safety and traceability requirements.
Compliance with cGMP Requirements
Manufacturers of biologics must comply with applicable current Good Manufacturing Practices, or cGMP, regulations, including quality control and quality assurance and maintenance of records and documentation. Manufacturers and others involved in the manufacture and distribution of such products also must register their establishments with the FDA and certain state agencies, as well as foreign authorities including the competent authorities of the EU Member States. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA, as well as foreign authorities including the competent authorities of the EU Member States, upon their initial participation in the manufacturing process. Any material changes to the manufacturing equipment, process or location of the approved manufacturing site must be reported to the relevant agency/authority. Establishments may be subject to periodic, unannounced inspections by government authorities (including regulatory agencies) to ensure compliance with cGMP requirements and other laws. Discovery of problems may result in a government entity placing restrictions on a product, manufacturer or holder of an approved BLA or authorization for clinical trial, and may extend to requiring withdrawal of the product from the market, issue warning or similar letters or seeking civil, criminal or administrative sanctions against the company. The FDA and foreign authorities including the competent authorities of the EU Member States will not approve a BLA unless they determine that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specification.
Concurrent with clinical trials, companies develop additional information about the physical and biological characteristics of the product candidate as well as finalize a process for manufacturing the product candidate in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents or of causing other adverse events with the use of biologic products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently
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producing quality batches of the product candidate and, among other requirements, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biologic product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biologic product candidate does not undergo unacceptable deterioration over its shelf life.
For a product candidate that is also a human cellular or tissue product, the FDA also requires compliance with current Good Tissue Practices, or cGTPs. These are FDA and EU regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues and cellular and tissue-based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA and EU regulations also require tissue establishments to register and list their HCT/Ps with the FDA or the competent authorities of the EU Member States and, when applicable, to evaluate donors through screening and testing.
U.S. Review and Approval Processes
The results of the preclinical tests and clinical trials, together with detailed information relating to the product’s CMC, and proposed labeling, among other things, are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. The PDUFA also imposes an annual program fee for approved biologics. 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 or for a product indication for orphan diseases.
The FDA reviews a BLA within 60 days of submission to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In that event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth, substantive review of the BLA.
The FDA reviews the BLA to determine, among other things, whether the proposed product candidate is safe and effective, for its intended use and whether the product candidate is being manufactured in accordance with cGMP to assure and preserve the product candidate’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biologic products or biologic products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the product approval process, the FDA also will determine whether a risk evaluation and mitigation strategy, or REMS, is necessary to assure the safe use of the product candidate. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. A REMS could include medication guides, physician communication plans and elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.
Before approving a BLA, the FDA will inspect the facilities at which the product candidate is manufactured. The FDA will not approve the product candidate unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product candidate within required specifications. Additionally, before approving a BLA, the FDA typically will inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements.
On the basis of the BLA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the biologic product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval letter.
If a product candidate receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product
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distribution, prescribing or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post-marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biologic product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
The FDA has agreed to specified performance goals in the review of BLAs under the PDUFA. One such goal is to review standard BLAs in 10 months after the FDA accepts the BLA for filing, and priority BLAs in six months, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.
EU Review and Approval Process
In the EU, medicinal products can only be commercialized after a related MA, has been granted. To obtain an MA for a product in the European Economic Area, or EEA (which is comprised of the 27 Member States of the EU plus Norway, Iceland and Liechtenstein), an applicant must submit a MAA, either under a centralized procedure administered by the EMA or one of the procedures administered by competent authorities in the EU Member States (decentralized procedure, national procedure or mutual recognition procedure). An MA may be granted only to an applicant established in the EU.
The centralized procedure provides for the grant of a single MA by the European Commission that is valid for all EU Member States. Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for (i) medicinal products derived from biotechnological processes, (ii) products designated as orphan medicinal products, (iii) ATMPs and (iv) products with a new active substance indicated for the treatment of HIV/AIDS, cancer, neurodegenerative diseases, diabetes, autoimmune and other immune dysfunctions and viral diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, authorization through the centralized procedure is optional on related approval.
Under the centralized procedure, the EMA’s Committee for Medicinal Products for Human Use, or CHMP, conducts the initial assessment of a product. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing MA. The maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated assessment may be granted by the CHMP in exceptional cases. If the CHMP accepts a request for accelerated assessment, the time limit of 210 days will be reduced to 150 days (excluding clock stops). The CHMP can, however, revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment.
Unlike the centralized authorization procedure, the decentralized MA procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU Member State in which the product is to be marketed. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States that, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the Heads of Medicines Agencies’ Coordination Group for Mutual Recognition and Decentralised Procedures – Human for review. The subsequent decision of the European Commission is binding on all EU Member States.
The mutual recognition procedure allows companies that have a medicinal product already authorized in one EU Member State to apply for this authorization to be recognized by the competent authorities in other EU Member States. Like the decentralized procedure, the mutual recognition procedure is based on the acceptance by the competent authorities of the EU Member States of the MA of a medicinal product by the competent authorities of other EU Member States. The holder of a national MA may submit an application to the competent authority of an EU Member State requesting that this authority recognize the MA delivered by the competent authority of another EU Member State.
An MA has, in principle, an initial validity of five years. The MA may be renewed after five years on the basis of a reevaluation of the risk-benefit balance by the EMA or by the competent authority of the EU Member State in which the original MA was granted. To support the application, the MA holder must provide the EMA or the competent authority with a consolidated version of the electronic Common Technical Document providing up-to-date data concerning the quality, safety and efficacy of the product, including all variations introduced since the MA was granted, at least nine months before the MA ceases to be valid. The European Commission or the competent authorities of the EU Member States may decide on justified grounds relating to pharmacovigilance to proceed with one further five-year renewal period for the MA. Once subsequently
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definitively renewed, the MA shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the medicinal product on the EU market (for a centralized MA) or on the market of the authorizing EU Member State (for a decentralized MA) within three years after authorization ceases to be valid (the so-called sunset clause).
Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the Priority Medicines, or PRIME, designation. Products eligible for PRIME must target conditions for which there is an unmet medical need and demonstrate the potential to address the unmet medical need by introducing new methods of therapy or improving existing ones. Benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements and potentially accelerated MAA assessment once a dossier has been submitted.
In the EU, a “conditional” MA may be granted in cases where all the required safety and efficacy data are not yet available. The European Commission may grant a conditional MA for a medicinal product if it is demonstrated that all of the following criteria are met: (i) the benefit-risk balance of the medicinal product is positive, (ii) it is likely that the applicant will be able to provide comprehensive data post-authorization, (iii) the medicinal product fulfils an unmet medical need and (iv) the benefit of the immediate availability to patients of the medicinal product is greater than the risk inherent in the fact that additional data are still required. The conditional MA is subject to conditions to be fulfilled for generating the missing data or ensuring increased safety measures. It is valid for one year and must be renewed annually until all related conditions have been fulfilled. Once any pending studies are provided, the conditional MA can be converted into a traditional MA. However, if the conditions are not fulfilled within the timeframe set by the EMA and approved by the European Commission, the MA will cease to be renewed.
An MA may also be granted “under exceptional circumstances” where the applicant can show that it is unable to provide comprehensive data on efficacy and safety under normal conditions of use even after the product has been authorized and subject to specific procedures being introduced. These circumstances may arise in particular when the intended indications are very rare and, in the state of scientific knowledge at that time, it is not possible to provide comprehensive information, or when generating data may be contrary to generally accepted ethical principles. Like a conditional MA, an MA granted in exceptional circumstances is reserved to medicinal products intended to be authorized for treatment of rare diseases or unmet medical needs for which the applicant does not hold a complete data set that is required for the grant of a standard MA. However, unlike the conditional MA, an applicant for authorization in exceptional circumstances is not subsequently required to provide the missing data. Although the MA “under exceptional circumstances” is granted definitively, the risk-benefit balance of the medicinal product is reviewed annually, and the MA will be withdrawn if the risk-benefit ratio is no longer favorable.
Manufacturing Regulation in the EU
Various requirements apply to the manufacturing and placing on the EU market of medicinal products. The manufacturing of medicinal products in the EU requires a manufacturing authorization, and import of medicinal products into the EU requires a manufacturing authorization allowing for import. The manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance, including EU cGMP standards. Similarly, the distribution of medicinal products within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of EU Member States. Marketing authorization holders and/or manufacturing and import authorization, or MA holders and/or distribution authorization holders may be subject to civil, criminal or administrative sanctions, including suspension of manufacturing authorization, in case of non-compliance with the EU or EU Member States’ requirements applicable to the manufacturing of medicinal products.
Post-approval Requirements
Rigorous and extensive FDA and EU regulation of biologic products continues after approval, particularly with respect to cGMP requirements. Manufacturers are required to comply with applicable requirements in the cGMP regulations, including quality control and quality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biologic products include reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information and complying with electronic record and signature requirements. After a BLA is approved, the product also may be subject to official lot release. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA, together with a release protocol, showing a summary of the history of manufacture of the lot and the results of all tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products before releasing the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency and effectiveness of biologic products. Failure to comply with the FDA’s post-approval regulations can result in withdrawal of product approval and licensure.
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A sponsor also must comply with the FDA’s or EMA’s, European Commission’s and/or the applicable EU Member States’ competent regulatory authorities’ advertising and promotion requirements, such as the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (or Summary of Product Characteristics in the EU) (known as “off-label use”). Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
Orphan and RMAT Designation
Products that are intended for treating rare conditions that affect fewer than 200,000 people in the United States, or that affect more than 200,000 persons but are not expected to recover the costs of developing and marketing a treatment drug, may qualify for orphan designation. In the EU, these rare conditions are defined as either having a prevalence of no more than five in every 10,000 people in the EU or that the medicinal product to treat such condition, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify the necessary investment in developing the medicinal product. Once a medicinal product with orphan designation obtains a marketing approval, it can benefit from a marketing exclusivity period in respect of the specific orphan indication for which the drug has been approved for a period of seven years in the United States and for up to 10 years in the EU. If the manufacturer is no longer able to assert that the product meets the orphan designation criteria or is not able to provide sufficient quantities, it may lose the orphan market exclusivity.
Regenerative medicine advanced therapy, or RMAT, designation is intended to expedite review of a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, intended to treat, modify, reverse, or cure a serious or life‑threatening disease or condition and for which preliminary clinical evidence indicates the potential to address unmet medical needs for such a disease or condition.
RMAT designation provides potential benefits that include more frequent meetings with the FDA to discuss the development plan for the product candidate, and eligibility for rolling review and priority review of the related BLA. Products granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. However, RMAT designation does not change the FDA’s standards for product approval. Additionally, RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges.
Clinical Trial Data Disclosure
Many jurisdictions have mandatory clinical trial information obligations incumbent on sponsors. In the EU, transparency requirements relating to clinical trial information are established in the CTR, which establishes a general principle according to which information contained in CTIS shall be made publicly accessible unless confidentiality is justified on grounds of protecting personal data or commercially confidential information, protecting confidential communications between EU Member States in relation to the preparation of an assessment report or ensuring effective supervision of the conduct of a clinical trial by EU Member States. This confidentiality exception may be overruled if there is an overriding public interest in disclosure. The publication of data and documents in relation to the conduct of a clinical trial will take place in accordance with specific timelines. The timelines are established by the EMA and are determined based on the documents and the categorization of the clinical trial. In addition, sponsors of clinical trials may apply for deferral of publication of certain documents at the time of submission of the initial clinical trial application. The application for deferral of publication should be based on justified grounds and include a reasoned proposed deferral period. Applications for deferral of publication are subject to the approval of concerned EU Member States.
In addition, Regulation No. 1049/2001 on access to documents, or the ATD Regulation, and the related EMA policy 0043 on access to documents provide for a wide right for EU-based interested parties to submit an access to documents request to the EMA to access certain information held by the EMA. Only very limited information is exempted from disclosure (i.e., commercially confidential information, which is construed increasingly narrowly and protected personal data). It is possible for competitors to access and use this data in their own research and development programs anywhere in the world, once these data are in the public domain.
Regulation of Our Operations
Although we currently do not have any products on the market, we may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation:
•the federal healthcare Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, overtly or
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covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
•federal civil and criminal false claims laws, including the federal False Claims Act, and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment or approval that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information held by certain healthcare providers, health plans and healthcare clearinghouses, known as covered entities, and individuals and entities that perform services for them that involve individually identifiable health information, known as business associates as well as covered subcontractors;
•the federal Physician Payments Sunshine Act created under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to payments and other transfers of value to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members;
•analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, require drug manufacturers to report information related to payments and other transfers of value to other healthcare providers and healthcare entities, marketing expenditures; or drug pricing; and/or ensure the registration of sales personnel; and
•state and foreign laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to significant penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs, imprisonment, suspension or withdrawal of our marketing and commercialization in respect of our commercially approved products, and additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our financial results. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.
Healthcare Reform
The U.S. and some foreign jurisdictions are considering enacting or have enacted a number of additional legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our product candidates profitably, if approved. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts, which include major legislative initiatives, such as the ACA, to reduce the cost of care through changes in the healthcare system, including limits on the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government-funded health care programs, and increased governmental control of drug pricing. The ACA and its implementing regulations,
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among other things, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including products similar to our product candidates, that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, created a new Patient Centered Outcomes Research Institute, which provides incentives to programs that increase the federal government’s comparative effectiveness research, established a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D, and created a licensure framework for follow-on biologic products.
There have been legal and political challenges to certain aspects of the ACA, as well as efforts to repeal or replace certain aspects of the ACA. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or the IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how additional challenges and the healthcare reform measures of the Biden administration will impact the ACA.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and, due to subsequent legislative amendments to the statute, including the Bipartisan Budget Act of 2018, will remain in effect through 2031 unless additional Congressional action is taken. However, pursuant to COVID-19 pandemic relief legislation, these Medicare sequester reductions are suspended from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In January 2013, the American Taxpayer Relief Act of 2012, or the ATRA, was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Further, Congress is considering additional health reform measures.
Also, there has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. Additionally, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. It is unclear whether these or similar measures will be implemented in the future. In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. Further, the Biden administration released an additional executive order on October 14, 2022, directing HHS to submit a report within ninety (90) days on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models
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for lowering drug costs for Medicare and Medicaid beneficiaries. It is unclear whether this executive order or similar policy initiatives will be implemented in the future. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
In the United States, the EU and other potentially significant markets for our product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices. Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the EU will put additional pressure on product pricing, reimbursement and usage, which may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
Pricing, Coverage and Reimbursement
Pricing and reimbursement of a therapeutic product will largely determine the affordability of the product, and whether the product is prescribed and supplied to patients and private insurance companies may take into account government reimbursement methodologies. Due to these proposed and enacted laws, as well as other actions, significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval, particularly for novel products. In both domestic and foreign markets, sales and reimbursement of any approved products will depend, in part, on the extent to which third-party payors, such as government health programs, commercial insurance and managed healthcare organizations provide coverage, and establish adequate reimbursement levels, for such products. Third-party payors are increasingly challenging the prices charged for medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Additionally, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. If third-party payors do not consider our products to be cost-effective compared to other therapies, these payors may not cover our products after approved as a benefit under their plans or, if they do, the level of reimbursement may not be sufficient to allow us to sell our products on a profitable basis.
In the EU, pricing and reimbursement schemes vary widely from country to country. EU Member States may approve a specific price for a product, or they may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other EU Member States allow companies to fix their own prices for products but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the EU have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures. The Health Technology Assessment, or HTA, process is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. In December 2021, the EU HTA Regulation was adopted, which will enter into application in 2025 and is intended to harmonize the clinical benefit assessment of HTA across the EU. See “Risk Factors—Even if we are able to commercialize any approved products, such products may not receive coverage and adequate reimbursement from third-party payors in the United States and in other countries in which we seek to commercialize them, which could harm our business.”
Environmental Regulation
U.S. federal and state laws regarding safe working conditions, environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. We may incur significant costs to comply with such laws and regulations now or in the future. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and regulations that continued compliance therewith will not have a material effect on our business. We cannot predict, however, how changes in these laws and regulations may affect our future operations.
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Privacy Regulation
We are, or may become, subject to numerous privacy and data security laws and regulations in the United States and in other foreign jurisdictions, including, as applicable, the Federal Trade Commission Act, the EU General Data Protection Regulation, or EU GDPR, the EU GDPR as it forms part of the United Kingdom’s law by virtue of Section 3 of the European Union (Withdrawal) Act 2018, as amended, or UK GDPR, and the California Consumer Privacy Act of 2018, or CCPA.
The collection, use, disclosure, transfer or other processing of personal data regarding individuals in the EEA, including personal health data, is subject to the EU GDPR. The EU GDPR, which is wide-ranging in scope, imposes several requirements on us relating to, among other things, the control over personal data by individuals to whom the personal data relates, notice we must provide to individuals regarding our processing of their personal data, the documentation we must maintain, the security and confidentiality of the personal data, data breach notification, and the use of third-party processors in connection with the processing of personal data. The EU GDPR also imposes strict rules on the transfer of personal data to countries that the European Commission does not consider to provide an adequate level of privacy and data security (including the United States). While the European Commission recently issued a decision that allows transfers of personal data from the EEA to the United Kingdom to occur without restriction for a period of four years ending June 27, 2025, this decision could be withdrawn or not renewed, which would require us to implement additional mechanisms to continue making such transfers. The EU GDPR authorizes the imposition of large penalties and other corrective actions for noncompliance, including potential fines of up to €20 million or 4% of the annual global revenue of the noncompliant company, whichever is greater, definitive bans on data processing or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. The EU GDPR requirements related to international data transfers apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries such as Sangamo France, including employee information. The EU GDPR has increased our responsibility and potential liability in relation to personal data that we process compared to prior EU law, particularly in light of our acquisition of Sangamo France, and we may be required to put in place additional mechanisms to ensure compliance with the EU GDPR, which could divert management’s attention and increase our cost of doing business.
In the United States, federal, state and local governments have enacted numerous privacy and data security laws, including laws on data breach notification, personal data privacy and consumer protection. For example, the CCPA requires businesses to provide detailed disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights related to their personal data (including the right to delete their personal data and to opt out of the sale of their personal data). The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA may increase compliance costs and potential liability with respect to other personal data we may maintain about California residents. The California Privacy Rights Act of 2020, or CPRA, which became operative on January 1, 2023, expanded the CCPA’s requirements to apply to personal information of business representatives and employees, and established a new regulatory agency, the California Privacy Protection Agency, to implement and enforce the law and impose administrative fines. Other states, such as Virginia, Colorado, Utah and Connecticut, have also passed comprehensive privacy and data security laws, and similar laws are being considered in several other states, as well as at the federal and local levels. These developments may further complicate compliance efforts, and may increase legal risk and compliance costs for us and the third parties upon whom we rely.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that could adversely affect our business, financial condition and results of operations. Furthermore, the laws are not consistent, and compliance in the event of a widespread data breach is costly. See “Risk Factors—Our current and future relationships with healthcare providers, customers and third-party payors subject us to applicable anti-kickback, fraud and abuse, privacy, data security and other healthcare laws and regulations. If we fail to comply with such regulations, we could face regulatory investigations or actions, litigation, and substantial fines and penalties, and our business, reputation, results of operations, financial condition and prospects could be adversely affected.”
HUMAN CAPITAL MANAGEMENT
Our Mission and Our Employees
At Sangamo, we are committed to translating ground-breaking science into genomic medicines that transform patients’ lives. We are a passionate group of biotechnology professionals based in the United States, France and the United Kingdom with years of experience and technical expertise, committed to developing best-in-class genomic medicines. We embrace collaboration, discipline and efficiency while welcoming fresh ideas and stimulating personal development. We encourage and
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embrace diversity, equity and inclusion, and believe it enhances our work towards one common goal: to transform the lives of the patients we aim to serve.
We view our employees as one of our most valuable assets in serving our mission. We compete in the highly competitive biotechnology industry, and attracting, retaining and developing a diverse group of talented employees is crucial to our strategy and our ability to compete effectively. We are committed to the development and retention of our workforce to support our research, product development, manufacturing and regulatory efforts and our plans for commercializing our wholly-owned product candidates if and when approved. There continues to be a shortage of skilled individuals with substantial experience discovering, developing and manufacturing genomic medicines, which is likely to continue. As a result, there continues to be competition between biopharmaceutical companies and academic institutions for individuals with these skills.
Our Values
We believe success comes when we align our core values with our mission to deliver genomic medicines that replace today’s symptomatic treatments and transform patients’ lives. Our core values are:
•Doing what’s right for patients:
◦We collaborate with purpose and are driven by results that benefit patients.
◦We strive to put patient safety and quality of care first.
◦Patient needs drive our sense of urgency to deliver medicines.
◦We embrace our responsibility to pioneer the field of genomic medicine bioethically.
◦We take an inclusive approach to guide our drug development.
•Succeeding through teamwork:
◦We are driven by our shared vision that genomic medicine will transform the lives of patients and the field of healthcare.
◦We are a passionate and dedicated group of individuals who collaborate proactively and openly to execute and progress our business forward.
◦We define our priorities clearly, communicate them, and take collective accountability to deliver results for all stakeholders.
◦We are resilient and determined to succeed together because patients are depending on us.
•Innovating through smart decisions:
◦We courageously, relentlessly, and urgently pursue the journey of innovation to succeed in the field of genomic medicine.
◦We mine scientific possibilities with the goal of unlocking new treatment solutions for serious diseases.
◦We strive to achieve our business goals through agile, inclusive and efficient decision making.
◦We learn and grow from decades of scientific experience to develop therapies at the cutting edge of medicine.
◦We learn from failure, and seek to continuously improve performance, as part of the journey to achieve breakthroughs.
•Fostering belonging:
◦We develop shared goals that create a sense of belonging.
◦We are a company where diverse individuals can flourish, grow and develop their expertise while bringing their authentic selves to work.
◦We feel connected to our local communities, the environment in which we live and the patient communities we serve.
◦We come together to understand our scientific learnings and progress the evolution of our business.
◦We embrace diversity, equity and inclusion.
◦We are committed to nurturing diverse and inclusive environments to advance healthcare equity.
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Our Management of Human Capital
Our Chief People Officer leads our human resources function with a focus on attraction and recruitment of candidates, leadership training and development, diversity and inclusion efforts, total rewards packages consisting of compensation and benefits, and employee engagement and retention. As of December 31, 2022, our global human resources function was comprised of 12 full time human resources professionals.
As of December 31, 2022, we had 478 full time employees located in the United States, France and the United Kingdom. Of these employees, 375 were located in the United States, primarily in the San Francisco Bay Area, 94 were located in Valbonne, France and the remaining nine were located near London, United Kingdom. Of these employees, 206 were primarily engaged in research and development activities, 176 were primarily engaged in technical operations and manufacturing and 96 were primarily engaged in general and administrative activities. We also engage the services of independent contractors and consultants as needed for special or temporary projects or specific expertise.
To manage our human resources, we track and report internally on key talent metrics including headcount by business unit and country, historical headcount growth, turnover, new hires and terminations, open roles and employee demographics including gender, race and ethnicity. Our senior executives use these metrics to assist with resource planning, recruitment and retention initiatives and the design of our compensation and benefits programs. We share these metrics quarterly with the Compensation Committee of our Board of Directors to assist it in fulfilling its duties to establish our enterprise compensation philosophy, administer our compensation and benefit plans, evaluate the performance of our executive officers and key employees and review and monitor management development and succession plans.
Our employees participate in a biannual employee engagement survey. The results of this survey continue to help us better understand the culture, work dynamics and overall commitment of our employees and to also identify areas of focus that will increase overall employee engagement. We were pleased with our participation rate of 74%, demonstrating favorable levels of employee engagement and commitment.
Our Commitment to Diversity, Equity and Inclusion
We strongly believe in a diverse workplace where all Sangamo employees can thrive in an inclusive environment free from discrimination, harassment, bias and prejudice. We aim to treat all individuals with respect and dignity and to provide all Sangamo employees with equal opportunity and fair treatment based on merit. By embracing diversity and inclusion, we create an organization committed to working together to develop innovative solutions in support of the Sangamo mission consistent with our values. At Sangamo, we cultivate a culture and environment where different backgrounds and perspectives are not only respected and heard, but also embraced and celebrated. Not only is a diverse, equitable and inclusive mindset and culture critical to an engaged and committed workplace, but it is also imperative in delivering innovative solutions for our patients.
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The following depicts Sangamo’s United States employee demographics, based on self-identification, as of December 31, 2022:
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Within the human resources team, we have a Senior Program Manager whose time is fully dedicated to leading our Diversity, Equity and Inclusion, or DEI, efforts in partnership with our Chief People Officer and Chief Operations Officer. There is also a working group who identifies key areas of focus for the company to implement diversity initiatives. We have six employee resource groups, or ERGs, that are led by employees in partnership with an executive sponsor, and we have dedicated budgets for each of these ERGs so that they can make a specific impact in the areas of building and reinforcing community, leadership development and talent attraction. We are working on various partnerships with Life Science Cares, a non-profit organization with a mission of leveraging the resources of life science companies to help reduce the effects of poverty, and our Chief Operating Officer, D. Mark McClung, serves as a board member. We have also participated in the Bloomberg Gender Equality Index to better align our investments and initiatives with our employees.
Our Compensation and Benefits
Given the highly competitive nature of our industry and the importance of recruitment and retention to our success, we strive to provide our employees with what we believe is a very competitive and comprehensive total rewards package of compensation, benefits and development opportunities. This package includes at or above-market pay; healthcare benefits for employees and family members; a health savings account for eligible U.S. employees with above market employer contributions; generous paid time off benefits; family leave; bereavement leave; flexible work schedules; contributions to retirement and/or pension plans; a supplemental long term disability plan; mental health benefits and onsite gym access. In addition, we offer a monthly stipend for employees to spend on health and well-being. We also offer every full-time employee globally the benefit of equity ownership in Sangamo through stock option grants and/or restricted stock units. Our U.S. employees are also eligible to participate in an employee stock purchase plan, which offers the opportunity to purchase our common stock at a discount of at least 15%.
The COVID-19 Pandemic
Employee safety and wellbeing is of paramount importance to us in any year and continued to be of particular focus in 2022 in light of the continuing COVID-19 pandemic. In response to the pandemic, we have supported our employees and government efforts to curb the COVID-19 pandemic through safety and communication efforts and resources. These efforts will continue as needed pending shifts in the external and internal environments as a result of the pandemic.
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Environment
Sangamo is headquartered in Brisbane, California, with research facilities in Richmond, California and European facilities in Valbonne, France and the United Kingdom. In house manufacturing operations are located within the Brisbane and Valbonne facilities. Sangamo’s headquarters in Brisbane is LEED certified, meaning it meets the requirements of a green building set by the U.S. Green Building Council.
Trademarks and Tradenames
SANGAMO® and Better Therapeutics By Design® are our registered trademarks in the United States and Sangamo Therapeutics™ and SIFTER™ are our trademarks. All other trademarks or trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.
Available Information
Our website is located at www.sangamo.com. This Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge on our website as soon as reasonably practicable after we electronically file this material with, or furnish it to, the Securities and Exchange Commission, or SEC. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
ITEM 1A – RISK FACTORS
Our business involves significant risks, some of which are described below. Before making investment decisions regarding our common stock, you should carefully consider these risks, as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. In such event, the market price of our common stock could decline, and you could lose all or part of your investment. In addition, there are additional risks not described below that either are not presently known to us or that we currently deem immaterial, and these additional risks could also materially impair our business, operations or market price of our common stock.
Risks Relating to Research, Development, Regulatory Approval and Commercialization of Our Product Candidates and Technologies
Our success depends substantially on clinical trial results demonstrating safety and efficacy of our product candidates to the satisfaction of regulatory authorities. We may be unable to obtain positive clinical trial results and regulatory approvals for any of our product candidates.
We are a clinical-stage biotechnology company with no approved products and no product revenues. We have ongoing clinical trials evaluating product candidates that use our platform technologies in gene therapy and cell therapy and we anticipate initiating additional clinical trials in the future on other product candidates. We are substantially dependent on the results of these clinical trials, and there is no guarantee that final results of clinical trials conducted on our product candidates now or in the future will demonstrate the safety and efficacy of any of our product candidates. In addition, none of our product candidates have obtained regulatory approval. Obtaining positive clinical trial results and regulatory approvals is expensive, lengthy, challenging and unpredictable and may never occur for any of our product candidates. If we fail to obtain positive clinical trial results and regulatory approvals for our product candidates, our anticipated revenues from our product candidates and our prospects for profitability would be adversely affected, which would likely cause the market price of our common stock to significantly decline.
Conducting clinical trials and obtaining regulatory approvals is complex and exposes our business to numerous risks, including potential unexpected costs and delays.
We must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates to the satisfaction of regulatory authorities in order to obtain regulatory approvals necessary for commercialization. We have limited experience in conducting later stage clinical trials and may not possess the necessary resources and expertise to complete such trials. Clinical trials are expensive, lengthy and unpredictable. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage. Events that may delay or prevent successful or timely completion of clinical development and regulatory approval include, among others:
•delays in reaching a consensus with regulatory authorities on clinical trial design;
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•delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;
•delays in opening clinical trial sites or obtaining required institutional review board, or IRB, ethics committee or national competent authority approval at each clinical trial site, such as the delays we have experienced opening the clinical trial sites in the United Kingdom for our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, due to the COVID-19 pandemic;
•delays or interruptions in recruiting, screening and enrolling suitable patients to participate in our clinical trials and dosing enrolled patients, such as (i) the delays we have experienced in recruiting, screening and enrolling patients and experienced and continue to experience in dosing patients for our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec due to challenges related to the COVID-19 pandemic, including due to patients testing positive for COVID-19, patients reconsidering their participation in the study and the limited number of screening sites, among other reasons and (ii) the pause in dosing of additional patients in the Phase 3 AFFINE trial of giroctocogene fitelparvovec implemented by Pfizer in March 2022 and lifted in September 2022;
•the imposition of clinical holds by regulatory authorities on our clinical trials or those of our collaborators, such as the clinical hold imposed by the FDA on the Phase 3 AFFINE trial of giroctocogene fitelparvovec imposed in November 2021 and lifted in March 2022;
•delays in clinical trial activities due to the COVID-19 global pandemic, including delays associated with certain patients testing positive for COVID-19 prior to enrollment or dosing in the study, which have previously impacted clinical trial timelines for our Fabry and TX200 programs;
•delays or difficulties we may experience in enrolling and dosing the final patients in our Phase 1/2 PRECIZN-1 study evaluating BIVV003, our ZFN gene-edited autologous cell therapy product candidate for the treatment of sickle cell disease;
•failure by us, any CROs we engage or any other third parties to adhere to clinical trial requirements;
•failure to perform in accordance with the Good Clinical Practice and Good Laboratory Practice regulations of the FDA, or applicable comparable foreign regulations in the EU and other countries;
•delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites, including delays by third parties with whom we have contracted to perform certain of those functions, or as a result of manufacturing or formulation changes to our product candidates;
•delays in having patients complete participation in a trial or return for post-treatment follow-up;
•clinical trial sites or patients dropping out of a trial;
•selections of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data;
•occurrences of serious adverse events or other safety concerns associated with product candidates that are viewed to outweigh their potential benefits, result in approval delays or other regulatory restrictions, or harm our reputation;
•occurrences of serious adverse events or other safety concerns in clinical trials of the same class of agents conducted by other sponsors;
•failures to demonstrate that product candidates are safe and effective for their proposed indication;
•changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
•unexpected costs and expenses and lack of sufficient funding to develop our product candidates; and
•losses of licenses to critical intellectual properties.
We have not yet reached agreement with regulatory authorities on the complete development pathway for certain product candidates, and such authorities have the ability to change decisions or guidance with respect to approvable endpoints, particularly as the technology continues to develop in these areas. For example, we are aware of another company developing a gene therapy to treat hemophilia A that the FDA recommended complete its Phase 3 study and submit two-year follow-up safety and efficacy data on all study participants notwithstanding the company’s contention that it and the FDA had previously agreed on the extent of data necessary to support a biologics license application, or BLA. While we and Pfizer anticipate pivotal data readouts for our Phase 3 AFFINE trial to be based on full analyses of all study participants, when the first 50 patients are twelve months past reaching a steady-state of FVIII expression, the FDA or other comparable foreign regulatory authorities
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could determine that we need to treat more patients in this trial than expected or follow patients for longer than expected to generate the required data, or that we need to make other modifications to the trial, any of which could negatively impact the ability to complete the trial and seek regulatory approvals for giroctocogene fitelparvovec, which could in turn materially and adversely affect its competitive position and commercial viability and therefore our business, prospects and market price of our stock.
Due to the novelty of certain product candidates and their technologies, the endpoints needed to support regulatory approvals will likely be different from those originally anticipated. Any inability to successfully complete preclinical and clinical development of our product candidates, or complete such trials in the timeframes anticipated, could result in additional costs to us or impair our ability to generate revenues from product sales or achieve regulatory and commercialization milestones and royalties, or shorten any periods during which we may have exclusivity.
Even if a product candidate successfully obtains approval from the FDA and comparable foreign regulatory authorities, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements. Also, any regulatory approval of our product candidates, once obtained, may be withdrawn, varied or suspended. If we are unable to obtain and maintain regulatory approvals for our product candidates in one or more jurisdictions, or if any approval contains significant limitations, we would not be able to generate anticipated revenues and may struggle to become profitable, which would have an adverse effect on our business operations and financial condition.
Success in research and preclinical studies or early clinical trial results may not be indicative of results obtained in later trials. Likewise, preliminary, initial or interim data from clinical trials may be materially different from final data.
Results from research and preclinical studies or early clinical trials are not necessarily predictive of future clinical trial results, and preliminary, initial and interim results of a clinical trial are not necessarily indicative of final results. Our product candidates may fail to show the desired safety and efficacy in clinical trials despite demonstrating positive results in preclinical studies or having successfully advanced through initial clinical trials or preliminary stages of clinical trials. From time to time, we have and may in the future publish or report preliminary, initial or interim data. Preliminary, initial or interim data from our clinical trials and those of our collaborators may not be indicative of the final results of the trial and are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and/or more patient data become available. In this regard, such data may show initial evidence of clinical benefit, but as patients continue to be followed and more patient data becomes available, there is a risk that any therapeutic effects will not be durable in patients and/or will decrease over time, or cease entirely. Preliminary, initial or interim data also remain subject to audit and verification procedures that may result in the final data being materially different from such preliminary, initial or interim data. As a result, preliminary, initial or interim data should be considered carefully and with caution until the final data are available. For example, there can be no assurance that the FVIII levels shown in the updated data announced in December 2022 by Pfizer and us from the Phase 1/2 Alta study of giroctocogene fitelparvovec will persist in future follow-up or any other data from the Alta study or the Phase 3 AFFINE trial. Mean FVIII levels shown in the Alta study, after an initial peak, have trended downward from the time of treatment through each week of follow up. We cannot anticipate whether and to what extent this trend will continue downward over time. Similarly, there can be no assurance that the sustained elevated α-Gal A levels or the reduction of lyso-Gb3 levels observed in patients treated in the STAAR study will persist in future follow-up or in any other data from the STAAR study, or that such patients or any other future patients in the study, who are withdrawn from ERT will remain off ERT. In addition, patients in the STAAR study may experience more serious AEs, or SAEs. For this reason and potentially other reasons, giroctocogene fitelparvovec and isaralgagene civaparvovec may not ultimately demonstrate a durable, safe and effective clinical benefit to the satisfaction of regulatory authorities in the final results of the Alta study, the Phase 3 AFFINE clinical trial or Phase 1/2 STAAR study, as applicable, and even if satisfactory to regulatory authorities, such benefit may not be sufficient to yield a commercially-viable product.
There is no guarantee that any of our pending clinical trials will be successful. Many of our product candidates currently use our ZF technology platform, including ZF nuclease and ZF-transcriptional regulator-technologies, which has not yet yielded any approved therapeutic products. Moreover, many of our product candidates are preclinical and have never demonstrated any clinical benefit. In addition, our viral delivery systems continue to evolve and have not been used in any approved products. If our product candidates using our ZF technology platform and viral delivery systems are not able to demonstrate the safe, effective and durable results we are hoping to see in clinical trials, we may be forced to suspend or terminate development of some or all of our product candidates or seek alternative technologies to develop or deliver product candidates.
In addition, there is a high failure rate for product candidates proceeding through clinical trials. Many companies in the biopharmaceutical industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. Any such setbacks could adversely affect our business, financial condition, results of operations and prospects.
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Our product candidates are subject to a lengthy and unpredictable regulatory approval process in each jurisdiction where approval is sought.
A regulatory authority such as the FDA, the European Commission or comparable foreign regulatory authorities must approve any human therapeutic product before it can be marketed in the jurisdiction it governs. The process for receiving regulatory approval is lengthy and unpredictable, and a product candidate may not withstand the rigors of testing under the process. Before commencing clinical trials in humans in the United States, we must submit an IND to the FDA. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the EU, for example, an application for the approval of a clinical trial must be submitted for each clinical trial to each national competent authority and relevant ethics committee of EU Member States in which sponsor wishes to conduct the clinical trial. Only after an IND becomes effective and/or the clinical trial authorization has been obtained may clinical trials begin. See “Business—Government Regulation” for details regarding the regulatory approval processes applicable to our product candidates. While there is some overlap, the regulatory requirements to conduct clinical trials and seek marketing approval vary by jurisdiction. There is no guarantee that the safety studies and other data generated will be sufficient to permit us to conduct clinical trials in all jurisdictions where planned, or once generated, that such clinical trial data will be sufficient to obtain marketing approval in all jurisdictions in which we intend to seek such approval. If we are not able to obtain the necessary regulatory approvals to conduct our clinical trials and commercialize our product candidates, or if such approvals are delayed or suspended, our business, prospects and market price of our common stock would be adversely affected.
We may not be able to identify, qualify and enroll sufficient patients for our clinical trials or complete our clinical trials in a timely manner, which could delay or prevent us from proceeding with the development of our product candidates.
Identifying, qualifying and enrolling patients in clinical trials of our product candidates, and completing these clinical trials, is critical to our success. Patient enrollment and trial completion is affected by factors including:
•size of the patient population and process for identifying patients;
•design of the trial protocol;
•eligibility and exclusion criteria;
•perceived risks and benefits of the product candidate under study;
•perceived risks and benefits of genomic approaches to treatment of diseases;
•availability of competing therapies and clinical trials;
•potential additional delays related to the COVID-19 global pandemic, including the impact of certain patients testing positive for COVID-19 prior to enrolling or dosing in the study;
•delays or interruptions related to voluntary pauses of our clinical trials or those of our collaborators, such as the prior voluntary pause in March 2022 in enrolling and dosing additional patients in the Phase 3 AFFINE trial of giroctocogene fitelparvovec, which pause was lifted in September 2022, and the activation of trial sites;
•the imposition of clinical holds by regulatory authorities on our clinical trials or those of our collaborators, such as the prior clinical hold imposed by the FDA on the Phase 3 AFFINE trial of giroctocogene fitelparvovec, which hold has since been lifted, and the potential inability of Sangamo and our collaborators to lift clinical holds imposed by regulatory authorities in a timely manner or on acceptable terms, or at all;
•delays or difficulties we may experience in enrolling and dosing additional patients in our Phase 1/2 PRECIZN-1 study;
•severity of the disease under investigation;
•availability of genetic testing for potential patients;
•proximity and availability of clinical trial sites for prospective patients;
•required and desired characteristics of patients;
•ability to obtain and maintain patient consent;
•risk that enrolled patients will drop out before completion of the trial;
•patient referral practices of physicians; and
•ability to monitor patients adequately during and after treatment.
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The timing of our clinical trials depends on our ability to recruit patients to participate as well as completion of required follow-up periods. There are also a number of other product candidates in development by our competitors, who compete for the same limited patient populations. If we are not able to enroll the necessary number of patients in a timely manner, we may not be able to complete our clinical trials on our desired timelines or at all, which could negatively impact the competitive position and commercial viability of our product candidates or delay or reduce the product revenues, milestone payments or royalty payments we expect to earn from our product candidates. For example, we have experienced delays and challenges in recruiting, screening, enrolling and dosing patients for our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, due to challenges related to the COVID-19 pandemic, patients testing positive for COVID-19, patients reconsidering their participation in the study and the limited number of screening sites, among other reasons. Our Phase 1/2 STEADFAST clinical study evaluating TX200 has experienced similar delays and challenges.
In addition, we and Pfizer also previously announced that some of the patients treated in the Phase 3 AFFINE trial of giroctocogene fitelparvovec have experienced FVIII activity greater than 150% following treatment, and that Pfizer had decided to voluntarily pause screening and dosing of additional patients in this trial to implement a proposed protocol amendment intended to provide guidelines for the clinical management of elevated FVIII levels. Subsequent to the voluntary pause, the FDA put this trial on clinical hold, which was subsequently lifted in March 2022. While the voluntary pause initiated by Pfizer was lifted, the trial re-opened, and recruitment, enrollment and dosing resumed, we cannot assure you that the dosing will be completed in a timely manner, or at all, or that the presentation of data from such trial will be published in a timely manner, if at all. Continued delays or additional pauses to the Phase 3 AFFINE trial could negatively impact the projected timelines for conducting and completing the trial and seeking regulatory approvals for giroctocogene fitelparvovec, which could in turn materially and adversely affect giroctocogene fitelparvovec’s competitive position and commercial viability and therefore our business, prospects and market price of our common stock.
In addition, if fewer patients are willing to participate in our clinical trials because of negative publicity from adverse events related to genomic medicines, competitive clinical trials for similar patient populations or for other reasons, the timelines for conducting clinical trials of our product candidates and presenting clinical data may be delayed. These delays could result in increased costs, limitation or termination of clinical trials, and delays in product development timelines. If we are forced to expand to additional jurisdictions to address these challenges, it could impose additional costs, delays and risks. If we are not successful in conducting our clinical trials as planned, it would have an adverse effect on our business, financial condition, results of operations, prospects and market price of our common stock.
We may encounter difficulties in advancing product candidates from research programs to preclinical and clinical development.
We intend to advance our product candidates from research programs through preclinical development and to submit new INDs, applications for clinical trial approval and equivalent filings in other jurisdictions necessary to conduct human clinical trials evaluating our product candidates. The preparation and submission of applications to conduct clinical trials requires us to conduct rigorous and time-consuming preclinical testing and studies and prepare documentation relating to, among other things, the toxicity, safety, manufacturing, chemistry and clinical protocols of our product candidates. We may experience unforeseen difficulties that could delay or otherwise prevent us from executing this strategy successfully. For example, we may encounter problems in the manufacturing of a product candidate and may fail to demonstrate consistency in the formulation of a product candidate. Our preclinical tests may produce negative or inconclusive results, which may lead us to decide, or which may lead regulators to require us, to conduct additional preclinical testing. If we cannot obtain positive results in preclinical testing, we may decide to abandon a product candidate altogether. In addition, our ability to complete and submit such applications to conduct clinical trials may depend on the support of our collaborators and the timely performance of their obligations under relevant collaboration agreements. If our collaborators are not able to perform such obligations or if they choose to slow down or delay the development of a product candidate, we may not be able to submit the clinical trial applications on a timely basis or at all. Furthermore, the submission of applications to conduct clinical trials involves significant cost and labor, and we may not have sufficient resources and personnel to complete the filing of all intended applications, which may force us to scale back the number of applications or forego potential applications that we believe are promising. Any delay, suspension or reduction of our efforts to pursue our preclinical and clinical development strategy could have an adverse effect on our business and cause the market price of our common stock to decline.
Special regulatory designations, such as RMAT or orphan drug designations, may not be available for our product candidates or may not lead to a faster development or regulatory review or approval process.
We have received RMAT designation for our product candidate to treat severe hemophilia A. Additionally, some of our product candidates, including our product candidate to treat Fabry disease, have also been granted Orphan Drug Designation by the FDA, and some have also been designated Orphan Medicinal Products by the EMA. Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs for relatively small patient populations as
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orphan drugs. For additional information regarding these special regulatory designations, see “Business—Government Regulation.”
If we request such designations for our other current or future product candidates, there can be no assurances that the FDA, the European Commission or comparable foreign regulatory authorities will grant any of our product candidates such designations. Additionally, such designations do not guarantee that any regulatory agency will accelerate regulatory review of, or ultimately approve, those product candidates, nor does it limit the ability of any regulatory agency to grant such designations to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving marketing approval. Such designations can also be revoked. RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges. Orphan drug exclusivity may be revoked if any regulatory authority determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the approved indications or commercial potential, or result in significant negative consequences following any potential marketing approval.
During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions, particularly as many of the diseases we are studying have complex comorbidities. If clinical experience indicates that a product candidate has side effects or causes serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked, which would severely harm our business, prospects, operating results and financial condition.
There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia and death seen in other trials using other genomic therapies. Gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. There also is the potential risk of significantly delayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carry the genetic material. Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic reaction early after administration that, while not necessarily adverse to the patient’s health, could substantially limit the effectiveness of the treatment. For example, one patient in the STAAR study expansion phase experienced a Grade 3 SAE of shoulder enthesopathy in December 2022 requiring hospitalization that occurred 14 days following infusion of isaralgagene civaparvovec. The Principal Investigator and the Safety Monitoring Committee for the study assessed the SAE as possibly related to the isaralgagene civaparvovec treatment, and the SAE was reported to regulatory authorities. While the Safety Monitoring Committee has since determined that the study may proceed without modification, the patient remains enrolled in the STAAR study, and this event was reported to other investigators for awareness, possible adverse side effects in this or other studies, including additional SAEs, could develop in the future, which could delay or halt any further development or potential commercialization of the applicable product candidate.
Even if our product development efforts are successful and even if the requisite regulatory approvals are obtained, our products may not gain market acceptance among physicians, patients, healthcare payors and the medical community.
Even if we obtain regulatory approval for any of our product candidates that we may develop or acquire in the future, the approved product may not gain market acceptance among physicians, healthcare payors, patients or the medical community. Market acceptance of approved products depends on a number of factors, including:
•the efficacy and safety of the product as demonstrated in clinical trials;
•the clinical indications and patient populations for which the product is approved;
•acceptance by physicians, treatment centers and patients of the product as a safe and effective treatment;
•the adoption of novel genomic therapies by physicians, hospitals and third-party payors;
•the potential and perceived advantages of the product over alternative treatments;
•the safety of the product seen in a broader patient group, including its use outside the approved indications;
•any restrictions on product use together with other medications;
•the prevalence and severity of any side effects;
•product labeling or product insert requirements of the FDA or other comparable foreign regulatory authorities;
•the timing of market introduction of the product as well as competitive products;
•the development of manufacturing and distribution processes for the product;
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•the cost of treatment in relation to alternative treatments;
•the availability of coverage and adequate reimbursement and the willingness of patients to pay out-of-pocket in the absence of coverage or inadequacy of reimbursement by third-party payors and government authorities;
•relative convenience and ease of administration; and
•the effectiveness of our sales and marketing efforts and those of our collaborators.
If any of our product candidates are approved but fail to achieve market acceptance among physicians, patients, healthcare payors or treatment centers, we will not be able to generate significant revenues from the approved product, which would compromise our ability to become profitable.
Even if we are able to commercialize any approved products, such products may not receive coverage and adequate reimbursement from third-party payors in the United States and in other countries in which we seek to commercialize them, which could harm our business.
Our ability to commercialize any product successfully will depend, in part, on the extent to which coverage and adequate reimbursement for these products and related treatments will be available. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels, which can affect demand for, or the price of, any approved product. Given the nature of the product candidates that we are developing, some patients may require treatment only one-time (e.g., single dose administration), and there is substantial uncertainty about the pricing structure for such products, and the level of coverage and reimbursement that will be available for a shift to single-dose treatment as compared to chronic therapy over a patient’s lifetime. If other companies establish a new pricing structure or business model, including payment based on demonstration of long-term efficacy, our ability to price or obtain reimbursement for our products may be adversely affected. If such pricing structure or business model do not adequately fund the costs of our research and development, manufacturing and commercialization efforts, our business may be adversely affected.
In addition to uncertainty about the potential pricing structure for certain of our product candidates, cost containment is a recurrent trend in the healthcare industry. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for certain medications. We cannot be sure that coverage and adequate reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. If reimbursement is not available or is available only at limited levels, we may be unable to successfully commercialize any product candidate for which we obtain regulatory approval. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have an adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Many EU Member States periodically review their reimbursement procedures for medicinal products, which could have an adverse impact on reimbursement status. We expect that legislators, policymakers and healthcare insurance funds in the EU Member States will continue to propose and implement cost-containing measures, such as lower maximum prices, lower or lack of reimbursement coverage and incentives to use cheaper, usually generic, products as an alternative to branded products, and/or branded products available through parallel import to keep healthcare costs down, particularly due to the financial strain that the COVID-19 pandemic has placed on national healthcare systems of the EU Member States. These measures could include limitations on the prices we would be able to charge for product candidates that we may successfully develop and for which we may obtain regulatory approval or the level of reimbursement available for these products from governmental authorities or third-party payors. Further, an increasing number of EU and other foreign countries use prices for medicinal products established in other countries as “reference prices” to help determine the price of the product in their own territory. Consequently, a downward trend in prices of medicinal products in some countries could contribute to similar downward trends elsewhere.
Moreover, in order to obtain reimbursement for our products in some European countries, including some EU Member States, we may be required to compile additional data comparing the cost-effectiveness of our products to other available therapies. HTA of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures in some EU Member States, including those representing the larger markets. The outcome of an HTA will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product currently varies between EU Member States. In December 2021, the EU HTA Regulation was adopted, which will enter into application in 2025 and is intended to harmonize the clinical benefit assessment of HTA across the EU. However, individual EU Member States will continue to be responsible for assessing non-clinical (e.g., economic, social and ethical) aspects of health technologies and making decisions on pricing and reimbursement. If we are unable to maintain favorable pricing and reimbursement status in EU Member States for product candidates that we may successfully develop and for which we may
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obtain regulatory approval, any anticipated revenue from and growth prospects for those products in the EU could be negatively affected.
Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our product candidates and affect the prices we may obtain.
The regulations that govern, among other things, regulatory approvals, coverage, pricing and reimbursement for new drug products vary widely from country to country. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our product candidates, restrict or regulate post-approval activities and affect our ability to successfully sell any product candidates for which we obtain regulatory approval. Also, there has been heightened governmental scrutiny recently over biopharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for biopharmaceutical products. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, have been designed to encourage importation from other countries and bulk purchasing. For a discussion of health reform activity and the current pricing framework, see “Business—Government Regulation—Healthcare Reform” and “Business—Government Regulation—Pricing, Coverage and Reimbursement.”
The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
•the demand for our product candidates, if we obtain regulatory approval;
•our ability to set a price that we believe is fair for our products;
•our ability to generate revenue and achieve or maintain profitability;
•the level of taxes that we are required to pay; and
•the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.
In addition, the policies of the FDA, the competent authorities of the EU Member States, the EMA, the European Commission and other comparable regulatory authorities with respect to clinical trials may change, and additional government regulations may be enacted. For instance, the regulatory landscape related to clinical trials in the EU recently evolved. The CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each EU Member State along with a harmonized assessment procedure, leading to a single decision for each EU Member State. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our developments plans. It is currently unclear to what extent the UK will seek to align its regulations with the EU in the future. A decision by the UK not to closely align its regulations with the new approach that will be adopted in the EU may have an effect on the cost of conducting clinical trials in the UK as opposed to other countries and/or make it harder to seek a marketing authorization in the EU for our product candidates on the basis of clinical trials conducted in the UK.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted.
Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.
Even if we obtain regulatory approval in a jurisdiction, the competent regulatory authority may still impose significant restrictions on the indicated uses or marketing of our product candidates or impose ongoing requirements for potentially costly post-approval studies, post-market surveillance or patient or drug restrictions. For example, the FDA typically advises that patients treated with gene therapy undergo follow-up observations for potential adverse events for a 15-year period. Additionally, the holder of an approved BLA is required to comply with FDA rules and is subject to FDA review and periodic inspections, in addition to other potentially applicable federal and state laws, to ensure compliance with cGMP and adherence to commitments made in the BLA.
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If we or a regulatory authority discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. Moreover, product labeling, advertising and promotion for any approved product will be subject to regulatory requirements and continuing regulatory review. Failure to comply with such requirements, when and if applicable, could subject us to a number of actions ranging from warning letters to product seizures or significant fines, among other actions.
Any government investigation of alleged violations of laws or regulations could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenues.
Failure to comply with EU and EU Member State laws that apply to the conduct of clinical trials, manufacturing approval, marketing authorization of medicinal products and marketing of such products, both before and after grant of the marketing authorization, or with other applicable regulatory requirements may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.
See “Business—Government Regulation—Post-approval Requirements” for more information.
Our employees or contractors may engage in misconduct or other improper activities, including noncompliance with research, development, manufacturing or regulatory standards and requirements, which could cause significant liability for us and harm our reputation.
We are exposed to the risk of fraud or other misconduct by our employees and contractors, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us. Misconduct by our employees and contractors could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, personal imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, or comparable foreign programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.
We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on other programs or product candidates that may be more profitable or for which there is a greater likelihood of success.
We have limited resources and may forego or delay pursuit of certain research programs or product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities or pursue collaborations rather than retain sole responsibility for development. Our current and future research and development programs for product candidates may not yield any commercially viable products. The evaluation of the commercial potential or target market for a particular product candidate is forward-looking and based upon assumptions involving, for example and not limited to, market evolution, advances in disease standard of care, competition and reimbursement. This reliance on assumptions means that, if our assumptions prove to be inaccurate or incomplete, we may pursue opportunities that end up having a number of competitors that are more advanced than our product candidates, or we may relinquish valuable rights to a product candidate through strategic collaboration, licensing or other royalty arrangements in cases where it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. For example, we recently made the strategic decision to halt further material investments in the BIVV003 program beyond completion of the Phase 1/2 PRECIZN-1 study in order to prioritize deployment of resources to our Fabry and TX200 programs. While we intend to launch a search for a collaboration partner who can progress this program to a potential Phase 3 trial, we may not be successful in doing so in a timely manner, on acceptable terms or at all, and as a result, we could miss valuable opportunities to capitalize on the potential of the BIVV003 program. We
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may also allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a collaboration or that does not prove to have viable commercial opportunities. Any failure to use our financial and human resources efficiently could harm our business and operations.
ZF technology is novel and has never been used to develop any approved, commercially viable therapeutic products.
Our ZF technology is a novel technology which to date has not yielded any approved commercially viable therapeutic products, and there can be no guarantee that our product development efforts using ZF technology will be fruitful. We have invested heavily in development of this technology, and our failure to develop approved, commercially viable products using ZF technology would significantly limit our business and prospects and would adversely impact the market value of our common stock.
Risks Relating to Manufacturing
We recently completed the construction of several facilities for clinical trial supplies. We have limited experience manufacturing biopharmaceutical products, and there can be no assurance that we will be able to maintain compliant manufacturing facilities, build additional facilities and manufacture our product candidates as intended.
We expect to use both contract manufacturing organizations, or CMOs, and our own facilities to meet our projected needs for clinical trial supply. We operate an AAV manufacturing facility in Brisbane, California to manufacture Phase 1/2 clinical study supplies for our gene therapy product candidates, and in 2021 we completed construction of cell therapy manufacturing facilities in Brisbane, California and Valbonne, France to manufacture supplies for our cell therapy product candidates. Operationalizing these new facilities requires us to transition manufacturing processes and know-how of our product candidates from our CMOs to our own facilities. Transferring manufacturing processes and know-how is complex and involves review and incorporation of both documented and undocumented processes that may have evolved over time. In addition, transferring production to different facilities may require utilization of new or different processes to meet the specific requirements of a given facility. Additional studies may also need to be conducted to support the transfer of certain manufacturing processes and process improvements. We cannot be certain that all relevant know-how and data has been adequately incorporated into the manufacturing process until the completion of studies and evaluations intended to demonstrate the comparability of material previously produced by CMOs with that generated by our facilities. Although some of our employees have experience in the manufacturing of biopharmaceutical products from prior employment at other companies, we, as a company, have no prior experience in biopharmaceutical product manufacturing, and operating these facilities will require us to comply with complex regulations and to continue to hire and retain experienced scientific, quality control, quality assurance and manufacturing personnel. In addition, government approvals are required for us to operate manufacturing facilities and are time-consuming to obtain and maintain. As a manufacturer of biopharmaceutical products, we also will be required to demonstrate and maintain cGMP compliance. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Furthermore, establishing manufacturing operations will require a reallocation of other resources, particularly the time and attention of our senior management. Even if we are able to establish our own manufacturing capabilities, we could encounter challenges in operating the manufacturing facilities in compliance with cGMP, regulatory or other applicable requirements, resulting in potential negative consequences, including regulatory actions, which could undermine our ability to use these facilities for our own manufacturing needs. Any failure or delay in the development of our manufacturing capabilities could adversely impact the development of our product candidates.
The manufacture, storage and transport of our product candidates is complex, expensive, highly regulated and risky, which could hamper their commercial viability.
There are significant risks associated with manufacturing, storing and transporting our product candidates including, among others, cGMP compliance, cost overruns, technical problems with process scale-up, specialized facilities, process reproducibility, stability issues, lot consistency, yields and timely availability of highly specific raw materials. Even though product batches released for use in clinical trials undergo sample testing, some defects may only be identified following release. In addition, process deviations or unanticipated effects of approved process changes may result in these intermediate products not complying with stability requirements or specifications. Also, our product candidates must be stored and transported at temperatures within a certain range. If these environmental conditions deviate, our product candidates’ remaining shelf-lives could be impaired or their efficacy and safety could be adversely affected, making them no longer suitable for use. Moreover, product candidates that are biologics involve complex processes, including the development of cell lines or cell systems to produce the biologic, with the challenge of significant variability. There are difficulties in growing large quantities of such cells, consistently and sufficiently isolating certain types of cells and harvesting and purifying the biologic produced by them. The cost to manufacture biologics is generally far higher than traditional small molecule chemical compounds, and the manufacturing process can be difficult to reproduce.
Moreover, manufacturing, storing and transporting our product candidates is subject to strict regulatory standards, which adds additional production risk. Even if efficacy and safety data from our clinical trials would otherwise support
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regulatory approval of a product candidate, there is no assurance that we or our CMOs will be able to manufacture our product candidates to specifications at levels necessary to support or maintain regulatory approval by the FDA or other comparable foreign regulatory authorities.
Thus, there is no guarantee we will be successful in establishing a larger-scale commercial manufacturing process for our product candidates or obtaining the needed manufacturing capacity. Due to these manufacturing challenges, there is risk that some of our product candidates could be subject to inventory outages, reputational damage and product liability risks, and result in additional expense and delays to clinical trials and commercialization. Supply interruptions or shortages could result in potential negative impacts to our business, prospects and market price of our common stock.
If we use chemical, biological or hazardous materials in a manner that causes injury or violates laws, we may be liable for damages.
Our research and development activities involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals, and various radioactive compounds typically employed in the study of molecular and cellular biology. We routinely use cells in culture and gene delivery vectors, and we employ small amounts of radioisotopes in trace experiments. Although we maintain up-to-date licensing and training programs, we cannot completely eliminate the risk of accidental contamination or injury from the use, storage, handling, or disposal of these materials. In the event of contamination or injury, we could be held liable for damages that result, and any liability could exceed our resources. We currently carry insurance covering certain claims arising from our use of these materials. However, if we are unable to maintain our insurance coverage at a reasonable cost and with adequate coverage, our insurance may not cover any liability that may arise. We are subject to federal, state, and local laws and regulations governing the use, storage, handling, and disposal of these materials and specified waste products. Failure to comply with these laws and regulations could result in fines, penalties and additional liabilities and restrictions on our operations.
We currently rely on third parties to conduct some or all aspects of manufacturing of our product candidates for preclinical and clinical development. If one of our third-party manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers.
We currently have limited experience in clinical-scale manufacturing of our product candidates, and we rely in large part upon third-party CMOs to manufacture and supply drug product for our preclinical studies and clinical trials. Although we have in-house manufacturing facilities in Brisbane, California and Valbonne, France, these facilities will only manufacture limited quantities of our product candidates for our early-stage clinical trials. We intend to continue to rely on third parties for the manufacture of product candidates for later stage clinical trials, and for commercial-scale manufacturing for any approved product. The manufacture of biopharmaceutical products in compliance with the FDA’s cGMP, or comparable foreign GMP regulations, requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biopharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of the product candidate and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced cGMP requirements, other federal and state regulatory requirements and foreign regulations. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to conduct later-stage clinical trials could be jeopardized. Any delay or interruption in the supply of clinical trial materials could delay the completion of our clinical trials, increase the costs associated with developing our product candidates and, depending upon the period of delay, require us to commence new clinical trials at significant additional expense or terminate the clinical trials completely.
We and our CMOs must comply with cGMP requirements enforced by the FDA through its facilities inspection program and comparable foreign regulatory authorities. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. We and our CMOs may be unable to comply with these cGMP requirements and with other FDA, state and comparable foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. We have limited control over our manufacturers’ compliance with these regulations and standards. Failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension, variation or delay in product approval, product seizure or recall or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of our product candidates, entail higher costs or impair our reputation.
Our current agreements with our CMOs do not provide for the entire supply of the drug product necessary for all anticipated clinical trials or for full scale commercialization. If we and our CMOs cannot agree to the terms and conditions for them to provide the drug product necessary for our clinical and commercial supply needs, we may not be able to manufacture
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the product candidate until a qualified alternative manufacturer is identified, which could also delay the development of, and impair our ability to commercialize our product candidates.
The number of third-party CMOs with the necessary manufacturing and regulatory expertise and facilities is limited, and it could be expensive and take a significant amount of time to arrange for alternative CMOs, which could have an adverse effect on our business. New manufacturers of any product candidate would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing the product candidate. Obtaining the necessary approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.
We and third parties on which we rely may be adversely affected by natural disasters and catastrophic or other events outside of our control, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster or event.
Natural disasters could severely disrupt our operations and our facilities, including our current manufacturing facilities in Brisbane, California and Valbonne, France and the manufacturing facilities of our CMOs, and any disruption would likely have a negative impact on our business, financial condition, results of operations and prospects. If a natural disaster, pandemic or epidemic, including the COVID-19 pandemic, political crisis, power outage or any other event that is out of our control occurred that prevented us or third parties on which we rely from using all or a significant portion of our or their facilities, that damaged critical infrastructure or that otherwise disrupted our or their operations, it may be difficult or, in certain cases, impossible for us to continue our business and operations for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and may not prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have an adverse effect on our business, financial condition, results of operations and prospects. Such disasters or events occurring at facilities of third parties on which we rely could also negatively impact our business and operations.
Risks Relating to our Industry
Our product candidates are based on novel genomic medicine technologies, which makes it difficult to predict the timing and costs of development and of subsequently obtaining regulatory approval.
We have concentrated our research and development efforts on genomic medicine, consisting of gene therapy, gene-edited cell therapy and genome engineering. The regulatory approval process for novel product candidates such as ours is unclear and may be lengthier and more expensive than the process for other, better-known or more extensively studied product candidates.
Regulatory review committees and advisory groups, and any new guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our current or future product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects would be harmed. Even if our product candidates are approved, we expect that the FDA, or comparable foreign regulatory authorities, will require us to submit follow-up data regarding our clinical trial patients for a number of years after any approval. If this follow-up data shows negative long-term safety or efficacy outcomes for these patients, the FDA, or comparable foreign regulatory authorities, may revoke their approval or change the label of our products in a manner that could have an adverse impact on our business.
In addition, adverse developments in clinical trials of genomic medicines conducted by others may cause the FDA or other comparable foreign regulatory authorities to change the requirements for approval of our product candidates. The FDA and European Commission have only very recent and limited experience in the approval of in vivo gene therapy products. As a result, it is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates.
If we or our competitors develop, acquire, or market technologies or products that are more effective than ours, our financial condition and ability to successfully market or commercialize our product candidates or be profitable would be adversely affected.
The biopharmaceutical industry is highly competitive and subject to significant and rapid technological change. We are aware of several companies focused on other methods for editing cells, editing genes and regulating gene expression and a
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growing number of commercial and academic groups pursuing the development of genome engineering technology. The field of genomic medicine is highly competitive, and we expect competition to persist and intensify in the future from a number of different sources, including biopharmaceutical companies, academic and research institutions, and government agencies that will seek to develop competing products as well as technologies that will compete with our ZF technology platform. For example, in genome engineering and gene therapy products, competing proprietary technologies with our product development focus include but are not limited to, recombinant proteins, other gene therapy/cDNAs, nuclease and base editing technologies, antisense therapeutics and RNA interference technologies, siRNA, RNAi and microRNA approaches, exon skipping, small molecule drugs, monoclonal antibodies, CRISPR/Cas technology and TALE proteins, meganucleases, and MegaTALs. A growing number of companies are also developing rival cell therapy technologies and product candidates. See “Business—Competition” for more information on the competition we may face.
Any products that we or our collaborators or strategic partners develop will enter into highly competitive markets. Even if we are able to generate products that are safe and effective for their intended use, competing technologies may prove to be more effective or less expensive, which, to the extent these competing technologies achieve market acceptance, will limit our revenue opportunities. In some cases, competing technologies have proven to be effective and less expensive. Competing technologies may include other methods of regulating gene expression or modifying genes. ZF nucleases and ZF-TRs have broad application in the life sciences industry and compete with a broad array of new technologies and approaches being applied to genetic research by many companies.
In addition to possessing competing technologies, our competitors include biopharmaceutical companies with:
•substantially greater capital resources than ours;
•larger research and development staffs and facilities than ours; and
•greater experience in product development and in obtaining regulatory approvals and patent protection.
These organizations also compete with us to attract qualified personnel, attract parties for acquisitions, joint ventures or other collaborations and license the proprietary technologies of academic and research institutions that are competitive with our technology, which may preclude us from pursuing similar opportunities. Accordingly, our competitors may succeed in obtaining patent protection or commercializing products before us. Even if our product candidate is more effective, it may be disadvantaged if it is not first to market. In addition, any products that we develop may compete with existing products or services that are well established in the marketplace. Further, some of our product candidates in development are designed for use once. Any success in developing one-time use therapeutics could cause us to lose potential recurring revenues from therapeutics that are designed to be taken over a patient’s lifetime.
The COVID-19 pandemic has adversely impacted and could continue to adversely impact our business and operations and the business and operations of our collaborators, manufacturers and other business partners.
We have experienced and continue to experience impacts from the COVID-19 pandemic on our business and operations and could continue to experience these or potentially more severe impacts as the pandemic evolves in the United States, France, the United Kingdom and locations of our clinical studies and trials, including the new sites for our STAAR study in Canada, Italy and Australia. For example, we have experienced periodic short-term disruptions to our onsite operations while addressing positive cases of COVID-19 in clinical trial patients, and our operations could experience longer term disruptions in the future in the event of a significant outbreak of COVID-19 among clinical trial patients. Moreover, from time to time, we have been required to reorganize and prioritize our resources to mitigate moderate supply constraints due to the impact of COVID-19. If our programs encounter longer-term disruptions, it could impact our ability to support our biopharmaceutical partners as contemplated in our collaboration agreements and could result in adjustments to our timelines, although we do not believe that the short-term disruptions to date have resulted in any such impacts.
Additionally, our Phase 1/2 STAAR clinical study previously experienced delays in its timeline due in part to COVID-19 impacts and the diversion of healthcare resources to fight the pandemic. For example, the April 2021 opening of the first clinical trial site in the United Kingdom for this study experienced a delay of approximately one year due to the significant prevalence of COVID-19 in the United Kingdom. Additionally, we have experienced delays in recruiting, enrolling and dosing patients for this study, due in part to the hesitation of patients to travel by plane to trial sites not within driving distance and to enter medical facilities during the pandemic and also due in part to trial sites prioritizing COVID-19 clinical care over research activities such as the STAAR study. The study has also experienced delays when certain patients have decided to take the COVID-19 vaccine or tested positive for COVID-19 prior to enrollment or dosing in the study. Moreover, we previously experienced some short-term delays in sourcing the necessary raw materials to manufacture supplies for the STAAR study and transporting clinical trial materials due to COVID-19 impacts. We estimate that these challenges set back our 2021 STAAR study timelines by approximately three to six months. Clinical timelines for this study could be revised again if COVID-19 impacts to our recruitment, screening, enrollment and dosing of patients and to our sourcing of raw materials for this study intensify because of vaccination delays, new COVID-19 variants or unexpected events.
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In addition, our STEADFAST study had previously experienced delays in its timeline due to COVID-19 impacts related to manufacturing and technology transfer challenges with our CMOs and due to patients and donors testing positive for COVID-19. We estimate that these challenges set back our overall clinical study timeline in total by approximately three months. COVID-19 impacts may affect guidance on future dosing timelines.
With respect to our partnered programs, the timelines for the studies and trials managed by our collaborators are also subject to potential delay in the future if these studies and trials experience similar challenges that we have experienced and continue to experience in our STAAR and STEADFAST studies.
The extent to which the COVID-19 pandemic will impact our business, operations and financial condition, either directly or indirectly, will also depend on future developments that remain highly uncertain at the present time. These developments include the ultimate duration and severity of the pandemic, the impacts of new COVID-19 variants, travel restrictions, public health restrictions in the United States, France, the United Kingdom, Australia, Taiwan and other countries, business closures or business disruptions and the effectiveness and timeliness of actions taken in the United States, France, the United Kingdom, Australia, Taiwan and other countries to contain and treat the disease, including the effectiveness of vaccination programs. The surge of new variants of the virus has resulted and may in the future result in new or the return of prior orders and restrictions. Disruptions to our operations, and possibly more severe disruptions in the future that could arise due to the restrictions applicable in the places we operate or our industry generally or to us and our facilities specifically, could impede our ability to conduct research in a timely manner, comply with our research obligations to our collaborators and advance the development of our therapeutic programs. These delays and disruptions could result in adverse material impacts to our business, operating results and financial condition. As our understanding of events evolves and additional information becomes available, we may materially change our guidance relating to our revenues, expenses and timelines for manufacturing, clinical trials and research and development.
In addition, to the extent the COVID-19 pandemic continues to adversely affect our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section.
Negative public opinion and increased regulatory scrutiny of genomic medicines may damage public perception of the safety of our product candidates and adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.
Genetically modified products are currently subject to public debate and heightened regulatory scrutiny. Gene therapy remains a novel technology, with only two in vivo gene therapy products approved for a genetic disease to date in the United States and only a few in vivo gene therapy products for genetic diseases approved to date in the EU. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. For example, reports of serious adverse events in a retroviral gene transfer trial for infants with X-linked severe combined immunodeficiency (X-linked SCID) in France and subsequent FDA actions putting related trials on hold in the United States had a significant negative impact on the public perception and stock price of certain companies involved in gene therapy, whether or not the specific company was involved with retroviral gene transfer, or whether the specific company’s clinical trials were placed on hold in connection with these events. Other adverse events could occur in the field of genomic medicine that could result in increased regulatory scrutiny, potential regulatory delays or negative impact on public perception genomic medicines, which could cause our stock price to decline.
In particular, our success will depend upon physicians who specialize in the treatment of genetic diseases targeted by our product candidates, prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are familiar and for which greater clinical data may be available.
Even if the regulatory approval for genetically modified products developed using our technology is obtained, our success will also depend on public acceptance of the use of genetically modified products including medicines, plants and plant products. Claims that genetically modified products are unsafe for consumption or pose a danger to the environment may influence public attitudes. Our genetically modified products may not gain public acceptance. More restrictive government regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and prospects and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia and death seen in other trials using other vectors. Serious adverse events in our clinical trials, or other clinical trials involving gene therapy products or our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.
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Our current and future relationships with healthcare providers, customers and third-party payors subject us to applicable anti-kickback, fraud and abuse, privacy, data security and other healthcare laws and regulations. If we fail to comply with such regulations, we could face regulatory investigations or actions, litigation, and substantial fines and penalties, and our business, reputation, results of operations, financial condition and prospects could be adversely affected.
Healthcare providers, including physicians, and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain regulatory approval. Arrangements with healthcare providers, third-party payors and customers 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 would market, sell and distribute our products. As a biotechnology company, even though we will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse, transparency, health privacy and security and patients’ rights and comparable foreign legislation are and will be applicable to our business. Outside the United States, interactions between pharmaceutical companies and health care professionals are also governed by strict laws, such as national anti-bribery laws of EU Member States, national sunshine rules, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct. If we fail to comply with these, or to comply with these adequately or appropriately, we could be subject to significant penalties.
For details regarding the restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate see “Business—Government Regulation—Additional Regulation.”
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. Scrutiny has also increased, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. If our operations or if any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws or applicable regulations, we and they could be subjected to significant civil, criminal and administrative enforcement actions, see “Business—Government Regulation—Additional Regulation.”
Further, we are required to comply with domestic and international privacy and data security laws, such as the EU GDPR and the CCPA, which apply to the collection, use, disclosure, transfer, or other processing of personal data, including data we collect about trial participants in connection with clinical trials. Other states, such as Virginia, Colorado, Utah and Connecticut, have also passed comprehensive privacy and data security laws, and similar laws are being considered in several other states, as well as at the federal and local levels. Certain jurisdictions have enacted data localization and cross-border data transfer laws, which could make it more difficult to transfer information across jurisdictions. Existing mechanisms that may facilitate cross-border transfers of personal data may change or be invalidated. In particular, the EEA and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy and data security laws they believe to be inadequate. If we are unable to implement a legal mechanism to ensure that our transfers of personal data from the EEA or the UK are lawful, we could face adverse consequences, including increased exposure to regulatory actions, substantial fines and injunctions against processing or transferring personal data, and could be required to increase our data processing capabilities in the EEA, the UK or elsewhere at significant expense. Restrictions on our ability to transfer personal data from the EEA, the UK or elsewhere could impact our clinical trial activities in the EEA or the UK and limit our ability to collaborate with CROs and other third parties. For more information regarding these regulations, see “Business—Government Regulation—Privacy Regulation.”
Our obligations related to privacy and data security are quickly changing and becoming increasingly stringent, creating regulatory uncertainty. These obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources. These obligations may also necessitate changes to our information technologies, systems and practices and those of third parties upon which we rely. Moreover, despite our efforts, our personnel or third parties upon which we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
Any failure or alleged failure (including as a result of deficiencies in our policies, procedures or measures relating to privacy, data security, marketing or communications) by us or our third-party partners to comply with laws, regulations, policies, legal or contractual obligations, industry standards or regulatory guidance relating to privacy or data security, may result in significant consequences. These consequences may include, but are not limited to, governmental investigations and enforcement actions, litigation (including class-related claims), additional reporting requirements and/or oversight, fines and penalties, bans on processing personal data, orders to destroy or not use personal data, civil and criminal liability and adverse publicity. Any of these events could have a material adverse effect on our reputation, business or financial condition, including but not limited to interruptions or stoppages in business operations (including clinical trials), inability to process personal data
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or to operate in certain jurisdictions, limited ability to develop or commercialize our products, expenditure of time and resources to defend any claim or inquiry or revision or restructuring of our operations.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face inherent risks of product liability exposure related to the testing of our product candidates in human clinical trials and will face even greater product liability risks if we commercially sell any approved products. Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
•decreased demand for any product candidates or products that we may develop;
•termination of clinical trial sites or entire trial programs;
•injury to our reputation and significant negative media attention;
•withdrawal of clinical trial participants;
•significant costs to defend the related litigation;
•substantial monetary awards to clinical trial patients;
•loss of revenue;
•diversion of management and scientific resources from our business operations; and
•the inability to commercialize any products that we may develop.
We currently hold product liability insurance coverage at a level that we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain regulatory approval for our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products that receive regulatory approval. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
Unfavorable global economic conditions could have a negative impact on our operations, which could materially and adversely affect our business, financial condition, results of operations, prospects and market price of our common stock.
Financial instability or a general decline in economic conditions in the United States and other countries caused by political instability and conflict, including the ongoing conflict between Russia and Ukraine, and economic challenges caused by general health crises such as the COVID-19 pandemic have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally. These macroeconomic factors could adversely affect our business, operations, operating results and financial condition as well as the price of our common stock and our ability to raise additional capital when needed on acceptable terms. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our stock price and could require us to delay or abandon clinical development plans. In addition, any or all of these effects could disrupt our and our collaborators’ supply chains and adversely affect our and our collaborators’ ability to conduct ongoing and future clinical trials of our product candidates. The extent and duration of the military action, sanctions and resulting economic, market and other disruptions are impossible to predict, but could be substantial. Any such disruptions may magnify the impact of the other risks described herein.
Risks Relating to our Finances
We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.
We have generated operating losses since we began operations in 1995. The extent of our future losses and the timing of profitability are uncertain, and we expect to incur losses for the foreseeable future. We have been engaged in developing our ZF technology since inception, which has and will continue to require significant research and development expenditures. To date, we have generated our funding from issuance of equity securities, revenues derived from collaboration agreements, other strategic partnerships in non-therapeutic applications of our technology, federal government research grants and grants awarded
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by research foundations. We expect to continue to incur additional operating losses for the next several years as we continue to develop our product candidates. If the time required to generate significant product revenues and achieve profitability is longer than we currently anticipate or if we are unable to generate liquidity through equity financing or other sources of funding, we may be forced to curtail or suspend our operations.
We will need substantial additional funding to execute our operating plan and continue to operate as a going concern. We may be unable to raise additional capital on favorable terms, if at all, which would harm or preclude our ability to develop our technology and product candidates and could delay or terminate some or all of our programs. Future sales and issuances of equity securities could also result in substantial dilution to our stockholders.
We have incurred significant operating losses and negative operating cash flows since inception and have not achieved profitability. We expect capital outlays and operating expenditures to increase over the next several years as we expand our infrastructure and research and product development activities. While we believe our available cash, cash equivalents, and marketable securities as of December 31, 2022 will be adequate to fund our currently planned operations through the next 12 months from the date our consolidated financial statements in this Annual Report on Form 10-K are issued, our future viability beyond one year from the date of issuance of such consolidated financial statements is dependent on our ability to raise substantial additional capital to finance our operations. Our estimate as to how long we expect our existing cash, cash equivalents, and marketable securities to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
In order to mitigate substantial doubt about our ability to continue as a going concern, we will be required to raise substantial additional capital to fund our operations. In this regard, we are actively seeking additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations. However, additional capital may not be available to us, on terms that are acceptable or at all. If adequate funds are not available to us on a timely basis, or at all, we will be required to take additional actions to address our liquidity needs, including cost preservation measures such as reducing operating expenses and delaying, reducing the scope of, discontinuing or altering our research and development activities.
If we raise additional capital through public or private equity offerings, including sales pursuant to our at-the-market offering program with Jefferies LLC, the ownership interest of our existing stockholders will be diluted, and such dilution may be substantial, and the terms of any new equity securities may have a preference over, and include rights superior to, our common stock. If we raise additional capital through royalty financings or other collaborations, strategic alliances or licensing arrangements with third parties, we may need to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital through debt financing, we may be subject to specified financial covenants or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or pursuing certain transactions, any of which could restrict our ability to commercialize our product candidates or operate as a business.
In addition, as we focus our efforts on proprietary human therapeutics, we will need to seek regulatory approvals of our product candidates from the FDA or other comparable foreign regulatory authorities, a process that could cost in excess of hundreds of millions of dollars per product. We may experience difficulties in accessing the capital markets due to external factors beyond our control, such as volatility in the equity markets for emerging biotechnology companies and general economic and market conditions both in the United States and abroad. For example, our ability to raise additional capital may be adversely impacted by global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide, such as has been experienced recently due in part to, among other things, the impacts of the COVID-19 pandemic and the ongoing conflict between Russia and Ukraine. We cannot be certain that we will be able to obtain financing on terms acceptable to us, or at all. Our failure to obtain adequate and timely funding will adversely affect our business and our ability to develop our technology and products candidates.
Our ability to use net operating losses to offset future taxable income may be subject to limitations.
Although a certain amount of our federal net operating loss carryforwards carry forward indefinitely (but are subject to a percentage limitation), a significant amount of our federal and all of our state net operating loss carryforwards will begin to expire, if not utilized, beginning in 2024 and 2029, respectively. The net operating loss carryforwards subject to expiration could expire unused and be unavailable to offset future income tax liabilities. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change in its equity ownership value over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We have experienced an ownership change in the past and we may also experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some
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of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. In addition, at the state level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, if we earn net taxable income, we may be unable to use all or a material portion of our net operating loss carryforwards and other tax attributes, which could potentially result in increased future tax liability to us and adversely affect our future cash flows.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The market price of our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. In the event securities or industry analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Risks Relating to our Reliance on Third Parties
If conflicts arise with our contractors, collaborators or other business partners, these conflicts may limit our ability to implement our strategies and may harm our business and prospects.
If conflicts arise with our contractors, collaborators or other business partners, the other party will likely act in its self-interest, which may limit our ability to implement our strategies. For example, some of our collaborators are conducting multiple product development efforts within each area that is the subject of their collaboration with us. Our collaborators may develop, either alone or with others, product candidates in related fields that are competitive with the product candidates that are the subject of their collaborations with us. Competing products, either developed by the collaborators or to which the collaborators or have rights, may result in the withdrawal of their support for our product candidates.
Some of our collaborators could also become our competitors in the future. Our collaborators could develop or invest in competing products, preclude us from entering into collaborations with their competitors, fail to obtain timely regulatory approvals, terminate or breach their agreements with us unexpectedly or prematurely, or fail to devote sufficient resources to the development and commercialization of product candidates covered by the collaboration.
In addition, conflicts could arise between us and our collaborators resulting from disputes regarding our or our collaborators’ or strategic partners’ performance under the applicable agreement, including disputes arising from alleged breaches of our agreements with our collaborators.
Any of these conflicts could harm our product development efforts and otherwise adversely affect our business and prospects.
Our collaborators control certain aspects of our product development efforts, including certain of our clinical trials, which could result in unanticipated delays and other obstacles in the commercialization of our product candidates.
We depend on collaborators to design and conduct certain of our clinical trials for some of our product candidates. As a result, these clinical trials may not be conducted in the manner or on the timeline we desire, which may negatively impact our product development efforts. For example, Pfizer is the trial sponsor of the Phase 3 AFFINE trial of giroctocogene fitelparvovec and we depended on the efforts of Pfizer to diligently seek to lift the clinical hold on the Phase 3 AFFINE trial and resume the trial. Although dosing in the AFFINE trial has now resumed, we cannot guarantee that we will not experience future delays in this trial or that the trial will be completed on the anticipated timeframe or at all.
Our lack of control over aspects of product development in our agreements with Novartis, Biogen, Kite, Takeda and Pfizer could cause delays or other difficulties in the development and commercialization of our product candidates, which may prevent us from completing the intended IND filings in a timely fashion and receiving any milestone, royalty payments and other benefits under the agreement. In addition, under their respective agreements, our third-party collaborators have certain rights to terminate the agreements by providing us with advance notices, therefore, the actual milestone payments that we may receive under these agreements may be substantially lower than the full amounts provided for under these agreements.
Our collaborators licensing our ZF technologies may decide to adopt alternative technologies or products or may be unable or unwilling to develop commercially viable products with our ZF technologies, which would negatively impact our revenues and our strategy to develop product candidates using ZF technologies.
Several of our collaborations leverage our ZF technology platform. These collaborators may elect to adopt alternative technologies in the future, which could decrease the value of our ZF technology platform and impede the development of product candidates using the platform. Additionally, because many of our collaborators are likely to be working on more than one development project, they could choose to shift their resources to projects other than those they are working on with us. If
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they do so, this would delay our ability to test and develop our ZF technology platform and would delay or terminate the development of our product candidates using the platform. Further, our collaborators may elect not to develop product candidates arising out of our collaborations or not to devote sufficient resources to the development, manufacturing, marketing or sale of these product candidates. If they terminate the collaborations with us and we wish to continue developing the product candidates, we will be required to seek the support of other collaborators or develop the products ourselves. We may not be able to identify a suitable partner or negotiate a favorable collaboration agreement, and we may not have sufficient resources and expertise internally, to allow us to continue the development of these product candidates.
Commercialization of our technologies will depend, in part, on collaborations with other companies. If we are not able to find collaborators in the future or if our collaborators do not diligently pursue product development efforts, we may not be able to develop our technologies or product candidates, which could slow our growth and decrease the market value of our common stock.
We do not have financial resources ourselves to fully develop, obtain regulatory approval for and commercialize our product candidates. We rely significantly on our collaborations with other biopharmaceutical companies to provide funding for our research and development efforts, including preclinical studies and clinical tests, and expect to rely significantly on such collaborations to provide funding for the lengthy regulatory approval processes required to commercialize our product candidates.
For example, we have collaborations with Novartis to develop product candidates to treat certain neurodevelopment disorders, including autism and intellectual disability; with Biogen to develop product candidates to treat tauopathies including Alzheimer’s disease, alpha-synuclein related diseases including Parkinson’s disease and other neurological diseases; and with Kite to develop product candidates to treat cancer; with Pfizer to develop product candidates to treat hemophilia A and amyotrophic lateral sclerosis and frontotemporal lobar degeneration linked to mutations of the C9ORF72 gene.
In June 2022, we completed the transition of the rights and obligations of Sanofi S.A, or Sanofi, under our prior collaboration agreement back to us. Although we expect to complete the Phase 1/2 PRECIZIN-1 study of BIVV003, our product candidate to treat SCD, we cannot guarantee that we will be able to complete this study in a timely manner or at all. Also, we do not expect to make additional material investments in our SCD program and, accordingly, do not plan to continue developing BIVV003 beyond completion of this study. Although we are currently seeking a potential collaboration partner to advance the development of BIVV003 beyond this study, we cannot guarantee that we will be able to successfully secure any such collaboration in a timely manner, on acceptable terms or at all. In such case, the continued development of BIVV003 could be further delayed or precluded altogether, in which case may choose to discontinue the BIVV003 program. Any further delays to or discontinuance of this program could have an adverse impact on our business, results of operations, financial condition and prospects.
If we are unable to secure additional collaborations or if our collaborators are unable or unwilling to diligently advance the development, regulatory approval and commercialization of our product candidates, our growth may slow and adversely affect our ability to generate funding for development of our technologies and product candidates. In addition, our collaborators may sublicense or abandon development programs with little advance notice, or we may have disagreements or disputes with our collaborators, which would cause associated product development to slow or cease. In addition, the business or operations of our collaborators may change significantly through restructurings, acquisitions, other strategic transactions that may negatively impact their ability to advance our programs.
Under typical collaborations, we expect to receive revenue for the research and development of our product candidates based on achievement of specific milestones, as well as royalties based on a percentage of sales of any commercialized products. Achieving these milestones will depend, in part, on the efforts of our collaborators, which we have no control over, as well as our own efforts. In addition, business combinations, changes in a collaborator’s business strategy and financial difficulties or other factors could result in that collaborator abandoning or delaying development of any product candidates covered by our collaboration agreement with that collaborator. For example, the transition back to us of the rights and obligations of Sanofi related to BIVV003 and the related termination for convenience by Sanofi of our prior collaboration agreement followed a change in Sanofi’s strategic direction to focus on allogeneic universal genomic medicine approaches rather than autologous personalized cell therapies. Further, if we fail or any collaboration partner fails to meet specific milestones, then the collaboration agreement may be terminated, which would preclude our ability to earn any additional milestone payments under that collaboration agreement and would reduce our revenues. In addition, even if a collaboration product candidate is successfully developed and approved for marketing by relevant regulatory authorities, if sales of the commercialized product fails to meet expectations, we could receive lower royalties than expected. In any event, the milestone and royalty payment opportunities associated with our collaborations involve a substantial degree of risk to achieve and may never be received. Accordingly, investors should not assume that we will receive all of the potential milestone payments provided for under our collaborations and it is possible that we may never receive any further significant milestone payments or any royalty payments under our collaborations.
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Risks Relating to our Intellectual Property
Because it is difficult, time consuming and costly to obtain, maintain and enforce patent protections for our technologies and product candidates, and because third parties may have made inventions that are similar to ours, we may not be able to secure optimal patent protections of our technologies and product candidates.
Our commercial success may depend in part on obtaining, maintaining and enforcing patent protection for our technologies and product candidates and successfully defending any of our patents that may be challenged. Obtaining, maintaining and enforcing biopharmaceutical patents is costly, time consuming and complex, and we may not be able to file and prosecute all necessary or desirable patent applications in all desired jurisdictions, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner or at all. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent positions of biopharmaceutical companies can be highly uncertain and can involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date. In addition, future patent laws, regulations, rules, and court decisions may affect the scope, validity, enforceability, and associated remedies of our current and future patent claims. Accordingly, we cannot predict the breadth of claims that may issue from any patent applications that we own or license, nor are we able to predict whether any third-party patents might issue with claims that are relevant to our product candidates or technologies. Even if patents do successfully issue and even if such patents cover our technologies and product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated or deemed unenforceable. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, the existence of which could invalidate a patent or prevent a patent from issuing from a pending patent application. Furthermore, if third parties have made similar inventions, there are multiple ways they could impact the coverage of our own applications.
We are a party to various license agreements that grant us rights under specified patents and patent applications. We are also party to various license agreements by which we grant third parties rights under specified patents and patent applications. Our current licenses contain performance obligations. If we fail to meet those obligations, the licenses could be terminated. If we are unable to continue to license these technologies on commercially reasonable terms, or at all, we may be forced to delay or terminate aspects of our product development and research activities.
We are unable to exercise the same degree of control over intellectual property that we license from third parties as we exercise over our internally developed intellectual property. We do not control the prosecution of certain of the patent applications that we license from third parties; therefore, the patent applications may not be prosecuted as we desire or in a timely manner.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
•we or our licensors were the first to conceive and/or reduce to practice the inventions covered by each of our pending patent applications;
•we or our licensors were the first to file patent applications for these inventions;
•the patents of others will not have an adverse effect on our ability to do business;
•others will not independently develop similar or alternative technologies or reverse engineer any of our products, processes or technologies;
•any of our pending patent applications will result in issued patents;
•any patents issued or licensed to us, our collaborators or strategic partners will provide a basis for commercially viable products or will provide us with any competitive advantages;
•any patents issued or licensed to us will not be challenged and invalidated by third parties;
•the laws, regulations, rules, or court decisions in the United States and foreign countries will not change or be interpreted in a way that modifies our patent rights or impacts our ability to enforce or maintain our patent rights; or
•we will develop additional products, processes or technologies that are patentable.
Others have filed and in the future are likely to file patent applications that are similar to ours. We are aware that there are academic groups and other companies that are attempting to develop technology that is based on the use of zinc finger, TALE, CRISPR/Cas and other DNA-binding proteins, and that these groups and companies have filed patent applications. Several patents with claims directed to this technology have issued, although we have no current plans to use the claimed inventions. If these or other patent applications issue as patents, it is possible that the holder of any patent or patents granted on these applications may bring an infringement action against us, our collaborators, or strategic partners claiming damages and
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seeking to enjoin research, development or commercial activities relating to the affected products and processes. The costs of litigating the claim could be substantial regardless of outcome. Moreover, we cannot predict whether we, our collaborators, or strategic partners would prevail in any actions. In addition, if the relevant patent claims were upheld as valid and enforceable and our products or processes were found to infringe a patent or patents, we or our collaborators may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, and we may be prevented from making, using, selling, offering to sell, or importing into the United States the relevant product or process unless we or our collaborators could obtain a license or were able to design around the patent claims. We can give no assurance that such a license would be available to us or our collaborators on commercially reasonable terms, or at all, or that we would be able to successfully design around the relevant patent claims. There may be significant litigation in the genomics or cell therapy industry regarding patent and other intellectual property rights, which could subject us to costly, lengthy and distracting litigation with unpredictable results.
We rely on trade secrets to protect technology where we believe patent protection is not appropriate or obtainable. Trade secrets, however, are difficult to protect. While we require employees, academic collaborators and consultants to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary information or enforce these confidentiality agreements.
Our collaborators, strategic partners, and scientific advisors have rights to publish data and information in which we may have rights. If we cannot maintain the confidentiality of our technology and other confidential information in connection with our collaborations and strategic partnerships, then we may not be able to receive patent protection or protect our proprietary information.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time and may vary based on jurisdiction.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date or from the filing date of the corresponding international application. Various means to extend this expected expiration date may be available. Regardless, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be adversely affected, and our business would be harmed.
We rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, collaborators, partners and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures have been and may in the future be breached, and we may not have adequate remedies for any breach. See also the risk factor titled “If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations and reputational harm.” In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, collaborators, partners and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have an adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual
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property both in the United States and abroad. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could adversely affect our business, results of operations and financial condition.
We may not be successful in obtaining or maintaining necessary rights to product components, platforms and processes for our development pipeline through acquisitions and in-licenses.
Presently, we believe we have rights to the intellectual property, through licenses from third parties and under patents that we own, to develop our gene and cell therapy product candidates. Because our programs may involve additional product candidates, such as TX200 and potential future CAR-Treg therapies that may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify on commercially reasonable terms, if at all. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights, including from other companies and academic institutions, that we may consider attractive. Other companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. Once an intellectual property right that we desire is licensed to another company, we may be precluded from obtaining our own license to such rights.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We are a party to a number of intellectual property license agreements that are important to our business and expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone, royalty and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license.
We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist that might be enforced against our current product candidates or future products, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
In many cases, patent prosecution of our in-licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we control the prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is complicated by the rapid pace of scientific discovery in our industry.
The agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have an adverse effect on our business, financial condition, results of operations and prospects. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have an adverse effect on our business, financial condition, results of operations and prospects. As an example, Sangamo France has exclusively licensed the right to the CAR for use in TX200 from the University of British Columbia, or UBC. Should UBC terminate this license agreement, we may have to develop or acquire the appropriate CAR which would extend our
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anticipated development timeline and add expense, and which could result in our failure to realize the anticipated benefits of the acquisition of Sangamo France.
We may be involved in patent or intellectual property lawsuits or similar disputes involving patents under our control or patents of third parties claiming infringement, which lawsuits could be expensive, time-consuming and impair or prevent development and commercialization activities.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, declaratory judgment lawsuits, invalidity proceedings, interferences, oppositions, ex parte or inter partes reexaminations, post-grant reviews and inter partes review proceedings before the U.S. PTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization, and such parties may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. For example, we are aware of certain patents held by third parties related to certain vector and vector manufacturing methods that are related to certain of our product candidates. We have not yet finalized the commercial scale manufacturing process for any of our product candidates. If our commercial scale manufacturing process utilizes these vector manufacturing methods, and if these third-party patents are valid and in force at the time of commercialization, we may need to challenge these patents, use or develop non-infringing alternatives or seek a license to these patents. In any event, if any third-party patents were held by a court of competent jurisdiction to cover our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block or hinder our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations or processes for manufacture or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license, or until such patents expires. Moreover, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe.
In some instances, third parties may allege that we are infringing their patents or other proprietary rights even if they are not competitors or have an associated business. Such litigants would bring such infringement actions or threats of action with the goal of obtaining settlement money from us instead of engaging in costly and time-consuming litigation.
Defense of these claims, regardless of their merit, would involve substantial litigation expense, could expose proprietary information and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Competitors may also infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid, is unenforceable, in whole or in part, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Moreover, if we or one of our licensing partners initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidate. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have an adverse impact on our business.
Interference or derivation proceedings provoked by third parties or brought by us or declared by the U.S. PTO may be necessary to determine the priority of inventions or other matters of inventorship with respect to our patents or patent
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applications or those of our licensors. An unfavorable outcome could expose us to significant monetary damages, result in the loss of valuable intellectual property, require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation, interference, derivation or other proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may be unable to license gene transfer technologies that we may need to commercialize our ZF technology and potential products, if approved.
In order to regulate or modify a gene in a cell, the ZFP must be efficiently delivered to the cell. We have licensed certain gene transfer technologies for our ZFP in research, including AAV and mRNA technology, and we are evaluating these systems and other technologies that may need to be used in the delivery of ZFP into cells for in vitro and in vivo applications. We have not fully developed our own gene transfer technologies, and we rely on our ability to enter into license agreements to provide us with rights to the necessary gene transfer technology. Our approach has been to license appropriate technology as required. For example, in addition to our own vector manufacturing methods currently being used in our product candidates, we are aware of certain patents held by a third party related to certain vector manufacturing methods that are currently being used in certain of our product candidates. We have not yet finalized the commercial scale manufacturing process for any of our product candidates. If our commercial scale manufacturing process utilizes these vector manufacturing methods, and if these third-party patents are in force at the time of commercialization, we may need to use or develop a non-infringing manufacturing method or seek a license to these patents. However, we may not be able to license the gene transfer technologies on reasonable terms, if at all, required to develop and commercialize our product candidates. The inability to obtain a license to use gene transfer technologies with entities that own such technology on reasonable commercial terms, if at all, could delay or prevent the preclinical evaluation, drug development collaborations, clinical testing and/or commercialization of our therapeutic product candidates.
Risks Relating to our Business Operations
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm and other adverse consequences.
We are increasingly dependent on information technology systems and infrastructure to operate our business, which are large and complex. In the ordinary course of our business, we and the third parties upon which we rely, may collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, share and transmit large amounts of proprietary, confidential and sensitive information, including intellectual property, trade secrets and personal data (such as health-related information). It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such sensitive information. We have also outsourced elements of our operations (including elements of our information technology infrastructure) to third parties, and as a result, we manage a number of third-party vendors who may have access to our computer networks or our confidential information. Many of those third parties in turn subcontract or outsource some of their responsibilities to other third parties. Our ability to monitor third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.
While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the size, complexity, accessibility and distributed nature of our information technology
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systems, and the large amounts of sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks on our technology environment. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity. Threats to information systems and data are increasingly difficult to detect and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation-states and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties on which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems, operations and supply chain. We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, natural disasters (such as earthquakes, fires, floods), war, terrorism and other similar threats. Ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm and diversions of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. In addition, the effects of the COVID-19 pandemic and our updated work from home policies have intensified our dependence on information technology systems and could increase our cybersecurity risk as many of our critical business activities are currently being conducted remotely utilizing network connections, computers and devices outside our premises or network and our increased reliance on personnel working from home, while in transit and in public locations.
Any of the previously identified or similar threats could cause a data security incident or other interruption of our, our third-party vendors’ and/or business partners’ information technology systems that could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive information, which could result in financial and reputational harm to us. While we have implemented security measures designed to protect against data security incidents, there can be no assurance that these measures will be effective. We have not always been able in the past and may be unable in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in nature and may not be detected until after a data security incident has occurred. For example, in April 2018, we announced a data security incident involving the compromise of a senior executive’s company email account. Our investigation of the incident did not reveal any evidence that our systems were otherwise compromised in connection with the incident or that personal data about patients or other individuals besides the executive were accessed or disclosed. However, proprietary, confidential and other sensitive information of ours and that of other entities was accessed and may have been compromised as a result of the incident. Unforeseen developments related to this incident could occur, which could have a further adverse impact on us. Any litigation or regulatory review or investigation arising from this incident could result in significant legal exposure to us. A security incident or other interruption could also result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
While we are aware of the company email incident described above, there is no way of knowing with certainty whether we have experienced any other data security incidents that have not been discovered. While we have no reason to believe this to be the case, attackers have become very sophisticated in the way they conceal access to systems, and many companies that have been attacked are not aware that they have been attacked. Any delay in the discovery of an attack may result in increased expense and may harm our reputation. Any security incident or interruption that we, or a third-party upon which we rely, experience (including the company email incident described above) could lead to adverse consequences, including government enforcement actions (for example, investigations, fines, penalties, audits and inspections), additional reporting requirements and/or oversight, restrictions on processing data (including personal data), litigation (including class claims), indemnification obligations, harm to our reputation, monetary fund diversions and financial loss. Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. In addition, failure to maintain effective internal accounting controls related to security breaches and cybersecurity in general could impact our ability to produce timely and accurate financial statements and subject us to regulatory scrutiny. We may expend significant resources or modify our business activities in an effort to protect against security incidents or other interruptions. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages or claims related to our data privacy and security obligations. While we may be entitled to damages if our third-party partners fail to satisfy their privacy or data security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
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Additionally, we cannot be sure that our insurance coverage, if any, will be adequate or sufficient to protect us from or mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms, or at all, or that such coverage will pay future claims.
We have business operations in France and the United Kingdom, which exposes us to additional costs and risks.
Our business operations in France and the United Kingdom subject us to certain additional costs and risks associated with doing business outside the United States, including:
•the increased complexity and costs inherent in managing international operations in geographically disparate locations;
•challenges of complying with diverse regulatory, financial and legal requirements, which are subject to change at any time;
•potentially adverse tax consequences, including changes in applicable tax laws and regulations;
•potentially costly trade laws, tariffs, export quotas, custom duties or other trade restrictions, and any changes to them;
•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
•liabilities for activities of, or related to, our international operations;
•challenges inherent in efficiently managing employees in diverse geographies, including the need to adapt systems, policies, benefits and compliance programs to differing labor and other regulations;
•natural disasters, political and economic instability, including wars, terrorism and political unrest, including the conflict between Russia and Ukraine, outbreak of health epidemics, including the COVID-19 pandemic, and the resulting global economic and social impacts;
•workforce uncertainty in countries where labor unrest is more common than in the United States; and
•differing laws and regulations relating to data security and the unauthorized use of, or access to, commercial and personal information.
In addition, our international operations in France and the United Kingdom expose us to fluctuations in currency exchange rates between the Euro and the U.S. dollar and between the Pound Sterling and the U.S. dollar. Given the volatility of currency exchange rates, there is no assurance that we will be able to effectively manage currency transaction and/or conversion risks. To date, we have not entered into derivative instruments to offset the impact of foreign exchange fluctuations, which fluctuations could have an adverse effect on our financial condition and results of operations. In any event, difficulties resulting from these and other risks related to our operations outside of the United States could expose us to increased expenses, impair our development efforts, adversely affect our financial condition and results of operations and harm our competitive position.
We have experienced and may continue to experience difficulties in hiring, integrating and retaining qualified skilled employees
The growth and stability of our organization is critical to our ability to successfully achieve our strategic objectives. We may not be able to hire, integrate and retain a sufficient number of qualified employees with the appropriate levels of experience and skills to accomplish our growth objectives.
There currently is a shortage of skilled individuals with substantial experience discovering, developing and manufacturing genomic medicines, which is likely to continue. As a result, competition for these individuals is intense and the turnover rate can be high. We have experienced, and may continue to experience, difficulty hiring, integrating and retaining employees with these skills on acceptable terms given the competition among numerous biopharmaceutical companies and academic institutions for individuals with these skills. In addition, any negative or unexpected results in our preclinical or clinical trials or applications for marketing approval would make it more challenging to hire and retain qualified skilled employees. If we do not achieve our growth objectives, the progress of our research, development, manufacturing and regulatory efforts will slow down, which will adversely impact our business, financial condition, results of operations and prospects.
We are dependent on certain key members of our executive team and certain of our scientific, clinical development and manufacturing personnel, the loss of whose services may impede the progress of our research, development, manufacturing and regulatory efforts. For example, in 2022, our former Senior Vice President, Head of Development, resigned from Sangamo, and we have experienced similar departures in recent years among senior finance and legal employees to pursue opportunities at various other biotechnology companies. We could experience resignations of other executives and employees in the future given the intensity of the competition for talent in the biotechnology industry, particularly in the San Francisco Bay Area.
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Additional resignations could result in more significant disruptions and threats to our growth and stability. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. We do not have “key person” insurance on any of our employees.
We may not be successful in our efforts to discover, license or acquire new potential product candidates and may fail to capitalize on product candidates with a greater commercial opportunity or for which there is a greater likelihood of success.
If our existing product candidates do not receive regulatory approval or are not successfully commercialized, then the success of our business will depend on our ability to continue to expand our product pipeline through discovery, in-licensing or acquisitions. We may be unable to do so. If we do identify potential product candidates for licensing or acquisition, we may be unable to reach acceptable terms with the licensors or sellers. Further, there may be risks and liabilities associated with the product candidates which our due diligence efforts fail to discover, that are not disclosed to us, that we inadequately assess, or that we are unable to manage effectively. Additionally, we may not realize the anticipated benefits of such licenses or acquisitions for a variety of reasons, including the possibility that the product candidates prove not to be safe or effective in clinical trials, that we are unable to successfully integrate the product candidate into our operations, or that the anticipated benefits will not otherwise be realized within the expected timeframe.
Additionally, because we have limited resources, we may forego or delay pursuit of opportunities with certain product candidates or indications that later prove to have greater commercial potential. Our spending on current and future research and development programs may not yield any commercially viable products. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. Alternatively, we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a collaboration arrangement.
Risks Relating to our Common Stock and Corporate Organization
Our stock price has been volatile and will likely continue to be volatile, which could result in substantial losses for investors, and could be influenced by public perception of genomic medicines and the biotechnology sector.
Our stock price has been volatile and may continue to be volatile, which could cause stockholders to incur substantial losses. An active public market for our common stock may not be sustained, and the market price of our common stock may continue to be volatile. The market price of our common stock has fluctuated significantly in response to various factors, some of which are beyond our control, including but not limited to the following:
•announcements by us or collaborators providing updates on the progress or development status of product candidates or data from clinical trials;
•initiation or termination of clinical trials;
•changes in market valuations of similar companies;
•overall market and economic conditions, including the equity markets for emerging biotechnology companies;
•deviations in our results of operations from the guidance given by us;
•announcements by us or our competitors of new or enhanced products or technologies or significant contracts, acquisitions, strategic relationships, joint ventures or capital commitments;
•announcement of changes in business and operations by our collaborators, or changes to our existing collaboration agreements;
•changes in public opinions of genomic medicines;
•regulatory developments, including increased regulatory scrutiny of genomic medicines;
•changes by one or more of our securities analysts in recommendations, ratings or coverage of our stock;
•additions or departures of key personnel; and
•sales of our common stock or other securities by us, officers or directors, liquidation of institutional funds that comprised large holdings of our stock and decreases in our cash balances.
In addition, the stock markets have recently experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. These
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fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, including worsening macroeconomic conditions and other adverse effects or developments relating to the COVID-19 pandemic, and political, geopolitical, regulatory and other market conditions, may negatively affect the market price of shares of our common stock, regardless of our actual operating performance.
Actual or potential sales of significant amounts of shares of our common stock into the market could cause the market price of our common stock to fall or prevent it from increasing for numerous reasons.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. Our outstanding shares of common stock generally may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended, or the Securities Act, or to the extent the issuance of such shares has already been registered under the Securities Act and are held by non-affiliates of ours. In 2022, the restrictions applicable to the sale of the shares that we issued to Biogen lapsed, and accordingly, may be sold in the public market without restriction. Further, we also agreed, subject to certain limitations, to register for resale under the Securities Act any of the shares we issued to Biogen. We have also filed registration statements registering the shares of common stock that we may issue under our equity compensation plans. Such shares can be freely sold in the public market upon issuance, subject to volume limitations and black-out periods applicable to affiliates. Additionally, we are party to a sales agreement with Jefferies LLC which permits us from time to time at our discretion to sell up to $325.0 million of shares of our common stock in the public markets at prevailing market prices. As of February 22, 2023, we have sold 22,953,199 shares of our common stock under the sales agreement for net proceeds of approximately $117.7 million.
In addition, in accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and our policies regarding stock transactions, certain of our employees, executive officers and directors have adopted, and may continue to adopt, stock trading plans pursuant to which they have arranged to sell shares of our common stock from time to time in the future. Generally, sales under such plans by our executive officers and directors require public filings. Our employees, executive officers, directors and affiliated stockholders also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. Actual or potential sales of our common stock by such persons could be viewed negatively by other investors and could cause the price of our common stock to fall or prevent it from increasing.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.
Anti-takeover provisions in our certificate of incorporation, Delaware law and our bylaws could make an acquisition of our company more difficult and could prevent attempts by our stockholders to remove or replace current management.
Anti-takeover provisions of Delaware law and in our certificate of incorporation and our bylaws may discourage, delay or prevent a change in control of our company, even if a change in control would be beneficial to our stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. In particular, under our certificate of incorporation our board of directors may issue up to 5,000,000 shares of preferred stock with rights and privileges that might be senior to our common stock, without the consent of the holders of the common stock. Moreover, without any further vote or action on the part of the stockholders, the board of directors would have the authority to determine the price, rights, preferences, privileges, and restrictions of the preferred stock. This preferred stock, if it is ever issued, may have preference over, and harm the rights of, the holders of common stock. Although the issuance of this preferred stock would provide us with flexibility in connection with possible acquisitions and other corporate purposes, this issuance may make it more difficult for a third party to acquire a majority of our outstanding voting stock.
Similarly, our authorized but unissued common stock is available for future issuance without stockholder approval. Our certificate of incorporation further provides that stockholders may not take action by written consent.
In addition, our amended and restated bylaws:
•establish advance notice requirements for nominations for election to the board of directors or proposing matters that can be acted upon at stockholders’ meetings; and
•prohibit stockholders from calling a special meeting of stockholders.
We are also subject to Section 203 of the General Corporation Law of the State of Delaware, which provides, subject to certain exceptions, that if a person acquires 15% of our voting stock, the person is an “interested stockholder” and may not
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engage in “business combinations” with us for a period of three years from the time the person acquired 15% or more or our voting stock. The application of Section 203 may, in some circumstances, deter or prevent a change in control of our company even when such change may be beneficial to our stockholders.
Our amended and restated bylaws designate exclusive forums for the adjudication of certain disputes, which could limit our stockholders’ ability to bring claims in a judicial forum it finds favorable for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction, the federal district court of the State of Delaware, will be the sole and exclusive forum for:
•any derivative action or proceeding brought on our behalf;
•any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee or stockholder of Sangamo to us or our stockholders;
•any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, our charter or our bylaws, as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware; and
•any action asserting a claim governed by the internal affairs doctrine.
Our amended and restated bylaws further provide that a federal district court of the United State is the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. These provisions further provide that any person or entity that acquires any interest in shares of our capital stock will be deemed to have notice of and consented to these provisions.
These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find any of these provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.
ITEM 1B – UNRESOLVED STAFF COMMENTS
None.
ITEM 2 – PROPERTIES
Our corporate headquarters occupies approximately 87,700 square feet of office and research and development laboratory facilities in Brisbane, California, pursuant to a lease that expires in May 2029. We also lease approximately 59,485 square feet of research and office space, pursuant to a lease that expires in August 2031, and approximately 7,700 of office space, pursuant to a lease that expires in August 2026, in Richmond, California. We also lease approximately 26,600 square feet of office and research and development space in Valbonne, France, subject to leases that expire beginning in June 2025 through January 2030. We believe that our facilities are currently adequate to meet our needs. As we continue to expand our operations, we may need to lease or purchase additional facilities.
ITEM 3 – LEGAL PROCEEDINGS
We are not a party to any material pending legal proceeding. From time to time, we may be involved in legal proceedings arising in the ordinary course of business.
ITEM 4 – MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock trades on the Nasdaq Global Select Market under the symbol “SGMO.”
Holders
As of February 17, 2023, there were 60 holders of record of our common stock. This number does not include “street name,” or beneficial holders, whose shares are held of record by banks, brokers, financial institutions and other nominees.
Dividends
We have not paid dividends on our common stock, and currently do not plan to pay any cash dividends in the foreseeable future.
Stock Performance Graph
The above Stock Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
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ITEM 6 – [RESERVED]
Data responsive to Item 6 have not been presented in accordance with amendments to Item 301 of Regulation S-K contained in SEC Release No. 33-10890.
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains trend analysis, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Exchange Act, as amended. These forward-looking statements include, without limitation, statements containing the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” “will,” and other words of similar import or the negative of those terms or expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties, estimates and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual results could differ materially from those set forth in such forward-looking statements as a result of, but not limited to, the “Risk Factors” described in Part I, Item 1A of this Annual Report on Form 10-K. You should read the following discussion and analysis along with the Consolidated Financial Statements and notes attached to those statements included elsewhere in this report.
In addition, the section of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Annual Report on Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022.
Overview
We are a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients and families afflicted with serious diseases. We plan to deliver on this mission through development of our clinical and preclinical product candidates, leveraging our novel science and our in-house manufacturing capabilities.
Our current clinical-stage product candidates are:
•Isaralgagene civaparvovec, also known as ST-920, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, is currently being evaluated in our Phase 1/2 STAAR clinical study, and we are progressing plans for a potential Phase 3 clinical trial;
•TX200, our wholly-owned Chimeric Antigen Receptor, or CAR, engineered regulatory T cell, or CAR-Treg, cell therapy product candidate for the prevention of immune-mediated rejection in HLA-A2 mismatched kidney transplantation, is currently being evaluated in our Phase 1/2 STEADFAST clinical study;
•Giroctocogene fitelparvovec, also known as SB-525, a gene therapy product candidate for the treatment of moderately severe to severe hemophilia A, is currently being evaluated in the registrational Phase 3 AFFINE clinical trial. We are developing giroctocogene fitelparvovec with our collaborator Pfizer Inc., or Pfizer; and
•BIVV003, our zinc finger nuclease, or ZF nuclease, gene-edited cell therapy product candidate for the treatment of sickle cell disease, or SCD, is currently being evaluated in our Phase 1/2 PRECIZN-1 clinical study. BIVV003 is a wholly-owned Sangamo program following the transition from Sanofi S.A., or Sanofi, to Sangamo in June 2022. As discussed below, we recently made the strategic decision to halt further material investments in the BIVV003 program beyond completion of the Phase 1/2 PRECIZN-1 study in order to prioritize deployment of resources to our Fabry and TX200 programs.
Our preclinical development is focused in two innovative priority areas: (i) CAR-Treg cell therapies for autoimmune disorders and (ii) genome engineering for neurological diseases. Indications for our preclinical programs include neurodevelopmental disorders, cancer, inflammatory bowel disease, or IBD, tauopathies and neurodegenerative diseases such as amyotrophic lateral sclerosis, or ALS, multiple sclerosis, or MS, and Huntington’s disease, some of which we are developing with our collaborators Biogen MA, Inc. and Biogen International GmbH, which we refer to together as Biogen, Novartis Institutes for BioMedical Research, Inc., or Novartis, Pfizer, Takeda Pharmaceutical Company Limited, or Takeda, and Kite Pharma, Inc.
Our multiple collaborations with biopharmaceutical companies bring us important financial and strategic benefits and reinforce the potential of our research and development efforts and our ZF technology platform. They leverage our
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collaborators’ therapeutic and clinical expertise and commercial resources with the goal to bring our medicines more rapidly to patients. We believe these collaborations reflect the value of our ZF technology platform and will potentially expand the addressable markets of our product candidates. To date, we have received approximately $815.0 million in upfront licensing fees, milestone payments and proceeds from the sale of our common stock to collaborators, and have the opportunity to earn up to $6.7 billion in potential future milestone payments from our collaborations, in addition to potential product royalties.
We believe that our in-house manufacturing capacity provides us a competitive advantage. We currently operate an adeno-associated virus, or AAV, manufacturing facility in our Brisbane, California headquarters and cell therapy manufacturing facilities in Brisbane, California and Valbonne, France. Our manufacturing strategy is to provide greater flexibility, quality and control by building a balanced and necessary capacity achieved through our in-house manufacturing and contract manufacturing organization, or CMO, partnerships, investing in manufacturing processes and analytics and developing a strong supply chain.
For additional information regarding our business, see “Business” in Part I, Item 1 of this Annual Report on Form 10‑K.
Recent Business Highlights
Fabry Disease
•On February 22, 2023, we announced updated preliminary clinical data from our Phase 1/2 STAAR study evaluating isaralgagene civaparvovec, or ST-920, a wholly owned gene therapy product candidate for the treatment of Fabry disease, in advance of our presentation at the 19th Annual WORLDSymposium on February 24, 2023. This announcement included data on the 13 patients treated with isaralgagene civaparvovec as of the cutoff date of October 20, 2022, including kidney biopsy data on two patients. Since the cutoff date, an additional four patients have been dosed in the Phase 1/2 STAAR study, resulting in a total of 17 patients dosed to date. A total of 20 sites are now active and recruiting. Progress in the study continues with additional male and female patients currently in screening.
•The Phase 1/2 STAAR study expansion phase is ongoing and preparations for a potential Phase 3 clinical trial actively progress. A Phase 3 trial start is anticipated by the end of 2023, depending on regulatory interactions, and dosing of the first patient may occur as early as the first part of 2024. The completion of dosing in the Phase 1/2 expansion phase is expected by the end of 2023 and is not expected to be a gating factor for the commencement of the Phase 3 trial.
•In December 2022, one patient in the study expansion phase experienced a Grade 3 serious adverse event, or SAE, of shoulder enthesopathy requiring hospitalization that occurred 14 days following infusion. The event has since fully resolved, and the patient remains enrolled in the study. The Principal Investigator and the Safety Monitoring Committee for the study assessed the SAE as possibly related to treatment, and the SAE was reported to regulatory authorities. The Safety Monitoring Committee has since determined that the study may proceed without modification, and this event was reported to other investigators for awareness.
Renal Transplant Rejection
•In March 2022, we dosed the first patient in our Phase 1/2 STEADFAST study evaluating TX200, our wholly‑owned autologous HLA-A2 CAR Treg cell therapy product candidate treating patients receiving an HLA-A2 mismatched kidney from a living donor, with the second patient dosed in September 2022. The third patient has received their kidney transplant and their personalized TX200 cell therapy has been manufactured, with dosing expected early in the second quarter of 2023. Manufacturing and clinical activities for the second cohort are progressing and dosing of the fourth patient is anticipated in the summer of 2023. Additional patients are in pre-screening for potential enrollment in the study. Opportunities to accelerate the dose escalation scheme are being explored with regulators.
Hemophilia A
•In September 2022, the voluntary pause initiated by Pfizer on the Phase 3 AFFINE clinical trial of giroctocogene fitelparvovec, our investigational gene therapy for the treatment of moderately severe to severe hemophilia A, was lifted and the trial re-opened recruitment and resumed enrollment. Dosing to support primary analysis resumed in November 2022 and is expected to be completed by the end of the first quarter of 2023. A pivotal readout is expected in the first half of 2024, with Pfizer anticipating a biologics license application, or BLA, submission in the second half of 2024.
•In December 2022, we and Pfizer presented updated follow-up data from the Phase 1/2 Alta study of giroctocogene fitelparvovec at ASH. As of the September 6, 2022 cutoff date:
◦At 156 weeks, the five patients in the highest dose 3e13 vg/kg cohort had mean factor VIII (FVIII) activity of 25.5% via chromogenic clotting assay.
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◦In this cohort, mean annualized bleeding rate was 0.0 in the first year post‑infusion and was 1.2 throughout the total duration of follow‑up. All bleeding events occurred after week 69 post‑infusion. Two patients experienced bleeding events necessitating treatment with exogenous FVIII. No participants in the highest dose cohort had resumed prophylaxis.
◦Giroctocogene fitelparvovec continued to be generally well-tolerated.
Sickle Cell Disease
•In December 2022, we presented updated preliminary proof-of-concept clinical data from the Phase 1/2 PRECIZN‑1 study of BIVV003, a ZF nuclease gene-edited cell therapy candidate in development with Sanofi, at ASH. As of the September 30, 2022 cutoff date, five of the six patients achieving successful target yields of HSPCs had been infused with BIVV003.
•For the first four patients dosed received BIVV003 produced using the initial manufacturing process:
◦The effects of BIVV003 infusion on total Hb and HbF levels were maintained up to 30 months.
◦Three of the four patients had stable engraftment of ZF nuclease-modified HSPCs, resulting in sustained elevated HbF levels greater than 30% and an absence of severe vaso-occlusive crisis, or VOCs, post-BIVV003 administration.
•Patient 5 received BIVV003 manufactured using improved methods that had been shown in internal experiments to increase the number of long-term progenitor cells in the final product.
•The HbF level of 45% and total Hb of 12.4 g/dL at week 26 post-infusion for Patient 5 in the latest sample collected post cutoff date were greater than the levels observed in Group 1 at week 26.
• Since presenting updated data at ASH, clinical and manufacturing activities in preparation for the dosing of patient 7, the Phase 3 trial design, the CMC package and other requirements have been agreed with the FDA. In addition, we have progressed additional manufacturing improvements which have the potential to further strengthen clinical outcomes and reduce manufacturing costs in a potential Phase 3 trial.
•We recently made the strategic decision to halt further material investments in the BIVV003 program beyond completion of the Phase 1/2 PRECIZN-1 study in order to prioritize deployment of resources to our Fabry and TX200 programs. We remain committed to completing the Phase 1/2 PRECIZN-1 study for BIVV003, and we expect to conclude dosing in the study using the funds already committed. We intend to launch a search for a collaboration partner who can progress this program to a potential Phase 3 trial.
Manufacturing
•We currently operate an adeno-associated virus, or AAV, manufacturing facility in our Brisbane, California headquarters and cell therapy manufacturing facilities in Brisbane, California and Valbonne, France.
Impacts of the COVID-19 Pandemic
We have experienced and continue to experience impacts from the COVID-19 pandemic on our business and operations and could continue to experience these or potentially more severe impacts as the pandemic evolves in the United States, France, the United Kingdom and locations of our clinical studies and trials, such as the new sites for our STAAR study in Canada, Italy and Australia. For example, we have experienced periodic short-term disruptions to our onsite operations while addressing positive cases of COVID-19 in clinical trial patients, and our operations could experience longer term disruptions in the future in the event of a significant outbreak of COVID-19. Moreover, from time to time, we have been required to reorganize and prioritize our resources to mitigate moderate supply constraints due to the impact of COVID-19. If our programs encounter longer-term disruptions, it could impact our ability to support our biopharmaceutical partners as contemplated in our collaboration agreements and could result in adjustments to our timelines.
Additionally, our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec has experienced and continues to experience delays in its timeline due in part to COVID-19 impacts. For example, the study has experienced delays when certain patients have tested positive for COVID-19 prior to enrollment or dosing in the study. Moreover, we had experienced some short-term delays in sourcing the necessary raw materials to manufacture supplies for the STAAR study and in transporting clinical trial materials due to COVID-19 impacts. We estimated that these challenges set back our initial STAAR study timelines by approximately three to six months. Clinical timelines for this study could be revised again if COVID-19 impacts to our recruitment, screening, enrollment and dosing of patients and to our sourcing of raw materials for this study intensify because of vaccination delays, new COVID-19 variants or unexpected events.
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In addition, our STEADFAST study evaluating TX200, our wholly-owned CAR-Treg cell therapy product candidate for the treatment of kidney transplant rejection, has experienced delays in its timeline due to COVID-19 impacts related to manufacturing and technology transfer challenges with our CMOs and due to patients and donors testing positive for COVID-19. Our timelines for this study could be adjusted if COVID-19 impacts result in additional delays.
Going forward, we will continue to monitor the impact of COVID-19 on our operations, research commitments and clinical trials and those of our collaborators, clinical trial sites and CMOs. Disruptions to these operations, and possibly more severe disruptions in the future that could arise due to restrictions applicable in the places we operate or our industry generally or to us and our facilities specifically, could impede our ability to conduct research in a timely manner, comply with our research obligations to our collaborators and advance the development of our therapeutic programs. These delays and disruptions could result in adverse material impacts to our business, operating results and financial condition.
We do not anticipate any material negative impact on our financial condition in 2023 as a result of the COVID-19 pandemic. We do not currently anticipate any material impairments to the valuation of the financial assets or goodwill on our balance sheet as a result of the COVID-19 pandemic. We do not believe that the remote workplace arrangements we have implemented for our office-based employees have affected our financial reporting or control systems.
The extent to which the COVID-19 pandemic will impact our business, operations and financial condition, either directly or indirectly, will depend on future developments that remain highly uncertain at the present time. These developments include the ultimate duration and severity of the pandemic, the impacts of new COVID-19 variants, travel restrictions, new public health restrictions in the United States, France, the United Kingdom and other countries, business disruptions and the effectiveness and timeliness of actions to contain and treat the disease, including the effectiveness and timing of vaccination programs. As our understanding of events evolves and additional information becomes available, we may materially change our guidance relating to our revenues, expenses and timelines for manufacturing, clinical trials and research and development.
See the section titled “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K for additional information on risks and uncertainties related to the COVID-19 pandemic.
Certain Components of Results of Operations
Our revenues have consisted primarily of revenues from upfront licensing fees, reimbursements for research services, milestone achievements and research grant funding. We expect revenues to continue to fluctuate from period to period and there can be no assurance that new collaborations or partner reimbursements will continue beyond their initial terms or that we are able to meet the milestones specified in these agreements.
We have incurred net losses since inception and expect to incur losses for at least the next several years as we continue our research and development activities. To date, we have funded our operations primarily through the issuance of equity securities and revenues from collaborations and research grants.
We expect to continue to devote substantial resources to research and development in the future and expect research and development expenses to increase in the next several years if we are successful in advancing our product candidates from research stage through clinical trials. Pursuant to the terms of our collaboration agreements with Biogen, Kite Pharma, Inc., or Kite, and Novartis and our termination and transition agreement with Sanofi, certain expenses related to research and development activities will be reimbursed to us. The reimbursement funds to be received from Biogen, Kite, and Novartis will be recognized as revenue as the related costs are incurred and collection is reasonably assured. The reimbursement funds to be received from Sanofi will decrease our research and development expense.
General and administrative expenses consist primarily of salaries and personnel related expenses for executive, finance and administrative personnel, stock-based compensation expense, professional fees, allocated facilities expenses, patent prosecution expenses and other general corporate expenses. As we continue to advance our product candidates into and through the clinic, we expect the growth of our business to require increased general and administrative expenses.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements and the related disclosures have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these Consolidated Financial Statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our Consolidated Financial Statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following policies to be the most critical to an understanding of our financial condition and results of operations because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain.
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We believe our critical accounting policies and estimates relating to revenue recognition and valuation of long-lived assets including goodwill and intangible assets are the most significant estimates and assumptions used in the preparation of our Consolidated Financial Statements.
For a complete description of our significant accounting policies, see Note 1 – Organization, Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Revenue Recognition
Our revenues are primarily derived from collaboration arrangements which primarily include licensing intellectual property and providing research and development services. We recognize revenue when our customers obtain control of promised goods or services in a contract for an amount that reflects the consideration we expect to receive in exchange for those goods or services.
For most of our arrangements, the licenses granted to our intellectual property are not distinct from providing related research and development services and such combined performance obligations are satisfied over time. Such agreements may also contain options for additional goods and services that are considered to be material rights. For these agreements, we are required to estimate a transaction price and then allocate such transaction price based on the estimated standalone selling price of each distinct performance obligation. Most of our performance obligations are delivered over time. We generally recognize revenue using measure of progress based on an input method (e.g., cumulative actual level of effort, which includes the value of actual time incurred by our researchers plus third-party cost reimbursements, relative to the total estimated level of effort to be incurred, or cumulative actual hours incurred relative to total estimated hours to be incurred) which we believe best depicts our satisfaction of the relevant performance obligation. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Estimating the standalone selling price of material rights including their likelihood of exercise requires significant judgment. Estimating the measure of progress is also complex, involves significant judgment, and is affected by our estimates of the total costs to be incurred to satisfy the respective performance obligation. Changes in these estimates can have a material effect on our revenue recognition.
For a further description of our revenue recognition, see Note 4 – Major Customers, Partnerships and Strategic Alliances in the accompanying notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Valuation of Long-lived Assets including Goodwill and Intangible Assets
We review goodwill and indefinite-lived intangible assets for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value these assets below their carrying values. As of December 31, 2022, no impairment of goodwill or indefinite-lived intangible assets was identified.
Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment charges during the years presented.
Results of Operations
Years Ended December 31, 2022, 2021 and 2020
Revenues
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentage values) | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change | % | 2021 | 2020 | Change | % | ||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 111,299 | $ | 110,701 | $ | 598 | 1 | % | $ | 110,701 | $ | 118,192 | $ | (7,491) | (6) | % | |||||||||||||||||||||||||||||||
Revenues consisted of amounts earned from our collaboration agreements. We anticipate revenues over the next several years will be derived primarily from our collaboration agreements with Biogen, Novartis, Kite, and Pfizer.
Revenues remained consistent in 2022 compared to 2021. There were increases of $13.1 million and $1.8 million in revenues related to our collaboration agreements with Kite and Novartis, respectively. These increases were partially offset by
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decrease of $13.9 million in revenue related to our collaboration agreement with Biogen, $0.2 million in revenue related to our license agreement with Sigma-Aldrich Corporation and $0.2 million in revenue from sublicense fees related to our agreement with Dow AgroSciences LLC.
Operating Expenses
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentage values) | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change | % | 2021 | 2020 | Change | % | ||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 249,898 | $ | 230,819 | $ | 19,079 | 8 | % | $ | 230,819 | $ | 180,647 | $ | 50,172 | 28 | % | |||||||||||||||||||||||||||||||
| General and administrative | 62,682 | 63,219 | (537) | (1) | % | 63,219 | 67,097 | (3,878) | (6) | % | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 312,580 | $ | 294,038 | $ | 18,542 | 6 | % | $ | 294,038 | $ | 247,744 | $ | 46,294 | 19 | % | |||||||||||||||||||||||||||||||
Research and Development Expenses
Research and development expenses consisted primarily of compensation related expenses, including stock-based compensation, laboratory supplies, preclinical and clinical studies, manufacturing clinical supply, contracted research, and allocated facilities and information technology expenses.
The increase of $19.1 million in research and development expenses in 2022 compared to 2021 was primarily driven by an increase of $10.9 million in facilities and information technology costs driven by overall cost increases and progress made on projects resulting in reassignment of additional space to our research and development departments, an increase of $7.1 million in preclinical, clinical and lab supply expenses due to the timing of our trials and increased activity primarily attributable to our collaborations and research programs, an increase of $1.9 million in compensation and other personnel costs as a result of increased headcount to support our programs, clinical trials and manufacturing operations, and an increase of $1.3 million in travel and entertainment expenses. These increases were partially offset by $2.1 million in reimbursement of certain research and development expenses by Sanofi. Stock-based compensation expense included in research and development expenses was $18.4 million and $19.5 million for the years ended December 31, 2022 and 2021, respectively.
The table below shows research and development expenses related to our clinical, preclinical and other research and development programs. As shown in the table below, clinical programs contributed $34.2 million of the increase in our research and development expenses, offset by a decrease of $14.0 million in our preclinical and research programs in 2022 as compared to 2021, primarily driven by timing of activities related to our wholly-owned programs.
| Year Ended December 31, | ||||||||||||||
| (in thousands) | ||||||||||||||
| Programs | 2022 | 2021 | ||||||||||||
| Clinical programs: | ||||||||||||||
| Fabry clinical programs | $ | 67,351 | $ | 58,880 | ||||||||||
| TX200 clinical programs | 26,185 | 14,557 | ||||||||||||
| Sickle cell clinical programs | 14,547 | 483 | ||||||||||||
| Subtotal | 108,083 | 73,920 | ||||||||||||
| Preclinical and research programs: | ||||||||||||||
| Wholly-owned programs and early research activities | 103,160 | 99,297 | ||||||||||||
| CNS partner programs | 28,247 | 47,418 | ||||||||||||
| Oncology partner programs | 2,222 | 894 | ||||||||||||
| Others | — | 38 | ||||||||||||
| Subtotal | 133,629 | 147,647 | ||||||||||||
| Other research and development programs | 8,186 | 9,252 | ||||||||||||
| Total research and development expenses | $ | 249,898 | $ | 230,819 | ||||||||||
(*) The amount is related to dissolution of the repayment obligation of the grant from CIRM associated with the ST-400 clinical program which was discontinued in 2021. See Note 4 – Major Customers, Partnerships and Strategic Alliances in the accompanying notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
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We expect to continue to devote substantial resources to research and development in the future and expect research and development expenses to increase in the next several years if we are successful in advancing our clinical programs and if we are able to progress our earlier stage product candidates into clinical trials.
The length of time required to complete our development programs and our development costs for those programs may be impacted by the scope and timing of enrollment in clinical trials for our product candidates, our decisions to pursue development programs in other therapeutic areas, and whether we pursue development of our product candidates with a partner or collaborator or independently. For example, our product candidates are being developed in multiple therapeutic areas, and we do not yet know how many of those therapeutic areas we will continue to pursue. Furthermore, the scope and number of clinical trials required to obtain regulatory approval for each pursued therapeutic area is subject to the input of the applicable regulatory authorities, and we have not yet sought such input for all potential therapeutic areas that we may elect to pursue, and even after having given such input, applicable regulatory authorities may subsequently require additional clinical studies prior to granting regulatory approval based on new data generated by us or other companies, or for other reasons outside of our control. As a condition to any regulatory approval, we may also be subject to post-marketing development commitments, including additional clinical trial requirements. As a result of the uncertainties discussed above, we are unable to determine the duration of or complete costs associated with our development programs.
Our potential therapeutic products are subject to a lengthy and uncertain regulatory process that may not result in our receipt of any necessary regulatory approvals. Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected. In addition, clinical trials of our product candidates may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval. A discussion of the risks and uncertainties with respect to our research and development activities, including completing the development of our product candidates, and the consequences to our business, financial position and growth prospects can be found in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation related expenses including stock-based compensation for executive, legal, finance and administrative personnel, professional fees, allocated facilities and information technology expenses, and other general corporate expenses.
The decrease of $0.5 million in general and administrative expenses in 2022 compared to 2021 was primarily driven by a decrease of $7.4 million in allocated costs attributable to reassignment of additional space to our research and development departments. This decrease was offset by an increase of $3.3 million in compensation and other personnel costs as a result of increased headcount, an increase of $1.8 million of legal and professional fees, an increase of $1.3 million in facilities and information technology costs, and an increase of $0.4 million in travel and entertainment expenses. Stock-based compensation expense included in general and administrative expenses was $13.2 million and $13.4 million for the years ended December 31, 2022 and 2021, respectively.
Interest and other income, net
Interest and other income, net was $9.4 million and $5.3 million for the years ended December 31, 2022 and 2021, respectively. The increase of $4.1 million in 2022 compared to 2021 was primarily driven by an increase of $3.5 million in interest income reflecting increases in market interest rates, a benefit of $3.0 million of employee retention credit under the Coronavirus Aid, Relief, and Economic Security Act, and an increase of $0.5 million in research tax credits earned by Sangamo France. These increases were partially offset by a decrease of $1.9 million related to fluctuations in foreign currency exchange rates and a net benefit of $1.2 million recorded in 2021 related to dissolution of the repayment obligation of a grant from California Institute for Regenerative Medicine associated with the discontinuation of the ST-400 program.
Income tax expense
Provision for income taxes was $0.4 million, $0.3 million, and $0.3 million for 2022, 2021 and 2020, respectively. The income tax expense for all years was due to foreign income taxes and partially offset by a foreign deferred tax benefit.
Beginning in 2022, the 2017 Tax Cuts and Jobs Act amended Section 174 to eliminate current-year deductibility of research and experimentation, or R&E, expenditures and software development costs, collectively, R&E expenditures, and instead require taxpayers to charge their R&E expenditures to a capital account amortized over five years (15 years for expenditures attributable R&E activity performed outside the United States). We generated a deferred tax asset for capitalized R&E expenditures for the year ended December 31, 2022, which is fully offset with a valuation allowance.
As of December 31, 2022, we had net operating loss carryforwards for federal and state income tax purposes of approximately $689.7 million and $312.0 million, respectively. The federal net operating loss generated before 2018 will begin to expire in 2023 and will keep expiring through 2037, if not utilized. Federal net operating losses generated from 2018 will
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carry forward indefinitely. If not utilized, the state net operating loss carryforwards will begin to expire in 2029. We also have federal and state research tax credit carryforwards of $36.8 million and $26.1 million, respectively. The federal research credits will begin to expire in 2022, while the state research credits have no expiration date. Utilization of our net operating loss carryforwards and research tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss carryforwards and research tax credit carryforwards before use. Due to the carryforwards related to the net operating losses and research and development tax credits, we do not expect to pay any U.S. federal taxes related to income in the near future.
Liquidity and Capital Resources
Liquidity
Since inception, we have incurred significant net losses, and we have funded our operations primarily through the issuance of equity securities, payments from corporate collaborators and strategic partners and research grants.
As of December 31, 2022, we had cash, cash equivalents, and marketable securities totaling $307.5 million compared to $464.7 million as of December 31, 2021. Our most significant use of capital was for employee compensation and external research and development expenses, such as manufacturing, clinical trials and preclinical activity related to our therapeutic programs. Our cash and investment balances are held in a variety of interest-bearing instruments, including U.S. government-sponsored entity debt securities, commercial paper securities, money market funds, corporate debt securities, asset-backed securities and certificates of deposit. Cash in excess of immediate requirements is invested in accordance with our investment policy with a view toward capital preservation and liquidity.
In August 2020, we entered into an Open Market Sale Agreement℠, or the sales agreement, with Jefferies LLC, providing for the sale of up to $150.0 million of our common stock from time to time in ‘at-the-market’ offerings under an existing shelf registration statement, of which $35.0 million remained available as of December 31, 2022. In December 2022, we entered into Amendment No. 2 to the Open Market Sale Agreement℠ which increased the aggregate offering price under the sales agreement by an additional $175.0 million. During the year ended December 31, 2022, we sold 19,300,743 shares of our common stock under the sales agreement for net proceeds of approximately $84.9 million. From January 1, 2023 to the date of this Annual Report on Form 10-K, we sold 1,644,524 shares of our common stock under the sales agreement for net proceeds of approximately $5.7 million.
Under Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements—Going Concern, we have the responsibility to evaluate whether conditions and/or events could raise substantial doubt about our ability to meet our future financial obligations as they become due within twelve months after the date that the consolidated financial statements included in this Annual Report on Form 10-K are issued. We have identified several potential actions including cost preservation measures that would be initiated in a timely manner to address our liquidity needs, as follows:
•Deferral and reprioritization of certain research and development programs that would involve reduced program and headcount spend;
•Pause on any new hiring and reduction in ancillary expenses such as travel and recruitment expenses; and
•Reduction in non-critical capital and operating expenditures including additional equipment, lab improvements, efficiency projects, and business support spend.
We believe management’s plans, as described above, sufficiently alleviate the risk of substantial doubt about our ability to continue as a going concern for at least twelve months from the date that the consolidated financial statements included in this Annual Report on Form 10-K are issued.
We will be required to raise additional capital to fund our operations and support our product development endeavors. In this regard, we are actively seeking substantial additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations. However, additional capital may not be available to us, on terms that are acceptable or at all. If adequate funds are not available to us on a timely basis, or at all, we will be required to take additional actions to address our liquidity needs, including cost preservation measures such as reducing operating expenses and delaying, reducing the scope of, discontinuing or altering our research and development activities. If we raise additional capital through public or private equity offerings, including sales pursuant to our at-the-market offering program with Jefferies LLC, the ownership interest of our existing stockholders will be diluted, and such dilution may be substantial, and the terms of any new equity securities may have a preference over, and include rights superior to, our common stock. If we raise additional capital through royalty financings or other collaborations, strategic alliances or licensing arrangements with third parties, we may need to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital
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through debt financing, we may be subject to specified financial covenants or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or pursuing certain transactions, any of which could restrict our ability to commercialize our product candidates or operate as a business. In addition, management’s planned cost reductions are intended to reduce our operating expenses and optimize our cash resources. Based on the timing of these cost reduction plans, we expect to start realizing the benefit of our efforts beginning in the third quarter of 2023; however, there can be no assurance that we realize the benefits of the cost reduction plans on the anticipated timeline, or at all.
Cash Flows
Operating activities
Net cash used in operating activities was $223.6 million in 2022, primarily reflecting our net loss of $192.3 million, a decrease in deferred revenues of $91.3 million, an increase in prepaid expenses and other assets of $4.9 million, and a decrease in lease liabilities by $2.2 million. These decreases were partially offset by $51.0 million of non-cash expenses related to stock-based compensation, depreciation and amortization, amortization of operating lease right-of-use assets, and net amortization of premium (discount) on marketable securities, an increase in accounts payable and other accrued liabilities of $13.3 million, and an increase in accounts receivable of $2.3 million.
Net cash used in operating activities was $233.3 million in 2021, primarily reflecting our net loss of $178.3 million, a decrease in deferred revenues of $84.2 million, a decrease in accounts payable and other accrued liabilities of $7.7 million, an increase in prepaid expenses and other assets of $7.2 million, a decrease for adjustment of CIRM award liability related to termination of the grant of $6.4 million, and a decrease in lease liabilities of $4.3 million. These decreases were partially offset by $53.4 million of non-cash expenses related to stock-based compensation, depreciation and amortization, amortization of operating lease right-of-use assets, and net amortization of premium (discount) on marketable securities, and an increase in non-current liabilities of $1.2 million.
Investing activities
Net cash provided by investing activities was $59.3 million in 2022, primarily related to maturities of marketable securities of $354.6 million and sales of marketable securities of $2.3 million, partially offset by purchases of marketable securities of $277.4 million and purchases of property and equipment of $20.2 million.
Net cash provided by investing activities was $248.2 million in 2021, primarily related to maturities of marketable securities of $602.9 million and sales of marketable securities of $6.9 million, partially offset by purchases of marketable securities of $338.2 million and purchases of property and equipment of $23.3 million.
Financing activities
Net cash provided by financing activities was $84.7 million in 2022, primarily related to $87.1 million of proceeds from the at-the-market offering, netted by offering expenses of $2.2 million, and an increase of $1.8 million related to proceeds from the issuance of common stock under our employee stock purchase plan, offset by a decrease of $2.1 million for taxes paid related to net share settlement of equity awards.
Net cash provided by financing activities was $32.9 million in 2021, primarily related to $27.9 million of proceeds from the at-the-market offering, netted by offering expenses of $0.8 million, an increase of $5.6 million related to proceeds from the exercise of stock options, and an increase of $3.4 million related to proceeds from the issuance of common stock under our employee stock purchase plan, offset by a decrease of $3.3 million for taxes paid related to net share settlement of equity awards.
Operating Capital and Capital Expenditure Requirements
We anticipate continuing to incur operating losses for at least the next several years and need to raise substantial additional capital. The effects of the current macroeconomic environment, including the COVID-19 pandemic, the effects of war in Ukraine, inflation, climate change, rising interest rates and other economic uncertainty and volatility, has resulted and may continue to result in significant disruption of global financial markets, which could impair our ability to access capital on terms that are acceptable or at all, and in turn could negatively affect our liquidity. Future capital requirements beyond the next 12 months will be substantial, and we need to raise substantial additional capital to fund the development, manufacturing and potential commercialization of our product candidates. In this regard, we are actively seeking substantial additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations. However, additional capital may not be available to us, on terms that are acceptable or at all. If adequate funds are not available to us on a timely basis, or at all, we will be required to take additional actions to address our liquidity needs, including cost preservation measures such as reducing operating expenses and delaying, reducing the scope of, discontinuing or altering our research and development activities, which could have a material adverse effect on our business.
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As we focus our efforts on proprietary human therapeutics, we will need to seek FDA approvals of our product candidates, a process that could cost in excess of hundreds of millions of dollars per product. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to advance our product candidate pipeline would be harmed. Our future capital requirements will depend on many forward-looking factors, including the following:
•the initiation, progress, timing and completion of clinical trials for our product candidates and potential product candidates;
•the outcome, timing and cost of regulatory approvals;
•the success of our collaboration agreements;
•delays that may be caused by changing regulatory requirements;
•the number of product candidates that we pursue;
•the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
•the timing and terms of future in-licensing and out-licensing transactions;
•the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities;
•the cost of procuring clinical and commercial supplies of our product candidates;
•the extent to which we acquire or invest in businesses, products or technologies, including the costs associated with such acquisitions and investments; and
•the costs of potential disputes and litigation.
Contractual Obligations
Our contractual obligations as of December 31, 2022 relate primarily to (i) operating leases consisting of base rents for facilities we occupy in Brisbane, California; Richmond, California; and Valbonne, France, (ii) purchase obligations related to manufacturing, facilities, and equipment, and (iii) license obligations for ongoing license maintenance fee associated with cancellable in-licensed patent agreements. These agreements are enforceable and legally binding and specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price, and the approximate timing of the actions under the contracts. For more information regarding our contractual obligations and commitments as of December 31, 2022, see Note 7 – Commitments and Contingencies in the accompanying notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk relates to our cash, cash equivalents, and marketable securities. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and capturing a market rate of return based on our investment policy parameters and market conditions. We select investments that maximize interest income to the extent possible within these guidelines. To achieve our goals, we maintain a portfolio of cash equivalents and investments in securities of high credit quality and with varying maturities to match projected cash needs.
The securities in our investment portfolio are not leveraged and are classified as available-for-sale. The majority of these available-for-sale securities are short-term in nature and subject to minimal interest rate risk. Our investments currently consist of U.S. government-sponsored entity debt securities, commercial paper securities, corporate debt securities, asset-backed securities and certificates of deposit. Our investment policy, approved by our Board of Directors, limits the amount we may invest in any one type of investment issuer, thereby reducing credit risk concentrations. All investments are carried at market value, which approximates cost. We do not use derivative financial instruments in our investment portfolio. If market interest rates were to increase or decrease by one hundred basis points, the fair value of our investment portfolio would increase or decrease by an immaterial amount.
Foreign Currency Exchange Risk
We have operations in the United States as well as in Europe. The functional currency of each foreign subsidiary is the local currency. We are exposed to foreign currency risk, primarily through operations of our subsidiaries in Europe which conduct business primarily in Euros. We record gains and losses within our stockholders’ equity due to the translation of our subsidiaries’ financial statements into U.S. dollars.
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A 10% strengthening/(weakening) in the rates used to translate the results of our foreign subsidiaries would have increased/(decreased) net loss for the year ended December 31, 2022 by approximately $3.3 million and would not have materially impacted our operating loss.
Additionally, we incur foreign currency transaction gains and losses related to the level of activity between the United States and Europe. In 2022, we incurred foreign currency transaction losses of $3.1 million. A 10% unfavorable change in the Euro and U.S. dollar exchange rate on December 31, 2022 would have had an immaterial impact on foreign currency transaction losses for 2022.
We did not maintain any cash balances denominated in a foreign currency in the United States as of December 31, 2022.
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ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SANGAMO THERAPEUTICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | |||||
Report of Independent Registered Public Accounting Firm (PCAOB ID: | |||||
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Sangamo Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sangamo Therapeutics, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
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Revenue recognition for collaboration arrangements | ||||||||
| Description of the Matter | The Company’s contract revenues are derived from collaboration arrangements which primarily include licensing intellectual property and providing research and development services. As discussed in Note 1 of the consolidated financial statements, in determining the amount of revenue to be recognized as the Company fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations; (iii) measurement of the transaction price, including the variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. Revenues are recognized over time by measuring progress towards satisfaction of the relevant performance obligation, using the input method (i.e., cumulative actual costs incurred relative to total estimated costs). Auditing the Company’s accounting for revenues under collaboration arrangements was complex primarily due to significant judgment involved in evaluating the standalone selling price of material rights including the likelihood of exercise, as well as the Company’s estimates of the total costs required to complete each performance obligation and its periodic reassessment of the estimates of total costs expected to complete the performance obligations. Changes in these estimates can have a material effect on revenue recognized. | |||||||
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s process for accounting for new collaboration arrangements or modifications related to existing arrangements. For example, we tested management’s controls over the determination of the standalone selling price of the material rights, including the likelihood of exercise as well as the Company’s estimates of the total costs required to complete each performance obligation and its periodic reassessment of the estimates of total costs expected to complete the performance obligations. Our audit procedures included, among others, inspecting the agreements and evaluating the identification of performance obligations. We tested the Company’s estimates of standalone selling prices of identified material right performance obligations by performing inquiries of the research and development personnel responsible for the specific development projects, and inspecting the minutes of the relevant quarterly joint steering committee meetings to evaluate management’s assumptions of the likelihood of the customers exercising the material rights. In addition, we performed sensitivity analyses over these assumptions used in the estimate of the standalone selling prices to evaluate the changes in the estimated standalone selling prices resulting from significant changes in the assumptions. To test the initial and subsequent remeasurement of the total costs required to complete each performance obligation, we performed inquiries of the research and development personnel responsible for the specific development projects, inspected the minutes of the relevant quarterly joint steering committee meetings to evaluate management’s assumptions used in the Company’s estimates of total expected costs by project, and evaluated changes in the total expected costs by project. We also performed sensitivity analysis of changes to the total expected costs to evaluate the changes in the total expected costs resulting from significant changes to the assumptions. We compared previous estimates of total expected costs by project to actual costs incurred, to assess the accuracy of the forecasts. We also tested the amount of cumulative actual costs incurred under each project and recalculated the resulting revenue recognized under the Company’s models. | |||||||
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 1997.
February 22, 2023
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| December 31, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Interest receivable | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Marketable securities, non-current | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets | |||||||||||
| Goodwill | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other non-current assets | |||||||||||
| Restricted cash | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Other accrued liabilities | |||||||||||
| Accrued compensation and employee benefits | |||||||||||
| Deferred revenues | |||||||||||
| Total current liabilities | |||||||||||
| Deferred revenues, non-current | |||||||||||
| Long-term portion of lease liabilities | |||||||||||
| Deferred income tax | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Revenues | $ | $ | $ | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | |||||||||||||||||
| General and administrative | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Loss from operations | ( | ( | ( | ||||||||||||||
| Interest and other income, net | |||||||||||||||||
| Loss before income taxes | ( | ( | ( | ||||||||||||||
| Income tax expense | |||||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||
| Net loss attributable to non-controlling interest | ( | ( | |||||||||||||||
| Net loss attributable to Sangamo Therapeutics, Inc. stockholders | $ | ( | $ | ( | $ | ( | |||||||||||
| Basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders | $ | ( | $ | ( | $ | ( | |||||||||||
| Shares used in computing basic and diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders | |||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||
| Net pension gain (loss) | ( | ( | |||||||||||||||
| Change in unrealized loss on marketable securities, net of tax | ( | ( | ( | ||||||||||||||
| Comprehensive loss | ( | ( | ( | ||||||||||||||
| Comprehensive loss attributable to non-controlling interest | ( | ( | |||||||||||||||
| Comprehensive loss attributable to Sangamo Therapeutics, Inc. | $ | ( | $ | ( | $ | ( | |||||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Non- Controlling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2019 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with the Biogen collaboration agreement, net of issuance costs | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition of additional shares of Sangamo France | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net pension losses | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Net unrealized loss on marketable securities, net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2020 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with at-the-market offering, net of offering expenses | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Acquisition of additional shares of Sangamo France | — | — | ( | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Net pension losses | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Net unrealized loss on marketable securities, net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Buy-out of non-controlling interest | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2021 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with at-the-market offering, net of offering expenses | — | — | — | ||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options and in connection with restricted stock units, net of tax | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Net pension gains | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net unrealized loss on marketable securities, net of tax | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
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SANGAMO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Operating Activities: | |||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Amortization of (discount) premium on marketable securities | ( | ( | |||||||||||||||
| Amortization and other changes in operating lease right-of-use assets | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Gain on free shares | ( | ( | |||||||||||||||
| Net (gain) loss on disposal of property and equipment | ( | ||||||||||||||||
| Adjustment of CIRM award liability related to termination of the grant | ( | ||||||||||||||||
| Net changes in operating assets and liabilities: | |||||||||||||||||
| Interest receivable | ( | ( | |||||||||||||||
| Accounts receivable | ( | ||||||||||||||||
| Prepaid expenses and other assets | ( | ( | ( | ||||||||||||||
| Accounts payable and other accrued liabilities | ( | ||||||||||||||||
| Accrued compensation and employee benefits | |||||||||||||||||
| Deferred revenues | ( | ( | |||||||||||||||
| Lease liabilities | ( | ( | ( | ||||||||||||||
| Other non-current liabilities | ( | ||||||||||||||||
| Net cash (used in) provided by operating activities | ( | ( | |||||||||||||||
| Investing Activities: | |||||||||||||||||
| Purchases of marketable securities | ( | ( | ( | ||||||||||||||
| Maturities of marketable securities | |||||||||||||||||
| Sales of marketable securities | |||||||||||||||||
| Purchases of property and equipment | ( | ( | ( | ||||||||||||||
| Purchase of additional Sangamo France shares | ( | ( | |||||||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||||||||
| Financing Activities: | |||||||||||||||||
| Proceeds from at-the-market offering, net of offering expenses | |||||||||||||||||
| Proceeds from issuance of common stock in connection with the Biogen collaboration agreement, net of issuance costs | |||||||||||||||||
| Taxes paid related to net share settlement of equity awards | ( | ( | ( | ||||||||||||||
| Proceeds from issuance of common stock under employee stock purchase plan | |||||||||||||||||
| Proceeds from exercise of stock options | |||||||||||||||||
| Net cash provided by financing activities | |||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents, and restricted cash | ( | ( | |||||||||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | ( | ||||||||||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | |||||||||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | $ | ||||||||||||||
| Supplemental cash flow disclosures: | |||||||||||||||||
| Property and equipment included in unpaid liabilities | $ | $ | $ | ||||||||||||||
| Tenant improvement allowance included in contra-lease liability | $ | $ | $ | ||||||||||||||
| Buy-out of non-controlling interest | $ | $ | $ | ||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations | $ | $ | $ | ||||||||||||||
See accompanying Notes to Consolidated Financial Statements
110
SANGAMO THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
Sangamo Therapeutics, Inc. (“Sangamo” or “the Company”) was incorporated in the State of Delaware in June 1995 and changed its name from Sangamo Biosciences, Inc. in January 2017. Sangamo is a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients with serious diseases.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in the Consolidated Financial Statements. For consolidated entities where the Company owns or is exposed to less than 100% of the economics, the Company records net loss attributable to non-controlling interests on its Consolidated Statements of Operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties.
Liquidity, Capital Resources and Management’s Plans
Sangamo is currently working on a number of long-term development projects that involve experimental technologies. The projects may require several years and substantial expenditures to complete and ultimately may be unsuccessful. In recent years, the Company’s operations have been funded primarily through collaborations and strategic partnerships, research grants and from the issuance of equity securities. As of December 31, 2022, the Company had capital resources of $307.5 million consisting of cash, cash equivalents, and marketable securities. Management believes that the Company’s existing cash, cash equivalents, and marketable securities will be sufficient to fund its operations for at least the next 12 months from the date these Consolidated Financial Statements are issued.
Under Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements—Going Concern (“ASC Topic 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the Consolidated Financial Statements are issued. As required under ASC Topic 205-40, management’s evaluation should initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the Consolidated Financial Statements are issued.
Substantial Doubt Raised
In performing the first step of the evaluation, the Company concluded that the following conditions raised substantial doubt about its ability to continue as a going concern:
•Net loss of $192.3 million and $178.3 million for the years ended December 31, 2022 and 2021, respectively, and history of recurring net losses; and
•Accumulated deficit of $1,148.5 million and $956.3 million as of December 31, 2022 and 2021, respectively.
Consideration of Management’s Plans
In performing the second step of this assessment, the Company is required to evaluate whether it is probable that its plans will be effectively implemented within one year after the consolidated financial statements are issued and whether it is probable those plans will alleviate the substantial doubt about its ability to continue as a going concern.
The Company has identified several potential actions including cost preservation measures that would be initiated in a timely manner to address the Company’s liquidity needs over the twelve-month period from the date the Consolidated Financial Statements are issued, as follows:
•Deferral and reprioritization of certain research and development programs that would involve reduced program and headcount spend;
•Pause on any new hiring and reduction in ancillary expenses such as travel and recruitment expenses; and
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•Reduction in non-critical capital and operating expenditures including additional equipment, lab improvements, efficiency projects, and business support spend.
Management Assessment of Ability to Continue as a Going Concern
The Company believes management’s plans, as described more fully above, will provide sufficient liquidity to meet its financial obligations and maintain levels of liquidity over the twelve-month period from the date the Consolidated Financial Statements are issued. Therefore, management concluded these plans alleviate the substantial doubt that was raised about the Company’s ability to continue as a going concern for at least twelve months from the date that the Consolidated Financial Statements are issued.
The accompanying Consolidated Financial Statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.
Future Plans and Considerations
The Company will be required to raise additional capital to fund its operations and support its product development endeavors. In this regard, the Company is actively seeking substantial additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations. However, additional capital may not be available to the Company, on terms that are acceptable or at all. If adequate funds are not available to the Company on a timely basis, or at all, it will be required to take additional actions to address its liquidity needs, including cost preservation measures such as reducing operating expenses and delaying, reducing the scope of, discontinuing or altering its research and development activities. If the Company raises additional capital through royalty financings or other collaborations, strategic alliances or licensing arrangements with third parties, it may need to relinquish certain valuable rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If the Company raises additional capital through public or private equity offerings, including sales pursuant to its at-the-market offering program with Jefferies LLC, the ownership interest of its existing stockholders will be diluted, and such dilution may be substantial, and the terms of any new equity securities may have a preference over, and include rights superior to, its common stock. If the Company raises additional capital through royalty financings or other collaborations, strategic alliances or licensing arrangements with third parties, it may need to relinquish certain valuable rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If the Company raises additional capital through debt financing, it may be subject to specified financial covenants or covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or pursuing certain transactions, any of which could restrict its ability to commercialize its product candidates or operate as a business. In addition, management’s planned cost reductions are intended to reduce the Company’s operating expenses and optimize its cash resources. Based on the timing of these cost reduction plans, the Company expects to start realizing the benefit of its efforts beginning in the third quarter of 2023; however, there can be no assurance that the Company will realize the benefits of the cost reduction plans on the anticipated timeline, or at all.
Summary of Significant Accounting Policies
During the year ended December 31, 2021, the Company recorded adjustments to revenue related to changes in estimates in connection with the collaboration agreement with Sanofi S.A. (“Sanofi”). These changes in estimates were driven by a change in project scope and related project costs in September 2021 and subsequent notification of termination of the collaboration agreement, effective June 28, 2022, which resulted in changes to the measure of proportional cumulative performance. These adjustments decreased revenue by $1.6 million, increased net loss by $1.6 million and increased the Company’s basic and diluted net loss per share by $0.01 for the year ended December 31, 2021.
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During the year ended December 31, 2020, the Company recorded adjustments to revenue related to changes in estimates in connection with the collaboration agreements with Sanofi and Pfizer Inc. (“Pfizer”). These changes in estimates were driven by changes in project scope and related project costs which resulted in changes to the measure of proportional cumulative performance. These adjustments increased revenue by $8.9 million, decreased net loss by $8.9 million and decreased the Company’s basic and diluted net loss per share by $0.06 for the year ended December 31, 2020.
Revenue Recognition
The Company accounts for its revenues pursuant to the provisions of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company’s contract revenues are derived from collaboration agreements including licensing arrangements and research services. Research and licensing agreements typically include nonrefundable upfront signing or license fees, payments at negotiated rates for time incurred by Company researchers, third-party cost reimbursements, additional target selection fees, sublicense fees, milestone payments tied to ongoing development and product commercialization, and royalties on future licensees’ product sales. All funds received from the Company’s collaboration partners are generally not refundable. Non-refundable upfront fees are fixed at the commencement of the contract. All other fees represent variable consideration in contracts. One of the Company’s contracts also contains a provision where we reimburse its customer for certain costs they incur which is accounted for as a reduction to the contract transaction price as we do not acquire any distinct goods or services in exchange for such payments. Deferred revenue primarily represents the portion of nonrefundable upfront fees or milestone payments received but not earned.
In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Most of the Company’s performance obligations in its collaboration agreements represent distinct bundles of licenses of intellectual property and research and development services, with these components being individually non-distinct. Options to license our intellectual property and/or acquire research and development services also represent performance obligations when they grant customers a material right, e.g. a right to a discount the customer would not have received if they did not purchase our services under the existing contract.
Revenues from bundles of licenses of intellectual property and research and development services are recognized over time using a proportional performance method. Under this method, revenue is recognized by measuring progress towards satisfaction of the relevant performance obligation using a measure that best depicts the progress towards satisfaction of the relevant performance obligation. For most of the Company’s agreements the measure of progress is an input measure based on a level of effort incurred, which includes the value of actual time by Company researchers plus third-party cost reimbursements.
Consideration allocated to options that include material rights is deferred until the options are exercised or expire. The exercise of such options is accounted for as contract continuation, with target selection fees and estimated variable consideration included in the transaction price at that time and allocated specifically to the respective target’s performance obligation.
Significant management judgment is required to determine the level of effort required under an arrangement, and the period over which the Company expects to complete its performance obligations under the arrangement. Changes in these estimates can have a material effect on revenue recognized. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. For variable consideration, the amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. A cumulative catch-up is then recorded in the current period to reflect the updated transaction price and the updated measure of progress. The estimated period of performance and level of effort, including the value of Company researchers’ time and third-party costs, are reviewed quarterly and adjusted, as needed, to reflect the Company’s current expectations.
As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, discount rates and probabilities of exercise of technical and regulatory success, and the expected level of effort for research and development services.
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| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Novartis Institutes for BioMedical Research, Inc. | % | % | % | ||||||||||||||
| Kite Pharma, Inc. | % | % | % | ||||||||||||||
| Biogen MA, Inc. | % | % | % | ||||||||||||||
| Sanofi S.A. | % | % | % | ||||||||||||||
| Pfizer Inc. | % | % | % | ||||||||||||||
| As of December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Novartis Institutes for BioMedical Research, Inc. | % | % | |||||||||
| Kite Pharma, Inc. | % | % | |||||||||
| Biogen MA, Inc. | % | % | |||||||||
| Sanofi S.A. | % | % | |||||||||
Fair Value Measurements
The carrying amounts for financial instruments consisting of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to their short-term maturities. Marketable securities are stated at their estimated fair values.
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| As of December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Non-current restricted cash | |||||||||||||||||
| Cash, cash equivalents, and restricted cash as reported within the Consolidated Statements of Cash Flows | $ | $ | $ | ||||||||||||||
Marketable Securities
Sangamo classifies its marketable securities as available-for-sale and records its investments at estimated fair value based on quoted market prices or observable market inputs of almost identical assets, with the unrealized holding gains and losses included in accumulated other comprehensive income (loss) (“AOCI”). The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as non-current marketable securities in the accompanying Consolidated Balance Sheets.
The Company’s investments are subject to a periodic impairment review. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time and extent to which the fair value has been less than the Company’s cost basis, the financial condition and near-term prospects of the investee and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market value. Realized gains and losses on marketable securities are included in interest and other income, net, which are determined using the specific identification method. Credit losses related to the marketable securities are recorded in interest and other income (expense), net in the Consolidated Statements of Operations through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.
Concentrations of Credit Risk and Other Risks
Cash, cash equivalents, and marketable securities consist of financial instruments that potentially subject the Company to a concentration of credit risk to the extent of the fair value recorded in the Consolidated Balance Sheets. The Company invests cash that is not required for immediate operating needs primarily in highly liquid instruments that bear minimal risk. The Company has established policies relating to the quality, diversification, and maturities of securities to enable the Company to manage its credit risk. The Company is exposed to credit risk in the event of a default by the financial institutions or issuers of investments holding its cash, cash equivalents, and investments to the extent recorded on the Consolidated Balance Sheets.
Certain materials and key components that the Company utilizes in its operations are obtained through single suppliers. Since the suppliers of key components and materials must be named in an investigational new drug application (“IND”) filed with the U.S. Food and Drug Administration for a product, significant delays can occur if the qualification of a new supplier is required. If delivery of material from the Company’s suppliers were interrupted for any reason, the Company may be unable to supply any of its product candidates for clinical trials.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method based on the estimated useful lives of the related assets which is generally to five years . For leasehold improvements, amortization is calculated using the straight-line method based on the shorter of the useful life or the lease term. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Research and Development Expenses
Research and development expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations, materials and supplies and overhead allocations consisting of various support and facility-related costs. Research and development costs are expensed as incurred.
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General and Administrative Expenses
General and administrative expenses consist of finance, human resources, legal and other administrative activities. These expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, facilities and overhead costs, legal expenses, and other general and administrative costs.
Stock-based Compensation
The Company measures and recognizes compensation expense for all stock-based payment awards made to Sangamo employees and directors, including employee share options, restricted stock units (“RSUs”) and employee stock purchases related to the Employee Stock Purchase Plan (“ESPP”) based on estimated fair values at the award grant date. The fair value of stock-based awards is amortized over the vesting period of the award using a straight-line method.
To estimate the fair value of an award, the Company uses the Black-Scholes option pricing model. This model requires inputs such as expected life, expected volatility, expected dividend yield of stock and risk-free interest rate. These inputs are subjective and generally require significant analysis and judgment to develop. While estimates of expected life and volatility are derived primarily from the Company’s historical data, the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption. The Company accounts for forfeitures in the period they occur.
Income Taxes
Income tax expense has been calculated using the liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets if, based upon the available evidence, it is not more likely than not that the deferred tax assets will be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Company’s Consolidated Financial Statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized. The Company recognizes interest and penalties associated with tax matters as part of the income tax provision and includes accrued interest and penalties with the related income tax liability within other accrued liabilities on its Consolidated Balance Sheets. The Company evaluates uncertain tax positions on a regular basis and makes adjustments to these accruals when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.
Leases
The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.
As the implicit rate in the Company’s leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of remaining lease payments. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease in a similar economic environment. The Company considers its credit risk, term of the lease, and total lease payments and adjusts for the impacts of collateral, as necessary, when calculating its incremental borrowing rates. The lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise any such options. Rent expense for the Company’s operating leases is recognized on a straight-line basis over the lease term.
The Company has elected not to separate lease and non-lease components for its real estate and copier leases and, as a result, accounts for any lease and non-lease components as a single lease component. The Company has also elected not to apply the recognition requirement to any leases with a term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.
Foreign Currency Translation
The functional currency of the Company’s foreign subsidiaries is primarily the Euro. Assets and liabilities denominated in foreign currencies are translated to U.S. dollars using the exchange rates at the balance sheet date. Foreign currency translation adjustments are recorded as a component of AOCI within stockholders’ equity. Revenues and expenses from the Company’s foreign subsidiaries are translated using the monthly average exchange rates in effect during the period in
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Net Loss Per Share
Basic net loss per share attributable to Sangamo Therapeutics, Inc. stockholders has been computed by dividing net loss attributable to Sangamo Therapeutics, Inc. stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to Sangamo Therapeutics, Inc. stockholders is calculated by dividing net loss attributable to Sangamo Therapeutics, Inc. stockholders by the weighted-average number of shares of common stock plus potentially dilutive securities outstanding during the period.
Recent Accounting Pronouncements
None.
NOTE 2 – FAIR VALUE MEASUREMENTS
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents and marketable securities. Fair value is determined based on a three-tier hierarchy under the authoritative guidance for fair value measurements and disclosures that prioritizes the inputs used in measuring fair value as follows:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurements and unobservable (i.e., supported by little or no market activity).
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The fair value measurements of the Company’s cash equivalents and marketable securities are identified at the following levels within the fair value hierarchy (in thousands):
| December 31, 2022 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | |||||||||||||||||||||||
| Commercial paper securities | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| U.S. treasury bills | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Agency bonds | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | |||||||||||||||||||||||
| Commercial paper securities | |||||||||||||||||||||||
| Corporate debt securities | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | $ | |||||||||||||||||||
Cash Equivalents and Marketable Securities
The Company generally classifies its marketable securities as Level 2. Instruments are classified as Level 2 when observable market prices for identical securities that are traded in less active markets are used. When observable market prices for identical securities are not available, such instruments are priced using benchmark curves, benchmarking of like securities, sector groupings, matrix pricing and valuation models. These valuation models are proprietary to the pricing providers or brokers and incorporate a number of inputs, including in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. For certain security types, additional inputs may be used, or some of the standard inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on any given day.
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NOTE 3 – CASH EQUIVALENTS AND MARKETABLE SECURITIES
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | ( | ||||||||||||||||||||||
| Commercial paper securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Asset-backed securities | ( | ||||||||||||||||||||||
| U.S. treasury bills | ( | ||||||||||||||||||||||
| Certificates of deposit | ( | ||||||||||||||||||||||
| Agency bonds | ( | ||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. government-sponsored entity debt securities | ( | ||||||||||||||||||||||
| Commercial paper securities | ( | ||||||||||||||||||||||
| Corporate debt securities | ( | ||||||||||||||||||||||
| Asset-backed securities | ( | ||||||||||||||||||||||
| Certificates of deposit | ( | ||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Maturing in one year or less | $ | $ | |||||||||
| Maturing after one year through five years | |||||||||||
| Total | $ | $ | |||||||||
Realized gains and losses on the sales of investments were not material during the years ended December 31, 2022, 2021 and 2020. Total unrealized gains for securities with net gains in accumulated other comprehensive income were not material for the year ended December 31, 2022.
The Company manages credit risk associated with its investment portfolio through its investment policy, which limits purchases to high-quality issuers and also limits the amount of its portfolio that can be invested in a single issuer. The Company did no
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NOTE 4 – MAJOR CUSTOMERS, PARTNERSHIPS AND STRATEGIC ALLIANCES
Novartis Institutes for BioMedical Research, Inc.
On July 27, 2020, the Company entered into a collaboration and license agreement with Novartis Institutes for BioMedical Research, Inc. (“Novartis”) for the research, development and commercialization of gene regulation therapies to treat three neurodevelopmental disorders. Under the agreement, which was effective upon execution, the Company granted Novartis an exclusive, royalty bearing and worldwide license, under its relevant patents and know-how, to develop, manufacture and commercialize certain of its zinc finger (“ZF”) transcriptional regulators (“ZF-TRs”) targeted to three undisclosed genes that are associated with certain neurodevelopmental disorders, including autism spectrum disorder and intellectual disability. The Company is performing early research activities over the collaboration period for each gene target and manufacture the ZF-TRs required for such research, costs of which are funded by Novartis. Novartis is responsible for additional research activities, studies enabling INDs, clinical development, regulatory approvals, manufacturing of preclinical, clinical and approved products, and global commercialization. Subject to certain exceptions set forth in the agreement, the Company is prohibited from developing, manufacturing or commercializing any therapeutic product targeting any of the three genes that are the subject of the collaboration. Novartis also has the option to license certain of the Company’s proprietary adeno-associated viruses (“AAVs”) for the sole purpose of developing, manufacturing and commercializing licensed products arising from the collaboration.
Under the agreement, Novartis paid the Company a $75.0 million upfront license fee in August 2020. In addition to this fee and the cost reimbursements for early research activities, the Company is eligible to earn from Novartis up to $420.0 million in development milestones and up to $300.0 million in commercial milestones. The Company is also eligible to earn from Novartis tiered high single-digit to sub-teen double-digit royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments will be subject to reduction due to patent expiration, loss of market exclusivity and payments made under certain licenses for third-party intellectual property. The agreement will continue, on a product-by-product and country-by-country basis, until the expiration of the applicable royalty term. Novartis has the right to terminate the agreement, in its entirety or on a target-by-target basis, for any reason after a specified notice period. Each party also has the right to terminate the agreement on account of the other party’s bankruptcy or material, uncured breach.
All payments received under the agreement, when earned, are non-refundable and non-creditable. The transaction price of $95.1 million includes the upfront license fee of $75.0 million and estimated research costs of $20.1 million to be provided over the estimated research period. All clinical or regulatory milestone amounts were considered fully constrained at inception of the agreement. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved. The Company will re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The Company assessed the agreement with Novartis in accordance with ASC Topic 606 and concluded that Novartis is a customer. The Company has identified a single performance obligation within this arrangement as a license to the technology and ongoing research services. The Company concluded that the license is not discrete as it does not have stand-alone value to Novartis apart from the research services to be performed pursuant to the agreement. As a result, the Company recognizes revenue from the upfront payment based on proportional performance of the ongoing research services through the estimated research period. The estimation of progress towards the satisfaction of performance obligation and project cost is reviewed quarterly and adjusted, as needed, to reflect the Company’s current assumptions regarding the timing of its performance
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obligation. As of December 31, 2022 and 2021, the Company had a receivable of $2.2 million and $1.9 million, respectively, and deferred revenue of $9.6 million and $40.9 million, respectively, related to this agreement. These amounts are expected to be recognized over the period through 2023.
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Revenue related to Novartis agreement: | |||||||||||||||||
| Recognition of upfront license fee | $ | $ | $ | ||||||||||||||
| Research services | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The Company paid $1.5 million for financial advisory fees during the year ended December 31, 2020, equal to 2 % of $75.0 million received for the upfront license fee related to the collaboration and license agreement with Novartis. The Company recognized $1.5 million as a contract asset as such amount represents a cost of obtaining the agreement. This balance is amortized and included in general and administrative expenses on a systematic basis consistent with the transfer of the services to Novartis in accordance with ASC Topic 340, Other Assets and Deferred Costs (“ASC Topic 340”). The Company amortized $0.6 million and $0.6 million during the years ended December 31, 2022 and 2021, respectively.
Biogen MA, Inc.
In February 2020, the Company entered into a collaboration and license agreement with Biogen MA, Inc. (“BIMA”) and Biogen International GmbH (together with BIMA, “Biogen”) for the research, development and commercialization of gene regulation therapies for the treatment of neurological diseases. The companies plan to leverage the Company’s proprietary ZF technology delivered via AAV to modulate expression of key genes involved in neurological diseases. Concurrently with the execution of the collaboration agreement, the Company entered into a stock purchase agreement with BIMA, pursuant to which BIMA agreed to purchase 24,420,157 shares of the Company’s common stock (the “Biogen Shares”), at a price per share of $9.2137 , for an aggregate purchase price of approximately $225.0 million.
The collaboration agreement became effective in April 2020 following the termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and satisfaction of other customary closing conditions, including the payment of $225.0 million for the purchase of the Biogen Shares.
Under the collaboration agreement, Biogen paid the Company an upfront license fee of $125.0 million in May 2020. The Company is also eligible to receive research, development, regulatory and commercial milestone payments that could total up to approximately $2.4 billion if Biogen selects all of the targets allowed under the agreement and all the specified milestones set forth in the agreement are achieved, which includes up to $925.0 million in pre-approval milestone payments and up to $1.5 billion in first commercial sale and other sales-based milestone payments. In addition, the Company is eligible to receive tiered high single-digit to sub-teen royalties on potential net commercial sales of licensed products arising from the collaboration. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
Under the collaboration agreement, the Company granted to Biogen an exclusive, royalty bearing and worldwide license, under its relevant patents and know-how, to develop, manufacture and commercialize ZF and/or AAV-based products directed to certain neurological disease gene targets selected by Biogen. Biogen has already selected four of these: ST-501 to treat tauopathies, ST-502 to treat synucleinopathies including Parkinson’s disease, a third product candidate targeting DM1, a neuromuscular disease, and a fourth undisclosed neurological disease gene target. Biogen has exclusive rights to nominate up to seven additional targets over the remaining period of five years from the effective date of the collaboration agreement. For each gene target selected by Biogen, the Company performs early research activities, costs of which are shared by the companies, aimed at the development of the combination of proprietary central nervous system delivery vectors and ZF-TRs (or potential other ZF products) targeting therapeutically relevant genes. Biogen has assumed responsibility and costs for the IND‑enabling studies, clinical development, related regulatory interactions, and global commercialization. The Company is responsible for manufacturing activities for the initial clinical trials for the first three products of the collaboration and plans to leverage its in-house manufacturing capacity, where appropriate, which is currently in development. Biogen is responsible for manufacturing activities beyond the first clinical trial for each of the first three products. The Company’s research activities for any targets will be performed over the period not to exceed seven years from the effective date of the agreement (i.e., through April 2027). Subject to certain exceptions set forth in the collaboration agreement, the Company is prohibited from developing, manufacturing or commercializing any therapeutic product directed to the targets selected by Biogen.
The collaboration agreement continues on a product-by-product and country-by-country basis until the expiration of all applicable royalty terms. Biogen has the right to terminate the collaboration agreement, in its entirety or on a target-by-target
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basis, for any reason after a specified notice period, and also has the right to replace up to eight targets. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach. In addition, the Company may terminate the collaboration agreement if Biogen challenges any patents licensed by the Company to Biogen.
Pursuant to the terms of the stock purchase agreement, Biogen has agreed not to, without the Company’s prior written consent and subject to specified conditions and exceptions, directly or indirectly acquire shares of the Company’s outstanding common stock, seek or propose a tender or exchange offer or merger between the parties, solicit proxies or consents with respect to any matter, or undertake other specified actions related to the potential acquisition of additional equity interests in the Company. Such standstill restrictions expire on the earlier of the three-year anniversary of the effectiveness of the collaboration agreement and the date that Biogen beneficially owns less than 5 % of the Company’s common stock.
The Company assessed the collaboration agreement with Biogen in accordance with ASC Topic 606 and concluded that Biogen is a customer. The transaction price includes the upfront license fee of $125.0 million and the excess consideration from the stock purchase of $79.6 million, which represents the difference between the $225.0 million received for the purchase of the Biogen Shares and the $145.4 million estimated fair value of the equity issued. The equity issued to Biogen was valued using an option pricing model to reflect certain holding period restrictions. None of the clinical or regulatory milestones have been included in the transaction price, as none of the milestones have yet been achieved, and all such amounts are fully constrained. As part of its evaluation of the constraint, the Company considers numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved. The transaction price also includes actual and estimated cost-sharing payments by Biogen for the work by Company researchers and reimbursement of the Company’s costs incurred with third-parties. The amounts paid and expected to be paid to Biogen for the use of Biogen’s resources and its expenses are consideration paid to a customer. Since the Company does not acquire distinct goods or services in exchange for these payments, they reduce the transaction price and are recorded as reduction in revenue. The Company uses the expected value method to estimate cost sharing payments, taking into account the impact of constraint. Variable consideration is included in the transaction price only to the extent it is probable a significant reversal of cumulative revenues recognized would not occur. Target selection fees are included in the transaction price when the options for the associated targets are exercised. The Company re-evaluates the transaction price as uncertain events are resolved or other changes in circumstances occur.
The Company concluded that the licenses to its intellectual property are not distinct from the related research and development activities as the licensed technology is not shared with and cannot be utilized by Biogen without the research services to be performed by the Company pursuant to the agreement. On the other hand, each combination of a license to the Company's intellectual property as applied to a specific target and the related research and development activities are a discrete research project that is distinct from any other target’s project. The targets Biogen could select in the future are options that provide Biogen with material rights, as the exercise of the options does not require payment of a fee commensurate with the value of the incremental license rights. As a result, such options also represent performance obligations.
At contract inception, the Company allocated fixed consideration of $204.6 million included in the initial transaction price to the existing targets’ license and research services performance obligations and those performance obligations for options that include material rights, based on their relative standalone selling prices. Through December 31, 2022, one material right has expired, and seven material rights remain outstanding and will expire if not exercised in 2023 or in 2025.
As of December 31, 2022 and 2021, the Company had a receivable of $0.5 million and $2.8 million, respectively, and deferred revenue of $132.2 million and $154.0 million, respectively, related to this agreement. Changes in deferred revenue balances relate primarily to progress in delivery of the performance obligations. The amounts of transaction price remaining to be recognized were $151.3 million and $182.2 million as of December 31, 2022 and 2021, respectively. These amounts are expected to be recognized over the period through 2027. The timing of recognition will be affected by the volume of annual activity under the agreement and by whether and when Biogen exercises options for additional targets and could be subject to significant changes.
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Revenue related to Biogen agreement: | |||||||||||||||||
| Recognition of license and other fixed consideration | $ | $ | $ | ||||||||||||||
| Cost-sharing payments for research services, net variable consideration | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The Company paid $7.0 million for financial advisory fees during the year ended December 31, 2020, equal to 2 % of $225.0 million received for the sale of shares and 2 % of $125.0 million received for the upfront fee. The fees incurred related to
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both the collaboration agreement with Biogen and to the stock purchase agreement for the sale of shares. The Company believes that the allocation of fees on a relative fair value basis between the two agreements is reasonable. The Company recognized $4.1 million, which represents 2 % of the initial transaction price of $204.6 million, as a contract cost asset. This balance is released into general and administrative expenses on a systematic basis consistent with the transfer of the services to Biogen in accordance with ASC Topic 340. The Company recognized as expense $0.4 million, $0.6 million and $0.4 million during the years ended December 31, 2022, 2021 and 2020, respectively. The Company recognized $2.9 million, which represented 2 % of the $145.4 million estimated fair value of the equity issued, as a share issuance cost and recorded this amount in equity as a reduction in net proceeds during the year ended December 31, 2020.
Kite Pharma, Inc.
In February 2018, the Company entered into a global collaboration and license agreement with Kite Pharma, Inc. (“Kite”), a Gilead Sciences, Inc. subsidiary, which became effective on April 5, 2018 (“Effective Date”), and was amended and restated in September 2019, for the research, development, and commercialization of potential engineered cell therapies for cancer. In this collaboration, Sangamo is working together with Kite on a research program under which the companies are designing zinc finger nucleases (“ZFNs”) and viral vectors to disrupt and insert certain genes in T-cells and natural killer cells (“NK-cells”) including the insertion of genes that encode chimeric antigen receptors (“CARs”), T-cell receptors (“TCRs”), and NK-cell receptors (“NKRs”) directed to mutually agreed targets. Kite is responsible for all clinical development, manufacturing and commercialization of any resulting products.
Subject to the terms of this agreement, the Company granted Kite an exclusive, royalty-bearing, worldwide sublicensable license under the Company’s relevant patents and know-how to develop, manufacture and commercialize, for the purpose of treating cancer, specific cell therapy products that may result from the research program and that are engineered ex vivo using selected ZFNs and viral vectors developed under the research program to express CARs, TCRs or NKRs directed to candidate targets.
During the research program term and subject to certain exceptions, the Company is prohibited from researching, developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a target expressed on or in a human cancer cell. After the research program term concludes and subject to certain exceptions, the Company will be prohibited from developing, manufacturing and commercializing, for the purpose of treating cancer, any cell therapy product that, as a result of ex vivo genome editing, expresses a CAR, TCR or NKR that is directed to a candidate target.
Following the Effective Date, the Company received a $150.0 million upfront payment from Kite. In addition, Kite reimburses the Company’s direct costs to conduct the joint research program. Sangamo is also eligible to receive contingent development- and sales-based milestone payments that could total up to $3.0 billion if all of the specified milestones set forth in this agreement are achieved. Of this amount, approximately $1.3 billion relates to the achievement of specified research, clinical development, regulatory and first commercial sale milestones, and approximately $1.8 billion relates to the achievement of specified sales-based milestones if annual worldwide net sales of licensed products reach specified levels. Each development- and sales-based milestone payment is payable (i) only once for each licensed product, regardless of the number of times that the associated milestone event is achieved by such licensed product, and (ii) only for the first 10 times that the associated milestone event is achieved regardless of the number of licensed products that may achieve such milestone event. In addition, the Company is entitled to receive escalating, tiered royalty payments with a percentage in the single digits based on future annual worldwide net sales of licensed products. These royalty payments are subject to reduction due to patent expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property.
The initial research term in the agreement is six years from the Effective Date. Kite has an option to extend the research term for up to two additional one-year periods for a separate upfront fee of $10.0 million per year. All contingent payments under the agreement, when earned, will be non-refundable and non-creditable. Through the amendment and restatement of the agreement in September 2019, the Company and Kite agreed to expand the scope of the collaboration program to incorporate the use of lentiviral or retroviral vectors provided by Kite. Kite has the right to terminate this agreement in its entirety or on a per licensed product or per candidate target basis for any reason after a specified notice period. Each party has the right to terminate this agreement on account of the other party’s bankruptcy or material, uncured breach.
The Company assessed the agreement with Kite in accordance with ASC Topic 606 and concluded that Kite is a customer. The transaction price includes the upfront license fee of $150.0 million and estimated reimbursable service costs for the research projects over the estimated performance period. None of the clinical or regulatory milestones have been included in the transaction price, as none of the milestones have yet been achieved, and all amounts are fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at this time is uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved.
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The transaction price also includes actual and estimated payments by Kite for the work by Company researchers and reimbursement of the Company’s costs incurred with third-parties. The Company uses the expected value method to estimate payments related to the Company’s researchers’ work, taking into account the impact of constraint. Variable consideration is included in the transaction price only to the extent it is probable a significant reversal of cumulative revenues recognized would not occur. The Company will re-evaluate the transaction price including the estimated variable consideration included in the transaction price and all constrained amounts in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The Company has identified four performance obligations within the Kite agreement as follows: (1) a license to the technology combined with the obligation to perform research and development services to apply the Company’s technology to Kite-selected targets; (2) production of research materials; and (3-4) two material rights, each for an extension of the research period for an additional one-year term. Such extensions contain material rights because their exercise does not require payment of a fee that is commensurate with the value of the incremental research term. The license to the Company’s intellectual property is not distinct from the related research and development activities as the licensed technology is not shared with and cannot be utilized by Kite without the research services performed by the Company.
The Company allocated variable consideration (payments by Kite for the work performed by the Company’s researchers and third party costs, as well as any future milestones and royalties) to the specific performance obligations to which they relate, as such allocation would meet the allocation objective in ASC Topic 606. The Company allocated the fixed consideration of $150.0 million to the performance obligations based on their relative standalone selling prices. Standalone selling prices of optional research years are similar to those of the initial year, but additionally take into account the intrinsic value of the discount upon exercise and the likelihood of exercise.
Fees allocated to options with material rights are deferred until the options are exercised or expire. The exercise of options is accounted for as contract continuation, with target selection fees and estimated variable consideration included in the transaction price at that time and allocated specifically to the respective target’s performance obligation.
Revenue for the combined license and research services performance obligations is recognized over time, as Kite consumes the benefit of such services as they are being performed by the Company. For the license combined with research and development services performance obligation, the Company recognizes revenue based on proportional performance of the ongoing research services over the period during which the Company performs the services. The estimation of progress towards the satisfaction of this performance obligation and project costs are reviewed quarterly and adjusted, as needed, to reflect the Company’s assumptions regarding the estimated volume of required activities. The production of research materials performance obligation is accounted for under the right to invoice practical expedient, as the Company has the right to invoice Kite for these services in an amount that corresponds directly with the value of the services.
As of December 31, 2022, and 2021 the Company had a receivable of $0.7 million and $0.1 million, respectively, and deferred revenue of $19.4 million and $56.5 million, respectively, related to this agreement. Changes in deferred revenue balances relate primarily to progress in delivery of the performance obligations. The amounts of transaction price (excluding the amounts recognized as invoiced for the production of research materials performance obligation) remaining to be recognized were $19.7 million and $51.4 million as of December 31, 2022 and 2021, respectively. These amounts are expected to be recognized over the period through 2024. The timing of recognition will be affected by the volume of annual activity under the agreement and by whether and when Kite exercises options for additional years of services, and could be subject to significant changes.
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Revenue related to Kite agreement: | |||||||||||||||||
| Recognition of license fee fixed consideration | $ | $ | $ | ||||||||||||||
| Research services variable consideration | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
Pfizer Inc.
Giroctocogene Fitelparvovec Global Collaboration and License Agreement
In May 2017, the Company entered into an exclusive global collaboration and license agreement with Pfizer, pursuant to which it established a collaboration for the research, development and commercialization of giroctocogene fitelparvovec, its gene therapy product candidate for hemophilia A, and closely related products.
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Under this agreement, the Company is responsible for conducting the Phase 1/2 clinical trial and for certain manufacturing activities for giroctocogene fitelparvovec, while Pfizer is responsible for subsequent worldwide development, manufacturing, marketing and commercialization of giroctocogene fitelparvovec. Sangamo may also collaborate in the research and development of additional AAV-based gene therapy products for hemophilia A.
Subject to the terms of the agreement, the Company granted Pfizer an exclusive worldwide royalty-bearing license, with the right to grant sublicenses, to use certain technology controlled by the Company for the purpose of developing, manufacturing and commercializing giroctocogene fitelparvovec and related products. Pfizer granted the Company a non-exclusive, worldwide, royalty-free, fully paid license, with the right to grant sublicenses, to use certain manufacturing technology developed under the agreement and controlled by Pfizer to manufacture the Company’s products that utilize the AAV delivery system. During a specified period, neither the Company nor Pfizer is permitted to clinically develop or commercialize, outside of the collaboration, certain AAV-based gene therapy products for hemophilia A.
Unless earlier terminated, the agreement has a term that continues on a per product and per country basis until the later of (i) the expiration of patent claims that cover the product in a country, (ii) the expiration of regulatory exclusivity for a product in a country, and (iii) fifteen years after the first commercial sale of a product in a country. Pfizer has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. Upon termination for any reason, the license granted by the Company to Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec and related products will automatically terminate. Upon termination by the Company for cause or by Pfizer in any country or countries, Pfizer will automatically grant the Company an exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize giroctocogene fitelparvovec in the terminated country or countries.
Upon execution of the agreement, the Company received an upfront fee of $70.0 million and is eligible to receive up to $208.5 million in payments upon the achievement of specified clinical development, intellectual property and regulatory milestones and up to $266.5 million in payments upon first commercial sale milestones for giroctocogene fitelparvovec and potentially other products. The total amount of potential clinical development, intellectual property, regulatory and first commercial sale milestone payments, assuming the achievement of all specified milestones in the agreement, is up to $475.0 million, which includes up to $300.0 million for giroctocogene fitelparvovec and up to $175.0 million for other products that may be developed under the agreement, subject to reduction on account of payments made under certain licenses for third-party intellectual property. In addition, Pfizer agreed to pay the Company royalties for each potential licensed product developed under the agreement that are 14 % - 20 % of the annual worldwide net sales of such product and are subject to reduction due to patent expiration, entry of biosimilar products to the market and payment made under certain licenses for third-party intellectual property. To date, two milestones of $55.0 million in aggregate have been achieved and paid, however no products have been approved and therefore no royalty fees have been earned under the agreement.
The Company assessed the agreement with Pfizer in accordance with ASC Topic 606 and concluded that Pfizer was a customer. The total transaction price under this agreement was $134.0 million, which represented the upfront fee and research services fees of $79.0 million and fees related to two achieved milestones in an aggregate amount of $55.0 million. Sangamo was responsible for internal and external research costs as part of the upfront fee and had the ability to request additional reimbursement from Pfizer if certain conditions were met. None of the constrained clinical or regulatory milestones were included in the transaction price. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at the time was uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved.
The Company has identified the performance obligations within the agreement as a license to the technology and ongoing research services. The Company concluded that the license was not discrete as it did not have stand-alone value to Pfizer apart from the research services to be performed by the Company pursuant to the agreement. As a result, the Company recognized revenue from the upfront payment based on proportional performance of the ongoing research services through 2020, the period during which the Company performed research services. The estimation of progress towards the satisfaction of its performance obligation and project cost was reviewed quarterly and adjusted, as needed, to reflect the Company’s assumptions regarding the timing of its deliverables.
In December 2020, the Company satisfied the deliverables and research services responsibilities within the arrangement. As a result, the Company recognized the remaining deferred revenue from the upfront payment in December 2020 and no revenues have been recognized during the years ended December 31, 2022 and 2021.
In December 2019, the Company entered into an amendment to the collaboration agreement, pursuant to which the Company transferred the IND for giroctocogene fitelparvovec to Pfizer. Upon this transfer the Company achieved a $25.0 million milestone as the conditions for achieving the milestone were met. The cumulative revenue recognized in
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connection with this milestone was $25.0 million as of December 31, 2020 and included $1.3 million recognized during the year ended December 31, 2020.
In September 2020, the Company determined that there was a high probability of achievement of a $30.0 million milestone with Pfizer for giroctocogene fitelparvovec. The milestone was subsequently achieved upon dosing of the first subject in a Phase 3 clinical trial in early October 2020. The cumulative revenue recognized in connection with this milestone was $30.0 million during the year ended December 31, 2020.
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
Revenue related to Pfizer giroctocogene fitelparvovec agreement: | |||||||||||||||||
| Recognition of upfront fee and research services | $ | $ | $ | ||||||||||||||
| Milestone achievement | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
In March 2020, the Company recorded an adjustment to revenue related to a change in estimate in connection with the giroctocogene fitelparvovec collaboration agreement with Pfizer. This adjustment was a direct result of the decision to decrease the project scope and the corresponding costs, after the successful IND transfer of the giroctocogene fitelparvovec product candidate to Pfizer, both of which resulted in an increase in the measure of proportional cumulative performance. This adjustment increased revenue by $2.4 million, decreased net loss by $2.4 million and decreased the Company’s basic net loss per share by $0.02 for year ended December 31, 2020.
C9ORF72 Research Collaboration and License Agreement
In December 2017, the Company entered into a separate exclusive, global collaboration and license agreement with Pfizer for the development and commercialization of potential gene therapy products that use ZF-TRs to treat amyotrophic lateral sclerosis and frontotemporal lobar degeneration linked to mutations of the C9ORF72 gene. Pursuant to this agreement, the Company agreed to work with Pfizer on a research program to identify, characterize and preclinically develop ZF-TRs that bind to and specifically reduce expression of the mutant form of the C9ORF72 gene.
Subject to the terms of this agreement, the Company granted Pfizer an exclusive, royalty-bearing, worldwide license under the Company’s relevant patents and know-how to develop, manufacture and commercialize gene therapy products that use resulting ZF-TRs that satisfy pre-agreed criteria. During a specified period, neither the Company nor Pfizer will be permitted to research, develop, manufacture or commercialize outside of the collaboration any ZFPs that specifically bind to the C9ORF72 gene.
Unless earlier terminated, the agreement has a term that continues on a per licensed product and per country basis until the later of (i) the expiration of patent claims that cover the licensed product in a country, (ii) the expiration of regulatory exclusivity for a licensed product in a country, and (iii) 15 years after the first commercial sale of a licensed product in a major market country. Pfizer also has the right to terminate the agreement without cause in its entirety or on a per product or per country basis. The agreement may also be terminated by either party based on an uncured material breach by the other party or the bankruptcy of the other party. The agreement will also terminate if the Company is unable to identify any lead candidates for development within a specified period of time or if Pfizer elects not to advance a lead candidate beyond a certain development milestone within a specified period of time. Upon termination for any reason, the license granted by the Company to Pfizer to develop, manufacture and commercialize licensed products under the agreement will automatically terminate. Upon termination by the Company for cause or by Pfizer without cause for any licensed product or licensed products in any country or countries, the Company will have the right to negotiate with Pfizer to obtain a non-exclusive, royalty-bearing license under certain technology controlled by Pfizer to develop, manufacture and commercialize the licensed product or licensed products in the terminated country or countries.
Following termination by the Company for Pfizer’s material breach, Pfizer will not be permitted to research, develop, manufacture or commercialize ZFPs that specifically bind to the C9ORF72 gene for a period of time. Following termination by Pfizer for the Company’s material breach, the Company will not be permitted to research, develop, manufacture or commercialize ZFPs that specifically bind to the C9ORF72 gene for a period of time.
The Company received a $12.0 million upfront payment from Pfizer and is eligible to receive up to $60.0 million in development milestone payments from Pfizer contingent on the achievement of specified preclinical development, clinical development and first commercial sale milestones, and up to $90.0 million in commercial milestone payments if annual worldwide net sales of the licensed products reach specified levels. In addition, Pfizer will pay the Company royalties of 14 % - 20 % of the annual worldwide net sales of the licensed products. These royalty payments are subject to reduction due to patent
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expiration, entry of biosimilar products to the market and payments made under certain licenses for third-party intellectual property. Each party will be responsible for the cost of its performance of the research program. Pfizer will be operationally and financially responsible for subsequent development, manufacturing and commercialization of the licensed products. To date, a milestone of $5.0 million has been achieved and paid, however no products have been approved and therefore no royalty fees have been earned under the C9ORF72 Pfizer agreement.
The Company assessed the agreement with Pfizer in accordance with ASC Topic 606 and concluded that Pfizer was a customer. The Company concluded the total transaction price under this agreement was $17.0 million, which represented the upfront fees of $12.0 million and fees related to achievement of one milestone in the amount of $5.0 million. None of the constrained clinical or regulatory milestones were included in the transaction price. As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones at the time was uncertain and contingent upon future periods when the uncertainty related to the variable consideration is resolved.
The Company had identified the performance obligations within this agreement as a license to the technology and ongoing research services. The Company concluded that the license is not discrete as it does not have stand-alone value to Pfizer apart from the services to be performed by the Company pursuant to the agreement. As a result, the Company recognized revenue from the upfront payment based on proportional performance of the ongoing research services through 2020, the period the Company performed research services.
The Company satisfied the deliverables and research services responsibilities within the arrangement in September 2020, and as a result, earned a $5.0 no
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
Revenue related to Pfizer C9ORF72 agreement: | |||||||||||||||||
| Recognition of upfront fee | $ | $ | $ | ||||||||||||||
| Milestone achievement | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
During the year ended December 31, 2020, the Company recorded adjustments to revenue related to changes in estimate in connection with the C9ORF72 collaboration agreement with Pfizer. These adjustments were a direct result of the decision to decrease the project scope and the corresponding costs due to advancement of the program, which resulted in an increase in the measure of proportional cumulative performance. These adjustments increased revenue by $8.8 million, decreased net loss by $8.8 million and decreased the Company’s basic net loss per share by $0.06 for the year ended December 31, 2020.
Sanofi S.A.
In January 2014, the Company entered into an exclusive worldwide collaboration and license agreement (“2014 Collaboration Agreement”) to develop therapeutics for hemoglobinopathies, focused on beta thalassemia and sickle cell disease (“SCD”). The 2014 Collaboration Agreement was originally signed with BIMA, who subsequently assigned it to Bioverativ Inc., which was later acquired by Sanofi. Under the 2014 Collaboration Agreement, the Company was originally jointly conducting two research programs: a beta thalassemia program, which was discontinued in the third quarter of 2021, and the SCD program, which resulted in the development of SAR445136 (now known as BIVV003), a ZFN, gene-edited cell therapy product candidate for the treatment of SCD. In December 2021, Sanofi notified the Company of its termination for convenience, effective June 28, 2022 (the “Termination Date”), of the 2014 Collaboration Agreement. A termination and transition agreement (the “Termination and Transition Agreement”) was executed by the parties on September 6, 2022.
In the SCD program, the Company and Sanofi were jointly responsible for research and development activities prior to filing of an IND, but Sanofi was responsible for subsequent worldwide clinical development, manufacturing and commercialization of licensed products developed under the agreement. Subject to the terms of the agreement, the Company had granted Sanofi an exclusive, royalty-bearing license, with the right to grant sublicenses, to use certain ZF and other technology controlled by the Company for the purpose of researching, developing, manufacturing and commercializing licensed products developed under the agreement. The Company had also granted Sanofi a non-exclusive worldwide, royalty-free fully paid license with the right to grant sublicenses, under the Company’s interest in certain other intellectual property developed pursuant to the agreement. During the term of the agreement, the Company was not permitted to research, develop, manufacture or commercialize, outside of the agreement, certain gene therapy products that target genes relevant to the licensed products.
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Under the 2014 Collaboration Agreement, the Company received an upfront license fee of $20.0 million and was eligible to receive additional payments upon the achievement of specified clinical development, regulatory milestones, and sales milestones, as well as royalty payments for each licensed product based on net sales of such product. Sanofi was also to reimburse Sangamo for agreed upon costs incurred in connection with research and development activities conducted by Sangamo. Through the Termination Date, a total of $13.5 million was received based on achievement of clinical development milestones. No products have been approved and therefore no royalty fees have been or will be earned under the 2014 Collaboration Agreement.
In its termination notice to the Company, Sanofi indicated that its termination relates to Sanofi’s change in strategic direction to focus on allogeneic universal genomic medicine approaches rather than autologous personalized cell therapies. As of the Termination Date, the 2014 Collaboration Agreement was terminated in its entirety and following the Termination Date, the Company will not be entitled to receive any further milestone payments or royalties from Sanofi. As of the Termination Date, Sanofi has no further obligations under the 2014 Collaboration Agreement to develop or to fund the development of any collaboration research programs under the 2014 Collaboration Agreement. The licenses granted to Sanofi under the 2014 Collaboration Agreement have been terminated, and the license rights have reverted to the Company.
As part of the Termination and Transition Agreement, Sanofi granted to the Company exclusive, worldwide, fully paid, royalty-free, perpetual, irrevocable licenses, with the right to grant sublicenses through multiple tiers, to certain of its intellectual property, to develop, manufacture, have manufactured, use, sell, offer to sale, import and otherwise commercialize BIVV003, the product candidate in development under the SCD program. The Company agreed to take on responsibilities for all clinical trials related to BIVV003, including completion of the ongoing clinical trial and the related long-term follow-up study. The Company also assumed all regulatory responsibilities related to BIVV003. Sanofi transferred and assigned to the Company all documentation, materials and contracts with third parties related to BIVV003, and the right to use certain Sanofi-owned or leased equipment related to BIVV003.
Sanofi has also agreed to reimburse the Company for the costs of conducting the ongoing clinical trial of BIVV003 and the costs of the long-term follow-up study through December 31, 2023, up to $7.0 million. In addition, should the Company elect not to continue the development of BIVV003 past December 31, 2023, Sanofi will become obligated to reimburse the Company for the costs of the long-term follow-up study incurred after 2023, up to $5.3 million. Sanofi’s reimbursement obligations will terminate upon certain triggering events, including the Company’s entering into a contract with a third party for collaboration, partnership, sale, licensing, or divestiture of BIVV003, or if the FDA permits early closure of the clinical trial and/or the long-term follow-up study.
The Company assessed the 2014 Collaboration Agreement in accordance with ASC Topic 606 and concluded that Sanofi was a customer, under that arrangement. The Company identified the performance obligation within this arrangement as a license to the technology combined with ongoing research services activities. The Company concluded that the license was not distinct as it did not have stand-alone value to Sanofi without the research services. As a result, the Company recognized revenue from the upfront payment and the milestones based on progress of performance of the ongoing research services. The estimation of progress towards the satisfaction of the performance obligation and project cost was reviewed quarterly and adjusted, as needed, to reflect the Company’s then current assumptions regarding the timing of its deliverables. Related costs and expenses under these arrangements have historically approximated the revenues recognized. Sanofi’s December 2021 notice of termination of the 2014 Collaboration Agreement represented a modification that reduced the expected scope of the Company’s services and the estimated transaction price and shortened the remaining performance timeline. Consistent with this change, all services provided by the Company under the 2014 Collaboration Agreement were completed by June 28, 2022, and all amounts ultimately included in the transaction price were recognized by such date. The final transaction price of $96.3 million included the upfront license fee of $20.0 million, two milestone payments in the aggregate amount of $13.5 million and reimbursement of research costs of $62.8 million. As of December 31, 2022 and 2021, the Company had a receivable of zero and $0.6 million, respectively, related to the 2014 Collaboration Agreement. Deferred revenue related to the 2014 Collaboration Agreement was zero and $1.1 million, respectively.
The Company concluded that Sanofi is not a customer under the Termination and Transition Agreement as Sanofi is not entitled to receive and cannot use the results of the ongoing clinical trial or the long-term follow-up study. This relationship is also not a collaboration in the scope of ASC Topic 808, Collaborative Arrangements. The Company concluded that the assets acquired from Sanofi do not represent a business, as substantially all of their value is concentrated in the acquired or re-acquired licenses to intellectual property. The Company has no obligation to repay Sanofi for its ongoing funding of the clinical trial or long-term follow-up study costs. Therefore, the Company will recognize Sanofi reimbursements as reductions to its research and development expense. During the year ended December 31, 2022, the Company decreased its research and development expense by $2.1 million, of which $1.1 million is included within prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet as of December 31, 2022.
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| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Revenue related to Sanofi agreement: | |||||||||||||||||
| Recognition of upfront fee | $ | $ | $ | ||||||||||||||
| Research services | |||||||||||||||||
| Milestone achievement | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
During the year ended December 31, 2021, the Company recorded adjustments to revenue related to changes in estimates in connection with the collaboration agreement with Sanofi. These changes in estimates were driven by a change in project scope and related project costs in September 2021 and subsequent notification of termination of the collaboration agreement which resulted in changes to the measure of proportional cumulative performance. These adjustments decreased revenue by $1.6 million, increased net loss by $1.6 million and increased the Company’s basic and diluted net loss per share by $0.01 for the year ended December 31, 2021.
During the year ended December 31, 2020, the Company recorded an adjustment to revenue related to a change in estimate in connection with the collaboration agreement with Sanofi. This adjustment was a direct result of the decision in March 2020 to increase the project scope and the corresponding costs, both of which resulted in a decrease in the measure of proportional cumulative performance. This adjustment decreased revenue by $2.2 million, increased net loss by $2.2 million and increased the Company’s basic net loss per share by $0.02 for the year ended December 31, 2020.
California Institute for Regenerative Medicine
In May 2018, the California Institute for Regenerative Medicine (“CIRM”) granted a Strategic Partnership Award for $8.0 million to fund the clinical studies of a potentially curative ZF therapeutic for the treatment of beta thalassemia based on the application of Sangamo’s ZF nuclease genome editing technology. The grant provided matching funds to support ST-400, a gene-edited cell therapy candidate for people with transfusion-dependent beta thalassemia. Under the terms of the CIRM grant, the Company was obligated to pay royalties and licensing fees based on a low single digit royalty percentage on net sales of CIRM-funded product candidates or CIRM-funded technology. The Company had the option to decline any and all amounts awarded by CIRM and as an alternative to revenue sharing, the Company had the option to convert the award to a loan, however no such election had been made as of December 31, 2020. The Company had received $5.2 million under the award as of December 31, 2020. The Company had recorded $6.4 million, including accrued interest of $1.2 million, as a loan related to this award in other non-current liabilities on the Consolidated Balance Sheet as of December 31, 2020.
As a result of the November 2021 decision to discontinue the development of ST‑400 in order to prioritize the development of other product candidates, the grant was terminated. In connection with the termination and discontinuation of the program, the Company elected not to convert the award to a loan and recognized the non-refundable award amount of $5.2 million as a reduction of research and development expenses, and $1.2 million of accrued interest on the award as interest and other income, net, on the Company’s Consolidated Statements of Operations for the year ended December 31, 2021. No
Agreement with Sigma-Aldrich Corporation
In 2007, Sangamo entered into a license agreement with Sigma-Aldrich Corporation (“Sigma”) to provide Sigma with access to Sangamo’s proprietary ZF technology and the exclusive right to use the technology to develop and commercialize research reagent products and services in the research field, excluding certain agricultural research uses that Sangamo previously licensed to Dow AgroSciences LLC (“DAS”), a wholly-owned subsidiary of Dow Chemical Company. Sangamo developed laboratory research reagents using its ZF technology over a three-year research services period. Sangamo has since transferred the ZF manufacturing technology to Sigma.
In October 2009, Sangamo expanded its license agreement with Sigma. In addition to the original terms of the license agreement, Sigma received exclusive rights to develop and distribute ZF-modified cell lines for commercial production of protein pharmaceuticals and certain ZF-engineered transgenic animals for commercial applications. Under the terms of the agreement, Sigma made an upfront cash payment of $20.0 million consisting of a $4.9 million purchase of 636,133 shares of Sangamo common stock, valued at $4.9 million, and a $15.1 million upfront license fee. Sangamo is also eligible to receive commercial license fees of $5.0 million based upon a percentage of net sales and sublicensing revenue and thereafter a reduced royalty rate of 10.5 % of net sales and sublicensing revenue. In addition, upon the achievement of certain cumulative commercial milestones, Sigma will make milestone payments to Sangamo up to an aggregate of $25.0 million. Sangamo does not have additional ongoing performance obligations under the agreement.
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Revenues recognized under the agreement with Sigma for the years ended December 31, 2022, 2021 and 2020, were $0.9 million, $1.1 million and $0.5 million, respectively.
Agreement with DAS
In 2005, Sangamo entered into an exclusive commercial license with DAS, with an initial three-year research term. Under this agreement, Sangamo is providing DAS with access to its proprietary ZF technology and the exclusive right to use the technology to modify the genomes or alter the nucleic acid or protein expression of plant cells, plants, or plant cell cultures. Sangamo has retained rights to use plants or plant-derived products to deliver ZF-TRs or ZFNs into humans or animals for diagnostic, therapeutic or prophylactic purposes. In 2008, DAS exercised its option and obtained a commercial license to sell products incorporating or derived from plant cells generated using the Company’s ZF technology. The exercise of the option triggered a one-time commercial license fee of $6.0 million, payment of the remaining $2.3 million of the previously agreed upon $4.0 million in research milestones, development and commercialization milestone payments for each product, and royalties on sales of products. In December 2010, the Company amended its agreement with DAS to extend the period of reagent manufacturing services and research services through December 31, 2012.
The agreement with DAS provided that DAS has the right to enter into certain sublicenses with third parties to use ZF products derived from Company’s ZF technology (“Licensing Program”) and also provided for minimum annual payment obligations each year due to Sangamo every October, provided the Licensing Program is not terminated by DAS. Annual fees ranged from $0.3 million to $3.0 million and totaled $25.3 million over 11 years, with the last payment being in October 2020 in the amount of $3.0 million. The Company had identified the performance obligation within this arrangement as a license to the technology. In July 2021, DAS gave notice to the Company of termination of the Licensing Program, effective as of September 2021. However, Sangamo’s sublicense to DAS remains in effect, as does the DAS agreement itself. In the event of any termination of the agreement, all rights to use the Company’s ZF technology will revert to Sangamo, and DAS will no longer be permitted to practice Sangamo’s ZF technology or to develop or, except in limited circumstances, commercialize any products derived from the Company’s ZF technology.
Revenues recognized under the agreement with DAS for the years ended December 31, 2022, 2021 and 2020 were zero , $0.2 million, and $3.0 million, respectively.
NOTE 5 – ACQUISITION OF SANGAMO FRANCE
In 2018, Sangamo entered into various agreements with the goal of eventually acquiring 100 % of Sangamo France’s share capital, including arrangements with the holders of approximately 477,000 free shares of Sangamo France pursuant to which the Company had the right to purchase such shares from the holders (a call option), and such holders had the right to sell to the Company such shares from time to time through mid-2021 (a put option) (collectively the “Free Shares Options”). As of December 31, 2021, the Company acquired all of the 477,000 free shares, resulting in 100 % ownership of Sangamo France.
The acquisition of Sangamo France was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations, in exchange for total consideration of approximately $45.9 million at the Acquisition Date. The operating results of Sangamo France after the Acquisition Date have been included in the Company’s Consolidated Statements of Operations. There was no
Non-controlling Interest
Prior to the acquisition of all the free shares, the fair value of the remaining non-controlling interest was determined based on the number of outstanding free shares comprising the non-controlling interest and the $2.99 acquisition price per share as of the Acquisition Date. The non-controlling interest was presented as a component of stockholders’ equity on the Company’s Consolidated Balance Sheet as of December 31, 2020. As of December 31, 2022 and 2021, after acquisition of 100
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NOTE 6 – OTHER BALANCE SHEET DETAILS
Property and Equipment, Net
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Laboratory equipment | $ | $ | |||||||||
| Leasehold improvements | |||||||||||
| Furniture and fixtures | |||||||||||
| Manufacturing equipment | |||||||||||
| Construction in progress | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense was $12.1 million in 2022, $9.4 million in 2021 and $5.7 million in 2020.
Intangible Assets
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||
| Balance at end of year | $ | $ | |||||||||
Goodwill
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||
| Balance at end of year | $ | $ | |||||||||
Other Accrued Liabilities
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Accrued research and development expenses | $ | $ | |||||||||
| Accrued professional fees | |||||||||||
| Other | |||||||||||
| Total other accrued liabilities | $ | $ | |||||||||
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Leases
Sangamo occupies approximately 87,700 square feet of office and research and development laboratory facilities in Brisbane, California pursuant to a lease that expires in May 2029. Sangamo also occupies approximately 59,485 square feet of research and office space, subject to a lease that expires in August 2031, and approximately 7,700 of office space, subject to a lease that expires in August 2026, in Richmond, California. In addition, the Company leases approximately 26,600 square feet of office and research and development space in Valbonne, France, subject to leases that expire beginning in June 2025 through January 2030.
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In May 2020, the Company entered into an amendment to an existing lease to acquire approximately 8,500 square feet of additional research and office space in Richmond, California. The amended lease was effective October 1, 2020, and the Company recorded a lease liability and corresponding right-of-use asset of $1.3 million upon inception of this amended lease.
In January 2021, the Company entered into an amendment to an existing lease to acquire approximately 5,000 square feet of research and office space in Richmond, California. With this amendment, the existing lease expires in August 2026. Total lease payments over the life of this amended lease are approximately $0.9 million. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. On February 1, 2021, the lease commencement date, the Company recorded an operating lease right-of-use asset and a corresponding lease liability of $0.7 million.
In January 2021, the Company also entered into a new lease to acquire approximately 5,800 square feet of research and office space in Valbonne, France, which expires in January 2030. Total lease payments over the life of this amended lease are approximately $0.8 million. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. On January 29, 2021, the lease commencement date, the Company recorded an operating lease right-of-use asset and a corresponding lease liability of $0.6 million.
In October 2021, the Company entered into an agreement to extend the lease of its research and office space in Richmond, California by five years until August 2031. The Company also leased an additional 7,997 square feet of office space at the same location from November 2021 through August 2031. The amended lease was effective October 1, 2021, and the Company recorded an adjustment to the lease liability and the corresponding right-of-use asset of $9.1 million upon inception of this amended lease. Pursuant to the terms of the amended lease, the landlord agreed to reimburse the Company up to $2.6 million, related to a tenant improvement allowance.
Certain of these leases include renewal options at the election of the Company to renew or extend the lease for an additional to ten years . These optional periods have not been considered in the determination of the ROU assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.
The Company performed evaluations of its contracts and determined each of its identified leases are operating leases. Components of operating leases were as follows (in thousands):
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Operating lease cost | $ | $ | |||||||||
| Variable lease cost | |||||||||||
| Total | $ | $ | |||||||||
Variable lease expenses were not included in the measurement of the Company’s operating ROU assets and lease liabilities. This variable expense consists primarily of the Company’s proportionate share of operating expenses, property taxes and insurance and is classified as lease expense, due to the Company’s election to not separate lease and non-lease components.
Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2022, 2021 and 2020 was $10.1 million, $6.9 million, and $6.4 million, respectively and was included in net cash used in operating activities in the Company’s Consolidated Statements of Cash Flows.
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Rent expense related to lease agreements was $11.0 million, $10.8 million, and $10.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. Future minimum payments under lease obligations at December 31, 2022 consist of the following (in thousands):
| Total | |||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total lease payments | |||||
| Less: | |||||
| Imputed interest | ( | ||||
| Tenant improvement allowance included in contra-lease liability | ( | ||||
| Total | $ | ||||
Reported as of December 31, 2022: | |||||
| $ | |||||
| Long-term portion of lease liabilities | |||||
| Total | $ | ||||
As of December 31, 2022, the weighted-average remaining lease term is 7.0 years and the weighted-average incremental borrowing rate used to determine the operating lease liability was 5.6 % for the Company’s operating leases.
Contractual Commitments
The Company’s non-cancelable material contractual commitments under manufacturing-related supplier arrangements as of December 31, 2022 related to Lonza Netherlands, B.V. amount to $7.5 million and expire in December 2023. The Company also had $0.6 million of license obligations related to its intellectual property as of December 31, 2022.
Contingencies
Sangamo is not party to any material pending legal proceeding. From time to time, Sangamo may be involved in legal proceedings arising in the ordinary course of business.
NOTE 8 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company’s Certificate of Incorporation authorizes the Company to issue up to 5,000,000 shares of preferred stock, which may be issued at the discretion of the Company’s Board of Directors. As of December 31, 2022, no
Common Stock
In June 2020, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation to increase the total number of shares of the Company’s common stock authorized for issuance from 160,000,000 shares to 320,000,000 shares. As of December 31, 2022, 166,793,320 shares of the Company’s common stock are outstanding.
In connection with the collaboration agreement with BIMA described in Note 4 of these Consolidated Financial Statements, the Company entered into a stock purchase agreement with BIMA, pursuant to which BIMA agreed to purchase the Biogen Shares at a price per share of $9.2137 , for an aggregate purchase price of $225.0 million. The Company closed the sale of the Biogen Shares in April 2020.
At-the-Market Offering Agreement
In August 2020, the Company entered into an Open Market Sale Agreement℠ with Jefferies LLC (“Jefferies”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of the Company’s common stock having an aggregate offering price of up to $150.0 million through Jefferies as the Company’s sales agent or principal. In December 2022, the Company entered into Amendment No. 2 to the Open Market
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Sale Agreement℠ which increased the aggregate offering price under the at-the-market offering program by an additional $175.0 million. The Company is not obligated to sell any shares under the sales agreement. As of December 31, 2022, the Company sold 19,300,743 shares of its common stock for net proceeds of approximately $84.9 million. As of December 31, 2021, the Company sold 2,007,932 shares of its common stock for net proceeds of approximately $27.1 million.
2018 Equity Incentive Plan
In May 2020, the Company’s stockholders approved an amendment and restatement of the 2018 Equity Incentive Plan (the “2018 Plan”), to, among other things, increase the aggregate number of shares of the Company’s common stock reserved for issuance under the 2018 Plan by 9,900,000 shares. Additionally, in May 2022, the Company’s stockholders approved an amendment and restatement of the 2018 Plan to, among other things, increase the aggregate number of shares of the Company’s common stock reserved for issuance under the 2018 Plan by 7,900,000 shares.
The exercise price of a stock option granted under the 2018 Plan may not be less than 100 % of the fair market value of the Company’s common stock subject to the stock option on the date of grant, and the option term will not exceed 10 years. If the person to whom the stock option is granted is a 10 % stockholder of the Company, and the stock option granted qualifies as an incentive stock option, then the exercise price per share will not be less than 110 % of the fair market value of the Company’s common stock on the date of grant, and the option term will not exceed five years . Generally, stock options granted under the 2018 Plan vest over or four years and expire 10 years after the date of grant, or earlier upon termination of employment or services to the Company.
The number of shares of common stock reserved for issuance under the 2018 Plan will be reduced: (i) on a 1 -for-1 basis for each share of common stock subject to a stock option or stock appreciation right granted under the plan, (ii) by a fixed ratio of 1.33 shares of common stock for each share of common stock issued pursuant to a full-value award granted under the plan.
Shares subject to any outstanding stock options or other awards under the 2018 Plan that expire or otherwise terminate prior to the issuance of the shares subject to those stock options or awards will be available for subsequent issuance under the 2018 Plan. Any unvested shares issued under the 2018 Plan that the Company subsequently purchases, pursuant to repurchase rights under the 2018 Plan, will be added back to the number of shares reserved for issuance under the 2018 Plan on a 1 -for-1 basis or a 1.33 -for-1 basis (depending on the ratio at which the share reserve was debited for the original award) and will accordingly be available for subsequent issuance in accordance with the terms of the 2018 Plan.
As of December 31, 2022, there were 9,869,961 shares of the Company’s common stock reserved for future awards under the Company’s 2018 Plan.
2020 Employee Stock Purchase Plan
In May 2021, the Company’s stockholders approved the Company’s 2020 Employee Stock Purchase Plan (“the ESPP”). The ESPP provides for a total of 5.0 million shares of common stock reserved for issuance thereunder. Eligible employees may purchase common stock at 85 % of the lesser of the fair market value of the Company’s common stock on the first day of the applicable two-year offering period or the last day of the applicable six-month purchase period. As of December 31, 2022, there were 4,205,502 shares of the Company’s common stock reserved for future issuance under the ESPP.
Stock Option Activity
| Number of Shares | Weighted- Average Exercise per Share Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| (in years) | (in thousands) | ||||||||||||||||||||||
| Options outstanding at December 31, 2021 | $ | ||||||||||||||||||||||
| Options granted | $ | ||||||||||||||||||||||
| Options exercised | ( | $ | |||||||||||||||||||||
| Options canceled | ( | $ | |||||||||||||||||||||
| Options outstanding at December 31, 2022 | $ | $ | |||||||||||||||||||||
| Options exercisable at December 31, 2022 | $ | $ | |||||||||||||||||||||
The intrinsic value of options exercised was zero , $2.8 million and $5.4 million during the years ended December 31, 2022, 2021 and 2020, respectively.
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Restricted Stock Units
During the years ended December 31, 2022, 2021 and 2020, the Company awarded 4,349,795 , 2,140,785 , and 2,517,101 RSUs, respectively. The RSUs awarded in the years ended December 31, 2022, 2021 and 2020 had an average grant date fair value per award of $5.52 , $11.16 and $8.06 , respectively. These awards generally vest over three years . The aggregate fair value of RSUs vested during the years ended December 31, 2022, 2021 and 2020 was $13.1 million, $9.0 million and $3.7 million, respectively.
| Number of Shares | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||
| (in years) | (in thousands) | ||||||||||||||||
| RSUs outstanding at December 31, 2021 | |||||||||||||||||
| RSUs awarded | |||||||||||||||||
| RSUs released | ( | ||||||||||||||||
| RSUs forfeited | ( | ||||||||||||||||
| RSUs outstanding at December 31, 2022 | $ | ||||||||||||||||
RSUs that vested in the years ended December 31, 2022, 2021 and 2020 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes and remitted the cash to the appropriate taxing authorities. The total shares withheld were approximately 380,917 , 293,120 , and 90,617 for the years ended December 31, 2022, 2021 and 2020, respectively, and were based on the value of the RSUs on their respective issuance dates as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to taxing authorities were $2.1 million, $3.3 million and $0.8 million in the years ended December 31, 2022, 2021 and 2020, respectively and are reflected as a financing activity within the accompanying Consolidated Statements of Cash Flows. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.
NOTE 9 – STOCK-BASED COMPENSATION
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Research and development | $ | $ | $ | ||||||||||||||
| General and administrative | |||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | ||||||||||||||
As of December 31, 2022, total stock-based compensation expense to be recognized in future periods related to unvested stock options was $23.3 million, which is expected to be expensed over a weighted-average period of 2.07 years. As of December 31, 2022, total stock-based compensation expense to be recognized in future periods related to unvested RSUs was $23.7 million, which is expected to be expensed over a weighted-average period of 1.90 years. There was no
Valuation Assumptions
Employee stock-based compensation expense was determined using the Black-Scholes option valuation model for stock options and employee share purchases under the ESPP. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The fair value of RSUs was based on the closing price of the underlying common stock on the date of grant.
The Company bases its determination of expected volatility through its assessment of the historical volatility of its common stock. The Company relied on its historical exercise and post-vested termination activity for estimating its expected term for use in determining the fair value of these options.
The weighted-average estimated fair value per share of options granted during the years ended December 31, 2022, 2021 and 2020 was $3.73 , $7.34 , and $5.25 , respectively, based upon the assumptions used in the Black-Scholes valuation
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model. The assumptions used for estimating the fair value of the employee stock options were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Risk-free interest rate | |||||||||||||||||
| Expected term (in years) | |||||||||||||||||
| Expected dividend yield of stock | |||||||||||||||||
| Expected volatility | |||||||||||||||||
Employees purchased 576,950 , 433,107 and 274,382 shares of common stock through the ESPP at a weighted-average exercise price of $3.07 , $7.78 , and $7.34 per share during the years ended December 31, 2022, 2021 and 2020, respectively. The weighted-average estimated fair values of shares purchased under the Company’s ESPP during the years ended December 31, 2022, 2021 and 2020 were $1.85 , $4.48 and $8.02 , respectively, based upon the assumptions used in the Black-Scholes valuation model.
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Risk-free interest rate | |||||||||||||||||
| Expected term (in years) | |||||||||||||||||
| Expected dividend yield of stock | |||||||||||||||||
| Expected volatility | |||||||||||||||||
NOTE 10 – EMPLOYEE BENEFIT PLAN
The Company sponsors a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code covering all full-time employees (“Sangamo 401(k) Plan”). The Sangamo 401(k) Plan is intended to qualify under Section 401 of the Internal Revenue Code.
The Company matched employee contributions equal to 100 50 % for the first 8 % in 2020, up to a limit of $4,000 1.5 million, $1.5 million, and $1.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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NOTE 11 – INCOME TAXES
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Domestic | $ | ( | $ | ( | $ | ( | |||||||||||
| Foreign | |||||||||||||||||
| Loss before income taxes | $ | ( | $ | ( | $ | ( | |||||||||||
Income tax expense consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Income tax expense: | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| Foreign | |||||||||||||||||
| Subtotal | |||||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | |||||||||||||||||
| State | |||||||||||||||||
| Foreign | ( | ( | ( | ||||||||||||||
| Subtotal | ( | ( | ( | ||||||||||||||
| Income tax expense | $ | $ | $ | ||||||||||||||
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Tax at federal statutory rate | $ | ( | $ | ( | $ | ( | |||||||||||
| State taxes, net | ( | ( | ( | ||||||||||||||
| Foreign rate differential | |||||||||||||||||
| Global Intangible Low-taxed Income | |||||||||||||||||
| Non-deductible stock-based compensation | |||||||||||||||||
| Research credits | ( | ( | ( | ||||||||||||||
| Change in valuation allowance | |||||||||||||||||
| Transfer pricing settlement | |||||||||||||||||
| Other | |||||||||||||||||
| Income tax expense | $ | $ | $ | ||||||||||||||
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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Assets: | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | $ | |||||||||
| Research and development tax credit carryforwards | |||||||||||
| Stock-based compensation | |||||||||||
| Deferred revenue | |||||||||||
| Capitalized research | |||||||||||
| Fixed assets | |||||||||||
| Lease liability | |||||||||||
| Accruals and reserves | |||||||||||
| Other | |||||||||||
| Total deferred tax asset | |||||||||||
| Valuation allowance | |||||||||||
| Deferred tax assets | |||||||||||
| Liabilities: | |||||||||||
| Intangible assets | ( | ( | |||||||||
| Operating lease right-of-use assets | ( | ( | |||||||||
| Deferred tax liabilities | ( | ( | |||||||||
| Total net deferred tax liabilities | $ | ( | $ | ( | |||||||
The deferred tax assets and liabilities based on tax jurisdictions are presented on the Consolidated Balance Sheets as follows (in thousands):
| December 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Deferred tax assets (included in Other non-current assets on the Consolidated Balance Sheets) | $ | $ | |||||||||
| Deferred tax liabilities | ( | ( | |||||||||
| Net deferred tax liabilities | $ | ( | $ | ( | |||||||
A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. The Company regularly assesses the need for a valuation allowance against its deferred income tax assets by considering both positive and negative evidence related to whether it is more likely than not that the Company’s deferred income tax assets will be realized. In evaluating the Company’s ability to recover its deferred income tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. Accordingly, based upon the Company’s analysis of these factors the net deferred tax assets have been substantially offset by a valuation allowance. The valuation allowance increased by $42.0 million, $45.5 million and $26.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2022, Sangamo had net operating loss carryforwards for federal and state income tax purposes of approximately $689.7 million and $312.0 million, respectively. The federal net operating loss generated before 2018 will begin to expire in 2023 and will keep expiring through 2037, if not utilized. Federal net operating loss generated from 2018 will carry forward indefinitely. If not utilized, the state net operating loss carryforwards will begin to expire in 2029, respectively. The Company’s French net operating loss carryforward balance is $115.6 million, which carries over indefinitely. The Company also has federal and state research tax credit carryforwards of $36.8 million and $26.1 million, respectively. The federal research credits will begin to expire in 2023 and will keep expiring through 2042, while the state research credits have no expiration date. Utilization of the Company’s net operating loss carryforwards and research tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation could result in the expiration of the net operating loss carryforwards and research tax credit carryforwards before utilization.
138
The Company’s policy is to reinvest the earnings of its non-U.S. subsidiaries in those operations. The Company does not provide for U.S. taxes on the earnings of foreign subsidiaries because the Company intends to reinvest such earnings offshore indefinitely. However, if these funds were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes. Due to the cumulative losses generated in foreign countries there are no earnings to repatriate.
The Company files federal and state income tax returns with varying statutes of limitations. The tax years from 2002 forward remain open to examination due to the carryover of net operating losses or tax credits. The Company also files the United Kingdom and French income tax returns, and the tax years from 2008 and thereafter remain open in the United Kingdom, and the tax years 2018 and thereafter in France are still subject to examination.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2022, the Company had $0.2 million accrued interest and/or penalties. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business. In the event that any unrecognized tax benefits are recognized, the amount that would impact the effective tax rate was $1.2 million, $1.2 million, and $0.6 million as of December 31, 2022, 2021 and 2020, respectively.
| December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Beginning balance | $ | $ | $ | ||||||||||||||
| Additions based on tax positions related to the current year | |||||||||||||||||
| Additions for tax positions of prior years | |||||||||||||||||
| Reductions for tax positions of prior years | ( | ( | ( | ||||||||||||||
| Ending balance | $ | $ | $ | ||||||||||||||
NOTE 12 – RELATED PARTY TRANSACTION
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ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A – CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2022. Based on that evaluation, as of December 31, 2022, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
Inherent Limitations on Controls and Procedures
Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures and our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can only provide reasonable assurances that the objectives of the control system are met. The design of a control system reflects resource constraints; the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, for our company have been or will be detected. As these inherent limitations are known features of the disclosure and financial reporting processes, it is possible to design into the processes safeguards to reduce, though not eliminate, these risks. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. While our disclosure controls and procedures and our internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives, there can be no assurance that any design will succeed in achieving its stated goals under all future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining an adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in the “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on an evaluation under that framework, our management concluded that our internal control over financial reporting was effective at the reasonable assurance level as of December 31, 2022.
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Sangamo Therapeutics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Sangamo Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Sangamo Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2022 consolidated financial statements of the Company and our report dated February 22, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ ERNST & YOUNG LLP
San Mateo, California
February 22, 2023
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ITEM 9B – OTHER INFORMATION
None.
ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
Certain information required by Part III is omitted from this Report on Form 10-K because we intend to file our definitive Proxy Statement for our next Annual Meeting of Stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, or the 2023 Proxy Statement, no later than 120 days following the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information to be included in the 2023 Proxy Statement is incorporated herein by reference.
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is to be included in our 2023 Proxy Statement as follows:
•The information relating to our directors and nominees for director is to be included in the section entitled “Election of Directors;”
•The information relating to our executive officers is to be included in the section entitled “Executive Officers;”
•The information relating to our audit committee and audit committee financial expert is to be included in the section entitled “Election of Directors – Audit Committee;”
•The information relating to our code of ethics is to be included in the section entitled “Election of Directors – Code of Business Conduct and Ethics;”
•The information relating to the procedures by which stockholders may recommend nominees to our Board of Directors is to be included in the section entitled “Questions and Answers About These Proxy Materials and Voting;” and
•The information regarding compliance with Section 16(a) of the Exchange Act is to be included in the section entitled “Delinquent Section 16(a) Reports.”
Such information is incorporated herein by reference to our 2023 Proxy Statement, provided that if the 2023 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
ITEM 11 – EXECUTIVE COMPENSATION
The information required by this item is to be included in our 2023 Proxy Statement under the sections entitled “Executive Compensation,” “Director Compensation,” “Election of Directors – Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” and is incorporated herein by reference, provided that if the 2023 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item with respect to equity compensation plans is to be included in our 2023 Proxy Statement under the section entitled “Equity Compensation Plan Information” and the information required by this item with respect to security ownership of certain beneficial owners and management is to be included in our 2023 Proxy Statement under the section entitled “Security Ownership of Certain Beneficial Owners and Management” and in each case is incorporated herein by reference, provided that if the 2023 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
142
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is to be included in our 2023 Proxy Statement under the sections entitled “Certain Relationships and Related Transactions” and “Election of Directors—Board Independence” and is incorporated herein by reference, provided that if the 2023 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is to be included in our 2023 Proxy Statement under the section entitled “Ratification of Independent Registered Public Accounting Firm” and is incorporated herein by reference, provided that if the 2023 Proxy Statement is not filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, the omitted information will be included in an amendment to this Annual Report on Form 10-K filed not later than the end of such 120-day period.
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PART IV
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are included as part of this Annual Report on Form 10-K:
1. Financial Statements—See Index to Consolidated Financial Statements in Item 8.
2. Financial Statement Schedules—Not Applicable.
3. Exhibits
Exhibit Number | Description of Document | ||||
| 2.1 | |||||
| 2.2 | |||||
| 2.3 | |||||
| 2.4 | |||||
| 3.1 | |||||
| 3.2 | |||||
| 3.3 | |||||
| 4.1 | |||||
| 4.2 | |||||
| 10.1(+) | |||||
| 10.2(+) | |||||
| 10.3(+) | |||||
| 10.4(+) | |||||
| 10.5(+) | |||||
| 10.6(+) | |||||
| 10.7(+) | |||||
| 10.8(+) | |||||
| 10.9(+) | |||||
| 10.10(+) | |||||
| 10.11(+) | |||||
| 10.12(+) | |||||
144
Exhibit Number | Description of Document | ||||
| 10.13(+) | |||||
| 10.14(+) | |||||
| 10.15(+) | |||||
| 10.16(+) | |||||
| 10.17(+) | |||||
| 10.18(+) | |||||
| 10.19(+) | |||||
| 10.20(+) | |||||
| 10.21(+) | |||||
| 10.22(+) | |||||
| 10.23(+) | |||||
| 10.24(+) | |||||
| 10.25(+) | |||||
| 10.26(+) | |||||
| 10.27(+) | |||||
| 10.28(+) | |||||
| 10.29(+) | |||||
| 10.30(+) | |||||
| 10.31(+) | |||||
| 10.32(+) | |||||
| 10.33(+) | |||||
145
Exhibit Number | Description of Document | ||||
| 10.34 | |||||
| 10.35 | |||||
| 10.36 | |||||
| 10.37 | |||||
| 10.38 | |||||
| 10.39 | |||||
| 10.40 | |||||
| 10.41 | |||||
| 10.42 | |||||
| 10.43 | |||||
| 10.44 | |||||
| 10.45 | |||||
| 10.46 | |||||
| 10.47 | |||||
| 10.48 | |||||
| 10.49† | |||||
| 10.50† | |||||
| 10.51† | |||||
| 10.52† | |||||
146
Exhibit Number | Description of Document | ||||
| 10.53⁑ | |||||
| 10.54⁑ | |||||
| 10.55† | |||||
| 10.56† | |||||
| 10.57⁑ | |||||
| 10.58† | |||||
| 10.59⁑ | |||||
| 10.60 | |||||
| 10.61⁑ | |||||
| 21.1 | |||||
| 23.1 | |||||
| 24.1 | |||||
| 31.1 | |||||
| 31.2 | |||||
| 32.1* | |||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | The cover page from Sangamo’s Annual Report on Form 10-K for the year ended December 31, 2022, is formatted in Inline XBRL and it is contained in Exhibit 101 | ||||
† Confidential treatment has been granted for certain information contained in this document pursuant to an order of the SEC. Such information has been omitted and filed separately with the SEC.
⁑ Certain portions of this exhibit (indicated by “[*]”) have been omitted in accordance with 17 CFR § 229.601(b).
(+) Indicates management contract or compensatory plan or arrangement.
* The certifications attached as Exhibit 32.1 accompany this Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
The agreements and other documents filed as exhibits to this Annual Report on Form 10-K are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or
147
other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
ITEM 16 – FORM 10-K SUMMARY
None.
148
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 22, 2023.
| Date: February 22, 2023 | |||||||||||
| SANGAMO THERAPEUTICS, INC. | |||||||||||
| By: | / S / ALEXANDER D. MACRAE | ||||||||||
Alexander D. Macrae President and Chief Executive Officer | |||||||||||
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Alexander D. Macrae and Scott Willoughby, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||||||
/ S / ALEXANDER D. MACRAE | President, Chief Executive Officer (Principal Executive Officer) and Director | February 22, 2023 | ||||||
| Alexander D. Macrae, M.B., Ch.B., Ph.D. | ||||||||
| / S / PRATHYUSHA DURAIBABU | Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | February 22, 2023 | ||||||
| Prathyusha Duraibabu | ||||||||
/ S / H. STEWART PARKER | Director and Chair of the Board | February 22, 2023 | ||||||
| H. Stewart Parker | ||||||||
/ S / COURTNEY BEERS | Director | February 22, 2023 | ||||||
| Courtney Beers, Ph.D | ||||||||
| / S / ROBERT F. CAREY | Director | February 22, 2023 | ||||||
| Robert F. Carey | ||||||||
/ S / KENNETH J. HILLAN | Director | February 22, 2023 | ||||||
| Kenneth J. Hillan, M.B., Ch.B. | ||||||||
/ S / MARGARET A. HORN | Director | February 22, 2023 | ||||||
| Margaret A. Horn, J.D. | ||||||||
/ S / JOHN H. MARKELS | Director | February 22, 2023 | ||||||
| John H. Markels, Ph.D. | ||||||||
/ S / JAMES R. MEYERS | Director | February 22, 2023 | ||||||
| James R. Meyers | ||||||||
/ S / KAREN L. SMITH | Director | February 22, 2023 | ||||||
| Karen L. Smith, M.D., Ph.D., M.B.A., L.L.M. | ||||||||
Exhibit 4.1
DESCRIPTION OF CAPITAL STOCK
References herein to “Sangamo,” “our,” “we,” “us” and the “Company” refer only to Sangamo Therapeutics, Inc. and not to any of our subsidiaries.
General
Our seventh amended and restated certificate of incorporation, as amended, or the Restated Certificate, authorizes us to issue 320,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share.
The following summary description of our capital stock is based on the provisions of the Restated Certificate, our fifth amended and restated bylaws, or the Bylaws, and the applicable provisions of the General Corporation Law of the State of Delaware, or DGCL. This information may not be complete in all respects and is qualified entirely by reference to the provisions of the Restated Certificate, the Bylaws and the DGCL. The Restated Certificate and the Bylaws are filed as exhibits to this Annual Report on Form 10-K to which this Description of Capital Stock is an exhibit.
Common Stock
Shares of our common stock are the only security of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The holders of common stock are entitled to one vote per share on all matters to be voted on by the stockholders. Stockholders have no cumulative voting rights. Subject to the preferences of any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably any dividends our board of directors declares out of funds legally available for the payment of dividends. If we are liquidated, dissolved or wound up, the holders of common stock are entitled to share pro rata all assets remaining after payment of liabilities and liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive rights or rights to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.
Preferred Stock
Pursuant to the Restated Certificate, our board of directors has the authority, without further action by the stockholders, to issue shares of preferred stock in one or more series. Our board of directors also has the authority to determine or alter the designation, rights, preferences, privileges and restrictions granted to or imposed upon any unissued series of preferred stock, any or all of which may be greater than the rights of the common stock. Our board of directors, without stockholder approval, may issue preferred stock with voting, conversion or other rights that are superior to the voting and other rights of the holders of common stock. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of Sangamo without further action by the stockholders, and may have the effect of delaying or preventing changes in management of Sangamo. In addition, the issuance of preferred stock may have the effect of decreasing the market price of the common stock and may adversely affect the voting power of holders of common stock and reduce the likelihood that common stockholders will receive dividend payments and payments upon liquidation.
Antitakeover Effects of Provisions of our Restated Certificate, Bylaws and Delaware Law
Our Restated Certificate and Bylaws
As noted above, our board of directors, without stockholder approval, has the authority under our Restated Certificate to issue preferred stock with rights superior to the rights of the holders of common stock. As a result, the issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of Sangamo without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock. Our Restated Certificate also requires that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of the stockholders and may not be effected by a consent in writing. Further, our Restated Certificate provides that a special meeting of the stockholders may be called only by our board of directors.
In addition to the provisions noted above, our Bylaws further establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors other than nominations made by or at the direction of the board of directors or a committee of the board of directors. Although our stockholders may amend, repeal or alter our Bylaws by a vote of at least a majority of the outstanding shares of our capital stock entitled to vote, our board of directors may also unilaterally adopt, repeal, alter, amend and rescind our Bylaws by a vote of at least a majority of board of directors. Finally,
our board of directors has the ability to elect a director to fill a vacancy created by the expansion of the board of directors or due to the resignation or departure of an existing board member.
These provisions may have the effect of delaying, deferring or preventing a change in control and may also delay or prevent changes in management of Sangamo, which could have an adverse effect on the market price of our stock. These and other provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, such provisions also may inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts.
Section 203 of the General Corporation Law of the State of Delaware
We are subject to Section 203 of the DGCL which regulates acquisitions of some Delaware corporations. In general, Section 203 prohibits, with some exceptions, a publicly held Delaware corporation such as us from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time that the stockholder became an interested stockholder, unless:
| • | prior to the time the stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; | ||||
| • | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (a) persons who are directors and also officers and (b) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or | ||||
| • | at or subsequent to the time the stockholder became an interested stockholder, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662⁄3% of the outstanding voting stock which is not owned by the interested stockholder. | ||||
Section 203 of the DGCL generally defines a “business combination” to include any of the following:
| • | any merger or consolidation involving the corporation and the interested stockholder; | ||||
| • | any sale, lease, exchange, mortgage, transfer, pledge or other disposition involving the interested stockholder (in one transaction or a series of transactions) of assets of the corporation having an aggregate market value equal to 10% or more of the aggregate market value of either all of the assets of the corporation or its outstanding stock; | ||||
| • | subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; | ||||
| • | subject to exceptions, any transaction involving the corporation that has the effect, directly or indirectly, of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; and | ||||
| • | the receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of such corporation), of any loans, advances, guarantees, pledges or other financial benefits, other than certain benefits set forth in Section 203, provided by or through the corporation. | ||||
In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.
Section 203 of the DGCL could depress our stock price and delay, discourage or prohibit transactions not approved in advance by our board of directors, such as takeover attempts that might otherwise involve the payment to our stockholders of a premium over the market price of our common stock.
Forum Selection Bylaw
Unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of Sangamo, (2) any action asserting a claim of breach of a fiduciary duty owed by any
director, officer or other employee or stockholder of Sangamo to Sangamo or to our stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL, the Restated Certificate, the Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (4) any action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware. However, this provision does not apply to actions arising under the Securities Act or the Exchange Act or any claim for which the federal courts have exclusive jurisdiction.
Unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of Sangamo is deemed to have notice of and consented to the forum selection provisions of the Bylaws.
Exhibit 10.53 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. COLLABORATION AND LICENSE AGREEMENT by and between Sangamo Therapeutics, Inc. and Pfizer Inc. May 10, 2017 2 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. COLLABORATION AND LICENSE AGREEMENT This COLLABORATION AND LICENSE AGREEMENT (this “Agreement”) is made as of May 10, 2017 (the “Effective Date”), by and between Sangamo Therapeutics, Inc., a Delaware corporation having an office at 501 Canal Blvd., Suite A100, Richmond, CA 94804 (“Sangamo”), and Pfizer Inc., a Delaware corporation having an office at 235 East 42nd Street, New York, NY 10017 (“Pfizer”). Pfizer and Sangamo are referred to in this Agreement individually as a “Party” and collectively as the “Parties”. RECITALS WHEREAS, Pfizer is a global biopharmaceutical company engaged in the research, development, manufacturing and commercialization of biopharmaceutical products for the treatment of human diseases or conditions, including therapies for patients with rare diseases. WHEREAS, Sangamo is a clinical stage biopharmaceutical company focused on the research, development and commercialization of genome editing / gene therapy products targeting monogenic diseases with unmet medical needs. WHEREAS, Sangamo is developing SB-525, a product for treating Hemophilia A, that uses Sangamo’s proprietary gene therapy platform to deliver a functional copy of the B-domain deleted human Factor VIII gene to liver cells to enable constitutive episomal expression of the Factor VIII protein. WHEREAS, Pfizer and Sangamo desire to establish a collaboration for the research and development and, if successful, commercialization of SB-525 and related products, all under the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, Pfizer and Sangamo hereby agree as follows: ARTICLE 1 DEFINITIONS Unless the context otherwise requires, the terms in this Agreement with initial letters capitalized shall have the meanings set forth below: 1.1 “AAV” means adeno-associated virus. 1.2 “Additional Product” means any gene therapy product (other than a Product as described in clauses (a) or (c) of Section 1.72) that (a) [*], and (b) [*]. 1.3 “Adverse Event” means any untoward medical occurrence in a patient or clinical investigation subject administered any Product, or administered any placebo or medical device in connection with the commercial use of or clinical study of a Product, including occurrences that do not necessarily have a causal relationship with such Product, placebo or medical device; 3 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. provided that such meaning may be further clarified by the Parties in the Pharmacovigilance Agreement. 1.4 “Affiliate” means, with respect to any Person, any other Person that controls, is controlled by, or is under common control with, such Person. For purposes of this Agreement, a Person shall be deemed to control another Person if it owns or controls, directly or indirectly, at least fifty percent (50%) of the equity securities (or other ownership interests, by contract or otherwise) of such other Person entitled to vote in the election of directors (or, in the case that such other Person is not a corporation, for the election of the corresponding managing authority), or otherwise has the power to direct the management and policies of such other Person; provided, however, that where an entity owns a majority of the voting power necessary to elect a majority of the board of directors or other governing board of another entity, but is restricted from electing such majority by contract or otherwise, such entity will not be considered to be in control of such other entity until such time as such restrictions are no longer in effect. The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage will be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity. 1.5 “Bankruptcy Event” means the occurrence of any of the following: (a) the institution of any bankruptcy, receivership, insolvency, reorganization or other similar proceedings by or against a Party under any bankruptcy, insolvency, or other similar law now or hereinafter in effect, including any section or chapter of the United States Bankruptcy Code, as amended or under any similar laws or statutes of the United States or any state thereof (the “Bankruptcy Code”), where in the case of involuntary proceedings such proceedings have not been dismissed or discharged within ninety (90) days after they are instituted, (b) the filing of an insolvency proceeding or making of an assignment for the benefit of creditors, (c) appointment of a receiver for all or substantially all of a Party’s assets or (d) any corporate action taken by the board of directors of a Party in furtherance of any of the foregoing actions. 1.6 “Binding Obligation” means, with respect to a Party: (a) any oral or written agreement or arrangement between such Party and an Affiliate of such Party or a Third Party that binds or affects such Party’s operations or property, including any assignment, license agreement, loan agreement, guaranty, or financing agreement, (b) the provisions of such Party’s charter, bylaws or other organizational documents or (c) any order, writ, injunction, decree or judgment of any court or Governmental Authority entered against such Party or by which any of such Party’s operations or property are bound. 1.7 “Biosimilar Product” means, with respect to a Product that is being sold in a country or regulatory jurisdiction in the Territory (the “Reference Product”), any biopharmaceutical product sold by a Third Party (other than a Third Party acting on behalf of or in concert with Pfizer or any Pfizer Affiliate or Sublicensee, or that purchased such product in a chain of distribution that included Pfizer or any of its Affiliates or Sublicensees) in such country or regulatory jurisdiction in the Territory that (i) [*] the Reference Product, and (ii) through reference to the BLA of the Reference Product, is eligible for and has achieved Marketing Approval (with all references in such definition to Product to be deemed references to such 4 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. biopharmaceutical product) in such country or regulatory jurisdiction pursuant to an abbreviated follow-on biological approval pathway established by the Regulatory Authority in such country or regulatory jurisdiction pursuant to the applicable Law, or otherwise is approved for marketing and sale in such country or regulatory jurisdiction by an abridged procedure in reliance, in whole or in part, on the BLA of the Reference Product, including any such biopharmaceutical product that (a) with respect to such biopharmaceutical product in the United States, has been approved or licensed as a biosimilar or interchangeable product by FDA pursuant to Section 351(k) of the Public Health Service Act (42 U.S.C. §262(k)), as may be amended, or any subsequent or superseding law, statute or regulation, (b) with respect to such biopharmaceutical product subject to the regulatory jurisdiction of the EMA, has been approved as a similar biological medicine product by EMA as described in CHMP/437/04, issued 30 October 2005, as may be amended, or any subsequent or superseding law, statute or regulation, or (c) with respect to such biopharmaceutical product outside the United States and in a country which is not subject to the regulatory jurisdiction of the EMA, has otherwise obtained Marketing Approval (with all references in such definition to Product to be deemed references to such biopharmaceutical product) by Regulatory Authorities in such other jurisdictions under analogous laws and regulations as those described the foregoing subsections (a) or (b). 1.8 “BLA” or “Biologic License Application” means (a) an application requesting permission from the FDA to introduce, or deliver for introduction, a biopharmaceutical product into interstate commerce, or (b) any similar application or submission for Marketing Approval of a biopharmaceutical product filed with a Regulatory Authority in a country or group of countries. 1.9 “Business Day” means a day other than a Saturday, Sunday or a bank or other public holiday in California or New York. 1.10 “Calendar Quarter” means a period of three consecutive calendar months ending on March 31, June 30, September 30 or December 31. 1.11 “Calendar Year” means any twelve (12) month period beginning on January 1 and ending on the first December 31 thereafter. 1.12 “Change of Control” means, with respect to a Party, (a) a merger, reorganization, combination or consolidation of such Party with a Third Party that results in holders of beneficial ownership (other than by virtue of obtaining irrevocable proxies) of the voting securities or other voting interests of such Party (or, if applicable, the ultimate parent of such Party) immediately prior to such merger, reorganization, combination or consolidation ceasing to hold beneficial ownership of at least fifty percent (50%) of the combined voting power of the surviving entity or the parent of the surviving entity immediately after such merger, reorganization, combination or consolidation, (b) a transaction or series of related transactions in which a Third Party, together with its Affiliates, becomes the beneficial owner (other than by virtue of obtaining irrevocable proxies) of fifty percent (50%) or more of the combined voting power of the outstanding securities or other voting interest of such Party, or (c) the sale, lease, exchange, contribution or other transfer (in one transaction or a series of related transactions) to a Third Party of all or substantially all of such Party’s assets to which this Agreement relates, other than a sale or disposition of such assets to an Affiliate of such Party or (d) the approval of any plan or proposal for the liquidation or
5 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. dissolution of such Party (other than in circumstances where such Party is deemed a debtor pursuant to Section 12.2(c)). 1.13 “Clinical Efficacy” means [*]. 1.14 “Commercialize” or “Commercialization” means to (a) market, promote, distribute, offer for sale, sell, have sold, import, have imported, export, have exported or otherwise commercialize a compound or product and (b) conduct pre-clinical, clinical and other Development activities with respect to a compound or product, in each case, after such compound or product has received Marketing Approval. 1.15 “Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective, those reasonable, good faith efforts to accomplish such objective as such Party would normally use to accomplish a similar objective under similar circumstances. With respect to any efforts relating to the Development, Marketing Approval, Manufacturing or Commercialization of a Product by a Party, generally or with respect to any particular country in the Territory, such Party will be deemed to have exercised “Commercially Reasonable Efforts” if such Party has exercised those efforts that would be normally used by such Party, in the relevant country, with respect to other gene therapy products or gene therapy product candidates, as applicable, (a) of similar modality controlled by such Party; or (b) (i) to which such Party has similar rights, (ii) which is of similar market potential in such country, and (iii) which is at a similar stage in its development or product life cycle, as such Product, in each case, taking into account all Relevant Factors in effect at the time such efforts are to be expended. Further, to the extent that the performance of a Party’s obligations hereunder is adversely affected by the other Party’s failure to perform its obligations hereunder, the impact of such performance failure will be taken into account in determining whether such Party has used its Commercially Reasonable Efforts to perform any such affected obligations. 1.16 “Committee” means the JSC, JCRC, JMC, JIPC or any joint subcommittee established by the JSC, as applicable. 1.17 “Companion Diagnostic Assay” means any in vitro assay that is intended to qualitatively or quantitatively measure [*]. For clarity, any such assay may, but need not necessarily, include as a component(s) thereof any component(s) of any Product. 1.18 “Compliance” means, with respect to a Party, the adherence by such Party and its Affiliates in all material respects to all applicable Laws and such Party’s Party Specific Regulations, in each case with respect to the activities to be conducted under this Agreement. 1.19 “Confidential Information” of a Party means all Know-How, or other information, including proprietary information (whether or not patentable) regarding or embodying such Party’s or its Representatives’ technology, products, business information or objectives, including but not limited to unpublished patent applications and other non-public information and data of a financial, commercial, business, operational or technical nature (including information comprising or relating to concepts, discoveries, inventions, data, designs or formulae), that is disclosed by or on behalf of such Party or any of its Affiliates or otherwise made available to the other Party or any of its Affiliates, whether made available orally, in writing 6 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. or in electronic form, in connection with this Agreement on or after the Effective Date (or as otherwise provided in Section 16.12), but only to the extent that such Know-How or other information in written form is marked in writing as “confidential” at the time of disclosure, and such Know-How or other information disclosed orally or in non-tangible form is identified by the Disclosing Party as “confidential” at the time of disclosure. Failure to mark Confidential Information disclosed in writing hereunder as “Confidential” shall not cause the information to be considered non-confidential, with the burden on the disclosing Party to prove such information should have been known by a reasonable person with expertise on the subject matter, based on the nature of the information and the circumstances of its disclosure, to be Confidential Information, provided that the disclosing Party has otherwise made good faith efforts to clearly mark Confidential Information as such. 1.20 “Control” or “Controlled” means, with respect to any Patent Rights, Know-How or other intellectual property right, that a Party (a) owns or (b) has a license (other than a license granted to such Party under this Agreement) to such Patent Rights, Know-How or intellectual property right and, in each case, has the ability to grant to the other Party a license, sublicense or access (as applicable) to the foregoing on the terms and conditions set forth in this Agreement without violating the terms of any then-existing agreement or arrangement with any Third Party. 1.21 “Cover” means, with respect to a given Product and Patent Right, that a Valid Claim of such Patent Right would, absent a license thereunder or ownership thereof, be infringed by the making, use, sale, offer for sale or importation of such Product, and for purpose of determining such infringement, considering Valid Claims of pending patent applications, such claims should be considered as if they have already been issued in accordance with the definition of Valid Claim. 1.22 “Current License” means any agreement (i) that Sangamo or its Affiliates has entered into with a Third Party prior to the Effective Date and (ii) pursuant to which Sangamo or its Affiliates have a license from such Third Party to any Licensed Technology or Licensed Companion Diagnostic Technology as of the Execution Date. 1.23 “Current Licensor” means any Third Party that is a party to a Current License. 1.24 “Develop” or “Development” means all development activities for any Product, including conducting pre-clinical and clinical studies, manufacturing process development, and toxicology studies of a Product for use in clinical trials (including placebos and comparators), statistical analyses, and the preparation, filing and prosecution of any BLA for a Product, as well as all regulatory activities related to any of the foregoing, in each case prior to Marketing Approval. 1.25 “Dollar” means the U.S. dollar, and “$” shall be interpreted accordingly. 1.26 “EMA” means the European Medicines Agency or any successor entity thereto. 1.27 “Europe” means all countries of the European Economic Area and Switzerland. 1.28 “European Economic Area” means the member states of the European Union, as constituted on the Effective Date and as it may be expanded from time to time following such date, 7 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. plus Norway, Iceland, and Lichtenstein, and will be deemed to include the United Kingdom whether or not the United Kingdom is a member state thereof . 1.29 “Executive Officers” means, for Sangamo, the Chief Executive Officer or designee, and for Pfizer, the Chief Scientific Officer of the Rare Disease Research Unit, the Global President, Rare Disease, or designee, provided in each case that such person is not a member of the JSC at the time that the applicable disagreement arises. 1.30 “FDA” means the United States Food and Drug Administration or any successor entity thereto. 1.31 “Field” means the treatment of all Indications in humans, including the use of any related diagnostics (including but not limited to companion diagnostics) in connection with such treatment. 1.32 “Filing” of a IND or BLA means the acceptance by a Regulatory Authority of such IND or BLA for filing and review, if applicable, or otherwise the submission of such IND or BLA. 1.33 “First Commercial Sale” means, with respect to a particular Product and country of the Territory, the first sale of such Product by Pfizer or an Affiliate or Sublicensee to a Third Party in an Indication in the Field in such country after such Product has been granted Marketing Approval and, where necessary, Pricing Approval by the appropriate Regulatory Authority in such country. 1.34 “FTE” means the equivalent of a full-time individual’s work for a twelve (12) month period (consisting of a total of [*] hours per year). In the case that any individual works partially on such activities under this Agreement and partially on other work in a given year, then the full-time equivalent to be attributed to such individual’s work hereunder shall be equal to the percentage of such individual’s total work time in such year that such individual spent working on such activities under this Agreement. 1.35 “FTE Rate” means an initial rate of [*] per FTE per year. Commencing on January 1, 2018, the FTE Rate shall be changed annually on a Calendar Year basis to reflect any year-to- year percentage increase or decrease (as the case may be) in the Consumer Price Index for All Urban Consumers for the San Francisco Bay Area, as published by the U.S. Department of Labor, Bureau of Labor Statistics (“CPI”) (based on the change in the CPI from the most recent index available as of the Effective Date to the most recent index available as of the date of the calculation of such revised FTE Rate). 1.36 “GAAP” means the U.S. generally accepted accounting principles, consistently applied. 1.37 “GCP” means the then-current good clinical practice standards for clinical trials for pharmaceuticals, as set forth in the United States Food, Drug and Cosmetic Act, as amended from time to time, or other applicable law, and such standards of good clinical practice as are required by the Regulatory Authorities of the European Union and other organizations and Governmental Authorities in countries for which the applicable Product is intended to be developed, to the extent such standards are not less stringent than United States GCP. 8 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 1.38 “Genome Editing” means [*]. 1.39 “GLP” means the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58 or the successor thereto, or comparable regulatory standards in jurisdictions outside the United States. 1.40 “GMP” or “cGMP” means current good manufacturing practices as specified in 21 C.F.R. Parts 11, 210 and 211, ICH Guideline Q7A, or equivalent laws, rules, or regulations of an applicable Regulatory Authority at the time of manufacture. 1.41 “Governmental Authority” means any national, international, federal, state, provincial or local government, or political subdivision thereof, or any multinational organization or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof, or any governmental arbitrator or arbitral body). 1.42 “Government Official”, to be broadly interpreted, means (a) any elected or appointed government official (e.g., a member of a ministry of health), (b) any employee or person acting for or on behalf of a government official, Governmental Authority, or other enterprise performing a governmental function, (c) any political party, candidate for public office, officer, employee, or person acting for or on behalf of a political party or candidate for public office, and (d) any employee or person acting for or on behalf of a public international organization (e.g., the United Nations). For clarity, HCP employed by government-owned hospitals will be considered Government Officials. 1.43 “GxP” means, individually or collectively, as the context requires, all relevant good practice quality guidelines and regulations, encompassing such internationally-recognized standards as GMP, cGMP, GCP, GLP, Good Distribution Practice (GDP), Good Review Practice (GRP) and Good Pharmacovigilance Practice (GPvP). 1.44 “IND” means any investigational new drug application, clinical trial application, clinical trial exemption or similar or equivalent application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority. 1.45 “Indication” means a separate, defined, well-categorized class of human disease syndrome or medical condition for which a separate BLA or a supplement thereto may be filed. 1.46 “Initiate” or “Initiation” means, with respect to a clinical trial of a Product, the [*] in such clinical trial. 1.47 “Invention” means any invention, discovery, improvement, modification, process, method, assay, design, protocol, formula, data, know-how or trade secret, whether patentable, copyrightable or otherwise, that is discovered, generated, conceived or reduced to practice by or on behalf of a Party or its Affiliate or Sublicensee through activities conducted under this Agreement, including all rights, title and interest in and to the intellectual property rights therein and thereto.
9 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 1.48 “Know-How” means any information, including discoveries, improvements, modifications, processes, methods, assays, designs, protocols, formulas, data, inventions, know- how and trade secrets (in each case, patentable, copyrightable or otherwise), but excluding any Patent Rights. 1.49 “Law” means any federal, state, local, foreign or multinational law, statute, standard, ordinance, code, rule, regulation, resolution or promulgation, or any order by any Governmental Authority, or any license, franchise, permit or similar right granted under any of the foregoing, or any similar provision having the force or effect of law. 1.50 “Licensed Companion Diagnostic Technology” means all Know-How and Patent Rights that are Controlled by Sangamo or its Affiliates as of the Effective Date or during the Term, including Sangamo’s interest in Joint Inventions and Joint Patents, that are necessary or useful for the development, manufacture, use, sale, offer for sale, importation or commercialization of Companion Diagnostic Assays in the Field in the Territory; provided, however, that (a) for purposes of this definition, “Affiliates” shall exclude any Third Party that becomes an Affiliate of Sangamo after the Effective Date as a result of a Change of Control of Sangamo; (b) Licensed Companion Diagnostic Technology shall exclude all Know-How and Patent Rights licensed to Sangamo pursuant to [*], (c) Licensed Companion Diagnostic Technology shall exclude all Excluded Upstream IP pursuant to Section 2.6, and (d) Licensed Companion Diagnostic Technology shall exclude all Know-How and Patent Rights licensed to Sangamo pursuant to the [*]. 1.51 “Licensed Know-How” means the Know-How included in the Licensed Technology. 1.52 “Licensed Patents” means the Patent Rights included in the Licensed Technology. As of the Effective Date, the Patent Rights listed on Exhibit A are Licensed Patents. 1.53 “Licensed Technology” means all Know-How and Patent Rights that are Controlled by Sangamo or its Affiliates as of the Effective Date or during the Term, including Sangamo’s interest in Joint Inventions and Joint Patents, that are necessary or useful for the Development, Manufacture, use, sale, offer for sale, importation or Commercialization of Products in the Field in the Territory; provided, however, that (a) for purposes of this definition, the Know- How and Patent Rights owned or Controlled by any Third Party that becomes an Affiliate of Sangamo after the Effective Date as a result of a Change of Control of Sangamo shall not be included in the Licensed Technology unless Sangamo or its Affiliates use or develop such Know- How or Patent Rights in the performance of their activities under the Agreement (e.g. in Development or Manufacturing); (b) Licensed Technology shall exclude all Know-How and Patent Rights licensed to Sangamo pursuant to the [*], (c) Licensed Technology shall exclude all Excluded Upstream IP pursuant to Section 2.6, and (d) Licensed Technology shall exclude all Know-How and Patent Rights licensed to Sangamo pursuant to the [*]. 1.54 “[*]” means that certain [*]. 1.55 “Major EU Countries” means France, Germany, Italy, Spain, and United Kingdom. 10 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 1.56 “Major Market Countries” means U.S., Japan and Major EU Countries. 1.57 “Manufacture” means to make, produce, manufacture, process, fill, finish, package, label, perform quality assurance testing, release, ship or store a compound or product or any component thereof. When used as a noun, “Manufacture” or “Manufacturing” means any and all activities involved in the Manufacture of a compound or product or any component thereof. 1.58 “Manufacturing Costs” means: (a) with respect to any material Manufactured by a Party hereunder, the standard unit cost of Manufacture of such material, consisting of direct material and direct labor costs plus Manufacturing overhead attributable to such material (including all directly incurred manufacturing variances), all calculated in accordance with GAAP and such Party’s internal cost accounting procedures, consistently applied, wherein (i) direct material costs will include the costs incurred in Manufacturing or purchasing materials for use in Manufacturing such material, including freight costs, sales and excise taxes imposed thereon and customs duty and charges levied by Governmental Authorities, and all costs of packaging components; (ii) direct labor costs will include the costs of employees engaged in direct Manufacturing activities and direct or indirect quality control and quality assurance activities who are directly employed in Manufacturing and packaging such material; (iii) overhead attributable to such material (1) will be calculated and allocated in a manner consistent with the method used to allocate overhead to other material Manufactured in the same facility, (2) will include a reasonable allocation of indirect labor (not previously included in direct labor costs), a reasonable allocation of administrative costs, and a reasonable allocation of facilities costs, all in accordance with GAAP and such Party’s internal cost accounting procedures, consistently applied, and (3) will not include corporate administrative overhead or plant start-up costs or costs associated with excess or idle capacity; (b) with respect to any material Manufactured by a Third Party manufacturer, (i) the actual price paid by such Party or its Affiliates to the Third Party for the Manufacture, supply and packaging of such material, and all taxes and shipping costs related thereto and the cost of any materials supplied and paid for by such Party, including Third Party processing charges associated with any such Third Party costs, such as procurement and accounts payable expenses, and (ii) reasonable and necessary direct labor costs, calculated at the FTE Rate, of such Party’s or its Affiliates’ employees engaged in activities relating to the selection, engagement, oversight and management of such Third Party manufacturer and the management of such supply (including quality control and quality assistance activities); and (c) all Manufacturing process development costs incurred by Sangamo and its Affiliates, for process development-related activities specifically included in the Product Development Plan. 1.59 “Marketing Approval” means all technical, medical and scientific licenses, registrations, authorizations and approvals (including approvals of BLAs, supplements and amendments, pre- and post- approvals and labeling approvals) of any Regulatory Authority, necessary for the Commercialization of a Product in a given country or regulatory jurisdiction. 1.60 “Net Sales” means: 11 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (a) with respect to a Product that is not a Combination Product, the gross receipts from sales by Pfizer and its Affiliates and Sublicensees of such Product to Third Parties in the Territory that is recorded as revenue by Pfizer or its Affiliate or Sublicensee according to such Person’s revenue recognition policies consistently applied, less in each case, to the extent actually incurred or allowed with respect to such Product, (i) bad debts actually incurred, (ii) sales returns and allowances actually paid, granted or accrued, including trade, quantity and cash discounts and any other adjustments, including those granted on account of price adjustments, billing errors, rejected goods, damaged or defective goods, recalls, returns, rebates, chargeback rebates, reimbursements or similar payments granted or given to wholesalers or other distributors, buying groups, health care insurance carriers, chain pharmacies, mass merchandisers, staff model HMO’s, pharmacy benefit managers or other institutions, (iii) adjustments arising from consumer discount programs or other similar programs, (iv) customs or excise duties, sales tax, consumption tax, value added tax, and other taxes (except income taxes) or duties relating to sales of such Product, (v) any payment in respect of sales of such Product to the United States government, any state government or any foreign government, or to any other Governmental Authority, or with respect to any government-subsidized program or managed care organization, and (vi) freight and insurance (to the extent that Pfizer, its Affiliates or its Sublicensees bear the cost of freight and insurance for the Product); and (b) with respect to sales in a particular country and Pfizer Quarter of a product containing a Product and one or more other therapeutically active ingredients, excluding empty viral capsids (i.e., AAV vectors which do not contain DNA) (each a “Combination Product”), the percentage of the Net Sales in such country of such Combination Product (as determined in accordance with clause (a)) that is calculated as follows: (i) if the Product and other therapeutically active ingredient(s) of such Combination Product are each sold separately in such country during such Pfizer Quarter, the fraction A/(A+B), where A is the average sale price of the Product as sold separately in such country and Pfizer Quarter and B is the average sale price of the other therapeutically active ingredient(s) in the Combination Product as sold separately in such country and Pfizer Quarter; (ii) if the Product is sold separately in such country and Pfizer Quarter, but the other therapeutically active ingredient(s) of such Combination Product are not sold separately in such country during such Pfizer Quarter, the fraction A/C, where A is the average sale price of the Product as sold separately in such country and Pfizer Quarter and C is the average sale price of the Combination Product in such country and Pfizer Quarter; (iii) if the Product is not sold separately in such country and Pfizer Quarter, but the other therapeutically active ingredient(s) of such Combination Product are sold separately in such country during such Pfizer Quarter, the fraction the fraction [1-B/C], where B is the average sale price in such country and Pfizer Quarter of the other therapeutically active ingredient(s) of such Combination Product and C is the average sale price of the Combination Product in such country and Pfizer Quarter; and (iv) if neither the Product nor the other therapeutically active ingredient(s) of such Combination Product are sold separately in such country during such Pfizer Quarter, the Parties shall in good faith determine such fraction by mutual agreement based on the relative 12 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. contribution of the Product and the other active ingredient(s) in the Combination Product, and if the Parties fail to agree, the fraction will be determined by an independent expert agreed by the Parties, whose decision will be binding. Net Sales will be determined from books and records maintained in accordance with GAAP, as consistently applied by Pfizer, its Affiliate or Sublicense, as applicable, with respect to sales of the Products. For clarity, Net Sales shall not include (i) sales of any Product made at or below cost under a compassionate use program, (ii) distribution of Samples of any Product, or (iii) donations of any Product, in each case by Pfizer, its Affiliates or Sublicensees. 1.61 “Party Specific Regulations” means all non-monetary judgments, decrees, orders or similar decisions issued by any Governmental Authority specific to a Party, and all consent decrees, corporate integrity agreements, or other agreements or undertakings of any kind by a Party with any Governmental Authority, in each case as the same may be in effect from time to time and applicable to a Party’s activities contemplated by this Agreement. 1.62 “Patent Rights” means any and all (a) issued patents, (b) pending patent applications, including all provisional applications, substitutions, continuations, continuations-in- part, divisions and renewals, and all patents granted thereon, (c) patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including patent term adjustments, patent term extensions, supplementary protection certificates or the equivalent thereof, (d) inventor’s certificates, (e) other forms of government- issued rights substantially similar to any of the foregoing and (f) United States and foreign counterparts of any of the foregoing. 1.63 “Person” means any individual, partnership, limited liability company, firm, corporation, association, trust, unincorporated organization or other entity. 1.64 “Pfizer Diligence Obligations” means Pfizer’s Development and Marketing Approval diligence obligations under Section 8.1(a) and Pfizer’s Commercialization diligence obligations under Section 8.2. 1.65 “Pfizer Manufacturing Improvement” means any Invention made solely by Pfizer, its Affiliates or Sublicensees or its or their employees, agents or independent contractors that are improvements to the manufacturing-related Know-How and Patent Rights included in the Licensed Technology. 1.66 “Pfizer Manufacturing Technology” means: (a) all manufacturing methods, processes and other Know-How that (i) are Controlled by Pfizer or any of its Affiliates, (ii) are directly related to the Manufacture of any Product (including any components of such Products) [*], including any step in the manufacturing process for a Product that [*], and (iii) [*], or [*]; provided, however, that any such methods, processes or Know-How that [*]; and (b) all Patent Rights Controlled by Pfizer or any of its Affiliates to the extent claiming any of the foregoing.
13 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 1.67 “Pfizer Quarter” means each of the four (4) thirteen (13) week periods (a) with respect to the United States, commencing on January 1 of any Pfizer Year and (b) with respect to any country in the Territory other than the United States, commencing on December 1. 1.68 “Pfizer Year” means the twelve month fiscal periods observed by Pfizer (a) commencing on January 1 with respect to the United States and (b) December 1 with respect to any country in the Territory other than the United States. 1.69 “Phase I/II Clinical Data Package” means the package containing all clinical study reports (including the clinical study report prepared by Sangamo based on the clinical data as of the applicable database lock, either interim or final, prior to the first EOP2 Meeting), results and other data in existence as of the applicable database lock, either interim or final, prior to the first EOP2 Meeting (including but not limited to the trial master file and associated quality documentation and attestations to quality procedures) that is generated pursuant to the SB-525 Phase I/II Trial, including the data and documents set forth in Exhibit E (the “Data Package Elements”). 1.70 “[*]” means that certain [*]. 1.71 “Pivotal Trial” means a human clinical trial of a Product that either (a) would satisfy the requirements of 21 C.F.R. 312.21(c) or corresponding foreign regulations; or (b) is intended (as of the time the clinical trial is Initiated) to obtain sufficient data to support the Filing of a BLA for such Product (but may not include the data that may be necessary to support the Pricing Approval). Pivotal Trial may include (i) a clinical trial that is designed to satisfy the requirements of both 21 C.F.R. 312.21(b) and 21 C.F.R. 312.21(c) or corresponding foreign regulations (i.e., a Phase 2/3 trial), or (ii) a Phase 2 clinical trial that is [*] to satisfy the requirements of 21 C.F.R. 312.21(c) or to provide sufficient data to support the Filing of a BLA for such Product, in which case such Pivotal Trial shall be deemed to [*]. 1.72 “Pricing Approval” means, in any country where a Governmental Authority authorizes reimbursement for, or approves or determines pricing for, pharmaceutical products, receipt (or, if required to make such authorization, approval or determination effective, publication) of such reimbursement authorization or pricing approval or determination (as the case may be). 1.73 “Product” means (a) SB-525, (b) any Additional Product that is approved by the JSC and added to this Agreement as a Product pursuant to Section 4.3, or (c) any gene therapy product that (1) [*], and (2) [*]. 1.74 “Region” means any of the following: [*]. 1.75 “Regulatory Authority” means with respect to a country in the Territory, any national (e.g., the FDA), supra-national (e.g., the European Commission, the Council of the European Union, or the European Medicines Agency), regional, state or local regulatory agency, department, bureau, commission, council or other Governmental Authority involved in granting Marketing Approvals for Products in such country, including the FDA, the EMA and any corresponding national or regional regulatory authorities. 14 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 1.76 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any Regulatory Authority with respect to a pharmaceutical product other than Patent Rights, including orphan drug exclusivity, new chemical entity exclusivity, data exclusivity, pediatric exclusivity, rights conferred in the United States under the Hatch-Waxman Act, the FDA Modernization Act of 1997 or the Biologics Price Competition and Innovation Act, or rights similar thereto outside the United States. 1.77 “Regulatory Materials” means all regulatory applications, submissions, notifications, communications, correspondences, registrations, approvals and other filings made to, received from or otherwise conducted with a Regulatory Authority in order to develop, manufacture, or commercialize a Product in a particular country or jurisdiction. “Regulatory Materials” includes all INDs, BLAs and Marketing Approvals. 1.78 “Relevant Factors” means all relevant factors that may affect the Development, Marketing Approval, Pricing Approval or Commercialization of a Product, including (as applicable and without limitation): [*]. Without limiting the foregoing, the following shall be considered Relevant Factors with respect to a Product: [*]. 1.79 “Representatives” means (a) with respect to Pfizer, Pfizer, its Affiliates, its Sublicensees and each of their respective officers, directors, employees, consultants, contractors and agents and (b) with respect to Sangamo, Sangamo, its Affiliates and each of their respective officers, directors, employees, consultants, contractors and agents. 1.80 “Samples” means units of a Product which are not intended to be sold or traded, which are intended to be distributed to authorized healthcare professionals, and which are intended to promote the sale of such Product in accordance with 21 C.F.R. Part 203(d), or any successor provisions to such laws and regulations or in accordance with Applicable Law in any non-U.S. jurisdiction where such Product units are to be distributed. 1.81 “Sangamo Manufacturing Improvement” means any Invention made solely by Sangamo, its Affiliates or Sublicensees or its or their employees, agents or independent contractors that are improvements to (i) the Pfizer Manufacturing Technology or (ii) the manufacturing-related Know-How and Patent Rights which are Controlled by Pfizer or its Affiliates as of the Effective Date or during the Term and which are used for the Manufacture of Products in the Field in the Territory. 1.82 “Sangamo Third Party Agreement” means any agreement between Sangamo (or any of its Affiliates) and any Third Party (such Third Party, a “Third Party Licensor”) under which such Third Party grants Sangamo a license under any of the Licensed Technology or Licensed Companion Diagnostic Technology, including Upstream Licenses. For clarity, the Sangamo Third Party Agreements consist of the Current Licenses and the Upstream Licenses, and all Current Licensors shall be deemed Third Party Licensors hereunder. 1.83 “SB-525” means Sangamo’s proprietary gene therapy product for Hemophilia A known as SB-525, as described in U.S. IND # 17250. 1.84 “SB-525 Phase I/II Long-Term Follow-Up Study” means the follow-on clinical study to the SB-525 Phase I/II Trial, which study’s purpose will be to further assess the safety of 15 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. patients from the SB-525 Phase I/II Trial, the protocol of which is set forth in the initial Development Plan, as may be amended from time to time. 1.85 “SB-525 Phase I/II Trial” means Sangamo’s first-in-human clinical trial of SB- 525, the protocol of which is set forth in the initial Development Plan, as may be amended from time to time, for example to address the need for clinical data on a manufacturing change. SB-525 Phase I/II Trial does not include the SB-525 Phase I/II Long-Term Follow-Up Study. 1.86 “Specified Patents” means those Patent Rights identified as the Specified Patents in that certain letter [*]. 1.87 “Sublicensee” means (a) with respect to Pfizer, any Person to whom Pfizer grants or has granted, directly or indirectly, a sublicense of rights licensed by Sangamo to Pfizer under this Agreement or (b) with respect to Sangamo, any Person to whom Sangamo grants or has granted, directly or indirectly, a sublicense of rights licensed by Pfizer to Sangamo under the Agreement. 1.88 “Target” means the Factor VIII gene (including partial versions of such gene), which, when defective, contributes to the human disease of Hemophilia A that can be treated by factor replacement. 1.89 “Territory” means worldwide. 1.90 “Third Party” means any Person other than a Party or an Affiliate of a Party. 1.91 “Trademarks” means all trademarks, service marks, trade names, service names, internet domain names, brand names, logos, protectable slogans, and trade dress rights, whether registered or unregistered, and all applications, registrations, and renewals thereof. 1.92 “United States” or “U.S.” means the United States of America, including its territories and possessions. 1.93 “Upstream Licensor” means any licensor of an Upstream License. 1.94 “[*]” means that certain [*]. 1.95 “Valid Claim” means, with respect to a particular country and Product (a) a claim of an issued and unexpired Patent Right in the Licensed Technology that (i) has not been revoked or held unenforceable, unpatentable or invalid by a decision of a court or other Governmental Authority of competent jurisdiction that is not appealable or has not been appealed within the time allowed for appeal, and (ii) that has not been canceled, withdrawn, abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise, or (b) a claim of a pending patent application that has not been cancelled, withdrawn, abandoned or finally rejected by an administrative agency action from which no appeal can be taken, provided that any claim in any patent application pending for more than [*] years from the earliest date on which such claim claims priority shall not be considered a Valid Claim for purposes of the Agreement from and after such [*] year date unless and until a patent containing such claim 16 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. issues from such patent application and solely if such patent issues while another Valid Claim Covers the relevant Product in the relevant country. 1.96 Interpretation. Except where the context expressly requires otherwise, (a) the use of any gender herein will be deemed to encompass references to either or both genders, and the use of the singular will be deemed to include the plural (and vice versa), (b) the words “include”, “includes” and “including” will be deemed to be followed by the phrase “without limitation”, (c) the word “will” will be construed to have the same meaning and effect as the word “shall”, (d) any definition of or reference to any agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (e) any reference herein to any Person will be construed to include the Person’s successors and assigns, (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, will be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Sections or Exhibits will be construed to refer to Sections or Exhibits of this Agreement, and references to this Agreement include all Exhibits hereto, (h) the word “notice” means notice in writing (whether or not specifically stated) and will include notices, consents, approvals and other written communications contemplated under this Agreement, (i) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like will require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise (but excluding e-mail and instant messaging), and (j) references to any specific law, rule or regulation, or article, section or other division thereof, will be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof. 1.97 List of Exhibits and Schedules. The following is a listing of the Exhibits and Schedules in this Agreement. Exhibit A: Licensed Patents Exhibit B: Transfer Plan Exhibit C: Initial Development Plan Exhibit D: Joint Press Release Exhibit E: Data Package Elements Exhibit F: Manufacturing Tech Transfer Plan Exhibit G: Specified Patents Exhibit H: Statement of Work #1 Exhibit I: Exceptions to Sangamo Representations and Warranties Exhibit J: Pre-clinically Developed Products and Additional Products Exhibit K: Current Licenses Schedule 2.1(d): Sangamo Third Party Agreement Provisions Schedule 4.9: Sangamo Subcontractors
17 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. ARTICLE 2 LICENSES; EXCLUSIVITY 2.1 Licenses to Pfizer. (a) License Grants. Subject to the terms and conditions of this Agreement (including Sangamo’s retained rights), effective as of the Effective Date and in each case without limiting any other license (or sublicense) granted under this Agreement, Sangamo hereby grants, and will cause its Affiliates to hereby grant, to Pfizer: (i) an exclusive (even as to Sangamo and its Affiliates except as provided in Section 2.1(c)), royalty-bearing license (or, to the extent any Licensed Technology is Controlled by Sangamo or its Affiliates pursuant to a Sangamo Third Party Agreement, a sublicense), with the right to sublicense solely as provided in Section 2.1(b), under the Licensed Technology, to use, have used, Develop, have Developed, Manufacture, have Manufactured, Commercialize, have Commercialized and otherwise exploit Products in the Field in the Territory; (ii) a non-exclusive, royalty-free, fully paid-up license (or sublicense, as applicable), with the right to sublicense solely to Pfizer’s Affiliates and to contractors working on behalf of Pfizer or its Affiliates, under the Licensed Technology, to research Additional Products up to but not including [*], during the Exclusivity Period. For clarity, the foregoing license (1) does not include the right to [*] any Additional Product; (2) does not include the right to perform research, without Sangamo’s prior written consent, on any Additional Product that [*]; and (3) shall expire at the end of the Exclusivity Period; (iii) a non-exclusive, fully paid, worldwide, perpetual and irrevocable license, with the right to sublicense solely as provided in Section 2.1(b)(iii), under the Sangamo Manufacturing Improvements, to make and have made any and all products researched or developed by Pfizer or its Affiliates [*] (each a “Pfizer Product”) and to use, have used, import, have imported, offer for sale, have offered for sale, have sold and sell such Pfizer Products; and (iv) a fully paid and royalty-free (except to the extent that any payments are owed to any Upstream Licensor with respect to the practice of a sublicense granted pursuant to this subsection (iv)), worldwide, non-exclusive license (or sublicense, as applicable), with the right to sublicense solely as provided in Section 2.1(b), under the Licensed Companion Diagnostic Technology, to use, have used, develop, have developed, make, have made, sell, have sold, offer for sale, import, export, and otherwise exploit Companion Diagnostic Assays (1) for the purpose of predicting or monitoring [*] and (2) with respect to any Companion Diagnostic Assay that has been developed in accordance with the preceding clause (1), for the purpose of predicting or monitoring [*]. Notwithstanding any provision to the contrary in this Agreement, the license granted under Section 2.1(a)(iv)(2) hereof shall be [*]. To the extent that Pfizer or its Affiliate or Sublicensee conducts any development or commercialization of a Companion Diagnostic Assay which was developed using 18 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Licensed Companion Diagnostic Technology through a Third Party, Pfizer shall use reasonable efforts to facilitate Sangamo’s access to such Companion Diagnostic Assay through such Third Party. For clarity, [*]. (b) Sublicenses. (i) Subject to the terms and conditions of this Agreement and the applicable Sangamo Third Party Agreements, Pfizer may grant to its Affiliates or Third Parties (through one or more tiers) sublicenses under the licenses granted by Sangamo to Pfizer under Sections 2.1(a)(i) and 2.1(a)(iv) upon written notice to Sangamo; provided that Pfizer shall remain responsible for the performance of all of its Sublicensees to the same extent as if such activities were conducted by Pfizer, and shall remain responsible for any payments due hereunder with respect to activities of any Sublicensees. (ii) Pfizer shall provide Sangamo with a copy of each executed sublicense agreement within thirty (30) days after execution thereof (excluding any such agreement under which Pfizer grants a sublicense to an Affiliate or solely to conduct Development or Manufacturing on behalf of Pfizer or its Affiliate, unless Sangamo is obligated to provide such copy to a Third Party Licensor in which case Sangamo will obtain the written consent from Pfizer, not to be unreasonably withheld, prior to entering into such license which would obligate Sangamo to provide such copy), which shall be treated by Sangamo as Pfizer’s Confidential Information, provided that to the extent required by any Sangamo Third Party Agreement, Sangamo shall be permitted to provide a confidential copy to the applicable Third Party Licensor. Prior to providing a copy of such sublicense agreement to Sangamo, Pfizer may (unless otherwise required by a Sangamo Third Party Agreement and Sangamo has received Pfizer’s prior written consent) redact certain terms of any such sublicense agreement to the extent not pertinent to an understanding of a Party’s obligations or benefits under this Agreement or a verification of compliance with the requirements of this Agreement. (iii) Subject to the terms and conditions of this Agreement, Pfizer may, upon written notice to Sangamo, grant sublicenses under the license granted by Sangamo to Pfizer under Section 2.1(a)(iii) to its Affiliates or Third Parties (through one or more tiers) to whom Pfizer assigns or grants a license under intellectual property rights of Pfizer (other than intellectual property rights licensed by Sangamo to Pfizer under this Agreement) with respect to a Pfizer Product, provided that Pfizer shall remain responsible for the performance of all of its Sublicensees to the same extent as if such activities were conducted by Pfizer. For clarity, Pfizer shall have no right to grant any sublicense under the Sangamo Manufacturing Improvements to make, use or sell any product that is not a Pfizer Product and, in the event Pfizer does grant any such sublicense in violation of this Section 2.1(b)(iii), Sangamo shall have the right to terminate the license granted to Pfizer under Section 2.1(a)(iii). (iv) Pfizer shall provide Sangamo with written notice of each executed sublicense agreement entered into pursuant to Section 2.1(b)(iii) within thirty (30) days after execution thereof, such notice to include the name of the Sublicensee and 19 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. a description of the applicable Pfizer Product and sublicense scope, which shall be treated by Sangamo as Pfizer’s Confidential Information. (c) Retained Rights for Exclusive Licenses. Notwithstanding the exclusive license granted by Sangamo to Pfizer under Section 2.1(a)(i), Sangamo retains the rights under the Licensed Technology to perform its obligations and to exercise its rights under this Agreement, whether directly or through one or more subcontractors. In addition, subject to Section 2.5, Sangamo retains the exclusive right to practice and license the Licensed Technology, Sangamo Manufacturing Improvement Technology and Licensed Companion Diagnostic Technology outside the scope of the licenses granted to Pfizer under Section 2.1(a). (d) Sangamo Third Party Agreements. The licenses granted to Pfizer in Section 2.1(a) include sublicenses under Licensed Technology or Licensed Companion Diagnostic Technology licensed to Sangamo pursuant to the Sangamo Third Party Agreements, which sublicenses are subject to the terms of such Sangamo Third Party Agreements (i.e. those terms set forth on Schedule 2.1(d), which may be amended by the Parties for Sangamo Third Party Agreements entered into after the Effective Date). Pfizer acknowledges and agrees to be bound by such terms, and agrees not to take or fail to take any action that would cause Sangamo to be in breach of any Sangamo Third Party Agreement. Pfizer acknowledges that certain of the licenses granted to Sangamo under the Sangamo Third Party Licenses are non-exclusive, and that Pfizer’s license pursuant to Section 2.1(a)(i) with respect to the relevant Licensed Technology are exclusive only with respect to Sangamo, and not with respect to its licensor. 2.2 Licenses to Sangamo. (a) License Grants. Subject to the terms and conditions of this Agreement, Pfizer hereby grants to Sangamo and its Affiliates: (i) a non-exclusive, fully paid, royalty-free, worldwide license, with the right to grant sublicenses only to its Affiliates and subcontractors, under all Know-How, Patent Rights and other intellectual property rights Controlled by Pfizer and its Affiliates as of the Effective Date or during the Term, solely to perform Sangamo’s and its Affiliates’ obligations under this Agreement; and (ii) a non-exclusive, fully paid and royalty-free (subject to Section 2.2(c), worldwide, perpetual and irrevocable (subject to Section 2.2(b)(i) and Section 2.2(c)) license, with the right to sublicense solely as provided in Section 2.2(b), under the Pfizer Manufacturing Improvements and Pfizer Manufacturing Technology, to make and have made any and all products researched or developed by Sangamo [*] (each a “Sangamo Product”) and to use, have used, import, have imported, offer for sale, have offered for sale, have sold and sell such Sangamo Products. (b) Sublicenses. (i) Subject to the terms and conditions of this Agreement, Sangamo may, upon written notice to Pfizer, grant sublicenses under the licenses granted by Pfizer to Sangamo under Section 2.2(a)(ii) to its Affiliates or Third Parties (through one or more tiers) to whom Sangamo assigns or grants a license under 20 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. intellectual property rights of Sangamo (other than intellectual property rights licensed by Pfizer to Sangamo under this Agreement) with respect to a Sangamo Product, respectively; provided that Sangamo shall remain responsible for the performance of all of its Sublicensees to the same extent as if such activities were conducted by Sangamo, and shall remain responsible for any and all payments due hereunder, if any, with respect to activities of any such Sublicensees. For clarity, Sangamo shall have no right to grant any sublicense under the Pfizer Manufacturing Improvements or Pfizer Manufacturing Technology to make, use or sell any product that is not a Sangamo Product and, in the event Sangamo does grant any such sublicense in violation of this Section 2.2(b)(i), Pfizer shall have the right to terminate the license granted to Sangamo under Section 2.2(a)(ii). (ii) Sangamo shall provide Pfizer with written notice of each executed sublicense agreement entered into pursuant to Section 2.2(b)(i) within thirty (30) days after execution thereof, such notice to include the name of the Sublicensee and a description of the applicable Sangamo Product and sublicense scope, which shall be treated by Pfizer as Sangamo’s Confidential Information. (c) Costs. In the event that any Pfizer Manufacturing Technology is licensed to Pfizer by a Third Party, Pfizer shall notify Sangamo promptly after disclosing such Pfizer Manufacturing Technology to Sangamo pursuant to Section 6.3(c), including a description of such Pfizer Manufacturing Technology and any payments that Pfizer would be obligated to pay directly as a result of Pfizer’s grant to Sangamo of the license under Section 2.2(a)(ii), Sangamo’s grant of a sublicense to any of its Affiliates or any Third Party under such license, or the practice of such license or sublicense, as the case may be, by or on behalf of Sangamo, its Affiliates or any of their respective licensees, Sublicensees or contractors. If within [*] days thereafter, Sangamo notifies Pfizer that it does not desire to obtain a sublicense under such Know-How and/or Patent Rights, then such Know-How and Patent Rights will be deemed excluded from the Pfizer Manufacturing Technology. If Sangamo does not notify Pfizer during such [*]-day period that it does not desire such sublicense, then Sangamo shall (i) provide Pfizer, in a timely manner as necessary for Pfizer to comply with its obligations to the Third Party as disclosed to Sangamo, with all information needed in order to determine the requirement to make and the amount of any such payment and (ii) promptly (but in no event later than [*] days after Pfizer’s submission of an invoice therefor) reimburse Pfizer for the full amount of such payment; provided that at any time Sangamo shall have the right to terminate its sublicense to such Pfizer Manufacturing Technology on [*] written notice to Pfizer, after which the foregoing obligations will terminate with respect to obligations (excluding payments for uncancellable obligations or payments obligations that have been incurred or matured prior to the effective date of termination) accrued under such sublicense after the effective date of termination. Pfizer shall have the right to terminate the sublicense granted to Sangamo with respect to any Pfizer Manufacturing Technology in-licensed from a Third Party in the event Sangamo fails to provide Pfizer any such information or reimburse Pfizer for any such payment(s) required under Pfizer’s agreement with such Third Party and fails to cure such failure within [*] days after written notice thereof from Pfizer specifying the failure. 2.3 Reciprocal Non-Exclusive Research License for Disclosed Know-How and Confidential Information. Subject to any pre-existing exclusive license grants to Third Parties as of the Effective Date, and excluding any license whose grant or practice would cause Sangamo to
21 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. be in breach of any exclusivity obligation to any Third Party existing as of the Effective Date, and without limiting any other license granted to either Party under this Agreement: (a) Pfizer hereby grants and shall cause its Affiliates to hereby grant to Sangamo a non-exclusive, irrevocable, perpetual, royalty-free, fully paid-up, worldwide license, with the right to sublicense to Sangamo’s Affiliates, to use for research purposes (which excludes [*]) all Know-How and Confidential Information of Pfizer that is (i) Controlled by Pfizer or its Affiliates and (ii) disclosed to Sangamo or its Affiliates pursuant to this Agreement during the Term; provided that nothing in this Section 2.3(a) shall give Sangamo or its Affiliates any right to practice under any Patent Right owned or Controlled by Pfizer or its Affiliates. (b) Sangamo hereby grants and shall cause its Affiliates to hereby grant to Pfizer a non-exclusive, irrevocable, perpetual, royalty-free, fully paid-up, worldwide license, with the right to sublicense to Pfizer Affiliates, to use for research purposes (which excludes [*]) all Know-How and Confidential Information of Sangamo that is (i) Controlled by Sangamo or its Affiliates and (ii) disclosed to Pfizer or its Affiliates pursuant to this Agreement during the Term; provided that nothing in this Section 2.3(b) shall give Pfizer or its Affiliates any right to practice under any Patent Right owned or Controlled by Sangamo or its Affiliates. 2.4 No Implied Licenses; Negative Covenant. Except as expressly set forth herein, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, under or to any Patent Rights, Know-How, or other intellectual property owned or controlled by the other Party. Neither Party shall, nor shall permit any of its Affiliates or Sublicensees to, practice any Patent Rights or Know-How licensed to it by the other Party outside the scope of the license granted to it under this Agreement, provided that, notwithstanding anything to the contrary in this Agreement, nothing in this Agreement (including but not limited to this Section 2.4 or Section 4.3(c)) shall be deemed to prevent or restrict in any way the ability of a Party or its Affiliates to conduct any activities in the Territory, which activities would be allowed under any safe harbor, research exemption, government or executive declaration of urgent public health need, or similar right available in law or equity if conducted by a Third Party. 2.5 Exclusivity. (a) Exclusivity Obligations. Except for their activities conducted under this Agreement and subject to the exception set forth in Section 2.5(b) below, during the time period [*] (the “Exclusivity Period”), neither Party shall, whether by itself, its Affiliates or with or through any Third Party, conduct any clinical development of, manufacture any clinical or commercial supply of, or commercialize, any [*] (a “Competing Program”). (b) Exception. Notwithstanding Section 2.5(a), if a Third Party becomes an Affiliate of a Party during the Exclusivity Period through merger, acquisition, consolidation or other similar transaction and such new Affiliate, as of the effective date of such transaction, is engaged, or has a then-existing plan to engage, in the conduct of a Competing Program: (i) If such transaction results in a Change of Control of such Party, then such new Affiliate shall have the right to continue such Competing Program and such continuation shall not constitute a breach by such Party of its exclusivity 22 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. obligation set forth in Section 2.5(a), provided that such new Affiliate conducts such Competing Program independently of the activities under this Agreement and does not use any Licensed Technology or the Confidential Information of the other Party in the conduct of such Competing Program. (ii) If such transaction does not result in a Change of Control of such Party, then such Party and its new Affiliate shall have [*] months from the closing date of such transaction to wind down or divest such Competing Program, and its new Affiliate’s conduct of such Competing Program during such [*] month period shall not constitute a breach by such Party of its exclusivity obligations set forth in Section 2.5(a), provided that such new Affiliate conducts such Competing Program during such [*] month period independently of the activities under this Agreement and does not use any Licensed Technology or the Confidential Information of the other Party in the conduct of such Competing Program. 2.6 Upstream Licenses. If, during the Term, Sangamo obtains Control of any intellectual property rights (other than the Specified Patents) that are owned or controlled by a Third Party and that are necessary or useful for the Development, Manufacture, use, sale, offer for sale, importation or Commercialization of any Product in the Field in the Territory, then Sangamo shall notify Pfizer in writing, including a description of such intellectual property rights, if they have been non-exclusively (“Non-Exclusive Upstream License”) or exclusively (“Exclusive Upstream License”) licensed and, with respect to such non-exclusively licensed intellectual property rights, of any payments that would be due as a result of the grant, maintenance or exercise of a sublicense to Pfizer under such intellectual property rights and a reasonable allocation (based on the scope of the license relative to the scope of the sublicense to Pfizer and provided that Sangamo disclose all the other relevant facts used by Sangamo to determine said reasonable allocation) of any other amounts payable under such license agreement that do not result solely from activities with respect to a particular product or entity (e.g., upfront fees or annual license fees). Notwithstanding anything in this Agreement to the contrary, the term and conditions specified in Exhibit G shall apply to the Specified Patents. Each Non-Exclusive Upstream License for which Pfizer agrees to reimburse Sangamo for payments thereunder pursuant to Section 2.6(a), and each Exclusive Upstream License, will be an “Upstream License”. (a) Non-Exclusive Upstream Licenses. If within [*] days after the receipt of such notice regarding a Non-Exclusive Upstream License, Pfizer agrees in writing to reimburse Sangamo for all payments due under such license as described above in this Section 2.6, then such intellectual property rights shall be included in the Licensed Technology and sublicensed to Pfizer under the terms and conditions of this Agreement (which sublicense shall be subject and subordinate to the terms and conditions of the Upstream License), and the agreement pursuant to which Sangamo obtained Control of such intellectual property rights shall become an Upstream License under this Agreement. If Pfizer does not agree in writing within such [*] days to reimburse Sangamo for all such payments, then such intellectual property rights shall be deemed “Excluded Upstream IP” and shall be excluded from the Licensed Technology, and the agreement pursuant to which Sangamo obtains Control of such intellectual property rights shall not be included in the Upstream Licenses. For avoidance of doubt, should Pfizer secure a license to any Excluded Upstream IP, [*] would apply. 23 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (b) Exclusive Upstream Licenses. If Sangamo obtains an Exclusive Upstream License, such exclusively licensed intellectual property rights shall be included in the Licensed Technology and sublicensed to Pfizer under the terms and conditions of this Agreement (which sublicense shall be subject and subordinate to the terms and conditions of the Upstream License), and the agreement pursuant to which Sangamo obtains Control of such intellectual property rights shall automatically become an Upstream License under this Agreement. (c) Information. Pfizer shall (i) provide Sangamo, in a timely manner as necessary for Sangamo to comply with its obligations under each Sangamo Third Party Agreement, with all information needed in order to determine the requirement to make, and the amount of, any payment thereunder, to the extent resulting from the grant, maintenance or exercise of a sublicense to Pfizer and (ii) promptly (but in no event later than [*] days after Sangamo’s submission of an invoice therefor) reimburse Sangamo for the full amount of each such payment under a Non-Exclusive Upstream License; provided Sangamo has provided Pfizer the information required under Section 2.6 and any other information necessary for Pfizer to comply with any payment obligations and in the case of clause (ii), Pfizer has agreed under Section 2.6(a) to make such payments. 2.7 Direct Licenses to Affiliates. Pfizer may, from time to time, request that Sangamo grant licenses or sublicenses, to the Licensed Technology or Licensed Companion Diagnostic Technology and of the same or narrowed scope as the licenses granted to Pfizer pursuant to Section 2.1(a), directly to Affiliates of Pfizer by giving written notice, upon receipt of which Sangamo agrees to enter into and sign a separate direct license or sublicense agreement with such designated Affiliate of Pfizer. All such direct license or sublicense agreements will be consistent with the terms and conditions of this Agreement, except for such modifications as may be required by applicable Laws in the country in which the direct license or sublicense will be exercised (excluding any such modifications that would require Sangamo to grant additional rights or take on additional obligations beyond what is set forth in this Agreement without any such modifications). The Parties further agree to make any amendments to this Agreement that are necessary to conform the combined terms of such direct licenses or sublicenses and this Agreement to the terms of this Agreement as set forth on the Effective Date. In connection with any such direct license, Sangamo may require that Pfizer guarantee the performance of its Affiliate. All reasonable costs of making such direct license or sublicense agreement(s) or amending this Agreement, including Sangamo’s reasonable attorneys’ fees, under this Section 2.7 will be borne by Pfizer and reimbursed to Sangamo within [*] days of Sangamo’s invoice therefor. 2.8 Right of Reference. Sangamo hereby grants to Pfizer, its Affiliates and its Sublicensees a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) (or any analogous Law recognized outside of the United States), to all regulatory filings Controlled by Sangamo or its Affiliates that directly relate to any Product, solely for purposes of Developing, Manufacturing and Commercializing Products in the Field in the Territory, and Sangamo will provide a signed statement to this effect, if requested by Pfizer, in accordance with 21 C.F.R. § 314.50(g)(3) (or any analogous Law outside of the United States). In addition, Pfizer hereby grants to Sangamo, its Affiliates and its Sublicensees a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b) (or any analogous Law recognized outside of the United States), to all Regulatory Materials (including the data contained in such Regulatory Materials) submitted by Pfizer, its Affiliates, Sublicensees or their CMOs in connection with the Manufacture of any 24 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Product, which right of reference Sangamo may use in connection with its practice of the license granted by Pfizer to Sangamo under Section 2.2(a)(ii) above. Pfizer will provide a signed statement to this effect, if requested by Sangamo, in accordance with 21 C.F.R. § 314.50(g)(3) (or any analogous Law outside of the United States). 2.9 Sangamo Third Party Agreements. (a) Maintenance of Sangamo Third Party Agreements. Sangamo will maintain in full effect and will perform all of its obligations in a timely manner under each of the Sangamo Third Party Agreements. Absent Pfizer’s prior written consent (which may be provided, conditioned or withheld in Pfizer’s sole discretion), Sangamo will not terminate, modify or amend any Sangamo Third Party Agreements in any manner that would (i) adversely affect any of the rights granted to Pfizer under this Agreement, (ii) impose any obligations upon Pfizer hereunder that are in addition to those obligations that exist under this Agreement based on the Current Licenses as they exist on the Effective Date or each Upstream License as it exists when it becomes an Upstream License pursuant to Section 2.6 or (iii) adversely affect Sangamo’s ability to perform its obligations under this Agreement. Further, Sangamo will not take any action or omit to take any action that would cause it to be in material breach of any Sangamo Third Party Agreements or that would give rise to a right of any Third Party Licensor to terminate the applicable Sangamo Third Party Agreements. (b) Communications and Performance. Notwithstanding anything to the contrary in this Agreement, Sangamo will facilitate any communications between Pfizer and any Third Party Licensor required for Pfizer to exercise the rights granted to it pursuant to this Article 2 and will use Commercially Reasonable Efforts to cause each applicable Third Party Licensor to perform all of its obligations under the applicable Sangamo Third Party Agreement that are necessary to effectuate the rights granted to Pfizer under this Agreement. (c) Breach of Sangamo Third Party Agreement. If Sangamo receives notification from the applicable Third Party Licensor of any actual or potential breach by Sangamo, or otherwise becomes aware of its breach, of any Sangamo Third Party Agreement, which breach if uncured could give rise to the termination of the applicable Sangamo Third Party Agreement, then Sangamo will promptly notify Pfizer of such breach, such notice to include a copy of the notification (if any) received from such Third Party Licensor. To the extent that any act or omission on the part of Pfizer is the cause of such breach of a Sangamo Third Party Agreement, Pfizer will take all actions and provide Sangamo with all cooperation necessary to cure such breach, in each case as reasonably requested by Sangamo and at Pfizer’s sole cost and expense. To the extent that Pfizer is not the cause of such breach of a Sangamo Third Party Agreement, Sangamo will have the first opportunity to cure such breach in accordance with a plan to be mutually agreed upon by the Parties in writing, acting reasonably (each, a “Cure Plan”). If (a) Sangamo does not use diligent efforts to cure such breach pursuant to the applicable Cure Plan or (b) Sangamo is unable to cure such breach in accordance with the applicable Cure Plan or it becomes reasonably apparent that Sangamo will not be able to cure such breach pursuant to the applicable Cure Plan, in each case during the applicable cure period, then Pfizer may, at its election and in its sole discretion, act reasonably to cure such breach and Sangamo will take all actions and provide Pfizer with all cooperation to cure such breach, in each case as reasonably requested by Pfizer. Further, if Pfizer is not the cause of such breach, then Sangamo will, at Pfizer’s sole election, (i) reimburse Pfizer
25 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. for all reasonable out-of-pocket costs and expenses incurred by or on behalf of Pfizer or any of its Representatives in connection with curing such breach; or (ii) permit Pfizer to offset any such reasonable out-of-pocket costs and expenses incurred by or on behalf of Pfizer or any of Pfizer’s Representatives in connection with curing such breach against Pfizer’s future payment obligations to Sangamo (or any of its successor or assigns) under this Agreement. (d) Termination of any Sangamo Third Party Agreement. In the event that any Sangamo Third Party Agreement is terminated by the applicable Third Party Licensor and this Agreement, as of the effective date of such termination, has not otherwise been terminated in its entirety, Pfizer, to the extent permitted by such Sangamo Third Party Agreement (or if not permitted or addressed in such Sangamo Third Party Agreement, to the extent permitted by the applicable Third Party Licensor), will have the right, at Pfizer’s election, to convert the sublicenses granted under this Agreement by Sangamo to Pfizer under the Licensed Technology licensed to Sangamo pursuant to such Sangamo Third Party Agreement to a direct license from the applicable Third Party Licensor to Pfizer on the terms and conditions contained in such Sangamo Third Party Agreement (with Pfizer assuming the applicable obligations of Sangamo thereunder) or such other terms and conditions as may be negotiated by Pfizer and the applicable Third Party Licensor. In the event Pfizer enters into any such direct license with a Third Party Licensor, Sangamo will, at Pfizer’s sole election, (i) reimburse Pfizer for all reasonable out-of-pocket costs and expenses incurred by or on behalf of Pfizer or any of its Representatives in connection with entering into and exercising its rights or performing under such direct license to the extent that Sangamo would have borne such costs if the applicable Sangamo Third Party Agreement had not been terminated; or (ii) permit Pfizer to offset any such reasonable out-of-pocket costs and expenses (to the extent not reimbursed pursuant to clause (i) above) incurred by or on behalf of Pfizer or any of Pfizer’s Representatives in connection with entering into and exercising its rights or performing under such direct license to the extent that Sangamo would have borne such costs if the applicable Sangamo Third Party Agreement had not been terminated, against Pfizer’s future payment obligations to Sangamo (or any of its successor or assigns) under this Agreement. (e) Consents and Waivers. In the event that any provision in any Sangamo Third Party Agreements which conflicts with this Agreement or adversely impacts the activities contemplated under this Agreement comes to the attention of either Sangamo or Pfizer, then either the Parties will (i) in Pfizer’s sole discretion, amend this Agreement to avoid such conflict or (ii) Sangamo, in consultation with Pfizer, will use Commercially Reasonable Efforts to obtain any and all additional required consents or waivers from the applicable Third Party Licensor(s) which may be necessary to align the conflicting provision(s) of the applicable Sangamo Third Party Agreement with this Agreement and to permit the activities contemplated by this Agreement. Notwithstanding the foregoing, Sangamo shall not have any obligation to obtain or attempt to obtain any rights to file, prosecute, maintain, enforce, defend or extend any Patent within the Licensed Technology that is non-exclusively licensed to Sangamo pursuant to a Sangamo Third Party Agreement. 2.10 Transfer of Non-Manufacturing Licensed Know-How to Pfizer. As of the Effective Date, the Parties have agreed on a plan for the initial transfer of Licensed Know-How (including relevant tangible materials, such as plasmids and cell lines), attached hereto as Exhibit B (the “Transfer Plan”). Promptly after the Effective Date and pursuant to the Transfer Plan, Sangamo shall disclose and make available to Pfizer the Licensed Know-How in existence as of 26 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. the Effective Date and not already known to Pfizer. Thereafter, upon Pfizer’s reasonable request (no more than once every [*]), Sangamo shall disclose and make available to Pfizer additional Licensed Know-How that has not been previously provided to Pfizer. The technology transfer under this Section 2.10 shall not include the transfer of Licensed Know-How for the Manufacture of the Products (the transfer of which shall be conducted in accordance with Article 6 below). The Parties shall cooperate with each other in good faith to enable a smooth transfer of the Licensed Know-How to Pfizer. Upon Pfizer’s reasonable request, Sangamo shall provide reasonable technical assistance, including making appropriate personnel available to Pfizer at reasonable times, places and frequency and upon reasonable prior notice, for the purpose of assisting Pfizer to understand and use the Licensed Technology in connection with Pfizer’s Development of the Products. 2.11 Costs of Transfer of Technology and Data to Pfizer. Sangamo shall be responsible for the cost and expenses it incurs in connection with the technology and data transfer performed in accordance with Exhibits B and F. If Pfizer requests that Sangamo transfer any Licensed Know-How or provide any additional technical assistance, in each case that is not included in Exhibit B or F, Pfizer shall reimburse Sangamo for (a) all out-of-pocket costs incurred by Sangamo for such activities and (b) the internal costs incurred by Sangamo for such activities in excess of [*] hours, which equals [*] at the FTE Rate as of the Effective Date (as such amount will be adjusted to reflect adjustments in the FTE Rate) ((a) and (b) collectively, the “Transfer Costs”). If Sangamo incurs any Transfer Costs, Sangamo shall submit an invoice to Pfizer within [*] days after each Pfizer Quarter pursuant to Section 9.7 for all Transfer Costs incurred in such Pfizer Quarter, and Pfizer shall pay to Sangamo the amount invoiced within [*] days after the receipt of the invoice and the corresponding report. ARTICLE 3 GOVERNANCE 3.1 Alliance Managers and Liaisons. (a) Alliance Managers. Promptly after the Effective Date, each Party shall appoint a representative to act as its alliance manager under this Agreement (each, an “Alliance Manager”) by providing written notification to the other Party. The Alliance Managers shall be primarily responsible for facilitating the flow of information and otherwise promoting communication, coordination and collaboration between the Parties under this Agreement. All request for information from one Party to the other Party will be made through the Alliance Managers. The Alliance Managers shall have the right to attend all meetings of the JSC, JCRC, JMC, JIPC and all other Committees (if any) as non-voting members, and bring matters to the attention of the relevant Committee if the Alliance Manager reasonably believes that such matter warrants such attention. Each Party may replace its Alliance Manager at any time upon written notice to the other Party. (b) Clinical Liaisons. Promptly after the Effective Date, each Party shall appoint a representative to act as its clinical liaison under this Agreement (each, a “Clinical Liaison”) by providing written notification to the other Party. Such Clinical Liaison must have relevant experience with managing and overseeing clinical trials. Each Party may replace its Clinical Liaison at any time upon written notice to the other Party. The Clinical Liaisons shall be 27 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. primarily responsible for promoting communication, coordination, and collaboration between the Parties and Sangamo’s clinical CRO and other vendors supporting or providing services to the SB- 525 Phase I/II Trial and/or the SB-525 Phase I/II Long-Term Follow-Up Study. Before the [*], the Clinical Liaisons will meet (which may be in person at Sangamo at Pfizer’s discretion) once every [*] for up to [*], or such other amount of time as may be mutually agreed by the Clinical Liaisons, which meeting will, if permitted under Sangamo’s contract with the CRO, include a representative from Sangamo’s CRO (who may or may not be in person at Sangamo) for some portion of such meeting, to discuss the conduct and results of the SB-525 Phase I/II Trial and/or the SB-525 Phase I/II Long-Term Follow-Up Study. (c) Manufacturing Liaisons. Promptly after the Effective Date, each Party shall appoint a representative to act as its manufacturing liaison under this Agreement (each, a “Manufacturing Liaison”) by providing written notification to the other Party. Such Manufacturing Liaison must have relevant experience with manufacturing biopharmaceuticals. Each Party may replace its Manufacturing Liaison at any time upon written notice to the other Party. The Manufacturing Liaisons shall be primarily responsible for promoting communication, coordination and collaboration between the Parties and Sangamo’s manufacturing CMO. Until [*], the Manufacturing Liaisons will meet (which may be in person at Sangamo at Pfizer’s discretion) once every [*] for up to [*], or such other amount of time as may be mutually agreed by the Manufacturing Liaisons, which meeting will, if permitted under Sangamo’s contract with the CMO, include a representative from Sangamo’s CMO (who may or may not be in person at Sangamo) for some portion of such meeting, to discuss the work being performed pursuant to said statement of work. 3.2 Joint Steering Committee. The Parties hereby establish a joint steering committee (the “JSC”), composed of two (2) (or a larger number agreed by the Parties) representatives of each Party, to manage the overall collaboration of the Parties under this Agreement. The JSC shall in particular: (a) coordinate the activities of the Parties under this Agreement, including facilitating communications between the Parties with respect to the Development and Manufacture of Products; (b) provide a forum for the discussion of the Development and Manufacture of Products and of updates provided by Pfizer regarding its plans to Commercialize Products (for clarity such updates not to include sales forecasts or details of what Pfizer will specifically be doing to commercialize any Product (e.g., sales force size, targeting, access plans or pricing, etc.); (c) with respect to the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long- Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates), review progress, including, for example, data outputs prepared for review by the Safety Monitoring Committee (SMC) or for any other purpose, endorse actions, provide program decisions and approve proposed amendments to the Development Plan (inclusive of Sangamo’s manufacture of SB-525); (d) with respect to the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long- Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its 28 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Affiliates), review all amendments to the study protocol and approve material amendments to the study protocol and external data presentation/publication plan; (e) review and discuss each Additional Product submitted by either Party during the Term and decide whether to include such Additional Product as a Product under this Agreement; (f) direct and oversee the operation of the JCRC, JMC, JIPC and any other joint subcommittee established by the JSC, including endorsement of recommendations and joint decision-making on matters raised by the Committees, and including resolving any disputed matter of such Committees; (g) establish additional joint subcommittees or working teams as it deems necessary or advisable to further the purpose of this Agreement; and (h) perform such other functions as appropriate to further the purposes of this Agreement, as expressly set forth in this Agreement or allocated to it, in all cases by the Parties’ written agreement. 3.3 Joint Clinical/Regulatory Committee. The Parties hereby establish a joint clinical/regulatory committee (the “JCRC”), composed of two (2) (or a larger number agreed by the Parties) representatives of each Party, to monitor and coordinate the conduct of the clinical Development of the Products and related regulatory activities. The JCRC shall in particular: (a) discuss updates provided by Sangamo regarding the results and activities related to the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates); (b) discuss updates provided by Pfizer (i) before the IND Transition Date, on the plans for the SB-525 Pivotal Trial, the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent being conducted by or on behalf of Pfizer or its Affiliates) and (ii) after the IND Transition Date, on material protocol amendments, identification of safety signals and periodic updates on site and enrollment status and trial results for clinical trials of Products conducted by or on behalf of Pfizer; (c) with respect to the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long- Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates), resolve issues, provide recommendations and prepare updates or amendments to the Development Plan and submit such updates and amendments to the JSC for review and approval; (d) with respect to the SB-525 Phase I/II and the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates), monitor the quality of the trials (including, for example, data quality/integrity and adherence to GCP by CRO, vendors, and Sangamo) and all material clinical activities for Products, including clinical trial planning and conduct and creation of documentation supporting clinical activities, and review and approve the following, to the extent not finalized as of the Effective Date, and any material amendments to the following: the statistical analysis plan, data quality plan, data management plan and charters for oversight committees, such as the safety monitoring
29 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. committees, data monitoring committees and any adjudication committees, provided that in the case of independent committee charters, this shall be limited to review; (e) with respect to the SB-525 Phase I/II and the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates), monitor and coordinate all regulatory actions, including information exchange on regulatory strategy and related activities as well as review of key regulatory deliverables and outcomes; (f) review and discuss regulatory actions for Products conducted outside the U.S. before the IND Transition Date, including regulatory strategy as well as review of key regulatory deliverables and outcomes; (g) monitor and discuss the preparation and submission of Regulatory Materials for the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates); (h) coordinate the transfer of the IND for SB-525 pursuant to Section 5.2; (i) provide a forum for and facilitate communications between the Parties with respect to the Development of Products; and (j) perform such other functions as may be appropriate to further the purposes of this Agreement with respect to the Development of Products, in all cases as allocated to the JCRC by the Parties’ written agreement. 3.4 Joint Manufacturing Committee. The Parties hereby establish a joint manufacturing committee (the “JMC”), composed of two (2) (or a larger number agreed by the Parties) representatives of each Party to monitor and coordinate the Manufacture and supply of the Products under this Agreement. The JMC shall in particular: (a) coordinate the activities of the Parties with respect to the Manufacture and supply of Products for clinical and commercial use; (b) provide a forum for and facilitate communications between the Parties with respect to the Manufacture and supply of Products, including the development and scale up of the manufacturing processes for Products; (c) coordinate and facilitate the transfer of manufacturing Know-How as and to the extent provided in Article 6; and (d) perform such other functions as may be appropriate to further the purposes of this Agreement with respect to the Manufacture and supply of Products, in all cases as allocated to the JMC by the Parties’ written agreement. 3.5 Joint Intellectual Property Committee. The Parties hereby establish a joint intellectual property committee (the “JIPC”), composed of one (1) patent counsel or agent of each Party to coordinate intellectual property related activities under this Agreement. The JIPC shall in particular: 30 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (a) coordinate the Parties’ patent prosecution and enforcement activities under Article 10, and make periodic reports of the same to the JSC and other Committees upon request; (b) review and discuss Inventions (including inventorship and ownership) generated from the Parties’ activities under this Agreement; and (c) perform such other functions as may be appropriate to further the purposes of this Agreement with respect to intellectual property related activities under this Agreement; provided that in no event will the JIPC or any other Committee have any decision-making authority with respect to any intellectual property-related activity that is allocated to one of the Parties under this Agreement. 3.6 Committee Membership and Meetings. (a) Committee Members. Within [*] days after the Effective Date, each Party shall appoint its representatives on the JSC, JCRC, JMC and JIPC, by providing written notification to the other Party. Each Party may replace its representatives on any Committee on written notice to the other Party, but each Party shall strive to maintain continuity in the representation of its Committee members. Each Party shall appoint one (1) of its representatives on each Committee to act as a co-chairperson of such Committee. The co-chairpersons shall jointly prepare and circulate agendas to Committee members at least [*] days before each Committee meeting and shall direct the preparation of reasonably detailed minutes for each Committee meeting, which shall be approved by the co-chairpersons and circulated to Committee members within [*] days of such meeting. Each Party shall be solely responsible for the costs incurred by its representatives in attending any Committee meeting and such costs shall not be included in Sangamo Development Costs or Sangamo Manufacture Costs. (b) Meetings. Each Committee (other than the JIPC, which shall meet only as directed to by the JSC) shall hold meetings at such times as it elects to do so, but in no event shall such meetings be held less frequently than (i) once every [*] months during the SB-525 Phase I/II Trial and (ii) once every [*] months thereafter. Meetings of any Committee may be held in person, by audio or video teleconference; provided that unless otherwise agreed by both Parties, at least (i) [*] meetings per year for each Committee (other than JIPC) shall be held in person during the SB-525 Phase I/II Trial and (ii) [*] meeting per year for each Committee (other than JIPC) shall be held in person thereafter. All in-person Committees shall be held at locations in the U.S. to be alternately selected by the Parties. Each Party shall be responsible for all of its own costs and expenses of participating in any Committee meetings. During the Phase I/II Trial, no action taken at any meeting of a Committee shall be effective unless at least one (1) representative of each Party is participating. (c) Ad Hoc Meetings. On [*] days’ written notice, either Party may request an ad-hoc meeting of a Committee to discuss issues that due to urgency need to be addressed prior to the next scheduled Committee meeting. Ad-hoc meetings may occur via audio or video teleconference or in-person as the Parties may agree. (d) Non-Member Attendance. Each Party may from time to time invite a reasonable number of participants, in addition to its representatives, to attend the Committee 31 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. meetings in a non-voting capacity; provided that if either Party intends to have any Third Party (including any consultant) attend such a meeting, such Party shall provide at least [*] days prior written notice to the other Party and obtain the other Party’s approval for such Third Party to attend such meeting, which approval shall not be unreasonably withheld or delayed. Such Party shall ensure that such Third Party is bound by confidentiality and non-use obligations consistent with the terms of this Agreement. 3.7 Decision-Making. (a) Consensus; Escalation. All decisions within the authority of each Committee shall be made by unanimous vote, with each Party’s representatives collectively having one (1) vote. If a Committee is unable to reach agreement as to a particular matter within such Committee’s jurisdiction, including due to a lack of a Party’s attendance at a Committee meeting, within [*] days (or a later date mutually agreed to by the Parties) after such matter has been brought to such Committee for resolution, such disagreement shall, in case of disagreement of the JCRC, JMC, JIPC or other joint subcommittee, be referred to the JSC for resolution, and in the case of disagreement of the JSC, be referred to the Executive Officers of the Parties for resolution. (b) Final Decision Making. If the Executive Officers do not fully resolve any matter within any Committee’s authority and referred to them under Section 3.7(a) within [*] days (or a later date mutually agreed to by the Parties) of the matter being referred to them, then [*] such disputed matter; except that [*]: (i) [*], including [*] that [*], provided that [*] or [*] or that [*]; (ii) [*] except [*]; (iii) [*]; (iv) [*] or [*]; (v) [*]; (vi) [*] that [*]; (vii) [*]; and (viii) [*]. 3.8 Limitations of Committee Authority. Each Committee shall only have the powers expressly assigned to it in this Article 3 and elsewhere in this Agreement (which powers do not include the power to make Commercialization or intellectual property decisions) and shall not have the authority to: (a) modify or amend the terms and conditions of this Agreement; (b) waive or determine either Party’s compliance with the terms and conditions of under this Agreement; or (c) decide any issue in a manner that would conflict with the express terms and conditions of this Agreement. 32 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 3.9 Discontinuation of Participation on a Committee. The activities to be performed by each Committee shall solely relate to governance under this Agreement, and are not intended to be or involve the delivery of services. Each Committee shall continue to exist until the first to occur of: (a) the Parties mutually agreeing to disband the Committee; (b) Sangamo providing written notice to Pfizer of its intention to disband and no longer participate in such Committee; or (c) [*]. Once a Committee ceases to exist as provided in the previous sentence, such Committee shall have no further obligations under this Agreement and, thereafter, each Party shall designate a contact person for the exchange of information under this Agreement. Notwithstanding the foregoing, all Committees will disband after the First Commercial Sale of a Product. ARTICLE 4 DEVELOPMENT 4.1 General. Subject to the terms and conditions of this Agreement and as outlined in this Article 4 below, the Parties shall collaborate with respect to the Development of Products under the direction of the JCRC and pursuant to the Development Plan(s). 4.2 Development Plan. The Development of each Product under this Agreement shall be conducted pursuant to a detailed Development plan (each a “Development Plan”), which shall set forth the timeline and details of all major Development activities to be conducted by or on behalf of Sangamo and/or Pfizer, as applicable, to support BLA and other Marketing Approval filings, including all pre-clinical, manufacturing, assay, clinical and regulatory Development work necessary to generate the data required for BLA Filings for such Product. The Development Plan shall also include the budget for the SB-525 Phase I/II Development activities to be conducted by Sangamo. As of the Effective Date, the Parties have agreed on the initial Development Plan for SB-525, which is attached hereto as Exhibit C (“SB-525 Development Plan”). From time to time during the Term (but no less than [*] during the SB-525 Phase I/II Trial and no less than [*] thereafter), the JCRC shall prepare updates and amendments to the then-current Development Plan(s) and submit such updates and amendment to the JSC for review and approval. Once approved by the JSC (to the extent applicable) such updated or amended Development Plan(s) shall become effective. The Development Plan(s) (including updates and amendments thereto) shall be consistent with the terms of this Agreement. In the event of an inconsistency between a Development Plan and this Agreement, the terms of this Agreement shall prevail. 4.3 Products Other Than SB-525; Additional Products. (a) The Parties intend to focus their Development efforts on SB-525, but (i) each Party may, in its discretion, conduct research on Products other than SB-525 and (ii) each Party may, in its discretion, subject to Section 2.1(a)(ii), conduct research on Additional Products [*], at its own cost and expense. If either Party would like to include an Additional Product as a Product under this Agreement, then such Party shall present such Additional Product to the JSC for review. (b) If the JSC decides to include such Additional Product under this Agreement then such Additional Product shall become a Product under this Agreement and the Parties shall amend this Agreement to reflect [*].
33 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (c) If the JSC decides not to include such Additional Product as a Product under this Agreement, then the exclusivity obligations set forth in Section 2.5 shall continue to apply to such Additional Product, and Pfizer will not have any licenses or other rights from Sangamo with respect to such Additional Product unless and until the JSC later determines to include such Additional Product as a Product under this Agreement. 4.4 Development Responsibilities. (a) Sangamo Development Responsibilities. As between the Parties, Sangamo shall be responsible (until the IND Transition Date) for and shall use Commercially Reasonable Efforts to conduct the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study. Sangamo is the regulatory sponsor of each of the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study prior to the IND Transition Date, and, subject to Section 5.2, will hold the IND therefor. Sangamo shall perform each of the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study in accordance with GxP and applicable Laws, including applicable guidelines of the International Council on Harmonisation (“ICH”) to the extent incorporated into FDA regulations, for investigations involving human subjects in accordance with the then-current protocol therefor, including, under the relevant JSC or JCRC: (i) providing Pfizer for review and comment any proposed amendments to the protocol for each of the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study; (ii) providing to Pfizer (i) information and transparency on all aspects of trial conduct and data generation, including Sangamo’s oversight of trial conduct by CROs and clinical investigators and providing to Pfizer for review and approval Sangamo’s plan for oversight of CROs and clinical investigators in conducting the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study, and (ii) any reports or findings made or received (e.g. audit report) within [*] hours of Sangamo’s receipt or identification, followed by written details and a corrective and preventative action plan within [*] days, during the course of the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study; (iii) providing Pfizer timely access to all data and information at regular intervals upon Pfizer’s request, including providing Pfizer parallel data and information review during the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long- Term Follow-Up Study, including, but not limited to, data outputs prepared for review by the Safety Monitoring Committee, and, subject to Section 4.4(b), using informed consent documents that will allow Sangamo to comply with such obligations (for example, in the context of an audit or for use or reference in a regulatory submission); (iv) if Pfizer has inquiries or questions related to any such data provided by or on behalf of Sangamo, Sangamo shall provide written responses to said inquiries and/or questions to Pfizer within [*] days or such other time period as may be agreed to by the Parties. 34 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (v) promptly providing Pfizer access to output from study committees, such as the safety monitoring committees, data monitoring committees and other applicable committees; (vi) including Pfizer in discussions with safety monitoring committees, data monitoring committees and any other adjudication study committees and other advisors to the program; and (vii) making any necessary amendments to any agreements with any clinical research investigators or other Third Parties conducting or participating in any activities related to the SB-525 Phase I/II Trial, or obtaining any necessary waivers or consents to such agreements, in order to permit Sangamo to comply with its obligations to Pfizer under this Agreement. In the event that there are obligations on Sangamo regarding the conduct of or data generated from the SB-525 Phase I/II Trial, Sangamo will use its Commercially Reasonable Efforts to make any necessary amendments to any agreements with any clinical research investigators or other Third Parties conducting or participating in any activities related to the SB-525 Phase I/II Trial, or obtain any necessary waivers or consents to such agreements, in order to permit Sangamo to comply with its obligations to Pfizer under this Agreement. Upon [*], or as otherwise directed by the JSC, Sangamo shall begin preparation of the Phase I/II Clinical Data Package; Sangamo shall deliver the Phase I/II Clinical Data Package to Pfizer promptly following completion of the Phase I/II Clinical Data Package. Sangamo will cooperate with Pfizer and use Commercially Reasonable Efforts to procure all such study reports and data in a form of sufficient quality and integrity such that all such data and reports will be suitable for submission to Regulatory Authorities for SB-525. As between the Parties, Sangamo will be solely responsible for the assembly and delivery to Pfizer of the Phase I/II Clinical Data Package. (b) Informed Consent Documents. Sangamo shall provide to Pfizer for Pfizer’s review, comment and approval all forms of draft informed consent documents (including any substantive amendments) for the SB-525 Phase I/II Trial or the SB-525 Phase I/II Long-Term Follow-Up Study prior to submission thereof to any institutional review board or independent ethics committee, to the extent not already submitted prior to the Effective Date. All forms of such informed consent documents provided to Pfizer prior to the Effective Date will be deemed approved by Pfizer. Sangamo shall provide to Pfizer a copy of each informed consent document (including any amendment) that has been approved by an institutional review board or independent ethics committee. Sangamo shall use reasonable efforts to amend the informed consent documents for the SB-525 Phase I/II Trial and the SB-525 Phase I/II Long-Term Follow-Up Study within three (3) months after the Effective Date to allow for Pfizer’s access to data and information as required under this Agreement, to the extent not already provided for therein. (c) Other Development Work. Subject to Section 4.4(a), and except for those activities allocated to Sangamo in a Development Plan, Pfizer shall be responsible and shall have the sole authority over (subject to Section 8.1(a)) and control for all Development work, including all other clinical trials (including but not limited to Pivotal Trials), development of clinical assays and conduct of animal studies necessary or useful for conduct of Pivotal Trials, as necessary or 35 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. useful for seeking Marketing Approval for SB-525 and other Products, if any, in the Field in the Territory. (d) Development of New Products. For each Product other than SB-525, the JCRC shall prepare a new Development Plan to include the Development work for such Product and submit such new Development Plan to the JSC for review and approval; provided that no Development work may be assigned to Sangamo under the new Development Plan without Sangamo’s written consent. (e) [*]. Notwithstanding [*], Sangamo will [*] and Pfizer shall [*] in each case to the extent [*], including [*] or [*]. 4.5 Development Cost. Subject to the reimbursement of excess Development cost provisions set forth in Section 9.2, Sangamo shall be responsible for the costs and expenses it incurs in conducting the SB-525 Phase I/II Trial. Except for the costs and expenses of SB-525 Phase I/II Trial to be borne by Sangamo pursuant to Section 9.2, Pfizer shall be responsible for all costs and expenses of all Development of Products in the Field in the Territory. 4.6 Conduct of Development. Each Party shall conduct its Development work in good scientific manner and in compliance with all applicable Laws, including but not limited to cGMP, GLP and GCP, as well as regulations involving investigations of human subject in compliance with expected standards, as applicable. 4.7 Development Records. Each Party shall maintain, consistent with applicable Law, the requirements of Regulatory Authorities, and its then-current internal policies and practices, and cause its Affiliates, Sublicensees and subcontractors (including their respective employees) to maintain, records and laboratory notebooks of the Development work conducted by it for any Product, including all data and results of such Development work. Such records shall fully and properly reflect all work done and results achieved in the performance of such Development work in good scientific manner appropriate for regulatory and patent purposes. 4.8 Development Reports. Each Party shall keep the other Party reasonably informed as to the progress and results of its and its Affiliates’ and Sublicensees’ Development activities under this Agreement. Without limiting the foregoing, at each regularly scheduled JCRC meeting prior to the IND Transition Date, each Party shall provide the JCRC with a presentation and thereafter Pfizer shall provide a presentation summarizing the Development activities performed since the last JCRC meeting and the results thereof, and comparing such activities with the Development Plan(s) for such time period. Such presentations shall be at a level of detail reasonably requested by the JCRC and sufficient to enable each Party to determine the other Party’s compliance with its diligence obligations pursuant to Section 8.1. The Parties shall discuss the status, progress and results of each Party’s Development activities at the JCRC meetings, and each Party shall promptly respond to the JCRC’s reasonable questions or requests for additional information raised at the JCRC meetings relating to such Development activities. 4.9 Subcontractors. Each Party may engage subcontractors to perform Development work for Products under this Agreement, provided that Pfizer approves each Sangamo subcontractor in writing, such approval not to be unreasonably withheld, and provided that each 36 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. subcontractor set forth on Schedule 4.9 will be deemed approved by Pfizer, and each such subcontractor is bound by written obligations of confidentiality and non-use consistent with this Agreement and has agreed to assign to such Party (or exclusively license to such Party, with the right to grant sublicenses) all inventions or other intellectual properties made by such subcontractor in the course of performing such subcontracted work that specifically relate to the Products or their use, Manufacture or sale. Each Party shall remain responsible for providing oversight of subcontractors as well as remain responsible for any obligations that have been delegated or subcontracted to any subcontractor, and shall be responsible for the performance of its subcontractors. If any subcontractor engaged by Sangamo is in material breach of any of its responsibilities related to the performance of the subcontracted work for one or more Products under this Agreement, including, but not limited to, compliance with GxP, and fails to cure such material breach within the applicable cure period under the applicable agreement with the subcontractor, Pfizer may, at its sole discretion, require Sangamo to promptly terminate its agreement with said subcontractor (but only with respect to the work being performed in connection with a Product) and the Parties shall promptly and in good faith determine a transition plan for the Development of such Product(s). 4.10 Adverse Events and Safety Reporting. (a) Adverse Events. Sangamo will report to the JCRC on a [*] basis, in a format to be reasonably agreed by the Parties, all Adverse Events or other safety data, including all investigator safety letters or other safety information, in each case related to the SB-525 Phase I/II Trial or the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates) that Sangamo generates, receives or otherwise becomes aware of during the preceding [*], including reports received from a clinical research investigator, CRO or other Third Party, including any events that require reporting to any Regulatory Authority or any trial conduct events that may be related to study conduct or safety reporting that raise questions about safety to clinical trial subjects, that (i) Pfizer may be required to report to any Regulatory Authority in connection with its Development, Manufacturing or Commercialization of any Product or (ii) otherwise indicates or signals that any Product has or may have an unacceptable risk-benefit profile. Any new reports made to any Regulatory Authority since the last JCRC meeting shall be provided to the JCRC in advance of their next meeting. In addition to such quarterly reports, Sangamo will notify Pfizer within [*] after becoming aware of any of the following events related to the SB-525 Phase I/II Trial or the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent being conducted by or on behalf of Sangamo or its Affiliates), and will provide Pfizer with copies of any reports of such events submitted to any Regulatory Authority, within [*] of such submissions, including all related correspondence, promptly after submission or receipt thereof: (i) an unexpected suspected serious Adverse Event (SUSAR Event), (ii) [*], (iii) [*], and (iv) any special safety concern resulting in changes to any informed consent form. Within [*] after Sangamo provides Pfizer with such report, each Party’s medical monitors shall meet to discuss such report. The Parties will cooperate in connection with the transfer of such data, results and information to Pfizer. (b) Pharmacovigilance Agreement. In addition, upon Pfizer’s request, the Parties will enter into a separate pharmacovigilance agreement setting forth the responsibilities and procedures for collecting, sharing and reporting to applicable Regulatory Authorities from and after the IND Transition Date information regarding Adverse Events and other safety information
37 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. that is or may be associated with any Product, including so as to permit each Party to comply with Applicable Laws and the requirements of Regulatory Authorities (the “Pharmacovigilance Agreement”); provided that, for clarity, to the extent there is any conflict between the terms and conditions of the Pharmacovigilance Agreement and this Agreement with respect to the matters covered by such Pharmacovigilance Agreement, the Pharmacovigilance Agreement will govern and control. 4.11 Access to Information. Sangamo shall provide to Pfizer from time-to-time and at any time upon Pfizer’s request, all information relating to the SB-525 Phase I/II Trial and, to the extent conducted by or on behalf of Sangamo or its Affiliates, the SB-525 Phase I/II Long-Term Follow-Up Study. (a) Documentation and Access. Without limiting the foregoing, upon Pfizer’s request, Sangamo will promptly provide Pfizer with: (i) to the extent in Sangamo’s possession or control, access to, or copies of, the [*] for the SB-525 Phase I/II Trial; (ii) to the extent in Sangamo’s possession or control, access to, or copies of, information regarding [*], including [*] in connection with the conduct of the SB-525 Phase I/II Trial, the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent conducted by or on behalf of Sangamo or its Affiliates), and other supporting information, such that Pfizer may: (1) [*] in order to [*]; (2) [*]; and (3) [*] during the SB-525 Phase I/II Trial or the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent conducted by, on behalf of Sangamo or its Affiliates) conduct that could [*]; such information to include but not be limited to [*], and, for each of the foregoing, [*]; and (iii) reasonable access, during normal business hours (provided that reasonable advance notice is given to Sangamo) to Sangamo personnel which were or are involved in the use, discovery or development of the applicable Licensed Technology. (b) Audit. Sangamo will, and will cause its Affiliates to, and will use good faith efforts to cause its subcontractors, CMOs and CROs to, permit Pfizer to conduct relevant audits regarding Development and Manufacturing activities to ensure GxP compliance, and will use good faith efforts to procure access for Pfizer to any manufacturer (including for purposes of conducting any applicable GMP audits of any manufacturer of any Product), subcontractors, CMO, CRO, sponsor or clinical trial site (including, without limitation, source document review) involved in either the SB-525 Phase I/II Trial or the SB-525 Phase I/II Long-Term Follow-Up Study (to the extent conducted by or on behalf of Sangamo or its Affiliates), including any subcontractor facilities and any Third Party involved in any SB-525 Phase I/II Trial or SB-525 Phase I/II Long- 38 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Term Follow-Up Study (to the extent conducted by or on behalf of Sangamo or its Affiliates) conduct, data or sample analysis, so that Pfizer may conduct an audit (independently or as a co- auditor alongside Sangamo or Sangamo’s auditor(s)) regarding Development and Manufacturing activities to ensure GxP compliance; for example, upon [*], Pfizer may audit Sangamo’s CRO contracted to perform the SB-525 Phase I/II Trial [*] to confirm that the [*], including but not limited to [*]. All trial related documents (such as informed consent documents, clinical study agreements, other Third Party agreements, clinical trial applications, etc.) will include appropriate language to permit such audits or, to the extent any informed consent documents do not include such language as of the Effective Date, Sangamo shall use reasonable efforts to amend such documents to include such language within [*] after the Effective Date. Sangamo will notify Pfizer within [*] of Sangamo’s or its Affiliates actual or suspected knowledge of the occurrence of any quality event: (i) that [*]; and/or (ii) [*], including any [*]. Such notice shall be promptly followed by written details and a corrective and preventative action plan within [*]. Sangamo will provide or cause to provide Pfizer with prompt access to any and all audit reports and deviation documentation and responses to any findings contained therein as well as corrective and preventative action plan(s) to address each finding. (c) Data Sets. Upon Pfizer’s request, and without limiting the right for Pfizer to receive information under Section 2.10 or Section 6.3(b), Sangamo will, and will cause its Affiliates or Third Parties to, provide Pfizer with all information in Sangamo’s possession or control, and will procure access for Pfizer, to all data arising from the SB-525 Phase I/II Trial and SB-525 Phase I/II Long-Term Follow-Up Study (to the extent conducted by, on behalf of Sangamo or its Affiliates), including provision of the following to Pfizer by Sangamo: [*] (d) Test Data Transfer. Upon Pfizer’s request, Sangamo and any vendors participating in the trial who have any clinical trial data (such as CROs, central laboratories, other e-data vendors, etc.) will transfer a set of test data to Pfizer or Pfizer’s designee in advance of within ten (10) Business days before the date on which the a request has been submitted to the applicable Regulatory Authority for the first EOP2 Meeting in order for Pfizer to perform certain qualification to determine if (a) the transmission meets Pfizer requirements in content and process and (b) the data will load successfully into the target Pfizer database. Sangamo will reasonably cooperate with Pfizer if changes are needed in the data formatting or transmission process to ensure data quality and usability. Sangamo will transfer additional sets of test data if needed after such changes are made and again if there are any changes in the SB-525 Phase I/II Trial variables or data collection tools during the SB-525 Phase I/II Trial. A test data set will consist of complete dummy data for at least five (5) hypothetical or actual study subjects. 4.12 Materials. To facilitate the performance of activities under this Agreement, either Party may provide to the other Party certain biological materials or chemical compounds owned by or licensed to the supplying Party for use by the other Party (such materials or compounds and any progeny and derivatives thereof, collectively, “Materials”), including those materials to be provided by Sangamo to Pfizer as described in the Manufacturing Tech Transfer Plan. All such Materials shall remain the sole property of the supplying Party, shall be used by the receiving Party solely to perform its obligations or to exercise its rights under this Agreement and, shall not be used or delivered to or for the benefit of any Third Party without the prior written consent of the supplying Party, and shall not be used in research or testing involving human subjects, unless expressly agreed. The Materials supplied under this Section 4.12 are supplied “as is” and must be 39 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. used with prudence and appropriate caution in any experimental work, since not all of their characteristics may be known. ARTICLE 5 REGULATORY 5.1 General. Subject to the terms and conditions of this Agreement and as outlined in this Article 5 below, the Parties shall collaborate with respect to the regulatory activities related to Products under the direction of the JCRC and pursuant to the Development Plans. 5.2 Regulatory Responsibilities. Pfizer shall be solely responsible for all regulatory activities for SB-525 and other Products outside the U.S., as Sangamo’s authorized agent or representative to the ex-US Regulatory Authority. Prior to the Effective Date, Sangamo filed an IND for SB-525. Sangamo shall retain ownership of the IND for SB-525, and shall be responsible for all regulatory activities for SB-525 in the U.S., in each case through the IND Transition Date, which will not occur prior to completion of the last to occur of the EOP2 Meetings, for clarity with both the FDA and EMA. Within [*] after Pfizer’s written request, such request to be made at any time during the period between [*], Sangamo shall transfer the IND for SB-525 to Pfizer, and thereafter Pfizer shall be solely responsible for all regulatory activities for SB-525 in the Territory (including conduct of the Pivotal Trial for SB-525 and the preparation and filing of the SB-525 BLAs) at Pfizer’s own cost and expense (the date of such IND transfer, the “IND Transition Date”). Upon the IND Transition Date, Pfizer shall assume all responsibilities for the SB-525 Phase I/II Trial and SB-525 Phase I/II Long-Term Follow-Up Study, including all obligations under agreements with clinical trial sites, CROs and other service providers; the Parties shall cooperate to ensure a smooth transition of such responsibilities and to assign or otherwise transfer to Pfizer all such agreements. If any Additional Product is included as a Product under this Agreement pursuant to Section 4.3, the JCRC shall allocate regulatory responsibilities for such Product consistent with the allocation of Development work in the updated or amended Development Plan; provided that no regulatory work for such Product may be assigned to Sangamo without Sangamo’s written consent. Pfizer will own all BLAs, Marketing Approvals, and Pricing Approvals for any Product. 5.3 Cooperation. Each Party shall cooperate reasonably with the other Party with respect to key regulatory activities relating to any Product, shall provide the other Party with all reasonable assistance in the preparation of Regulatory Materials for any Product, and, through JCRC meetings, shall keep the other Party reasonably and timely informed of the status of its preparation and submission of Regulatory Materials for any Product and provide the JCRC with a summary of the outcome of the Regulatory Authorities’ review of such Regulatory Materials. Each Party shall consult with the other Party through the JCRC regarding regulatory matters pertaining to any Product. Prior to the IND Transition Date, the Parties shall work jointly in preparation of key Regulatory Materials for planned interactions and each Party shall have the right to review and comment on drafts of such Regulatory Materials, provided that such review and comment shall not delay the submission of any Regulatory Materials. After the IND Transition Date, the Parties shall work through the JSC/JCRC for information exchange and understanding of Regulatory Materials and outcomes. 40 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 5.4 Meetings with Regulatory Authorities Prior to IND Transfer. At each regularly scheduled JCRC meeting before the IND Transition Date, each Party shall provide the other Party with a list and schedule of any in-person meeting or teleconference with any Regulatory Authority (or related advisory committees) planned and written outcomes from any such meetings previously conducted. In addition, each Party shall notify the other Party as soon as reasonably possible if such Party becomes aware of any additional such meetings or teleconferences that become scheduled prior to the next JCRC meeting. The other Party shall have the right, but not the obligation, to provide input in preparation of materials for all such meetings and teleconferences and the right, but not the obligation, to have its representatives attend (but, unless otherwise requested by such Party, not participate in) such meetings and teleconferences. 5.5 End of Phase II Meetings. Following the demonstration of Clinical Efficacy or earlier as determined by the JSC, the Parties will arrange for end-of-phase 2 meetings (as described in 21 CFR 312.47(b) or equivalent foreign regulations) with each of the FDA and EMA (each, an “EOP2 Meeting”). The objective of each EOP2 Meeting will be to discuss and confirm the clinical or CMC plans for the further Development of SB-525. The Parties shall jointly prepare for each EOP2 Meeting relating to SB-525, including (a) formulating the plan for the further Development of SB-525 and the regulatory strategy and pathway to obtain Marketing Approval for SB-525; and (b) the review of any jointly-prepared correspondences and filings with the Regulatory Authorities in connection with such EOP2 Meeting. Notwithstanding the foregoing, Pfizer (if necessary, due to Sangamo being the sponsor under the IND at such time, as Sangamo’s authorized representative or agent) shall be solely responsible for the conduct of all EOP2 Meetings, provided, however, that a reasonable number of representatives of both Parties shall participate in the EOP2 Meetings for SB-525. 5.6 Inspections. Each Party shall allow the Regulatory Authorities having jurisdiction or any other group with a legal or contractual interest in the study (such as IRBs, vendors or CROs) to conduct inspections of such Party, its Affiliates, Sublicensees or subcontractors (including clinical trial sites) relating to the Manufacture and Development work performed by or on behalf of such Party under this Agreement, and shall ensure that such Affiliates, Sublicensees and subcontractors permit such inspections, including, without limitation, Sangamo’s subcontractor PSI. In addition, during the SB-525 Phase I/II Trial prior to the IND Transition Date, Sangamo shall (i) permit Pfizer to conduct a GCP pre-inspection of Sangamo, its Affiliates, Sublicensees, and subcontractors (as contractually permitted), and (ii) promptly notify Pfizer of any inspection or action of which it becomes aware and shall provide Pfizer with copies of all materials, correspondence, statements, forms and records received or generated pursuant to any such inspection; and Pfizer shall have the right to be present at any such inspections and shall have the opportunity to provide, review, and comment on any responses that may be required, in each case to the extent permitted under applicable Law and the terms of Sangamo’s agreement with the applicable Third Party. 5.7 Product Recalls. In the event that any Regulatory Authority issues or requests a recall or takes similar action in connection with any Product, or in the event a Party reasonably believes that an event, incident or circumstance has occurred that may result in the need for a voluntary or mandatory recall, market withdrawal or other corrective action regarding any Product, such Party shall promptly advise the other Party thereof by telephone or facsimile. Pfizer shall decide and have control over whether to conduct a recall or market withdrawal (except in the event
41 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. of a recall or market withdrawal mandated by applicable Laws or Regulatory Authority, in which case it shall be required) or to take other corrective action in any country and the manner in which any such recall, market withdrawal or corrective action shall be conducted, and Pfizer shall be solely responsible for the costs and expenses of such recall, market withdrawal or corrective action; provided that Pfizer shall notify Sangamo prior to making any public disclosure of the recall, market withdrawal or corrective action and shall keep Sangamo regularly informed regarding any such recall, market withdrawal or corrective action. ARTICLE 6 MANUFACTURE AND SUPPLY 6.1 General. The Manufacture and supply of each Product shall be overseen and coordinated by the JMC. Each Party shall keep the JMC reasonably informed on the Manufacture activities (including Manufacture process development) performed by such Party under this Agreement and the Parties shall review and discuss Manufacture- and supply-related issues at JMC meetings. Each Party shall have the opportunity to provide input regarding the Manufacture and supply of Products at the JMC meetings. 6.2 Sangamo Manufacture Activities. (a) As between the Parties, Sangamo shall, either by itself or through a contract manufacturer (“CMO”), be responsible for the Manufacture and supply of SB-525 for use in the SB-525 Phase I/II Trial, including stability and QC/QA testing, product release and distribution and other ancillary Manufacture activities relating to such SB-525 supply. Additionally, Sangamo shall be responsible for contracting with and overseeing a CMO to conduct manufacturing process development activities in preparation for the manufacture of SB-525 for use in the Pivotal Trial to be conducted in accordance with the form of statement of work attached hereto as Exhibit H. The Parties acknowledge and agree (i) that, as of the Effective Date, [*], (ii) that, [*], and (iii) that [*], provided that [*] to the extent that (x) [*] or as otherwise agreed to by the Parties [*], (y) [*] after the Effective Date, [*] or (z) [*] or otherwise [*] and [*]. (b) Upon Pfizer’s reasonable request, Pfizer may participate and provide reasonable assistance in Sangamo’s (and its CMO’s) Manufacture and supply of SB-525 for the SB-525 Phase I/II Trial; (c) Subject to the reimbursement of excess cost as set forth in Section 9.2, Sangamo shall be responsible for the cost and expenses it incurs in performing the activities set forth in Sections 6.2(a) above (“Sangamo Manufacture Activities”). 6.3 Pfizer Manufacture Activities. (a) As between the Parties, except for the SB-525 supply for SB-525 Phase I/II Trial and process development activities under Section 6.2(a), Pfizer shall, either itself or through a CMO (which may be, in Pfizer’s sole discretion, Sangamo’s CMO for SB-525), be responsible for the Manufacture and supply of Products for all Development and Commercialization use, including process development, scale up, stability and QC/QA testing, development of assays for QC/QA and release, product release and distribution and other ancillary Manufacture activities, all at Pfizer’s own cost and expense. Notwithstanding anything to the contrary in this Agreement, 42 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Pfizer shall have no obligation to apply any particular Pfizer Know-How, Pfizer Patent Right or other technology owned by Pfizer or which Pfizer has the right to use in connection with the Manufacture of any Product hereunder or in the development of any process for the Manufacture of any Product hereunder. (b) To the extent any Licensed Know-How that is being used by Sangamo (or its CMO) in the Manufacture of SB-525 as of the Effective Date is in Sangamo’s (or its CMO’s) possession, Sangamo shall (either directly by itself or through its CMO) make such Licensed Know-How available to Pfizer. Upon Pfizer’s reasonable request, Sangamo shall provide Pfizer (or at additional cost, its CMO, if not Sangamo’s CMO for SB-525) with reasonable technical assistance and information, which shall include the provision of technical assistance and information identified in Exhibit F (Manufacturing Tech Transfer Plan), to enable Pfizer (or its CMO) to understand and utilize such Licensed Know-How in the Manufacture of SB-525. The Parties shall cooperate to ensure a smooth and orderly transition hereunder (c) Pfizer shall keep Sangamo informed on its Manufacture and supply of the Products, including updates and disclosure of Know-How in Pfizer Manufacturing Technology during each JMC meeting, and at each such JMC meeting Pfizer shall provide Sangamo with copies of all reports (including study reports) provided to Pfizer by its CMO(s) relating to the Manufacture and supply of the Products; provided that during the [*] period after the JMC is disbanded upon First Commercial Sale, Pfizer shall provide all such updates on a [*] basis, disclosures and reports directly to Sangamo. Pfizer shall also provide Sangamo with reasonable opportunity to observe (at Sangamo’s discretion and sole cost) Pfizer’s manufacturing team and/or Pfizer’s CMO(s) performing Manufacturing activities, including process development, QC/QA and release assay development, scale up and the preparation of manufacture related Regulatory Materials. All information disclosed to or otherwise obtained by Sangamo pursuant to this Section 6.3(c) shall be deemed to be Pfizer’s Confidential Information, provided, however, that, without expanding the rights granted to Sangamo under Section 2.2(a)(ii), Sangamo shall have the right to use such information in making decisions about manufacturing processes that Sangamo wishes to use for the manufacture of Sangamo’s other products. ARTICLE 7 COMMERCIALIZATION 7.1 General. Subject to the terms and conditions of this Agreement, Pfizer shall be solely responsible, at its sole cost and expense, for the Commercialization of Products in the Field throughout the Territory, including: (a) developing and executing a commercial launch and pre- launch plan for each Product; (b) negotiating with applicable Governmental Authorities regarding the price and reimbursement status of each Product; (c) marketing and promotion of Products; (d) booking sales and distribution of Products and performance of related services; (e) handling all aspects of Product order processing, invoicing and collection, inventory and receivables; (f) providing customer support for Products, including handling medical queries and performing other related functions; and (g) ensuring its practices and procedures relating to the marketing and promotion of the Products comply with applicable Laws. 7.2 Commercialization Plan and Reports. At least [*] prior to Pfizer’s anticipated First Commercial Sale of a Product anywhere in the Territory, and on an [*] thereafter, Pfizer shall 43 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. provide Sangamo with a [*]. After First Commercial Sale, Pfizer shall update Sangamo [*] regarding its Commercialization activities with respect to Products. Each such update shall be in a form to be agreed by the Parties and shall summarize Pfizer’s, its Affiliates’ and its Sublicensees’ major Commercialization activities with respect to Products, covering subject matter at a level of detail reasonably required and sufficient to enable Sangamo to verify Pfizer’s compliance with its diligence obligations under Section 8.2. 7.3 Trademarks. Pfizer shall have the right to brand Products using Trademarks it determines appropriate, which may vary by country or within a country. Pfizer shall own all rights in such Trademarks and shall register and maintain such Trademarks in the countries and regions that it determines reasonably necessary, at Pfizer’s cost and expense. In addition to such Trademarks, where permitted by applicable Laws, Pfizer shall include Sangamo’s logo and relevant Trademarks on all Product labels, packages, inserts and marketing materials to indicate that the Products are licensed from Sangamo and shall use its Commercially Reasonable Efforts to obtain any required approvals from the relevant Governmental Authorities to include such logo and Trademarks on the foregoing. Notwithstanding the foregoing, in the event there is a Change of Control of Sangamo, the previous sentence shall no longer apply. ARTICLE 8 DILIGENCE 8.1 Development Diligence. (a) Pfizer. (i) Pfizer shall use Commercially Reasonable Efforts to Develop, seek Marketing Approval, and where necessary, Pricing Approval for [*]; provided that should Pfizer terminate this Agreement pursuant to Section 12.2(a) with respect to (A) [*], then in lieu of using Commercially Reasonable Efforts in the U.S., Pfizer shall use Commercially Reasonable Efforts to Develop, seek Marketing Approval, and where necessary, Pricing Approval for [*] in one non-terminated country in [*], (B) [*], then in lieu of using Commercially Reasonable Efforts in [*] in one non- terminated country in [*], or (C) [*], then in lieu of using Commercially Reasonable Efforts in the [*], Pfizer shall use Commercially Reasonable Efforts to Develop, seek Marketing Approval, and where necessary, Pricing Approval for [*] in one non- terminated country in [*]. (ii) Should Pfizer terminate this Agreement with respect to SB-525 in [*] pursuant to Section 12.2(a), then in lieu of using Commercially Reasonable Efforts with respect to [*], Pfizer shall use Commercially Reasonable Efforts to Develop, seek Marketing Approval, and where necessary, Pricing Approval for [*] in [*], provided that should Pfizer subsequently terminate this Agreement with respect to [*] in [*] pursuant to Section 12.2(a), the terms of Section 8.1(a)(i) will apply to [*]. (iii) Pfizer will have diligence obligations with respect to the Development of Additional Products and seeking Marketing Approval for [*]. 44 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (iv) Pfizer will [*] the Development diligence obligations set forth in, or directly referenced in, subsections (i)-(iii) above. (b) Sangamo. Sangamo shall use Commercially Reasonable Efforts to complete the SB-525 Phase I/II Trial and Sangamo Manufacturing Activities in accordance with the Development Plan. For clarity, Sangamo shall [*]. 8.2 Commercial Diligence. Pfizer shall use Commercially Reasonable Efforts to Commercialize each Product [*] in which it receives Marketing Approval, provided that should Pfizer terminate this Agreement pursuant to Section 12.2(a) with respect to a Product in [*], then Pfizer shall use Commercially Reasonable Efforts to Commercialize such Product in [*]. [*] diligence obligations with respect to the Commercialization of Products under this Agreement. 8.3 Exceptions to Diligence Obligations. Notwithstanding any provisions of this Agreement to the contrary, Pfizer will be relieved of its Pfizer Diligence Obligations to the extent that Sangamo failed to fulfill its Development or other obligations (including, but not limited to, technology transfer pursuant to Section 2.10 or Section 6.3(b)) under the Agreement and such failure prevents Pfizer from fulfilling such Pfizer Diligence Obligations. 8.4 [*] Pfizer Diligence Obligations. Without in any way [*] obligations under this Agreement, [*] described in Section [*] Pfizer Diligence Obligations under this Agreement with respect to activities that are [*]. For the avoidance of doubt, the provisions of this Section 8.4 are intended only [*]. [*] the Pfizer Diligence Obligations [*] set forth in this Section 8.4, above, provided that Pfizer [*]. 8.5 Assertion of Pfizer Diligence Obligation Claims. If Sangamo becomes aware of facts that form a reasonable basis to allege that Pfizer has failed to meet any Pfizer Diligence Obligation, then Sangamo will promptly notify Pfizer in writing of such potential alleged performance failure (each such potential alleged performance failure, a “Diligence Issue”). Promptly upon Pfizer’s receipt of any notice of a Diligence Issue pursuant to this Section 8.5, the Pfizer Alliance Manager will contact the Sangamo Alliance Manager to discuss the specific nature of such Diligence Issue and seek to identify an appropriate corrective course of action. If, no later than [*] days after Pfizer’s receipt of such a notice, (a) the Parties have not reached consensus regarding whether Pfizer has failed to satisfy its obligations pursuant to Section 8.1(a) or Section 8.2 and (b) the Parties’ respective Alliance Managers have not agreed upon an appropriate corrective course of action for such Diligence Issue, then at Sangamo’s request such Diligence Issue will be escalated and resolved pursuant to the dispute resolution provisions set forth in Section 16.6. If Sangamo fails to notify Pfizer of a Diligence Issue pursuant to this Section 8.5 within [*] days after the date that Sangamo first discovers such Diligence Issue, then [*] with respect to such Diligence Issue. 8.6 Remedies for Breach of Pfizer Diligence Obligations. If Pfizer materially breaches any Pfizer Diligence Obligation and fails to remedy such breach in accordance with Section 12.2(b), then Sangamo may, in its sole discretion, elect to either (a) terminate this Agreement pursuant to the provisions of Section 12.2(b) on a Product-by-Product and country-by- country basis, but only in the country in the Territory in which the material breach occurred or (b) convert any exclusive license or sublicense granted to Pfizer under this Agreement with respect to
45 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. a Product in a given country in the Territory into a non-exclusive license or sublicense, as applicable; provided that upon any such termination, Pfizer shall have the diligence obligations set forth in Sections 8.1(a) and 8.2 as if Pfizer had terminated this Agreement with respect to the applicable Product and country(ies) except that if [*], Pfizer shall [*] by notice to Sangamo within [*] after the effectiveness of such termination. 8.7 Performance by Pfizer’s Affiliates or Sublicensees. For avoidance of doubt, any actions taken by Pfizer’s Affiliates or Sublicensees (or their respective subcontractors) under this Agreement shall be treated as actions taken by Pfizer in regard to satisfaction of the requirements of this Article 8. 8.8 Other Pfizer Programs. Sangamo understands and acknowledges that Pfizer may have present or future initiatives or opportunities, including initiatives or opportunities with its Affiliates or Third Parties, involving products, programs, technologies or processes that are similar to, and in some instances may compete with, a Product, program, technology or process covered by this Agreement. Sangamo acknowledges and agrees that except for Section 2.5 (which prohibits the Parties from pursuing Competing Programs during the Exclusivity Period), nothing in this Agreement will be construed as a representation, warranty, covenant or inference that Pfizer will not itself Develop, Manufacture or Commercialize or enter into business relationships with one or more of its Affiliates or Third Parties to develop, Manufacture or Commercialize products, programs, technologies or processes that are similar to or that may compete with any Product, program, technology or process covered by this Agreement, provided that, for clarity, Pfizer will not use Sangamo’s Confidential Information in breach of this Agreement, including in the course of or to further the development, Manufacture or Commercialization of any products, programs, technologies or processes that are similar to or that may compete with any Product. ARTICLE 9 FINANCIAL PROVISIONS 9.1 Upfront Payment. Within [*] Business Days after the Effective Date, Pfizer shall pay to Sangamo a one-time, non-refundable, non-creditable upfront payment of [*]; provided, however, that the Parties hereby acknowledge that [*] of said [*] shall be [*] subject to the instructions set forth in Section 4 of Exhibit G. Pfizer shall [*]. 9.2 Reimbursement of Sangamo Costs. (a) Sangamo shall keep Pfizer reasonably informed of (i) the costs (both internal and external (including Third Party processing charges associated with external costs, such as procurement and accounts payable expenses)) that Sangamo incurs or has incurred, after [*] and prior to the IND Transition Date, with respect to the SB-525 Phase I/II Clinical Trial or other non- manufacturing activities allocated to Sangamo under the SB-525 Development Plan, in each case that are within the budget therefor set forth in the SB-525 Development Plan and (ii) Manufacturing Costs that Sangamo incurs or has incurred after [*] with respect to performing Sangamo Manufacture Activities that are within the budget therefor set forth in the Development Plan (both (i) and (ii), “Sangamo Initial Costs”). All internal Sangamo Initial Costs shall be calculated at the then applicable FTE Rate. 46 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (b) Pfizer shall reimburse Sangamo for Sangamo Initial Costs as follows: (i) Once Sangamo has incurred Sangamo Initial Costs equal to [*] Dollars ($[*], the “Cap”), if such costs include at least [*] of internal Sangamo Initial Costs, then Pfizer will reimburse Sangamo for [*] of all additional external Sangamo Initial Costs and [*] of all additional internal Sangamo Initial Costs; (ii) Once Sangamo has incurred Sangamo Initial Costs equal to the Cap, if the portion of such costs that are internal Sangamo Initial Costs is less than [*], then Pfizer will reimburse Sangamo for [*] of all additional internal and external Sangamo Initial Costs until Sangamo has incurred [*] of internal Sangamo Initial Costs, after which Pfizer will reimburse Sangamo as provided in (i) above. (iii) Once Sangamo has incurred internal Sangamo Initial Costs equal to [*], if Sangamo’s total internal and external Sangamo Initial Costs have not yet reached the Cap, then (A) Sangamo will pay [*] of all additional internal Sangamo Initial Costs, with [*] of such additional internal Sangamo Initial Costs being applied toward the Cap, (B) [*] of all additional external Sangamo Initial Costs will be applied to the Cap, and (C) once the Cap is reached, Pfizer will reimburse as provided in (i) above. For clarity, Pfizer will not reimburse Sangamo Initial Costs until (a) Sangamo has incurred Sangamo Initial Costs above the Cap or (b) Sangamo has incurred [*] of internal Sangamo Initial Costs, whichever happens first. (c) If the Development Plan is modified after the Effective Date, then (i) all internal and external costs that Sangamo incurs to the extent they are on account of such modification of the Development Plan will be considered “Modified Sangamo Costs”, (ii) all Modified Sangamo Costs will count towards the Cap (if it has not yet been reached) as if they were Sangamo Initial Costs, and (iii) notwithstanding the limitations on reimbursement of internal Sangamo Initial Costs set forth in Section 9.2(b), Pfizer will fully reimburse Sangamo for all Modified Sangamo Costs incurred after the Cap has been met. (d) Within [*] days after the end of each Pfizer Quarter during which Sangamo has conducted any Development work for the SB-525 Phase I/II Clinical Trial and/or any Sangamo Manufacture Activities, Sangamo shall provide Pfizer with (i) a reasonably detailed report setting forth the Sangamo Initial Costs and Modified Sangamo Costs that Sangamo incurred during such Pfizer Quarter, said report to include reasonable supporting documentation evidencing the incurrence of expenses covered by such invoice and (ii) an invoice for the amount of such Sangamo Initial Costs and Modified Sangamo Costs for which Pfizer is obligated to reimburse Sangamo pursuant to Section 9.2(b) or 9.2(c). Pfizer shall pay such invoiced amount within [*] days of receipt. In addition, within [*] Business Days following the start of each Pfizer Quarter, Sangamo will use reasonable efforts to provide Pfizer with a good faith, non-binding estimate of the Sangamo Initial Costs and Modified Sangamo Costs to accrue for the Pfizer Quarter. 9.3 Intentionally Omitted 47 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 9.4 Development Milestone Payments. (a) Development Milestones. Subject to the remainder of this Section 9.4, Pfizer shall pay to Sangamo the non-refundable, non-creditable payments set forth in the table below upon the first occurrence of the applicable event listed below for [*] Products (whether SB- 525 or other Product) to achieve such event (whether by Sangamo or its Affiliates for Milestone Event #1 for SB-525 or by Pfizer and its respective Affiliates or Sublicensees for all other Milestone Events): Milestone Event Milestone Payment for SB-525 Milestone Payment for Products other than SB-525 [*] [*] [*] (i) For milestone #7, “[*]” means that, at the time in question, the applicable Product [*]; such milestone shall be paid [*]. For clarity, [*] the applicable Product [*] For example, [*]. (ii) The clinical Milestone Events set forth above (i.e., Milestone Events #[*]) shall be deemed achieved and the corresponding Milestone Payments payable, if not already achieved and paid, upon the achievement of any Milestone Event with a higher number. Milestone Events for [*] (i.e., Milestone Events #[*]) shall be deemed achieved and the corresponding milestone payments payable, if not already achieved and paid, upon the achievement of the [*] in the corresponding country or territory (i.e., milestone event #[*], as applicable). Without limiting the foregoing, the Milestone Event #[*] shall be paid no later than the due date for the Milestone Event #[*]. (iii) Each of the Milestone Payments #[*] set forth above shall be payable either (A) [*] or (B) [*], except that Milestone Payment #[*], and Milestone Payment #[*]. If the [*], and if [*] achieves a Milestone Event that [*] and for which [*], then [*] on account of the achievement of such Milestone Event [*]. (iv) The maximum amount payable under this Section 9.4 is (A) for SB-525, two hundred ninety five million Dollars ($295,000,000), (B) for a Product which is not SB-525, one hundred seventy-five million Dollars ($175,000,000) ([*] if [*]) and (C) for all Products, four hundred seventy million Dollars ($470,000,000). (b) Notice and Payment. The Party that achieves any milestone event set forth in Section 9.4(a) shall notify the other Party in writing within [*] Business Days after the achievement of any Milestone Event, and Pfizer shall pay to Sangamo the applicable Milestone Payment within [*] days after receipt from Sangamo of a proper invoice pursuant to Section 9.7 for such Milestone Event. If Sangamo believes any Milestone Event has occurred and has not received a written notice of same from Pfizer, it may so notify Pfizer in writing and invoice Pfizer for the corresponding Milestone Payment, and in that case shall provide to Pfizer documentation 48 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. or other information that supports its belief. Any dispute under this Section 9.4 that relates to whether or not a Milestone Event has occurred shall be resolved in accordance with Section 16.6. 9.5 Royalty Payments. (a) Royalty Rates. Subject to the remainder of this Section 9.5, Pfizer shall pay Sangamo non-refundable, non-creditable (subject to any refund of overpaid amounts pursuant to Section 9.9) royalties on a tiered marginal royalty rate basis as set forth below (the “Marginal Royalty Rates”) based on the annual aggregate Territory-wide Net Sales of each Product, on a Product-by-Product basis, during each Pfizer Year of the applicable Royalty Term for each Product. For the Portion of Annual Net Sales of each Product in the Territory Marginal Royalty Rate Less than or equal to: $[*] 14% Greater than: $[*] but less than or equal to: $[*] [*]% Greater than $[*] 20% Each Marginal Royalty Rate set forth in the table above will apply only to that portion of the Net Sales of a given Product in the Territory during a given Pfizer Year that falls within the indicated range. An example calculation of royalties under this Section 9.5(a) is set forth below. By way of example only, if (i) Pfizer, its Affiliates or its Sublicensees sell two Products in the Territory during a given Pfizer Year, (ii) Net Sales of the first Product in the Territory during such Pfizer Year are $[*] and (iii) Net Sales of the second Product in the Territory during such Pfizer Year are $[*], then the royalties payable by Pfizer under this Section 9.5(a) during such Pfizer Year would be calculated as follows: Royalty for first Product [*] Royalty for second Product [*] Total royalty payable for applicable Pfizer Year [*] (b) Royalty Term. Pfizer’s royalty payment obligations under Section 9.5(a) shall expire, on a Product-by-Product and country-by-country basis, upon the latest of: (i) the expiration of the period during which the Manufacture, approved use, sale, offer for sale or importation of such Product in such country would absent a license or ownership interest, infringe a Valid Claim in the Licensed Technology in such country (considering Valid Claims of pending patent applications to be issued with the then-pending claims); (ii) the expiration of all Regulatory Exclusivity for such Product in such country; and (iii) [*] years after the First Commercial Sale of
49 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. such Product in any country (the “Royalty Term”). For the avoidance of doubt, the Royalty Term for a given Product in a given country in the Territory (A) will not begin until the First Commercial Sale of such Product in such country and (B) if not previously expired, will expire immediately upon termination of this Agreement. (c) Fully Paid-Up, Royalty Free License. Following expiration of the Royalty Term for any Product in a given country, no further royalties will be payable in respect of sales of such Product in such country and, thereafter the license granted to Pfizer under Section 2.1(a)(i) with respect to such Product in such country will automatically become fully paid-up, perpetual, irrevocable and royalty-free. (d) Royalty Reductions. The following adjustments will be made, on a Product-by-Product and country-by-country basis, to the royalties payable pursuant to Section 9.5(a). (i) Biosimilar Entry. For any Pfizer Quarter in the applicable Royalty Term for a Product in a country in the Territory during which (1) a Biosimilar Product with respect to such Product is being sold in such country; and (2) the unit volume of such Biosimilar Product sold in such country in such Pfizer Quarter exceeds [*] of the combined unit volume of such Product and such Biosimilar Product sold in such country in such Pfizer Quarter, subject to Section 9.5(d)(vi), the royalties payable on Net Sales of such Product in such country in such Pfizer Quarter would be reduced by [*] of the amounts of royalties otherwise payable on such Net Sales pursuant to Section 9.5(a) for the remainder of the applicable Royalty Term, such reduction to be prorated appropriately in aggregate for the then-current Pfizer Quarter. The unit volume of the Product and Biosimilar Product shall be calculated using a mutually acceptable method and using market share data provided by a reputable and mutually agreed upon provider, such as QuintilesIMS Health. (ii) Third Party Patents. If Pfizer obtains a license from a Third Party to any Patent Right (other than a Specified Patent) owned by such Third Party in order to Manufacture or Commercialize any Product in a country in the Territory without infringing such Patent Right, whether directly or through any Pfizer Affiliate or Sublicensee, then, subject to Section 9.5(d)(vi), Pfizer shall have the right to deduct, from the royalty payment that would otherwise have been due pursuant to Section 9.5(a) with respect to Net Sales of such Product in such country in a particular Pfizer Quarter, an amount equal to [*] of the royalties paid by Pfizer to such Third Party pursuant to such license on account of the sale of such Product in such country during such Pfizer Quarter, such reduction to continue with any amounts not deducted carried over to future Pfizer Quarters until all such amounts have been expended. (iii) Expiry of Certain Valid Claim Coverage. If with respect to any particular Product in any particular country in the Territory, the Royalty Term for such Product in such country extends beyond the date on which there is no Valid Claim Covering such Product with respect to its sale, offer for sale or importation in such country, then, subject to Section 9.5(d)(vi), the royalties payable on Net Sales of such Product in such country shall be reduced by [*] for each Pfizer Quarter for the 50 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. remainder of the applicable Royalty Term. (iv) No Adjustment for Certain Sangamo Third Party Agreements. Sangamo will be solely responsible for (i) all obligations (including any royalty or other obligations that relate to the Licensed Technology) under the Current Licenses and under the Exclusive Upstream Licenses and (ii) all payments to inventors of Licensed Technology, including payments under inventorship compensation Laws and (iii) all obligations, including but not limited to financial obligations, under any agreement between Sangamo and [*], which is identified in Exhibit I, related to [*]. (v) Existing Pfizer Third Party Agreements. Pfizer will be solely responsible for all obligations (including royalty obligations) that relate to Products under its agreements with Third Parties that are in effect on or prior to the Effective Date. (vi) Notwithstanding the foregoing, during any Pfizer Quarter in the Royalty Term for a Product in a country in the Territory, the operation of Sections 9.5(d)(i), (ii) or (iii) individually or in combination shall not reduce by more than [*] the royalties that would otherwise have been due under Section 9.5(a) with respect to Net Sales of such Product in such country during such Pfizer Quarter. (e) Reports and Payment. (i) Cumulative Royalties. The obligation to pay royalties under this Agreement will be imposed only once with respect to any sale of any Product. (ii) Royalty Statements and Payments. Within [*] days after the end of each Pfizer Quarter during the Royalty Term, Pfizer shall provide Sangamo with a report that contains the following information for the applicable Pfizer Quarter, on a Product-by-Product and country-by-country basis: (1) the amount of gross sales of each Product, (2) an itemized calculation of Net Sales showing deductions provided for in the definition of “Net Sales,” (3) a calculation of the royalty due on such sales, including any reduction made in accordance with Section 9.5(d), and (4) the exchange rate for such country. No such reports will be due for any Product (A) before the First Commercial Sale of such Product or (B) after the Royalty Term for such Product has expired in all countries in the Territory. Pfizer shall pay in Dollars all royalty payments due to Sangamo for such Pfizer Quarter concurrently with the delivery of the royalty report or within [*] days after the end of each Pfizer Quarter, whichever is sooner, provided that to the extent any royalties are payable by Pfizer hereunder on Net Sales of a Product in a country [*] that is [*], such royalties payable by Pfizer shall be [*] and [*]. 9.6 Currency; Late Payments. All amounts payable and calculations under this Agreement will be in Dollars. As applicable, Net Sales and any royalty deductions in local currencies will be translated into Dollars in a manner consistent with Pfizer’s normal practices used to prepared its audited financial statements for public financial accounting purposes. If Sangamo does not receive payment of any sum due to it on the date due until [*] days past such 51 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. date, interest shall accrue on the sum due from the due date until the date of payment at the rate equal to [*] rate effective for the date that payment was due, as reported by the Wall Street Journal (New York Edition). Such interest shall be computed on the basis of [*] for the actual number of days payment is delinquent. 9.7 Invoicing; Method of Payment. Invoices must include the appropriate Pfizer Purchase Order (PO) number (provided that such PO number is provided to Sangamo by Pfizer within [*] days after the Effective Date or within [*] days before any payment is due), reference to the Agreement and type of payment due, itemized description of work completed (if applicable), amount owed and name and address to which the payment is to be sent. All invoices shall be clearly marked “INVOICE” and delivered by email to apinvoices@pfizer.com. Should Pfizer dispute in good faith the nature or basis of any charges contained in any invoice submitted by Sangamo hereunder, Pfizer shall promptly provide written notice to Sangamo setting forth the reason for the dispute, which the Parties shall attempt to resolve in good faith in accordance with Section 16.6. Payment by Pfizer shall not result in a waiver of any of its rights under this Agreement. Each payment hereunder shall be made by electronic transfer in immediately available funds via either back wire transfer, an ACH (automated clearing house) mechanism or any other means of electronic funds transfer, at Pfizer’s election, to the bank account as set forth below or as designated by Sangamo in writing to Pfizer at least [*] days before the payment is due: Bank Name: [*] Beneficiary Account Number: [*] Beneficiary Account Name: Sangamo Therapeutics, Inc. International SWIFT BIC: [*] ABA/Routing Number: [*] 9.8 VAT; Withholding Taxes; Tax Cooperation. (a) VAT. It is understood and agreed between the Parties that any payments made under this Agreement are exclusive of any value added or similar tax (VAT), which shall be added thereon as applicable. Where VAT is properly added to a payment made under this Agreement, the Party making the payment will pay the amount of VAT only on receipt of a valid tax invoice issued in accordance with the laws and regulations of the country in which the VAT tax is chargeable. (b) Withholding Taxes. Subject to Section 9.8(d) below, in the event any payments made pursuant to this Agreement become subject to withholding taxes under the laws or regulation of any jurisdiction, the Party making such payment shall deduct and withhold the amount of such taxes for the account of the payee to the extent required by applicable laws or regulations and such amounts payable to the payee shall be reduced by the amount of taxes deducted and withheld. Any such withholding taxes required under applicable laws or regulations to be paid or withheld shall be an expense of, and borne solely by, the payee. (c) Tax Cooperation. To the extent that the Party making a payment is required to deduct and withhold taxes on any payments under this Agreement, the Party making such payment shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to the payee an official tax certificate or other evidence of such 52 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. withholding sufficient to enable the payee to claim such payments of taxes. The payee shall provide any tax forms to the Party making such payment that may be reasonably necessary in order for such Party not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. The payee shall use reasonable efforts to provide any such tax forms to the Party making the payment at least [*] days prior to the due date for any payments for which the payee desires that the Party making the payment apply a reduced withholding rate. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by Law, of withholding taxes, VAT, or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or VAT. (d) Notwithstanding anything in this Agreement to the contrary, (i) if an action (including but not limited to any assignment (including pursuant to Section 16.2), any direction by Pfizer to Sangamo to grant a license or sublicense to any Affiliate of Pfizer pursuant to Section 2.7 (or otherwise), any sublicense of its rights or obligations under this Agreement, any transfer of payment obligations hereunder, or any failure to comply with applicable Laws or filing or record retention requirements) by a Party leads to the imposition of withholding tax liability or VAT on the other Party that would not have been imposed in the absence of such action or in an increase in such liability above the liability that would have been imposed in the absence of such action, then the sum payable by that Party (in respect of which such deduction or withholding is required to be made) shall be increased to the extent necessary to ensure that the other Party receives a sum equal to the sum which it would have received had no such action occurred, (ii) otherwise, the sum payable by that Party (in respect of which such deduction or withholding is required to be made) shall be made to the other Party after deduction of the amount required to be so deducted or withheld, which deducted or withheld amount shall be remitted in accordance with applicable law. 9.9 Financial Records and Audit. Each Party shall maintain complete and accurate records in sufficient detail to permit the other Party to confirm the accuracy of the amount of Development and Manufacture costs to be reimbursed, royalty payments and other amounts payable under this Agreement. Upon reasonable prior notice, such records shall be open during regular business hours for a period of [*] years from the creation of individual records for examination by an independent certified public accountant selected by the auditing Party and reasonably acceptable to the audited Party for the sole purpose of verifying for the auditing Party the accuracy of the financial reports furnished by the audited Party pursuant to this Agreement or of any payments made, or required to be made, by or to the audited Party pursuant to this Agreement. Such audits may occur no more often than [*]. Such auditor shall not disclose the audited Party’s Confidential Information to the auditing Party, except to the extent such disclosure is necessary to verify the accuracy of the financial reports furnished by the audited Party or the amount of payments to or by the audited Party under this Agreement. Any amounts shown to be owed but unpaid, or overpaid and in need of refund, shall be paid or refunded (as the case may be) within [*] days after the accountant’s report, plus interest (as set forth in Section 9.6) from the original due date (unless challenged in good faith by the audited Party). The auditing Party shall bear the full cost of such audit unless such audit reveals an overpayment to, or an underpayment by, the audited Party that resulted from a discrepancy in the financial report provided by the audited Party for the audited period, which underpayment or overpayment is more than [*] of the amount set forth in such report, in which case the audited Party shall reimburse the auditing Party for the costs for such audit.
53 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 9.10 Confidentiality. Notwithstanding any provision of this Agreement to the contrary all reports and financial information of Pfizer, its Affiliates or its Sublicensees which are provided to or subject to review by Sangamo under this Article 9 will be deemed to be Pfizer’s Confidential Information and subject to the provisions of Article 11. 9.11 No Guarantee of Success. Pfizer and Sangamo acknowledge and agree that payments to Sangamo pursuant to Section 9.4(a) and Section 9.5(a): (a) have been included in this Agreement on the basis that they are only payable or otherwise relevant if the applicable Milestone Event is achieved or Net Sales are made; (b) are solely intended to allocate amounts that may be achieved upon successful Development or Commercialization of such Product as applicable, between Pfizer (who will receive all Product sales revenues) and Sangamo; and (c) are not intended to be used and will not be used as a measure of damages if this Agreement is terminated for any reason, including pursuant to Pfizer’s right to terminate for convenience, before any such success is achieved and such amounts become due; and (d) will only be triggered in accordance with the terms and conditions of such provisions. Pfizer and Sangamo further acknowledge and agree that nothing in this Agreement, or in any document or presentation provided by Pfizer to Sangamo or Sangamo to Pfizer prior to the Effective Date will be construed as representing any estimate or projection of (i) the successful Development or Commercialization of any Product under this Agreement, (ii) the number of Products that will or may be successfully Developed or Commercialized under this Agreement, (iii) anticipated sales or the actual value of any Products that may be successfully Developed or Commercialized under this Agreement or (iv) the damages, if any, that may be payable if this Agreement is terminated for any reason. Neither Pfizer nor Sangamo makes any representation, warranty or covenant, either express or implied, that (A) it will successfully Develop, Manufacture, Commercialize or continue to Develop, Manufacture or Commercialize any Product in any country, (B) if Commercialized, that any Product will achieve any particular sales level, whether in any individual country or cumulatively throughout the Territory or (C) Pfizer will devote, or cause to be devoted, any level of diligence or resources to Developing or Commercializing any Product in any country, or in the Territory in general, other than is expressly required by the Pfizer Diligence Obligations or the other provisions of this Agreement. ARTICLE 10 INTELLECTUAL PROPERTY RIGHTS 10.1 Ownership of Inventions. (a) By Inventorship. Except as set forth in Section 10.1(b) below, ownership of all Inventions shall be based on inventorship, as determined in accordance with the rules of inventorship under United States patent laws. Each Party shall solely own any Inventions made solely by its and its Affiliates’ and Sublicensees’ employees, agents, or independent contractors (“Sole Inventions”). Without limiting the foregoing, Pfizer shall solely own all Pfizer Manufacturing Improvements, and Sangamo shall solely own all Sangamo Manufacturing Improvements. The Parties shall jointly own any Inventions that are made jointly by employees, agents, or independent contractors of one Party and its Affiliates and Sublicensees together with employees, agents, or independent contractors of the other Party and its Affiliates and Sublicensees (“Joint Inventions”). All Patent Rights claiming patentable Joint Inventions shall be referred to herein as “Joint Patents”. Except to the extent either Party is restricted by the licenses granted to 54 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. the other Party under this Agreement, each Party shall be entitled to practice, license (through multiple tiers), assign and otherwise exploit the Joint Inventions and Joint Patents in all countries and jurisdictions without the duty of accounting or seeking consent from the other Party. (b) Improvements to Licensed Technology. Notwithstanding Section 10.1(a), Sangamo shall solely own all Inventions that are improvements to the Licensed Technology (other than Inventions that are improvements to Joint Inventions and Joint Patents but not to any other Licensed Technology), including improvements to [*], but excluding any Inventions that are [*] or that relate to (i) [*] or (ii) [*] that is [*] and that is not [*] or [*]. Upon the JSC’s decision to include an Additional Product as a Product pursuant to Section 4.3(b), the Parties shall determine [*], such that [*]. To the extent any such Invention that belongs to Sangamo under this Section 10.1(b) is made by Pfizer, its Affiliates or Sublicensees or its or their employees, agents, or independent contractors, whether solely or jointly, Pfizer shall and hereby does assign and transfer to Sangamo, without additional consideration, all right, title and interest in and to such Invention, and such Invention shall be deemed Sangamo’s Sole Invention and Sangamo’s Confidential Information (and not the Confidential Information of Pfizer). (c) Disclosure. Through the JIPC, each Party shall promptly disclose to the other Party all Inventions, including all invention disclosures or other similar documents submitted to such Party by its, or its Affiliates’ or Sublicensees’, employees, agents or independent contractors relating to such Inventions, and shall also respond promptly to reasonable requests from the other Party for additional information relating to such Inventions. (d) Personnel Obligations. Each employee, agent or independent contractor of a Party or its respective Affiliates or Sublicensees performing work under this Agreement shall, prior to commencing such work, be bound by invention assignment obligations, including: (i) promptly reporting any invention, discovery, process or other intellectual property right; (ii) presently assigning to the applicable Party all of his or her right, title and interest in and to any invention, discovery, process or other intellectual property; (iii) cooperating in the preparation, filing, prosecution, maintenance and enforcement of any patent and patent application; and (iv) performing all acts and signing, executing, acknowledging and delivering any and all documents required for effecting the obligations and purposes of this Agreement. It is understood and agreed that such invention assignment agreement need not reference or be specific to this Agreement. 10.2 Patent Prosecution. (a) Sangamo Sole Patents. (i) As between the Parties, Sangamo shall have the sole right, but not the obligation, to file, prosecute and maintain all Licensed Patents that are not Joint Patents (“Sangamo Sole Patents”) throughout the world, at its own expense. Sangamo shall keep Pfizer reasonably informed of the status of such Sangamo Sole Patents and shall promptly provide Pfizer with material correspondence received from any patent authorities in connection therewith. In addition, Sangamo shall promptly provide Pfizer with drafts of all proposed material filings and correspondence to any patent authorities with respect to such Sangamo Sole Patents for Pfizer’s review and comment prior to the submission of such proposed filings and correspondence. 55 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Sangamo shall confer with Pfizer and take into consideration Pfizer’s comments prior to submitting such filings and correspondence, provided that Pfizer provides such comments within [*] days of receiving the draft filings and correspondence from Sangamo. If Pfizer does not provide comments within such period of time, then Pfizer shall be deemed to have no comment to such proposed filings or correspondence. In case of a disagreement between the Parties with respect to the filing, prosecution or maintenance of such Sangamo Sole Patents, the final decision shall be made by Sangamo subject to Pfizer’s rights in Section 10.2(a)(ii). (ii) Sangamo shall notify Pfizer of any decision to cease prosecution and/or maintenance of any Sangamo Sole Patent in any country. Sangamo shall provide such notice at least [*] days prior to any filing or payment due date, or any other due date that requires action in order to avoid loss of rights, in connection with such Sangamo Sole Patent. If, within [*] days after the receipt of such notice from Sangamo, Pfizer notifies Sangamo in writing that it wishes Sangamo to continue the prosecution and maintenance of such Sangamo Sole Patent in such country and agrees to reimburse Sangamo for the costs and expenses that Sangamo incurs in connection therewith, then Sangamo shall continue the prosecution and maintenance of such Sangamo Sole Patent in such country at Pfizer’s cost and expense. (iii) For the purpose of this Article 10, “prosecution” shall include any post-grant proceeding, including supplemental examination, post grant review proceeding, inter parties review proceeding, patent interference proceeding, opposition proceeding, inter parties review, reissue and reexamination. (b) Joint Patents. (i) As between the Parties, Sangamo shall have the first right, but not the obligation, to file, prosecute and maintain all Joint Patents throughout the world, at its own expense. Sangamo shall keep Pfizer reasonably informed of the status of Joint Patents and shall promptly provide Pfizer with material correspondence received from any patent authorities in connection therewith. In addition, Sangamo shall promptly provide Pfizer with drafts of all proposed material filings and correspondence to any patent authorities with respect to Joint Patents for Pfizer’s review and comment prior to the submission of such proposed filings and correspondence. Sangamo shall confer with Pfizer and take into consideration Pfizer’s comments prior to submitting such filings and correspondence, provided that Pfizer provides such comments within [*] days of receiving the draft filings and correspondence from Sangamo. If Pfizer does not provide comments within such period of time, then Pfizer shall be deemed to have no comment to such proposed filings or correspondence. Subject to Pfizer’s right to continue prosecution and maintenance of a Joint Patent pursuant to clause (ii) below, in case of a disagreement between the Parties with respect to the filing, prosecution or maintenance of Joint Patents, the final decision shall be made by Sangamo. (ii) Sangamo shall notify Pfizer of any decision to cease prosecution and/or maintenance of any Joint Patent in any country. Sangamo shall provide such notice at least [*] days prior to any filing or payment due date, or any other 56 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. due date that requires action in order to avoid loss of rights, in connection with such Joint Patent. In such event, Sangamo shall permit Pfizer, at its discretion and expense, to continue prosecution or maintenance of such Joint Patent in such country. Pfizer’s prosecution or maintenance of such Joint Patent shall not change the Parties’ respective rights and obligations under this Agreement with respect to such Joint Patent other than those expressly set forth in this Section 10.2(b). (c) Product-Specific Licensed Patents. Sangamo shall use reasonable efforts, in connection with its prosecution of the Sangamo Sole Patents and the Joint Patents, to the extent permitted under applicable Laws, to, reasonably considering comments by Pfizer with respect to such strategy, file patent applications that (i) claim priority to one or more Licensed Patents and (ii) claim one or more Products (generically or specifically) but are not intended to claim any products that are not Products (collectively, the “Product-Specific Licensed Patents”). For clarity, if during prosecution, the claims of a Product-Specific Licensed Patent are amended to include claims that claim any product that is not a Product, then such patent application shall no longer be considered a Product-Specific Licensed Patent. (d) Other Sangamo Patents. As between the Parties, Sangamo shall have the sole right, but not the obligation, to file, prosecute and maintain throughout the world, at its own expense, all Patent Rights Controlled by Sangamo that are not Licensed Patents or Joint Patents (including Patent Rights claiming Licensed Companion Diagnostic Technology or Sangamo Manufacturing Improvement Technology). (e) Pfizer Patents. As between the Parties, Pfizer shall have the sole right, but not the obligation, to file, prosecute and maintain all Patent Rights Controlled by Pfizer (including Patent Rights claiming Pfizer Sole Inventions or Pfizer Manufacturing Technology, but excluding Joint Patents) throughout the world, at its own expense. (f) Cooperation. Each Party shall provide the other Party, at the other Party’s request and expense, all reasonable assistance and cooperation in the patent prosecution efforts under this Section 10.2, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution. 10.3 Patent Enforcement. (a) Notification. If either Party becomes aware of any (i) infringement, anywhere in the world, of any issued patent within the Licensed Patents on account of a Third Party’s Manufacture, use, importation, offer for sale or sale of any [*], including any BLA filed by a Third Party for a Biosimilar Product that names a Product as a Reference Product (or similar filing in a country other than the U.S.) or (ii) declaratory judgment action by a Third Party that is developing or commercializing any [*] alleging the invalidity, unenforceability or non- infringement of any of the Licensed Patents (collectively, a “Product Infringement”), such Party will promptly notify the other Party in writing to that effect. (b) Enforcement Rights. (i) Product-Specific Licensed Patents. For any Product Infringement of a Product-Specific Licensed Patent, as between the Parties, Pfizer shall
57 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. have the first right, but not the obligation, to bring an appropriate suit or take other action against any person or entity engaged in such Product Infringement, at its own cost and expense. If Pfizer fails to institute and prosecute an action or proceeding to abate such Product Infringement within a period of [*] after the first notice of such Product Infringement under Section 10.3(a) (or such shorter period as may be necessary to bring or defend and maintain such action without loss of rights), then upon Pfizer’s written consent (not to be unreasonably withheld), Sangamo shall have the second right, but not the obligation, to commence a suit or take other action to enforce the applicable Product- Specific Licensed Patent against such Product Infringement at its own cost and expense. (ii) Other Licensed Patents. For any Product Infringement of a Licensed Patent that is not a Product-Specific Licensed Patent, as between the Parties, Sangamo shall have the first right, but not the obligation, to bring an appropriate suit or take other action against any person or entity engaged in such Product Infringement, at its own cost and expense. If Sangamo fails to institute and prosecute an action or proceeding to abate such Product Infringement within a period of [*] after the first notice of such Product Infringement under Section 10.3(a) (or such shorter period as may be necessary to bring or defend and maintain such action without loss of rights), then upon Sangamo’s written consent (not to be unreasonably withheld), Pfizer shall have the second right, but not the obligation, to commence a suit or take other action to enforce the applicable Licensed Patent against such Product Infringement at its own cost and expense. (c) Collaboration. Each Party shall provide to the enforcing Party reasonable assistance in the enforcement action brought under Section 10.3(b), at such enforcing Party’s request and expense, including to be named in such action if required by applicable Laws to pursue such action. The enforcing Party shall keep the other Party regularly informed of the status and progress of such enforcement efforts, shall reasonably consider the other Party’s comments on any such efforts, including, without limitation, determination of litigation strategy, filing of material papers to the competent court. The non-enforcing Party shall be entitled to separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall at all times cooperate fully with the enforcing Party. The enforcing Party shall not settle any claim, suit or action that it brought under Section 10.3(b) in any manner that would negatively impact the applicable Licensed Patents, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. (d) Expenses and Recoveries. The enforcing Party bringing a claim, suit or action under Section 10.3(b) shall be solely responsible for any expenses incurred by such Party as a result of such claim, suit or action. If such Party recovers monetary damages in such claim, suit or action, such recovery shall be allocated first to the reimbursement of any expenses incurred by the Party bringing suit, second to the reimbursement of any expenses incurred by the other Party in such litigation, and any remaining amounts shall be [*]; provided, however, that, [*]. (e) Other Infringement. Sangamo shall have the sole right, but not the obligation, to bring and control, at its own cost and expense, any legal action in connection with (i) any infringement of any Licensed Patent that is not a Product Infringement or (ii) any infringement of any Patent Right Controlled by Sangamo that is not a Licensed Patent (including 58 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Patent Rights claiming Licensed Companion Diagnostic Technology or Sangamo Manufacturing Improvement Technology). 10.4 Patent Extensions. [*] right, but not the obligation, to seek, [*] if so required, patent term extensions, patent term restorations and supplemental protection certificates or the like available under the Law, including 35 USC, Section 156 and applicable foreign counterparts, in any country in the Territory in relation to the Licensed Patents. Sangamo and Pfizer will cooperate in connection with all such activities. [*], its agents and attorneys will give due consideration to all suggestions and comments of [*] regarding any such activities, but in the event of a disagreement between the Parties, [*] will have the final decision making authority; provided however, that (a) [*] extend any Licensed Patent [*], including through the use of supplemental protection certificates and the like, [*] and (b) without [*] prior written consent, [*] shall not have the right to seek, with respect to any Product and country, any such extension of a Licensed Patent that [*] if (i) [*] with respect to such Product and country and (ii) [*], unless [*]. 10.5 Patents Licensed From Third Parties. Each Party’s rights under Sections 10.2, 10.3 and 10.4 with respect to any Licensed Patent that is licensed by Sangamo from a Third Party shall be subject to the rights retained by such Third Party. ARTICLE 11 CONFIDENTIALITY; PUBLICATION 11.1 Duty of Confidence. Subject to the other provisions of this Article 11: (a) during the Term and for [*] years thereafter, all Confidential Information of a Party (the “Disclosing Party”) shall be maintained in confidence and otherwise safeguarded by the other Party (the “Receiving Party”) and its Affiliates, in the same manner and with the same protections as the Receiving Party maintains its own confidential information, but in any event no less than reasonable efforts; (b) the Receiving Party may only use any such Confidential Information for the purposes of performing its obligations or exercising its rights under this Agreement; (c) the Receiving Party may only disclose Confidential Information of the other Party to: (i) its Affiliates, licensees and Sublicensees; and (ii) employees, directors, agents, contractors, consultants and advisers of the Receiving Party and its Affiliates and Sublicensees, in each case to the extent reasonably necessary for the purposes of performing its obligations or exercising its rights under this Agreement; provided that such Persons are bound by legally enforceable obligations to maintain the confidentiality of the Confidential Information in a manner consistent with the confidentiality provisions of this Agreement; and (d) the terms and conditions of this Agreement will be considered Confidential Information of both Parties. 11.2 Exceptions. The foregoing obligations as to particular Confidential Information of a Disclosing Party shall not apply to the extent that the Receiving Party can demonstrate that such Confidential Information: 59 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (a) is known by the Receiving Party at the time of its receipt without an obligation of confidentiality, and not through a prior disclosure by the Disclosing Party, as documented by the Receiving Party’s business records; (b) is in the public domain before its receipt from the Disclosing Party, or thereafter enters the public domain through no fault of the Receiving Party; (c) is subsequently disclosed to the Receiving Party by a Third Party who may lawfully do so and is not under an obligation of confidentiality to the Disclosing Party; or (d) is discovered or developed by the Receiving Party independently and without use of or reference to any Confidential Information received from the Disclosing Party, as documented by the Receiving Party’s business records. Any combination of features or disclosures shall not be deemed to fall within the foregoing exclusions merely because individual features are published or available to the general public or in the rightful possession of the Receiving Party unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the Receiving Party. 11.3 Authorized Disclosures. Notwithstanding the obligations set forth in Sections 11.1 and 11.6, a Party may disclose the other Party’s Confidential Information (including this Agreement and the terms herein) to the extent: (a) such disclosure is reasonably necessary: (i) to such Party’s directors, attorneys, independent accountants or financial advisors for the sole purpose of enabling such directors, attorneys, independent accountants or financial advisors to provide advice to such Party, provided that in each such case such recipients are bound by confidentiality and non-use obligations that are at least as restrictive as those contained in this Agreement; and provided further that the term of confidentiality for recipients may be shorter as long as it is no less than five (5) years; or (ii) to actual or potential investors, acquirors, licensees and other financial or commercial partners solely for the purpose of evaluating or carrying out an actual or potential investment, acquisition or collaboration, provided that in each such case such recipients are bound by confidentiality and non-use obligations at least as restrictive as those contained in the Agreement; and provided further that the term of confidentiality for recipients may be shorter as long as it is no less than [*] years; (b) such disclosure is to a Governmental Authority and necessary or desirable (i) to obtain or maintain INDs, Marketing Approvals or Pricing Approval for any Product within the Territory, or (ii) in order to respond to inquiries, requests or investigations by such Governmental Authority relating to Products or this Agreement; (c) such disclosure is required by Law, judicial or administrative process, provided that except for disclosures governed by the last two sentence of Section 11.4, in such event such Party shall promptly inform the other Party of such required disclosure and provide the other Party an opportunity to challenge or limit the disclosure obligations, provided that Confidential Information that is disclosed pursuant to Section 11.3(b) or this Section 11.3(c) shall remain otherwise subject to the confidentiality and non-use provisions of this Article 11 (provided 60 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. that such disclosure is not a public disclosure), and the Party disclosing Confidential Information to a Governmental Authority or pursuant to Law or court order shall cooperate with and reasonably assist the other Party (at the other Party’s cost) if the other Party seeks a protective order or other remedy in respect of any such disclosure and furnish only that portion of the Confidential Information which, in the opinion of Party’s legal counsel, is responsive to such requirement or request; (d) necessary in order to enforce its rights under the Agreement; or (e) such disclosure is by Sangamo and is required pursuant to the terms of any Sangamo Third Party Agreement. 11.4 SEC Filings and Other Disclosures. Either Party may disclose the terms of this Agreement and make any other public written disclosure regarding the existence of, or performance under, this Agreement, to the extent required, in the reasonable opinion of such Party’s legal counsel, to comply with (a) applicable Law, including the rules and regulations promulgated by the United States Securities and Exchange Commission or (b) any equivalent Governmental Authority, securities exchange or securities regulator in any country in the Territory. Before disclosing this Agreement or any of the terms hereof pursuant to this Section 11.4, the Parties will consult with one another on the terms of this Agreement to be redacted in making any such disclosure, with the disclosing Party providing as much advance notice as is feasible under the circumstances, and giving consideration to the timely comments of the other Party. Further, if a Party discloses this Agreement or any of the terms hereof in accordance with this Section 11.4, such Party will, at its own expense, seek such confidential treatment of confidential portions of this Agreement and such other terms as it reasonably determines, giving consideration to the comments of the other Party pursuant to the preceding sentence. 11.5 Technical Publication. Neither Party may publish peer reviewed manuscripts, or give other forms of public disclosure such as abstracts and presentations, of results of studies carried out under this Agreement, without the opportunity for prior review by the other Party, except to the extent required by applicable Laws. A Party seeking publication shall provide the other Party the opportunity to review and comment on any proposed publication which relates to the Product at least [*] days prior to its intended submission for publication. The other Party shall provide the Party seeking publication with its comments in writing, if any, within [*] days after receipt of such proposed publication. The Party seeking publication shall consider in good faith any comments thereto provided by the other Party and shall comply with the other Party’s request to remove any and all of such other Party’s Confidential Information from the proposed publication. In addition, the Party seeking publication shall delay the submission for a period up to [*] days in the event that the other Party can demonstrate reasonable need for such delay, including without limitation, the preparation and filing of a patent application. If the other Party fails to provide its comments to the Party seeking publication within such [*] day period, such other Party shall be deemed to not have any comments, and the Party seeking publication shall be free to publish in accordance with this Section 11.5 after the [*] day period has elapsed. The Party seeking publication shall provide the other Party a copy of the manuscript at the time of the submission. Each Party agrees to acknowledge the contributions of the other Party and its employees in all publications as scientifically appropriate. Notwithstanding anything in this Agreement to the contrary, nothing will prevent Pfizer from making any scientific publication or
61 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. public announcement with respect to any approved Product(s) under this Agreement; provided, however, that Pfizer will comply with this Section 11.5 and, except as permitted under Sections 11.2 and 11.3, Pfizer will not disclose any of Sangamo’s Confidential Information in any such publication or announcement without obtaining Sangamo’s prior written consent to do so (such consent not to be unreasonably withheld). In the event of any disagreement on publication, the matter shall be referred to the JSC for attempted resolution. 11.6 Publicity. (a) Sangamo and Pfizer have agreed on language of a joint press release announcing this Agreement, which is attached hereto as Exhibit D, to be issued by the Parties promptly after the Effective Date. (b) Other than the joint press release set forth in Exhibit D and disclosures under Section 11.4, the Parties agree that any other news release or other public announcement relating to this Agreement or the performance hereunder that would disclose information other than that already in the public domain shall first be reviewed and approved by both Parties (with such approval not to be unreasonably withheld or delayed); provided, however, that notwithstanding the foregoing, Sangamo shall have the right to disclose publicly (including in its securities filings and earning calls): [*]; provided that (A) Pfizer will have at least [*] business days to review and provide edits and comments to any public disclosure proposed by Sangamo under this sentence, and (B) Sangamo will reasonably incorporate any edits and address any comments provided by Pfizer in such proposed public disclosure. (c) The Parties agree that after a press release (including the initial press release) or other public announcement has been reviewed and approved by the other Party under this Section 11.6, the disclosing Party may reissue the public disclosures without having to obtain the other Party’s prior consent and approval. (d) Each Party agrees that the other Party shall have the right to use such first Party’s name in presentations, the company’s website, collateral materials and corporate overviews to describe the collaboration relationship, as well as in taglines of press releases issued pursuant to this Section 11.6. (e) Subject to Section 11.6(d), neither Party shall use the name, trade name, service marks, trademarks, trade, dress or logos of the other Party (or any of its Affiliates) in publicity releases, advertising or any other publication, without the other Party’s prior written consent in each instance. 11.7 Obligations in Connection with Change of Control. If Sangamo is subject to a Change of Control, Sangamo will, and it will cause its Representatives to, ensure that no Confidential Information of Pfizer is released to (a) any Affiliate of Sangamo that becomes an Affiliate as a result of the Change of Control or (b) any other Representatives of Sangamo (or of the relevant surviving entity of such Change of Control) who become a Representatives of Sangamo as a result of the Change of Control, unless such Affiliate or other Representatives, as applicable, have signed individual confidentiality agreements which include equivalent obligations to those set out in this Article 11. If any Change of Control of Sangamo occurs, Sangamo will 62 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. promptly notify Pfizer, share with Pfizer the policies and procedures it plans to implement in order to protect the confidentiality of Pfizer’s Confidential Information prior to such implementation and make any adjustments to such policies and procedures that are reasonably requested by Pfizer. ARTICLE 12 TERM AND TERMINATION 12.1 Term. The term of this Agreement shall commence upon the Effective Date and continue in full force and effect, on a Product-by-Product and country-by-country basis, until the expiration of the Royalty Term for such Product in such country, unless earlier terminated as set forth in Section 12.2 below (the “Term”). Notwithstanding any provision of this Agreement to the contrary, upon expiration of this Agreement, Pfizer will retain the fully paid-up, perpetual, irrevocable royalty-free license to each Product as set forth in Section 9.5(c), except with respect to those Products and countries for which the Agreement was previously terminated. 12.2 Termination. (a) Termination by Pfizer for Convenience. Pfizer may terminate this Agreement on a Product-by-Product or country-by-country basis, or in its entirety, without cause, for any or no reason, by providing written notice of termination to Sangamo, which notice includes an effective date of termination at least [*] days after the notice prior to Commercialization of a Product and [*] days after the date of the notice after the commencement of the Commercialization of a Product. Upon any such termination, the changes to Pfizer’s Diligence Obligations under Sections 8.1(a) and 8.2 will apply as set forth therein, as and to the extent applicable. (b) Termination for Material Breach. If either Party believes that the other is in breach of its material obligations hereunder, then the non-breaching Party may deliver notice of such breach (“Breach Notice”) to the other Party. If the Party receiving notice of breach fails to cure such material breach within the applicable period set forth below, then the Party originally delivering the notice of breach may terminate this Agreement effective on written notice of termination to the other Party. For all breaches other than a failure to make a payment as set forth in this Agreement, the allegedly breaching Party shall have [*] days from such Breach Notice to cure such breach, provided, however, that if any breach is not reasonably curable within [*] days and the allegedly breaching Party is making a bona fide effort to cure such breach, such termination will be delayed for a time period to be agreed by both Parties in order to permit the allegedly breaching Party a reasonable period of time to cure such breach, not to exceed an additional [*] days. For any breach arising from a failure to make a payment set forth in this Agreement, the cure period will be [*] days and such cure period will be tolled pending resolution of any bona fide dispute between the Parties as to whether such payment is due. In the event Sangamo believe Pfizer has failed to make a payment, Sangamo will provide Pfizer with written notice and both Parties will use reasonable efforts to convene their finance personnel to resolve such dispute within [*] days of receipt of the written notice. If the Parties agree to a resolution for such bona fide dispute or such dispute is resolved pursuant to Section 16.6, any amounts due as part of such resolution shall be paid within [*] days thereafter. (c) Termination for a Bankruptcy Event. 63 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (i) Termination Right. Each Party shall have the right to terminate this Agreement in the event of a Bankruptcy Event with respect to the other Party. (ii) Rights to Intellectual Property. All rights and licenses granted under or pursuant to this Agreement by a Party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that each Party, as licensee of intellectual property under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code. The Parties further agree that in the event of a rejection of this Agreement by a Party in any bankruptcy proceeding by or against such Party under the U.S. Bankruptcy Code, (a) the other Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property that are necessary for the other Party to practice its license to such intellectual property, which, if not already in such other Party’s possession, shall be promptly delivered to it upon its written request therefor, and (b) such Party shall not interfere with the other Party’s rights to such intellectual property, and shall assist and not interfere with such other Party in obtaining such intellectual property and such embodiments of such intellectual property from another entity. The term “embodiments” of intellectual property means all tangible embodiments of the intellectual property licensed hereunder to the extent of the license scope, and shall exclude, without limitation, all inventory of Products and filings with Regulatory Authorities. (iii) No Limitation of Rights. All rights, powers and remedies provided in this Section 12.2(c) are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at Law or in equity (including the Bankruptcy Code) in the event of the commencement of a case under the Bankruptcy Code. 12.3 Effects of Termination. (a) Termination by Sangamo for Cause or Bankruptcy; Termination by Pfizer for Convenience. In the event that Sangamo terminates this Agreement, pursuant to Section 12.2(b) or 12.2(c) or Pfizer terminates this Agreement, pursuant to Section 12.2(a) all rights and obligations of each Party under this Agreement shall cease (including all non-perpetual and revocable rights and licenses granted by either Party to the other Party hereunder), except as otherwise expressly provided herein; provided that if such termination is on a Product-by-Product or country-by-country basis then such rights and obligations shall cease with respect to the terminated Product(s) and country(ies) only. In addition, (x) if this Agreement is terminated [*] with respect to [*] (including a termination of this Agreement [*]), the Parties shall [*] with respect to such other terminated Product(s) and (y) if this Agreement is terminated [*] with respect to [*] (including but not limited to the termination of the Agreement [*] provided [*]) the following shall apply: 64 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (i) Effective upon termination, and subject to the terms of this Section 12.3(a)(i), Pfizer hereby grants Sangamo an exclusive right and license (subject to a retained research use right by Pfizer), with the right to grant sublicenses through multiple tiers, under its interest in Pfizer Program Technology Controlled by Pfizer or its Affiliates, to Develop, Manufacture and Commercialize [*] in the Field in the Territory, where “Pfizer Program Technology” means all Patent Rights and Know- How that are both Controlled by Pfizer or its Affiliates and [*]. (ii) Within a reasonable period of time following notice of termination from Pfizer to Sangamo, if requested by Sangamo, the Parties will meet to mutually agree upon a transition plan to effect an orderly and timely transition to Sangamo of all Development, Manufacture and Commercialization activities and responsibilities with respect to [*] (such plan, a “Transition Plan”), which will incorporate the following elements (which elements do not require mutual agreement after notice of termination) and other provisions as reasonably requested, including [*] in connection with any activities [*] in connection with such transition: (1) To the extent requested by Sangamo, assignment and transfer by Pfizer to Sangamo or its designee of all Regulatory Materials for [*] in the Territory. If Pfizer is prohibited by applicable Law from assigning or transferring ownership of any of the foregoing items to Sangamo, Pfizer shall grant Sangamo (or its designee) a right of reference or use to such item and shall take other actions reasonably requested by Sangamo to provide Sangamo or its designee access to and the benefit of such Regulatory Materials, including the data contained or referenced therein. Each Party shall take actions reasonably necessary to effect such assignment and transfer or grant of right of reference or use to Sangamo (or its designee), including by making such filings with Regulatory Authorities in the Territory that may be necessary to record such assignment or effect such transfer and, at Sangamo’s written request, to complete any pending regulatory filings with respect to [*]. (2) Upon Sangamo’s written request and at Sangamo’s reasonable expense, assignment and transfer to Sangamo of Pfizer’s entire right, title, and interest in and to all pharmacological, toxicological and clinical test data and results, research data, reports and batch records, safety data and all other data Controlled by Pfizer or its Affiliates and reasonably in its or their possession or Control as of the effective date of termination and generated in the Development, Manufacture or Commercialization of [*], subject to a retained right by Pfizer to use such data to continue prosecution of any Patent Rights conceived by Pfizer and its Affiliates in the course of conducting its activities under this Agreement. Such assigned data, results, reports and records shall be deemed the Confidential Information of both Parties. (3) Pfizer shall promptly provide Sangamo with a copy of each agreement for which Pfizer has a right to disclose and assign or sublicense that is then in effect between Pfizer (or its Affiliates) and a Third Party with respect to [*], or the Development, Manufacture and Commercialization thereof, and upon Sangamo’s request, Pfizer shall assign or sublicense, and shall ensure that its Affiliates assign or sublicense, to Sangamo (A) any such agreement that solely relates to [*], to the extent permitted under the terms thereof, and (B) for any agreement that does not solely relate to [*] and to the extent permitted under the terms of such agreement, the portion of such agreement (e.g., a work order or statement of work) that relates
65 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. solely to [*]. Upon Sangamo’s request, Pfizer shall provide reasonable assistance to Sangamo in connection with any such agreement that is not assignable or sublicenseable to Sangamo, such as introducing Sangamo to such Third Party. (4) If Pfizer is, itself or through its Affiliate, Manufacturing [*] at the time of the notice of termination, Pfizer shall, upon Sangamo’s request, supply [*] to Sangamo at Pfizer’s Manufacturing Cost [*] for a reasonable period of time (not to exceed [*] months) until Sangamo establishes an alternative supplier, and reasonably assist Sangamo in establishing an alternative supplier for [*]. (5) If, at the time of such termination, Pfizer is conducting any clinical trials for [*], then, at Sangamo’s election on a trial-by-trial and site-by-site basis: (A) Pfizer shall fully cooperate with Sangamo to transfer the conduct of all such clinical trials at such sites to Sangamo and Sangamo shall assume any and all liability for such clinical trials at such sites after the effective date of such termination; or (B) Pfizer shall, at its expense, orderly wind down the conduct of any such clinical trial or site which is not assumed by Sangamo under clause (A). Notwithstanding anything else herein, in the event Sangamo elects subpart B above, Pfizer shall only be obligated to provide Sangamo with the safety data from such trial or such site, as applicable. (iii) In consideration of and as a condition to the licenses granted and activities conducted in Section 12.3(a)(i) and Section 12.3(a)(ii), Pfizer shall receive the following consideration: (1) In the event that the effective date of termination occurs prior to [*], Sangamo shall pay Pfizer royalties on [*] in the Territory equal to [*] of Net Sales of [*] (as defined for purposes of this Section 12.3(a)(iii) on the same basis as if Sangamo was Pfizer in the definition of Net Sales), for a royalty term expiring [*], subject to royalty reductions equivalent to those set forth in Section 9.5(d). (2) In the event that the effective date of termination occurs following [*] but prior to [*], Sangamo shall pay Pfizer royalties on [*] equal to [*] of Net Sales of [*] (as defined for purposes of this Section 12.3(a)(iii) on the same basis as if Sangamo was Pfizer in the definition of Net Sales), for a royalty term expiring [*], subject to royalty reductions equivalent to those set forth in Section 9.5(d). (3) In the event that the effective date of termination occurs following [*], Sangamo shall pay Pfizer royalties on [*] equal to [*] of Net Sales of [*] (as defined for purposes of this Section 12.3(a)(iii) on the same basis as if Sangamo was Pfizer in the definition of Net Sales), for a royalty term expiring [*], subject to royalty reductions equivalent to those set forth in Section 9.5(d). (4) Sangamo would fully and forever release and discharge Pfizer and its Affiliates, from any and all claims, demands, liabilities, obligations, responsibilities, suits, actions and causes of action, known or unknown, past, present or future, or otherwise, arising out of or relating to this Agreement or a breach of Pfizer’s rights and obligations under this Agreement to the extent related to [*]; provided, however, that the foregoing release does not 66 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. discharge any rights or obligations set forth in the Transition Plan or for payment of any royalties, milestones, or any undisputed amounts owed under this Agreement. The Parties agree that this Section 12.3(a) would be in full and complete settlement of the rights and obligations of the parties in connection with [*] under this Agreement. Pfizer shall transfer and assign to Sangamo, at Sangamo’s request and expense, all Trademarks that have been used, or were intended to be used, in connection with [*] (excluding any such marks that include, in whole or part, any corporate name or logos of Pfizer or its Affiliates or Sublicensees). (5) Pfizer shall promptly deliver to Sangamo an inventory list of [*] then in its (or its Affiliates’) possession or control. At Sangamo’s request, Pfizer shall deliver to Sangamo all or part of such inventory, and Sangamo shall reimburse Pfizer for its Manufacturing Cost [*] for such delivered inventory, provided that such inventory complies with specifications and has been manufactured in compliance with all applicable Laws, including cGMP. (iv) Except as otherwise provided herein, within [*] days after any termination of this Agreement, each Party shall destroy or return to the other Party (at the other Party’s discretion) all tangible items bearing, containing, or contained in, any of the Confidential Information of the other Party. If the material is destroyed, it shall provide the other Party written certification of such destruction. For clarity, Sangamo shall not be required to destroy or return to Pfizer pursuant to this Section 12.3(a)(viii) any Confidential Information of Pfizer to which Sangamo has licenses or other rights pursuant to this Section 12.3(a). Notwithstanding the foregoing, in the event of a termination of this Agreement pursuant to Sections 12.2(a) or 8.6 as to less than the entire Territory, the Parties shall in good faith cooperate to effect a reversion of [*] rights and assets to Sangamo for the countries as to which such termination applies that is equivalent to the reversion of rights and assets specified in this Section 12.3(a) above, while leaving Pfizer in possession of such rights and assets as Pfizer reasonably requires to continue the Development, Manufacture and Commercialization of [*] in the balance of the Territory. In the event of a termination of this Agreement pursuant to Section 12.2(a) or 8.6 as to one or more (but not all) Products, the effects of termination set forth in this Section 12.3(a) will apply to the terminated Products only. (b) Termination by Pfizer for Bankruptcy. In the event that Pfizer terminates this Agreement pursuant to Section 12(c), all rights and obligations of each Party hereunder shall cease (including all non-perpetual, revocable rights and licenses granted by either Party to the other Party hereunder), except as otherwise expressly provided herein. (c) Termination by Pfizer for Cause. In the event that Pfizer terminates this Agreement pursuant to Section 12.2(b), all rights and obligations of each Party hereunder shall cease (including all non-perpetual, revocable rights and licenses granted by either Party to the other Party hereunder), except as otherwise expressly provided herein. (d) Pfizer Remedies for Sangamo Material Breach. In the event that Pfizer has the right, but elects (after notice to Sangamo and failure of Sangamo to cure within the applicable cure period) not, to terminate this Agreement pursuant to Section 12.2(b), Pfizer shall notify Sangamo promptly upon the end of such cure period and: (i) [*], and, [*] (1) Pfizer will [*] 67 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. on account of such material breach, to the extent [*]; or (2) Pfizer will [*] the uncured material breach [*]. [*]. 12.4 Sangamo’s Right to Receive All Payments Accrued. Expiration or termination of this Agreement for any reason (x) shall be without prejudice to Sangamo’s right to receive all Milestone Payments accrued under Section 9.4(a) (other than the [*] milestone payable on [*], which amount shall not be payable unless such event occurs prior to the date that a notice of termination is given by either Party to the other under Section 12.2) and all royalties accrued under Section 9.5(a) prior to the effective date of such termination and to any other remedies that either Party may otherwise have and (y) shall not release a Party hereto from any indebtedness, liability or other obligation incurred hereunder by such Party prior to the date of termination or expiration, provided that Pfizer will not be liable for any Milestone Payment that accrues between a notice of termination by Pfizer of the Agreement in its entirety and the date of termination of this Agreement. 12.5 Survival. Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or termination. Without limiting the foregoing, the provisions of Sections [*] shall survive the expiration or termination of this Agreement. 12.6 Termination Not Sole Remedy. Termination is not the sole remedy under this Agreement and, whether or not termination is effected and notwithstanding anything contained in this Agreement to the contrary, all other remedies shall remain available except as agreed to otherwise herein. ARTICLE 13 REPRESENTATIONS AND WARRANTIES 13.1 Mutual Representations and Warranties. Each Party represents and warrants to the other Party as of the Effective Date that: (a) such Party is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (b) such Party: (i) has the requisite power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and (ii) has taken all requisite action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; (c) this Agreement has been duly executed on behalf of such Party and is a legal, valid and binding obligation on such Party, enforceable against such Party in accordance with its terms; (d) all necessary consents, approvals and authorizations of all Governmental Authorities and other persons or entities required to be obtained by such Party in connection with the execution and delivery of this Agreement have been obtained; and 68 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (e) the execution and delivery of this Agreement and the performance of such Party’s obligations hereunder: (i) do not conflict with or violate any requirement of applicable Laws, regulations or orders of Governmental Authorities, (ii) do not conflict with, or constitute a breach or default under, any contractual obligation of such Party, and (iii) do not conflict with or result in a breach of any provision of the organizational documents of such Party. 13.2 Representations and Warranties by Sangamo. Sangamo represents and warrants to Pfizer that: (a) as of the Effective Date, Sangamo is the sole and exclusive owner of the Licensed Patents listed on Exhibit A, all of which are free and clear of any claims, liens, charges or encumbrances; (b) as of the Effective Date, Sangamo has the full right, power and authority to (i) grant the licenses and other rights (including the right to sublicense) granted to Pfizer under this Agreement and (ii) perform its obligations under this Agreement; (c) Exhibit J sets forth a true and complete list of all Products and Additional Product Candidates on which Sangamo or its Affiliates have conducted in vivo preclinical studies on or prior to the Effective Date; (d) (A) Exhibit A sets forth a true and complete list of all Licensed Patents (i) owned or otherwise Controlled by Sangamo or its Affiliates as of the Effective Date or (ii) to which Sangamo or its Affiliates have as of the Effective Date been granted or otherwise transferred any right to practice under, in each case that are necessary for the Development, Manufacture, or Commercialization of SB-525, (B) except for expired provisional patent applications, each such Patent Right , remains in full force and effect as of the Effective Date and (C) Sangamo or its Affiliates have timely paid, or caused the appropriate Third Parties to pay, all filing and renewal fees payable as of the Effective Date with respect to such Patent Rights; (e) as of the Effective Date, Sangamo has disclosed to Pfizer all material scientific and technical information and all material information relating to the safety and efficacy of SB-525, in each case that was generated by or on behalf of it or its Affiliates; (f) to Sangamo’s knowledge as of the Effective Date, no Third Party (i) is infringing any Licensed Patents or (ii) has challenged or threatened to challenge the inventorship, ownership, Sangamo’s right to use, scope, validity or enforceability of, or Sangamo’s or any Current Licensor’s rights in or to, any Licensed Patents (including, by way of example, through the institution or written threat of institution of interference, derivation, post-grant review, opposition, nullity or similar invalidity proceedings before the United States Patent and Trademark Office or any analogous foreign Governmental Authority); (g) as of the Effective Date, Sangamo has complied with all applicable Laws, including any disclosure requirements, in connection with the filing, prosecution and maintenance of the Licensed Patents; (h) except with respect to Licensed Patents Controlled by Sangamo pursuant to a Current License, Sangamo has obtained from all inventors of the Licensed Patents existing as of
69 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. the Effective Date, valid and enforceable agreements assigning to Sangamo each such inventor’s entire right, title and interest in and to all such Licensed Patents; (i) except with respect to Licensed Technology Controlled by Sangamo pursuant to a Current License, no Licensed Technology existing as of the Effective Date is subject to any funding agreement with any government or Governmental Authority; (j) except as expressly disclosed in Exhibit I, as of the Effective Date, neither Sangamo nor any of its Affiliates are party to or otherwise subject to any agreement or arrangement which limits the licensed or sublicensed rights of Pfizer with respect to, or limits the ability of Pfizer to grant a sublicense to, or provide access or other rights in, to, or under any Licensed Technology (including any Patent Right or Know-How included therein), in each case, that would, but for such agreement or arrangement, be included in the rights licensed to Pfizer pursuant to this Agreement; (k) as of the Effective Date, (i) there are no Sangamo Third Party Agreements other than the Current Licenses set forth on Exhibit K, (ii) true and complete copies of each Current License (other than financial terms redacted therefrom) have been provided to Pfizer, (iii) except as provided in the Current Licenses, no Third Party has any right, title or interest in or to, or any license under, any Licensed Technology that conflicts with the rights granted to Pfizer hereunder, (iv) no rights granted by or to Sangamo or its Affiliates under any Current License conflict with any right or license granted to Pfizer hereunder and (iv) Sangamo and its Affiliates are in compliance in all material respects with all Current Licenses; (l) to Sangamo’s knowledge as of the Effective Date, except as disclosed to Pfizer prior to the Effective Date, the Development and Manufacture by Sangamo (or its Affiliates) of SB-525 prior to the Effective Date did not, and the conduct by Sangamo or its Affiliates of the SB-525 Phase I/II Trial or the SB-525 Phase I/II Long-Term Follow-Up Study will not (a) infringe any issued patent of any Third Party or (b) infringe the claims of any published Third Party patent application when and if such claims issue as published; (m) as of the Effective Date, except as expressly disclosed in Exhibit I, there is no (i) claim, demand, suit, proceeding, arbitration, inquiry, investigation or other legal action of any nature, civil, criminal, regulatory or otherwise, pending or, to the knowledge of Sangamo, threatened against Sangamo or any of its Affiliates or (ii) judgment or settlement against or owed by Sangamo or any of its Affiliates, in each case in connection with the Licensed Technology or SB-525 or relating to the transactions contemplated by this Agreement; (n) as of the Effective Date, Sangamo has valid and enforceable agreements with all persons employed by Sangamo or its Affiliates who will conduct activities under this Agreement which require such persons to assign to Sangamo their entire right, title and interest in and to all Licensed Technology; (o) as of the Effective Date, Sangamo is not, and to Sangamo’s knowledge, none of its Affiliates or its or its Affiliates’ employees nor any Third Party that conducted Development or Manufacture of SB-525 on behalf of Sangamo prior to the Effective Date (in each case, as applicable) is, debarred by any Regulatory Authority or, to Sangamo’s knowledge, the 70 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. subject of debarment proceedings by any Regulatory Authority and, in the course of the discovery or pre-clinical development of SB-525 prior to the Effective Date, Sangamo has not and, to the knowledge of Sangamo, no Affiliate of Sangamo or Third Party acting on behalf of Sangamo (in each case, as applicable) have used any employee or consultant that is debarred by any Regulatory Authority or, to the knowledge of Sangamo, is the subject of debarment proceedings by any Regulatory Authority; and (p) as of the Effective Date, Sangamo has no knowledge of (i) any prior art or other facts that Sangamo reasonably believes would result in the invalidity or unenforceability of any issued or pending claims included in the Licensed Patents, (ii) any inequitable conduct or fraud on any patent office with respect to any of the Licensed Patents or (iii) any Person (other than Persons identified in the applicable patent applications or patents, as inventors of inventions claimed in the Licensed Patents) who claims to be an inventor of an invention claimed in the Licensed Patents. 13.3 Accuracy of Representations and Warranties. (a) Sangamo will promptly notify Pfizer of any lawsuits, claims, administrative actions or other proceedings asserted or commenced against Sangamo or its Representatives involving in any material way the ability of Sangamo to deliver the rights, licenses and sublicenses granted to Pfizer herein. (b) Sangamo will promptly notify Pfizer in writing of any facts or circumstances arising after the Effective Date which come to Sangamo’s attention at any time during the Term and which would cause, or through the passage of time would cause, any of the representations and warranties contained in Section 13.1 or Section 13.2, if made at the time of such fact or circumstance becomes known to Sangamo, to be inaccurate or untrue in any material respect. 13.4 Sangamo Covenants. In addition to the covenants made by Sangamo elsewhere in this Agreement, Sangamo hereby covenants to Pfizer that, from the Effective Date until expiration or termination of this Agreement: (a) Sangamo will use its best efforts to [*], which is identified in Exhibit I, within [*] days after the Effective Date. (b) Sangamo will not, and will cause its Affiliates not to (i) license, sell, or assign (other than in a connection with a permitted assignment of this Agreement by Sangamo pursuant to Section 16.2) or otherwise transfer to any Person (other than Pfizer or its Affiliates or Sublicensees pursuant to the terms of this Agreement) any Licensed Technology (or agree to do any of the foregoing) in a manner that is inconsistent with the licenses and other rights granted to Pfizer under this Agreement or (b) incur or permit to exist, with respect to any Licensed Technology, any lien, encumbrance, charge, security interest, mortgage, liability, assignment, grant of license or other Binding Obligation in each case that is inconsistent with the licenses and other rights granted to Pfizer under this Agreement; (c) Sangamo will not (i) take any action with respect to any Sangamo Third Party Agreement that diminishes the rights under the Licensed Technology granted to Pfizer under 71 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. this Agreement or (b) fail to take any action with respect to a Sangamo Third Party Agreement that is reasonably necessary to avoid diminishing the rights under the Licensed Technology granted to Pfizer under this Agreement; (d) Sangamo will (a) not enter into any Sangamo Third Party Agreement that adversely affects (1) the rights granted to Pfizer, Pfizer’s Affiliates or Sublicensees hereunder or (2) Sangamo’s ability to fully perform its obligations hereunder; and (b) promptly furnish Pfizer with true and complete copies of all (1) amendments to the Current Licenses and (2) Sangamo Third Party Agreements executed following the Effective Date, in each case redacted of financial terms, except in the case of Non-Exclusive Upstream Licenses;. (e) Sangamo has made or will make any payments owing by Sangamo to any inventor of any Licensed Technology owned by Sangamo that is required in connection with the creation or exploitation of or transfer of rights to such Licensed Technology; and (f) during the Term, Sangamo will promptly notify Pfizer in the event that it learns of: (i) any prior art or other facts that Sangamo believes would result in the invalidity or unenforceability of any of the claims including in any of the Licensed Patents; (ii) any inequitable conduct or fraud on the patent office with respect to any of the Licensed Patents; or (iii) any Person (other than Persons identified as inventors of inventions claimed in the Sangamo Patent Rights) who claims to be an inventor of an invention claimed in Licensed Patents. 13.5 Mutual Covenants. (a) No Debarment. In the course of the research, development, Manufacture and commercialization of the Products, neither Party nor its Affiliates or Sublicensees shall use any employee or consultant who has been debarred by any Regulatory Authority, or, to such Party’s or its Affiliates’ knowledge, is the subject of debarment proceedings by a Regulatory Authority. Each Party shall notify the other Party promptly upon becoming aware that any of its or its Affiliates’ or Sublicensees’ employees or consultants has been debarred or is the subject of debarment proceedings by any Regulatory Authority. (b) Compliance. Each Party and its Affiliates shall comply in all material respects with all applicable Laws (including all anti-bribery laws) in the Development, Manufacture and Commercialization of the Products and performance of its obligations under this Agreement. 13.6 Compliance with Law and Ethical Business Practices. In addition to the other representations, warranties and covenants made by each Party elsewhere in this Agreement, each Party (the “Compliant Party”) represents and warrants or covenants, as applicable, to the other Party that during the Term: 72 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (a) it is licensed, registered, or qualified under applicable Law to do business, and has obtained such licenses, consents, authorizations or completed such registrations or made such notifications as may be necessary or required by applicable Law to provide the goods or services encompassed within this Agreement, and providing such goods or services is not inconsistent with any other obligation of the Compliant Party; (b) in conducting its activities hereunder, it will and will cause its Affiliates and its other Representatives to comply in all material respects with applicable Law and accepted pharmaceutical industry business practices, including, to the extent applicable to each Compliant Party and each such Affiliate and other Representative, the United States Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301, et seq.), the Anti-Kickback Statute (42 U.S.C. § 1320a-7b), Civil Monetary Penalty Statute (42 U.S.C. § 1320a-7a), the False Claims Act (31 U.S.C. § 3729 et seq.), comparable state statutes, the regulations promulgated under all such statutes, and the regulations issued by the FDA, consistent with the ‘Compliance Program Guidance for Pharmaceutical Manufacturers’ published by the Office of Inspector General, U.S. Department of Health and Human Services; (c) with respect to any Products, payments or services provided under this Agreement, it has not taken and will not during the Term take any action directly or indirectly to unlawfully offer, promise or pay, or authorize the offer or payment of, any money or anything of value in order to improperly or corruptly seek to influence any Government Official or any other person in order to gain an improper advantage, and has not accepted, and will not accept in the future any such unlawful payment; (d) it complies with the applicable laws and regulations of the countries where it operates, including anti-bribery and anti-corruption laws, accounting and record keeping laws, and laws relating to interactions with healthcare professionals or healthcare providers (collectively, “HCPs”) and Government Officials; (e) commencing promptly after the Effective Date, it will take steps toward adopting and implementing policies and procedures, and will adopt and implement such policies and procedures within six (6) months after the Effective Date, setting out rules governing interactions with HCPs and Government Officials, engagement of Third Parties, including, where appropriate, due diligence (“Policies”), and its Policies will mandate a robust set of internal controls, including accounting controls, designed to ensure the making and keeping of fair and accurate books, records and accounts, on its operations around the world and apply worldwide to all its employees, subsidiaries, and Third Parties acting on its behalf, and which Policies will include (i) providing training to its officers, directors, employees and where appropriate, its other Representatives on such Policies, (ii) regular monitoring and auditing of activities to confirm compliance with such Policies and the adequacy of internal controls, and remediation of identified issues, and (iii) requirements for regular review as part of its internal processes of improvement, and, from time to time, benchmarking against the standards of the industry with the assistance of external counsel; (f) to its knowledge, it and each of its Affiliates has been and will, for the Term, be in compliance with all applicable Global Trade Control Laws (as defined in Section 16.8
73 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. below), including those related to, import controls, export controls, or economic sanctions, and it will cause each of its Affiliates to remain in compliance with the same during the Term; (g) to its knowledge, except to the extent permissible under United States law, neither it nor any of its Affiliates has, on its own behalf or in acting on behalf of any other Person, directly or indirectly engaged with, and will not for the Term, without any required government authorization, directly or indirectly engage in any transactions, or otherwise deal with, any country or Person targeted by United States, European Union, United Kingdom or other relevant economic sanctions laws in connection with any activities related to the Party’s interaction with the other Party, including those contemplated under this Agreement; and (h) it is, as between the Parties, solely responsible to ensure Compliance by it and its Affiliates. 13.7 Representation by Legal Counsel. Each Party hereto represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will exist or be implied against the Party which drafted such terms and provisions. 13.8 No Other Warranties. EXCEPT AS EXPRESSLY STATED IN THIS ARTICLE 13 AND IN SECTION 16.10, (A) NO REPRESENTATION, CONDITION OR WARRANTY WHATSOEVER IS MADE OR GIVEN BY OR ON BEHALF OF PFIZER OR SANGAMO; AND (B) ALL OTHER CONDITIONS AND WARRANTIES WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE ARE HEREBY EXPRESSLY EXCLUDED, INCLUDING ANY CONDITIONS AND WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. Both Parties understand that the Products are the subject of ongoing research and development and that neither Party can assure the safety, effectiveness, Marketing Approval, Pricing Approval or commercial success of any Product. ARTICLE 14 INDEMNIFICATION; LIABILITY; INSURANCE 14.1 Indemnification by Sangamo. Sangamo shall indemnify, defend and hold harmless Pfizer and its Affiliates and Sublicensees, and each of their respective directors, officers, employees and agents (collectively “Pfizer Indemnitees”), from and against all losses, liabilities, damages and expenses, including reasonable attorneys’ fees and costs (collectively, “Liabilities”), to the extent resulting from any claims, demands, actions or other proceedings by any Third Party arising out of: (a) the material breach of any representation, warranty or covenant by Sangamo under this Agreement; (b) the recklessness, negligence or intentional misconduct of any Sangamo Indemnitees; or 74 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (c) the research, Development and Manufacture of SB-525 by or on behalf of Sangamo or its Affiliates prior to the Effective Date; except, in each case, to the extent caused by the negligence or intentional misconduct of any Pfizer Indemnitees or a material breach by Pfizer of any of its representations, warranties or covenants set forth in this Agreement. 14.2 Indemnification by Pfizer. Pfizer shall indemnify, defend and hold harmless Sangamo and its Affiliates, Upstream Licensors and each of their respective directors, officers, employees and agents (collectively “Sangamo Indemnitees”), from and against all Liabilities to the extent resulting from any claims, demands, actions or other proceedings by any Third Party arising out of: (a) the material breach of any representation, warranty or covenant by Pfizer under this Agreement; (b) the recklessness, negligence or intentional misconduct of any Pfizer Indemnitees; (c) the research of Additional Products by or on behalf of Pfizer or its Affiliates; or (d) the research, Development, Manufacture, and Commercialization of the Products by or on behalf of Pfizer or its Affiliates or Sublicensees; except, in each case, to the extent caused by the negligence or intentional misconduct of any Sangamo Indemnitees or a material breach by Sangamo of any of its representations, warranties or covenants set forth in this Agreement. 14.3 Indemnification Procedure. (a) Notice. If either Party is seeking indemnification under Section 14.1 or 14.2 (the “Indemnified Party”), it shall promptly inform the other Party (the “Indemnifying Party”) of the claim giving rise to the obligation to indemnify pursuant to such Section as soon as reasonably practicable after receiving notice of the claim, provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party will relieve the Indemnifying Party from any obligation hereunder unless (and then only to the extent that) the Indemnifying Party is prejudiced thereby. (b) Control. The Indemnifying Party shall have the right, exercisable by notice to the Indemnified Party within [*] Business Days after receipt of notice from the Indemnified Party of the commencement of or assertion of any Third Party Claim, to assume the direction and control of the defense, litigation, settlement, appeal or other disposition of any such claim for which it is obligated to indemnify the Indemnified Party (including the right to settle the claim solely for monetary consideration) with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party; provided that (a) the Indemnifying Party has sufficient financial resources, to satisfy the amount of any adverse monetary judgment that is sought, (b) the claim seeks solely monetary damages and (c) the Indemnifying Party expressly agrees in writing 75 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. that as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party will be solely obligated to satisfy and discharge the claim in full (the conditions set forth in clauses (a), (b) and (c) above are collectively referred to as the “Litigation Conditions”). The Indemnifying Party will be entitled, at its sole cost and expense, to assume direction and control of such defense, with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party. During such time as the Indemnifying Party is controlling the defense of such Third Party Claim, the Indemnified Party shall cooperate with the Indemnifying Party, and will cause its Affiliates and agents to cooperate upon request of the Indemnifying Party, in the defense or prosecution of the claim, including by furnishing such records, information and testimony and attending such conferences, discovery proceedings, hearings, trials or appeals as may reasonably be requested by the Indemnifying Party. In the event that the Indemnifying Party does not satisfy the Litigation Conditions or does not notify the Indemnified Party of the Indemnifying Party’s intent to defend any Third Party Claim within [*] Business Days after notice thereof, the Indemnified Party may (without further notice to the Indemnifying Party) undertake the defense thereof with counsel of its choice and at the Indemnifying Party’s expense (including reasonable, out-of-pocket attorneys’ fees and costs and expenses of enforcement or defense). The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to participate (including the right to conduct discovery, interview and examine witnesses and participate in all settlement conferences), but not control, at its own expense and with counsel of its choice, in the defense of any claim that has been assumed by the other Party. (c) Settlement. The Indemnifying Party will not, without the prior written consent of the Indemnified Party, enter into any compromise or settlement that commits the Indemnified Party to take, or to forbear to take, any action. The Indemnified Party will have the sole and exclusive right to settle any claim, on such terms and conditions as it deems reasonably appropriate, to the extent such claim involves equitable or other non-monetary relief, but will not have the right to settle such claim to the extent such claim involves monetary damages without the prior written consent of the Indemnifying Party. Neither the Indemnifying Party nor the Indemnified Party will make any admission of liability in respect of any claim without the prior written consent of the other party, and the Indemnified Party will use reasonable efforts to mitigate Liabilities arising from such claim. If the Parties cannot agree as to the application of Section 14.1 or 14.2 as to any claim, pending resolution of such dispute, the Parties may conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other Party in accordance with Section 14.1 or 14.2 upon resolution of the underlying claim. 14.4 Mitigation of Loss. Each Indemnified Party shall take and shall procure that its Affiliates take all such reasonable steps and action as are reasonably necessary or as the Indemnifying Party may reasonably require in order to mitigate any claims (or potential losses or damages) under this Article 14. Nothing in this Agreement shall or shall be deemed to relieve any Party of any common law or other duty to mitigate any losses incurred by it. 14.5 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 14.5 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR 76 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. OBLIGATIONS OF ANY PARTY UNDER SECTION 14.1 OR 14.2, OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS IN ARTICLE 11. 14.6 Insurance. Each Party shall procure and maintain, during the Term, commercial general liability insurance, including product liability insurance, with minimum “A-” Best rated insurance carriers to cover its indemnification obligations under Section 14.1 or Section 14.2, as applicable, in each case with limits of not less than [*] per occurrence and in the aggregate. All deductibles and retentions will be the responsibility of the named insured. Pfizer and its Affiliates will be an additional insured on Sangamo’s commercial general liability and products liability policies, and be provided with a waiver of subrogation. To the extent of its culpability, all coverages of Sangamo will be primary and non-contributing with any similar insurance, carried by Pfizer. Each Party shall provide the other Party with evidence of such insurance by furnishing a certificate of insurance upon request and shall provide the other Party with written notice at least [*] days prior to the cancellation, non-renewal or material changes in such insurance. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 14. Notwithstanding any provision of this Section 14.6 to the contrary, Pfizer may meet its obligations under this Section 14.6 through self-insurance. Neither Party’s insurance will be construed to create a limit of liability with respect to its indemnification obligations under this Article 14. ARTICLE 15 ANTITRUST 15.1 Approvals. Each of Sangamo and Pfizer will cooperate with the other Party and use Commercially Reasonable Efforts to make all registrations, filings and applications, to give all notices and to obtain as soon as practicable all governmental or other consents, transfers, approvals, orders, qualifications authorizations, permits and waivers, if any, and to do all other things necessary or desirable for the consummation of the transactions as contemplated hereby. ARTICLE 16 GENERAL PROVISIONS 16.1 Force Majeure. Neither Party shall be held liable to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation under this Agreement to the extent such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, potentially including embargoes, war, acts of war (whether war be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, fire, floods, earthquakes or other acts of God, or acts, generally applicable action or inaction by any governmental authority (but excluding any government action or inaction that is specific to such Party, its Affiliates or Sublicensees, such as revocation or non-renewal of such Party’s license to conduct business), or omissions or delays in acting by the other Party. The affected Party shall notify the other Party in writing of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake and continue diligently all Commercially Reasonable Efforts necessary to cure such force majeure circumstances or to perform its obligations in spite of the ongoing circumstances.
77 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 16.2 Assignment. This Agreement may not be assigned or otherwise transferred, nor may any right or obligation hereunder be assigned or transferred, by either Party without the prior written consent of the other Party. Notwithstanding the foregoing, subject to the provisions of Section 16.3, as applicable, either Party may, without consent of the other Party, assign this Agreement and its rights and obligations hereunder in whole or in part to an Affiliate of such Party, or in whole to its successor in interest in connection with the sale of all or substantially all of its stock or its assets to which this Agreement relates, or in connection with a merger, acquisition or similar transaction provided that such sale is not primarily for the benefit of its creditors. In addition, Pfizer may assign its rights and obligations under this Agreement to a Third Party where Pfizer or its Affiliate is required, or makes a good faith determination based on advice of counsel, to divest a Product in order to comply with Law or the order of any Governmental Authority as a result of a merger or acquisition. Each Party will promptly notify the other Party of any assignment or transfer under the provisions of this Section 16.2. Any attempted assignment not in accordance with the foregoing shall be null and void and of no legal effect. Any permitted assignee shall assume all assigned obligations of its assignor under this Agreement. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their respected successors and permitted assigns. 16.3 Notification of a Change of Control of Sangamo. Sangamo will notify Pfizer in writing promptly (and in any event prior to the public disclosure thereof) following the entering into of a definitive agreement with respect to a Change of Control of Sangamo. 16.4 Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement. 16.5 Notices. All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to Sangamo: Sangamo Therapeutics, Inc. 501 Canal Blvd., Suite A100 Richmond, CA 94804 Attn: Chief Executive Officer Fax: (510) 236-8951 78 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. with a copy to: Cooley LLP 3175 Hanover Street Palo Alto, CA 94304 Attn: Marya Postner, Ph.D. Fax: (650) 849-7400 If to Pfizer: Pfizer Inc. R&D Business Development 235 East 42nd Street New York, New York 10017-5755 Attn: R&D BD Contract Notice with a copy to: Pfizer Inc. Notices: Pfizer Legal Division 235 East 42nd Street New York, New York 10017-5755 Attn: Chief Counsel, R&D Fax: (646) 563-9619 and an electronic copy to: apinvoices@pfizer.com or to such other address(es) as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a Business Day (or if delivered or sent on a non-Business Day, then on the next Business Day); (b) on the Business Day after dispatch if sent by nationally-recognized overnight courier; or (c) on the [*] Business Day following the date of mailing, if sent by mail. 16.6 Dispute Resolution. (a) Informal Dispute Resolution; Arbitration. The Parties recognize that disputes as to certain matters may from time to time arise that relate to either Party’s rights and/or obligations hereunder, including the interpretation, alleged breach, enforcement, termination or validity of this Agreement (a “Dispute”). For clarity, Dispute shall not include matters within the JSC’s authority, which shall be resolved in accordance with Section 3.7. It is the objective of the Parties to establish procedures to facilitate the resolution of such Disputes arising under this Agreement in an expedient manner by mutual cooperation. To accomplish this objective, the Parties agree that if a Dispute arises under this Agreement, and the Parties are unable to resolve such Dispute within [*] days after such Dispute is first identified by either Party in writing to the other, the Parties shall refer such Dispute to the Executive Officers of the Parties for attempted resolution by good faith negotiations within [*] days after such notice is received. If the Executive Officers are not able to resolve such Dispute within [*] days, then such Dispute (other than 79 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Excluded Claim as defined in Section 16.6(f) below) shall be finally resolved by binding arbitration administered by [*] pursuant to [*], and judgment on the arbitration award may be entered in any court having jurisdiction thereof. (b) Number of Arbitrators; Arbitral Seat. The arbitration shall be conducted by a panel of three arbitrators experienced in the pharmaceutical business: within [*] days after initiation of arbitration, each Party shall select one person to act as arbitrator; provided that if a Party fails to appoint an arbitrator within [*] days of the arbitration being initiated, such appointment shall be made by [*]. The two arbitrators appointed in accordance with the preceding sentence shall appoint the third arbitrator, who shall be the chairman of the tribunal. If the arbitrators selected pursuant to the first sentence of this Section 16.6(b) are unable or fail to agree upon the third arbitrator within [*] days of the appointment of the second arbitrator, the third arbitrator shall be appointed by [*]. The place of arbitration shall be [*]; all proceedings and communications shall be in English. (c) Powers of the Arbitrators. The arbitrators shall have the discretion to hear and determine at any stage of the arbitration any issue asserted by any Party to be dispositive of any claim or counterclaim, in whole or part, in accordance with such procedure as the arbitrators may deem appropriate, and the arbitrators may render an award on such issue. In addition to the authority conferred on the arbitrators by the [*] rules, and without prejudice to any provisional measures that may be available from a court of competent jurisdiction, the arbitrators shall have the power to grant any provisional measures that the arbitrators deem appropriate, including but not limited to provisional injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved and any provisional measures ordered by the arbitrators may, to the extent permitted by applicable Law, be deemed to be a final award on the subject matter of the measures and shall be enforceable as such. Either Party also may, without waiving any remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of that Party pending the arbitration award. The arbitrators are authorized to award to the prevailing Party, if any, as determined by the arbitrators, their costs and expenses. The arbitrators shall have no authority to award punitive or any other type of damages not measured by a Party’s compensatory damages. Each Party shall bear its own costs and expenses and attorneys’ fees and an equal share of the arbitrators’ fees and any administrative fees of arbitration, except as provided above. (d) Statute of Limitations. In no event shall an arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the dispute, controversy or claim would be barred by the applicable Delaware statute of limitations. (e) Confidentiality. No information concerning an arbitration, beyond the names of the Parties and the relief requested, may be unilaterally disclosed to a Third Party by any Party unless required by Law. Except to the extent necessary to confirm an award or as may be required by law, neither a Party nor an arbitrator may disclose the existence, content, or results of an arbitration without the prior written consent of both Parties. Any documentary or other evidence given by a Party or witness in the arbitration shall be treated as confidential by any Party whose access to such evidence arises exclusively as a result of its participation in the arbitration, and shall not be disclosed to any Third Party (other than a witness or expert), except as may be required by Law. 80 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. (f) Excluded Claims. As used in this Section, the term “Excluded Claim” shall mean a dispute, controversy or claim that concerns (i) the scope, validity, enforceability, inventorship or infringement of a patent, patent application, trademark or copyright; or (ii) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory. 16.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to any rules of conflict of laws; provided that the United Nations Convention on Contracts for International Sale of Goods shall not apply. 16.8 Global Trade Control Laws. Parties will perform all activities under this Agreement in full compliance with all applicable economic sanctions, import, and export control laws, regulations, and orders (collectively, “Global Trade Control Laws”). 16.9 Export Control. This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States of America or other countries which may be imposed upon or related to Sangamo or Pfizer from time to time. Neither Party will knowingly transfer to the other Party any goods, software, technology, or services that are (i) controlled at a level other than EAR99, or for reasons other than anti-terrorism, under the U.S. Export Administration Regulations; (ii) controlled under the U.S. International Traffic in Arms Regulations; (iii) specifically identified as an E.U. Dual Use Item; or (iv) on an applicable export control list of a foreign country. 16.10 Restricted Markets; Restricted Parties. The Parties agree that the activities under the Agreement will not (i) be in a Restricted Market; (ii) involve individuals ordinarily resident in a Restricted Market; or (iii) include companies, organizations, or Governmental Authorities from or located in a Restricted Market. Each Party represents and warrants that neither such Party, nor any other Person, directly or indirectly, performing activities under this Agreement on such Party’s behalf, are on any applicable Restricted Party Lists, and that such individuals are not employed by any Person on any of the applicable Restricted Party Lists. In the event that any of the Persons noted above, or any Third Party directly or indirectly engaged by such a Person, becomes listed on a Restricted Party List during the Term of this Agreement, the Party responsible for such Person will cease the activities that involve such Person and immediately notify the other Party. Each Party shall conduct Restricted Party Screening of the names and addresses of all employees and subcontractors invited to participate in activities under this Agreement by that Party, and shall require its subcontractors to conduct such screening of its employees and subcontractors or represent that no such subcontractor or employee is on an applicable Restricted Party List. Notwithstanding any cure periods set forth herein, both Parties acknowledge that listing of the other Party on a Restricted Party List, shall be grounds for immediate termination of this Agreement, for cause, with no cure period. For purposes of this Agreement, “Restricted Markets” means the Crimea region of Ukraine, Cuba, Iran, North Korea, Sudan, and Syria, and any other country that, during the Term of this Agreement, is or becomes subject to comprehensive trade sanctions by the United States and/or designated as a state sponsor of terrorism pursuant to section 6(j) of the Export Administration Act, section 40 of the Arms Export Control Act, and section 620A of the Foreign Assistance Act; “Restricted Party Lists” include, but are not limited to, the list of sanctioned entities maintained by the United Nations; the Specially Designated Nationals and Blocked Persons List, Foreign Sanctions Evaders List, and the Sectoral Sanctions
81 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Identifications List, as administered by the U.S. Department of the Treasury Office of Foreign Assets Control; the U.S. Denied Persons List, the U.S. Entity List, and the U.S. Unverified List, all administered by the U.S. Department of Commerce; the entities subject to restrictive measures and the Consolidated List of Persons, Groups and Entities Subject to E.U. Financial Sanctions, as implemented by the E.U. Common Foreign & Security Policy; the List of Excluded Individuals / Entities, as published by the U.S. Health and Human Services – Office of Inspector General; any lists of prohibited or debarred parties established under the U.S. Federal Food Drug and Cosmetic Act; the list of persons and entities suspended or debarred from contracting with the U.S. government; and similar applicable lists of restricted parties maintained by the Governmental Authorities of the jurisdictions of import and export; and “Restricted Party Screening” includes, but is not limited to, the comparison of any individual or entity directly or indirectly involved in activities under this Agreement, against the applicable Restricted Party Lists. 16.11 Termination and Blocked Payment. If this Agreement is terminated for inclusion of a Person on a Restricted Party List, Restricted Market, or Restricted Market national in activities under this Agreement without a license or other authorization required by Global Trade Control Laws or any other violation of Global Trade Control Laws, the terminating Party shall not be responsible for any payments due to the other Party, even if activities have already occurred. Further, the other Party shall be responsible for reimbursing the terminating Party for any payments due to the terminating Party under this Agreement that are blocked due to inclusion of a Person on a Restricted Party List, Restricted Market, or Restricted Market national in activities under this Agreement without a license or other authorization required by Global Trade Control Laws or any other violation of Global Trade Control Laws. 16.12 Entire Agreement; Amendments. This Agreement, together with the Exhibits hereto, contains the entire understanding of the Parties with respect to the subject matter hereof. Any other express or implied agreements and understandings, negotiations, writings and commitments, either oral or written, with respect to the subject matter hereof are superseded by the terms of this Agreement. The Exhibits to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representative(s) of both Parties hereto. The Parties agree that the Confidentiality Agreement between the Parties dated as of January 4, 2017, as amended, is hereby terminated, but each Party’s information that was the subject of confidentiality obligations under such Confidentiality Agreement shall been deemed to be Confidential Information of such Party under this Agreement. 16.13 Headings. The captions to the several Articles, Sections (and subsections) and Exhibits hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several Articles, Sections and Exhibits hereof. 16.14 Independent Contractors. It is expressly agreed that Sangamo and Pfizer shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither Sangamo nor Pfizer shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party. Neither Party shall report this Agreement or the relationship between the Parties as a partnership for tax purposes unless required by law. 82 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. 16.15 Waiver. No provision of this Agreement will be waived by any act, omission or knowledge of a Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving Party. The waiver by either Party hereto of any right hereunder, or of any failure of the other Party to perform, or of any breach by the other Party, shall not be deemed a waiver of any other right hereunder or of any other breach by or failure of such other Party whether of a similar nature or otherwise. 16.16 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law. 16.17 Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply. 16.18 Business Day Requirements. In the event that any notice or other action or omission is required to be taken by a Party under this Agreement on a day that is not a Business Day then such notice or other action or omission shall be deemed to be required to be taken on the next occurring Business Day. 16.19 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as necessary or appropriate in order to carry out the purposes and intent of this Agreement. 16.20 No Third Party Rights or Obligations. No provision of this Agreement will be deemed or construed in any way to result in the creation of any rights or obligation in any Person not a Party to this Agreement. However, Pfizer may decide, in its sole discretion, to use one or more of its Affiliates to perform its obligations and duties hereunder, provided that Pfizer will remain liable hereunder for the performance by any such Affiliates of any such obligations. 16.21 Counterparts. This Agreement may be executed in two or more counterparts by original signature, facsimile or PDF files, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. <REMAINDER OF PAGE INTENTIONALLY LEFT BLANK> [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. IN WITNESS WHEREOF, the Parties intending to be bound have caused this Collaboration and License Agreement to be executed by their duly authorized representatives as of the Effective Date. Sangamo Therapeutics, Inc. By: /s/ Sandy Macrae Name: Dr. Sandy Macrae Title: President and CEO Pfizer Inc. By: /s/ Mikael Dolsten Name: Mikael Dolsten, M.D., Ph.D. Title: President, Worldwide Research and Development [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit A Licensed Patents Reference Number Country Status Title Application Filing Date Publication Number Inventors [*] [*] [*] [*] [*] [*] [*] [*] (2 pages omitted)
[*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit B Transfer Plan [*] (2 pages omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit C SB-525 Development Plan [*] (5 pages omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit D SANGAMO THERAPEUTICS AND PFIZER ANNOUNCE COLLABORATION FOR HEMOPHILIA A GENE THERAPY Collaboration combines Pfizer’s heritage in Rare Disease, capabilities in gene therapy, and expertise in hemophilia with Sangamo’s deep knowledge in genomic therapies Richmond, Calif., May 10, 2017 – Sangamo Therapeutics, Inc. (Nasdaq: SGMO) and Pfizer Inc. (NYSE: PFE) today announced an exclusive, global collaboration and license agreement for the development and commercialization of gene therapy programs for Hemophilia A, including SB- 525, one of Sangamo’s four lead product candidates, which Sangamo expects will enter the clinic this quarter. “Sangamo brings deep scientific and technical expertise across multiple genomic platforms, and we look forward to working together to advance this potentially transformative treatment for patients living with Hemophilia A,” said Mikael Dolsten, MD, PhD, President of Worldwide Research and Development at Pfizer. “Pfizer has made significant investments in gene therapy over the last few years and we are building an industry-leading expertise in recombinant adeno- associated virus (rAAV) vector design and manufacturing. We believe SB-525 has the potential to be a best-in-class therapy that may provide patients with stable and durable levels of Factor VIII protein with a single administration treatment.” “With a long-standing heritage in rare disease, including hemophilia, Pfizer is an ideal partner for our Hemophilia A program,” said Dr. Sandy Macrae, Sangamo’s Chief Executive Officer. “We believe Pfizer’s end-to-end gene therapy capabilities will enable comprehensive development and commercialization of SB-525, which could potentially benefit Hemophilia A patients around the world. This collaboration also marks an important milestone for Sangamo as we continue to make progress in the translation of our ground-breaking research into new genomic therapies to treat serious, genetically tractable diseases.” Under the terms of the collaboration agreement, Sangamo will receive a $70 million upfront payment from Pfizer. Sangamo will be responsible for conducting the SB-525 Phase 1/2 clinical study and certain manufacturing activities. Pfizer will be operationally and financially responsible for all subsequent research, development, manufacturing and commercialization activities for SB- 525 and additional products, if any. Sangamo is eligible to receive potential milestone payments of up to $475 million, including up to $300 million for the development and commercialization of SB-525 and up to $175 million for additional Hemophilia A gene therapy product candidates that may be developed under the collaboration. Sangamo will also receive tiered double-digit royalties on net sales. Additionally, Sangamo will be collaborating with Pfizer on manufacturing and technical operations utilizing viral delivery vectors. Gene therapy is a potentially transformational technology for patients, focused on highly [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. specialized, one-time, treatments that address the root cause of diseases caused by genetic mutation. The technology involves introducing genetic material into the body to deliver a correct copy of a gene to a patient’s cells to compensate for a defective one. The genetic material can be delivered to the cells by a variety of means, most frequently using a viral vector such as rAAV. There have been no gene therapy products approved in the U.S. to date. Hemophilia A is a rare blood disorder caused by a genetic mutation resulting in insufficient activity of Factor VIII, a blood clotting protein the body uses to stop bleeding. There are approximately 16,000 patients in the U.S. and more than 150,000 worldwide with Hemophilia A. SB-525 is comprised of a rAAV vector carrying a Factor VIII gene construct driven by a proprietary, synthetic, liver-specific promoter. The U.S. Food and Drug Administration has cleared initiation of human clinical trials for SB-525, which also has been granted orphan drug designation. Sangamo is on track this quarter to start a Phase 1/2 clinical trial to evaluate safety and to measure blood levels of Factor VIII protein and other efficacy endpoints. Conference Call Sangamo will host a conference call today, May 10, 2017 at 5:00 p.m. ET, which will be open to the public, to discuss the details of the collaboration and the Company’s first quarter business and financial results. The call will also be webcast live and can be accessed via a link the Sangamo Therapeutics website in the Investors and Media section under Events and Presentations. A replay of the webcast will also be available for one week after the call. The conference call dial-in numbers are (877) 377-7553 for domestic callers and (678) 894-3968 for international callers. The conference ID number for the call is 15225000. For those unable to listen in at the designated time, a conference call replay will be available for one week following the conference call, from approximately 8:00 p.m. ET on May 10, 2017 to 11:59 p.m. ET on May 17, 2017. The conference call replay numbers for domestic and international callers are (855) 859- 2056 and (404) 537-3406, respectively. The conference ID number for the replay is 15225000. About Sangamo Therapeutics Sangamo Therapeutics, Inc. is focused on translating ground-breaking science into genomic therapies that transform patients' lives using the company's industry leading platform technologies in genome editing, gene therapy, gene regulation and cell therapy. The Company is advancing Phase 1/2 clinical programs in Hemophilia A and Hemophilia B, and lysosomal storage disorders MPS I and MPS II. Sangamo has a strategic collaboration with Pfizer for Hemophilia A, with Bioverativ Inc. for hemoglobinopathies, including beta thalassemia and sickle cell disease, and with Shire International GmbH to develop therapeutics for Huntington's disease. In addition, it has established strategic partnerships with companies in non-therapeutic applications of its technology, including Sigma-Aldrich Corporation and Dow AgroSciences. For more information about Sangamo, visit the Company's website at www.sangamo.com. Forward Looking Statements This press release may contain forward-looking statements based on Sangamo’s current expectations. These forward-looking statements include, without limitation references relating to the collaboration agreement with Pfizer, potential milestone payments and royalties under the collaboration agreement, ability of the collaboration to advance and commercialize SB-525 as a treatment for Hemophilia A, research and development of therapeutic applications of Sangamo's genomic therapy platforms, the expected timing of clinical trials of lead programs, including SB- 525 and the release of data from these trials, the impact of Sangamo’s clinical trials on the field of genetic medicine and the benefit of orphan drug status. Actual results may differ materially from these forward-looking statements due to a number of factors, including uncertainties relating to
[*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. substantial dependence on the clinical success of lead therapeutic programs, the initiation and completion of stages of our clinical trials, whether the clinical trials will validate and support the tolerability and efficacy of ZFNs, technological challenges, Sangamo’s ability to develop commercially viable products and technological developments by our competitors. For a more detailed discussion of these and other risks, please see Sangamo’s SEC filings, including the risk factors described in its Annual Report on Form 10-K and its most recent Quarterly Report on Form 10-Q. Sangamo Therapeutics, Inc. assumes no obligation to update the forward-looking information contained in this press release. Pfizer and Rare Disease Rare disease includes some of the most serious of all illnesses and impacts millions of patients worldwide,i representing an opportunity to apply our knowledge and expertise to help make a significant impact on addressing unmet medical needs. The Pfizer focus on rare disease builds on more than two decades of experience, a dedicated research unit focusing on rare disease, and a global portfolio of multiple medicines within a number of disease areas of focus, including hematology, neuroscience, and inherited metabolic disorders.ii Pfizer Rare Disease combines pioneering science and deep understanding of how diseases work with insights from innovative strategic collaborations with academic researchers, patients, and other companies to deliver transformative treatments and solutions. We innovate every day leveraging our global footprint to accelerate the development and delivery of groundbreaking medicines and the hope of cures. Click here to learn more about our Rare Disease portfolio and how we empower patients, engage communities in our clinical development programs, and support programs that heighten disease awareness and meet the needs of patient families. Pfizer Inc: Working together for a healthier world® At Pfizer, we apply science and our global resources to bring therapies to people that extend and significantly improve their lives. We strive to set the standard for quality, safety and value in the discovery, development and manufacture of health care products. Our global portfolio includes medicines and vaccines as well as many of the world's best-known consumer health care products. Every day, Pfizer colleagues work across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. Consistent with our responsibility as one of the world's premier innovative biopharmaceutical companies, we collaborate with health care providers, governments and local communities to support and expand access to reliable, affordable health care around the world. For more than 150 years, Pfizer has worked to make a difference for all who rely on us. For more information, please visit us at www.pfizer.com. In addition, to learn more, follow us on Twitter at @Pfizer and @Pfizer_News, LinkedIn, YouTube and like us on Facebook at Facebook.com/Pfizer. Pfizer Disclosure Notice: The information contained in this release is as of May 10, 2017. Pfizer assumes no obligation to update forward-looking statements contained in this release as the result of new information or future events or developments. This release contains forward-looking information about an investigational Hemophilia A agent, SB-525, including its potential benefits, that involves substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Risks and uncertainties include, among other things, the uncertainties inherent in research and [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. development, including the ability to meet anticipated clinical study commencement and completion dates as well as the possibility of unfavorable study results, including unfavorable new clinical data and additional analyses of existing clinical data; risks associated with initial data, including the risk that the final results of the Phase I/2 study for SB-525 and/or additional clinical trials may be different from (including less favorable than) the initial data results and may not support further clinical development; whether and when any applications may be filed with regulatory authorities for SB-525; whether and when regulatory authorities may approve any such applications, which will depend on the assessment by such regulatory authorities of the benefit- risk profile suggested by the totality of the efficacy and safety information submitted; decisions by regulatory authorities regarding labeling and other matters that could affect the availability or commercial potential of SB-525; and competitive developments. A further description of risks and uncertainties can be found in Pfizer's Annual Report on Form 10- K for the fiscal year ended December 31, 2016 and in its subsequent reports on Form 10-Q, including in the sections thereof captioned "Risk Factors" and "Forward-Looking Information and Factors That May Affect Future Results", as well as in its subsequent reports on Form 8-K, all of which are filed with the U.S. Securities and Exchange Commission and available at www.sec.gov and www.pfizer.com. Contact Sangamo Therapeutics, Inc. McDavid Stilwell 510-970-6000, x219 mstilwell@sangamo.com Varant Shirvanian 510-970-6000 x205 vshirvanian@sangamo.com ### i Rare Disease: Facts and Statistics. http://globalgenes.org/rare-diseases-facts-statistics. Accessed September 7, 2016. ii Pfizer Inc. Rare Disease. http://www.pfizer.com/health-and-wellness/health-topics/rare-diseases/areas-of-focus. Accessed December 20, 2016. [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit E Data Package Elements [*] (2 pages omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit F Manufacturing Tech Transfer Plan [*] (2 pages omitted)
[*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit G Specified Patents [*] (3 pages omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit H Work Statement #1 [*] (33 pages omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit I Exceptions to Sangamo Representations and Warranties [*] (1 page omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit J Pre-clinically Developed Products and Additional Products [*] (1 page omitted)
[*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Exhibit K Current Licenses Party Agreement Address Effective Date [*] [*] [*] [*] (1 page omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Schedule 2.1(d) Sangamo Third Party Agreement Provisions [*] (4 pages omitted) [*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. Schedule 4.9 Sangamo Subcontractors Subcontractor Address Category Description [*] [*] [*] [*] (1 page omitted)
Exhibit 21.1
Subsidiaries of the Company
Gendaq Limited (U.K.)
Ceregene Inc. (Delaware)
Sangamo Therapeutics France S.A.S. (France)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
| 1 | Registration Statements (Forms S-8 No. 333-189621, 333-206173, 333-221827, 333-225552, 333-241033, and 333-249482) pertaining to the Amended and Restated 2013 Stock Incentive Plan, the Amended and Restated 2018 Equity Incentive Plan, and the 2020 Employee Stock Purchase Plan of Sangamo Therapeutics, Inc., and | ||||
| 2 | Registration Statement (Form S-3 No. 333-255792) and related prospectuses of Sangamo Therapeutics, Inc.; | ||||
of our reports dated February 22, 2023, with respect to the consolidated financial statements of Sangamo Therapeutics, Inc. and the effectiveness of internal control over financial reporting of Sangamo Therapeutics, Inc. included in this Annual Report (Form 10-K) of Sangamo Therapeutics, Inc. for the year ended December 31, 2022.
/s/ Ernst & Young LLP
San Mateo, California
February 22, 2023
Exhibit 31.1
CERTIFICATION
I, Alexander D. Macrae, certify that:
1.I have reviewed this annual report on Form 10-K of Sangamo Therapeutics, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 22, 2023 | |||||
| /s/ ALEXANDER D. MACRAE | |||||
| Alexander D. Macrae | |||||
| President and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Exhibit 31.2
CERTIFICATION
I, Prathyusha Duraibabu, certify that:
1.I have reviewed this annual report on Form 10-K of Sangamo Therapeutics, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 22, 2023 | |||||
| /s/ PRATHYUSHA DURAIBABU | |||||
| Prathyusha Duraibabu | |||||
| Senior Vice President and Chief Financial Officer | |||||
| (Principal Financial and Accounting Officer) | |||||
Exhibit 32.1
Certifications Pursuant to 18 U.S.C. §1350, as Adopted
Pursuant to §906 of the Sarbanes-Oxley Act of 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, Alexander Macrae, President and Chief Executive Officer of Sangamo Therapeutics, Inc. (the “Company”), and Prathyusha Duraibabu, Senior Vice President and Chief Financial Officer of the Company, each hereby certifies in such capacity, that, to the best of his or her knowledge:
(1) the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, to which this Certification is attached as Exhibit 32.1 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ ALEXANDER D. MACRAE | |||||
| Alexander D. Macrae | |||||
| President and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
| Date: February 22, 2023 | |||||
| /s/ PRATHYUSHA DURAIBABU | |||||
| Prathyusha Duraibabu | |||||
| Senior Vice President and Chief Financial Officer | |||||
| (Principal Financial and Accounting Officer) | |||||
| Date: February 22, 2023 | |||||
This certification accompanies the Annual Report on Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Sangamo Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Sangamo Therapeutics, Inc. and will be retained by Sangamo Therapeutics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.