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What changed in Alector, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Alector, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+609 added−599 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Alector, Inc.'s 2023 10-K

609 paragraphs added · 599 removed · 461 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

178 edited+55 added−81 removed264 unchanged
Biggest changeThis allows us to differentially modulate microglia activity as needed to counteract a given degenerative brain disorder. 7 Findings in the fields of human genetics, immunology, and neuroscience have indicated that as a result of normal aging or genetic mutations, the beneficial functions of the microglia deteriorate leading to dysfunction of neuronal connections, massive death of neurons and neurodegeneration.
Biggest changeFindings in the fields of human genetics, immunology, and neuroscience have indicated that as a result of normal aging or genetic mutations, the beneficial functions of the microglia deteriorate leading to dysfunction of neuronal connections, massive death of neurons, and neurodegeneration. 6 We believe our therapies that focus on harnessing the power of microglia may improve neurodegenerative disease outcomes either as standalone therapies or in combination with anti-amyloid beta targeted therapies.
Microglia also control the survival and function of astrocytes and oligodendrocytes, the main brain support cells which control brain metabolism and blood supply and replenish aged or damaged nerve fibers after injury. Further, microglia have been shown to modulate the permeability of the blood brain barrier allowing access to peripheral immune cells, to assist against infection or injury.
Microglia also control the survival and function of astrocytes and oligodendrocytes, the main brain support cells which control brain metabolism and blood supply and replenish aged or damaged nerve fibers after injury. Further, microglia have been shown to modulate the permeability of the blood brain barrier allowing peripheral immune cells to access the brain and assist against infection or injury.
Ownership of intellectual property arising from the research is generally owned by the party that invents or creates the applicable intellectual property, although certain categories of intellectual property are specifically assigned to one party or the other.
Ownership of intellectual property arising from the research is generally owned by the party that invents or creates the applicable intellectual property, although certain categories of intellectual property are specifically assigned to one party or the other.
Generally, each party has the obligation to prosecute, maintain, defend, and enforce its own patents, but we are subject to certain contractual restrictions on our ability to prosecute, practice, and license certain of our patents that arose out of the research. These restrictions are lifted once we exercise the option described below as to such patents. Exercise of Options.
Generally, each party has the obligation to prosecute, maintain, defend, and enforce its own patents, but we are subject to certain contractual restrictions on our ability to prosecute, practice, and license certain of our patents that arose out of the research. These restrictions are lifted once we exercise the option described below as to such patents. Exercise of Options.
U.S. Patent-Term Restoration and Marketing Exclusivity Depending upon the timing, duration and specifics of FDA approval of any future product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act.
Patent-Term Restoration and Marketing Exclusivity Depending upon the timing, duration and specifics of FDA approval of any future product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act.
Our checkpoint therapies anticipated to act independently and in combination Our Research and Discovery Platform Our research and drug discovery platform leverages human genetic datasets, advanced tools in bioinformatics and imaging, and insights in neurodegeneration and immunology to: (1) identify immune system targets that play a critical role in the development of multiple neurodegenerative diseases, and rapidly develop antibody therapeutics to these targets, (2) interrogate and prioritize those targets for activity using biomarkers and related proprietary assays and preclinical models, and (3) clinically test product candidates, including in genetically defined patient populations that may be most likely to respond to treatment.
Our checkpoint therapies are anticipated to act independently and in combination Our Research and Discovery Platform Our research and drug discovery platform leverages human genetic datasets, advanced tools in bioinformatics and imaging, and insights in neurodegeneration and immunology to: (1) identify immune system targets that play a critical role in the development of multiple neurodegenerative diseases, and rapidly develop antibody therapeutics to these targets, (2) interrogate and prioritize those targets for activity using biomarkers and related proprietary assays and preclinical models, and (3) clinically test product candidates, including in genetically defined patient populations that may be most likely to respond to treatment.
At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted. • Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval.
At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted. • Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its 29 safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product approval.
Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength or for 39 a modification to the structure of the biological product that does not result in a change in safety, purity, or potency.
Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength or for a modification to the structure of the biological product that does not result in a change in safety, purity, or potency.
Mutations in a single copy of PGRN result in a 50% or greater decrease in the level of PGRN and result in a greater than 90% probability of developing FTD. (1) Rhinn H, Tatton N, McCaughey S, Kurnellas M, Rosenthal A. Progranulin as a therapeutic target in neurodegenerative diseases. Trends in Pharmacological Sciences. 2022 Aug; 43(8):641-652. DOI: 10.1016/j.tips.2021.11.015. PMID: 35039149.
Mutations in a single copy of GRN result in a 50% or greater decrease in the level of PGRN and result in a greater than 90% probability of developing FTD. (1) Rhinn H, Tatton N, McCaughey S, Kurnellas M, Rosenthal A. Progranulin as a therapeutic target in neurodegenerative diseases. Trends in Pharmacological Sciences. 2022 Aug; 43(8):641-652. DOI: 10.1016/j.tips.2021.11.015. PMID: 35039149.
As noted above, the marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. An increasing emphasis on cost containment measures in the United States has increased and we expect will continue to increase the pressure on pharmaceutical pricing.
As noted above, the marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. An increasing emphasis on cost containment measures in the United States has increased and we expect will continue to 39 increase the pressure on pharmaceutical pricing.
We believe that building a fully integrated research, development, and ultimately commercial company will enable us to develop therapies more rapidly and efficiently for patients and realize the full potential of our immuno-neurology approach and discovery capabilities. • Applying our proprietary capabilities to rapidly advance our product candidates through clinical proof-of-concept studies and beyond.
We believe that building a fully integrated research, development, and ultimately commercial company will enable us to develop therapies more rapidly and efficiently for patients and realize the full potential of our immuno-neurology approach and discovery capabilities. 4 • Applying our proprietary capabilities to rapidly advance our product candidates through clinical proof-of-concept studies and beyond.
Our clinical stage neurodegenerative disease programs Significant Scientific Data Support Our Hypothesis Understanding how the brain’s immune cells affect its structure and function, in both normal and diseased states, is in our view, the key to understanding many neurological diseases. Human genetic evidence has supported the importance of the interactions between the brain and the innate immune system.
Our clinical stage neurodegenerative disease programs pathways Significant Scientific Data Support Our Hypothesis Understanding how the brain’s immune cells affect its structure and function, in both normal and diseased states, is in our view, the key to understanding many neurological diseases. Human genetic evidence has supported the importance of the interactions between the brain and the innate immune system.
Some of the pharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of the neurodegenerative disease indications for which we have research programs, including FTD, Alzheimer’s disease, Parkinson’s disease, and ALS, include large companies with significant financial resources, such as Biogen, Eli Lilly, Merck and Roche Holding AG.
Some of the pharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of the neurodegenerative disease indications for which we have research programs, including FTD, Alzheimer’s disease, Parkinson’s disease, and ALS, include large companies with significant financial resources, such as Biogen, Eli Lilly, Merck, Roche Holding AG, and Eisai.
Additionally, no user fees are assessed on NDAs or BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication. The FDA reviews all submitted NDAs and BLAs before it accepts them for filing, and may request additional information rather than accepting the NDA or BLA for filing.
Additionally, no user fees are assessed on NDAs or BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication. 30 The FDA reviews all submitted NDAs and BLAs before it accepts them for filing, and may request additional information rather than accepting the NDA or BLA for filing.
CSF samples were taken from the five highest dose cohorts. The data shown are derived from analysis of CSF samples from 34 healthy volunteers (* denotes p Our TREM2 Preclinical Data AL002 binds to TREM2 on the surface of microglia and is designed to optimize microglial activity through the phosphorylation of Spleen Associated Tyrosine Kinase (Syk).
CSF samples were taken from the five highest dose cohorts. The data shown are derived from analysis of CSF samples from 34 healthy volunteers (* denotes p Our TREM2 Preclinical Data AL002 binds to TREM2 on the surface of microglia and is designed to optimize microglial activity through the phosphorylation of Spleen Associated Tyrosine Kinase.
However, we will remain disciplined about advancing this strategy, leveraging our discovery capabilities to inform expansion areas of maximum value and highest probability of success. • Continuing to focus on discovering new targets and product candidates, validated by human genetics, to fulfill the full potential of our insights and platform.
We will remain disciplined about advancing this strategy, leveraging our discovery capabilities to inform expansion areas of maximum value and highest probability of success. • Continuing to focus on discovering new targets and product candidates, validated by human genetics, to fulfill the full potential of our insights and platform.
We then seek to engineer immune modulating antibody product candidates to functionally counteract the harmful consequence of these genetic mutations. We leverage in vitro and in vivo functional tools to validate the activity of our product candidates and their ability to cross the blood brain barrier enough to be therapeutically effective. • Biomarker Selection .
We then seek to engineer immune modulating antibody product candidates to functionally counteract the harmful consequence of these genetic mutations. We leverage in vitro and in vivo functional tools to validate the activity of our product candidates and their ability to cross the blood brain barrier enough to be therapeutically effective. 7 • Biomarker Selection .
In our Phase 1 clinical trial, AL002 demonstrated tolerability, target engagement, and proof-of-mechanism in the central nervous systems of healthy volunteers and Alzheimer's disease patients. Figure 19. In healthy volunteers, a dose dependent decrease in sTREM2 and an increase in CSF-1R, a biomarker of microglial activation was observed in our AL002 Phase 1 clinical trial.
In our Phase 1 clinical trial, AL002 demonstrated tolerability, target engagement, and proof-of-mechanism in the central nervous systems of healthy volunteers and Alzheimer’s disease patients. 19 Figure 17. In healthy volunteers, a dose dependent decrease in sTREM2 and an increase in CSF-1R, a biomarker of microglial activation was observed in our AL002 Phase 1 clinical trial.
Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the 34 FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.
Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.
We utilize state of the art techniques such as CRISPR Activation and Inhibition, single cell transcriptomics, proteomics, metabolomics, microscopic and biochemical readouts in relevant in vitro systems such as hiPSC microglia and in vivo systems such as mouse/rat models to elucidate the 8 immune dysfunction caused by these mutations.
We utilize state of the art techniques such as CRISPR Activation and Inhibition, single cell transcriptomics, proteomics, metabolomics, microscopic and biochemical readouts in relevant in vitro systems such as hiPSC microglia and in vivo systems such as mouse/rat models to elucidate the immune dysfunction caused by these mutations.
Our first product candidate, latozinemab, is intended to treat orphan disorders, including genetic forms of FTD such as in patients that are missing a functional copy of the PGRN gene (FTD- GRN ). Our second PGRN product candidate, AL101, is intended to treat widely prevalent neurodegenerative disorders such as Alzheimer’s disease and Parkinson’s disease, in addition to FTD.
Our first product candidate, latozinemab, is intended to treat orphan disorders, including genetic forms of FTD such as in patients that are missing a functional copy of the GRN gene (FTD- GRN ). Our second PGRN product candidate, AL101, is intended to treat widely prevalent neurodegenerative disorders such as Alzheimer’s disease and Parkinson’s disease.
These trials may include comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing. 32 Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.
These trials may include comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing. Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.
The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. 41 There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices, including U.S.
The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices, including U.S.
Not only do mutations in a single copy of TREM2 increase the risk of Alzheimer’s disease significantly, but Alzheimer’s disease patients with TREM2 mutations exhibit an earlier onset of symptoms by three years and an increased rate of brain volume loss compared to individuals without such mutations.
Not only do mutations in a single copy of TREM2 increase the risk of Alzheimer’s disease significantly, but Alzheimer’s disease patients with TREM2 mutations also exhibit an earlier onset of symptoms by three years and an increased rate of brain volume loss compared to individuals without such mutations.
Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.
Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any 38 reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.
In the two multiple dose 17 (MD) cohorts, 27 healthy volunteers received either AL101 30 mg/kg IV every four weeks (q4w) for a total of four doses [n=11] or AL101 300 mg subcutaneously (SC) every two weeks (q2w) for a total of seven doses [n=13]. Three volunteers received MD IV placebo.
In the two multiple dose (MD) cohorts, 27 healthy volunteers received either AL101 30 mg/kg IV every four weeks (q4w) for a total of four doses [n=11] or AL101 300 mg subcutaneously (SC) every two weeks (q2w) for a total of seven doses [n=13]. Three volunteers received MD IV placebo.
Additionally, GSK or we can terminate the GSK Agreement in connection with a material breach of the GSK Agreement by the other party that remains uncured for a specified period of time. Strategic Alliance with AbbVie Overview In October 2017, we entered into the Co-Development and Option Agreement with AbbVie.
Additionally, GSK or we can terminate the 21 GSK Agreement in connection with a material breach of the GSK Agreement by the other party that remains uncured for a specified period of time. Strategic Alliance with AbbVie Overview In October 2017, we entered into the Co-Development and Option Agreement with AbbVie.
The primary goal of our global strategic collaboration with AbbVie is to co-develop and commercialize therapeutics to treat Alzheimer’s and other neurodegenerative diseases. 24 Under the AbbVie Agreement, we granted AbbVie an exclusive option to global development and commercialization for our TREM2 and SIGLEC 3 programs.
The primary goal of our global strategic collaboration with AbbVie is to co-develop and commercialize therapeutics to treat Alzheimer’s and other neurodegenerative diseases. Under the AbbVie Agreement, we granted AbbVie an exclusive option to global development and commercialization for our TREM2 and SIGLEC 3 programs.
The 2019 Adimab Agreement expires, on a product-by-product and country-by-country basis, on the later of the twelfth anniversary of the first commercial sale of such product in such country and expiration of the last patent covering such product in such country, or, in the event no product is optioned under the 2019 Adimab Agreement, upon the last to expire option period.
The 2019 Adimab Agreement expires, on a product-by-product and country-by-country basis, on the later of the twelfth anniversary of the first commercial sale of such product in such country and expiration of the last patent covering such product in such country, or, in 24 the event no product is optioned under the 2019 Adimab Agreement, upon the last to expire option period.
Upon expiration, the licenses Adimab granted to us with respect to products for which we have exercised our option will continue on a non-exclusive, royalty-free basis. 27 Overview—2021 Adimab Collaboration Agreement (2021 Adimab Agreement) In 2021, we entered into another Adimab collaboration agreement (the 2021 Adimab Agreement).
Upon expiration, the licenses Adimab granted to us with respect to products for which we have exercised our option will continue on a non-exclusive, royalty-free basis. Overview—2021 Adimab Collaboration Agreement (2021 Adimab Agreement) In 2021, we entered into another Adimab collaboration agreement (the 2021 Adimab Agreement).
To support marketing approval, the data submitted must be sufficient in 33 quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of FDA. FDA approval of an NDA or BLA must be obtained before a drug or biologic may be marketed in the United States.
To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of FDA. FDA approval of an NDA or BLA must be obtained before a drug or biologic may be marketed in the United States.
A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product.
A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable product based on the 36 reference biological product until four years after the date of first licensure of the reference product.
By restoring healthy immune function in the brain, we believe we can simultaneously counteract the multiple independent pathologies responsible for neurodegeneration. 5 Our Strategy Our goal is to develop therapies that harness the immune system to combat neurodegenerative diseases.
By restoring healthy immune function in the brain, we believe we can simultaneously counteract the multiple independent pathologies responsible for neurodegeneration. Our Strategy Our goal is to develop therapies that harness the immune system to combat neurodegenerative diseases.
Additionally, AbbVie or we can terminate the AbbVie Agreement in connection with a material breach of the AbbVie Agreement by the other party that remains uncured for a specified period of time. Adimab Collaboration Agreements Overview – 2014 Adimab Collaboration Agreement (2014 Adimab Agreement) In 2014, we entered into the 2014 Adimab Collaboration Agreement (the 2014 Adimab Agreement).
Additionally, AbbVie or we can terminate the AbbVie Agreement in connection with a material breach of the AbbVie Agreement by the other party that remains uncured for a specified period of time. 22 Adimab Collaboration Agreements Overview – 2014 Adimab Collaboration Agreement (2014 Adimab Agreement) In 2014, we entered into the 2014 Adimab Collaboration Agreement (the 2014 Adimab Agreement).
The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics (SPC), and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Member States Concerned) for their approval.
The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics (SPC), and a draft of the labeling and 37 package leaflet, which are sent to the other Member States (referred to as the Member States Concerned) for their approval.
Our patent portfolio is intended to cover our product candidates and related components, their methods of use and processes for their manufacture, our proprietary reagents and assays and any other inventions that are commercially important to our business.
Our patent portfolio is intended to cover our product candidates and related components, their methods of use and processes for their manufacture, our proprietary reagents, assays and platforms, and any other inventions that are commercially important to our business.
Mutations in a single copy of the PGRN gene result in a drop of between 50% and 70% in the level of PGRN and consequently lead to development of FTD with about 90% penetrance by 75 years of age.
Mutations in a single copy of the GRN gene result in a drop of between 50% and 70% in the level of PGRN and consequently lead to development of FTD with about 90% penetrance by 75 years of age.
We also rely on trademarks as well as trade secret protection of our confidential information and know-how relating to our proprietary technology, platforms and product candidates. We believe that we have substantial know-how and trade secrets relating to our technology and product candidates.
We also rely on trademarks as well as trade secret protection of our confidential information and know-how relating to our proprietary technology, platforms, methods and product candidates. We believe that we have substantial know-how and trade secrets relating to our technology and product candidates.
Generally, each party has the first right to prosecute and maintain its own patents. We generally have the first right to prosecute and maintain joint patents prior to AbbVie’s exercise of its option for the program relating to such patent, and AbbVie has the right following its exercise of such option.
Generally, each party has the first right to prosecute and maintain its own patents. We generally have the first right to prosecute and maintain joint patents prior to AbbVie’s exercise of its option for the program relating to such patents, and AbbVie has the right following its exercise of such option.
Under the 2014 Adimab Agreement, we are required to fund, and we and Adimab LLC (Adimab) are required to use commercially reasonable efforts to conduct, certain research to discover and optimize antibodies directed against 25 targets selected by us.
Under the 2014 Adimab Agreement, we are required to fund, and we and Adimab LLC (Adimab) are required to use commercially reasonable efforts to conduct, certain research to discover and optimize antibodies directed against targets selected by us.
In the case of a termination before expiration of the 2014 Adimab Agreement, we would have certain continuing payment obligations to Adimab, or would be required to adhere to certain restrictions as to the fruits of the collaboration.
In 23 the case of a termination before expiration of the 2014 Adimab Agreement, we would have certain continuing payment obligations to Adimab, or would be required to adhere to certain restrictions as to the fruits of the collaboration.
Item 1. Bu siness. Overview Our mission is to develop therapies that empower the immune system to cure neurodegeneration and other diseases. We are a clinical stage biopharmaceutical company pioneering immuno-neurology, a novel therapeutic approach for the treatment of neurodegeneration. Immuno-neurology targets immune dysfunction as a root cause of multiple pathologies that are drivers of degenerative brain disorders.
Item 1. Bu siness. Overview Our mission is to develop therapies that empower the immune system to cure neurodegeneration and other diseases. We are a clinical stage biotechnology company pioneering immuno-neurology, a novel therapeutic approach for the treatment of neurodegeneration. Immuno-neurology targets immune dysfunction as a root cause of multiple pathologies that are drivers of degenerative brain disorders.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended (Exchange Act). 43 These include our annual reports 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.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended (Exchange Act). 41 These include our annual reports 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.
Treatment with latozinemab showed a slowing of clinical progression in FTD- GRN patients enrolled in our Phase 2 trial relative to matched GENFI2 controls. Random Coefficient Model with Repeated Measurements including baseline & all available post-baseline measurements up to 12 months. In prior clinical trials, latozinemab was well tolerated and demonstrated proof of mechanism.
Treatment with latozinemab showed a slowing of clinical progression in FTD- GRN patients enrolled in our open label Phase 2 trial relative to matched GENFI2 controls. Random Coefficient Model with Repeated Measurements including baseline and all available post-baseline measurements up to 12 months. In prior clinical trials, latozinemab was well tolerated and demonstrated proof of mechanism.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-market may subject an applicant to administrative or judicial sanctions.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-market may subject an applicant to administrative or judicial sanctions.
For example, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products candidates.
Additionally, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products candidates.
In our Phase 2 trial results presented in 2021, many of these disease-relevant biomarkers of lysosomal function, complement activation, astrogliosis, and neuronal health trended toward normalization or remained stable over twelve months of treatment compared to baseline and age-matched controls. 13 Figure 9.
In our Phase 2 trial results presented in 2021, many of these disease-relevant biomarkers of lysosomal function, complement activation, astrogliosis, and neuronal health trended toward normalization or remained stable over 12 months of treatment compared to baseline and age-matched controls. 13 Figure 9.
Our TREM2 Clinical Program In January 2021, we initiated our Phase 2 trial in Alzheimer’s disease patients in early stages of the disease.
Our TREM2 Clinical Program In January 2021, we initiated INVOKE-2, our Phase 2 trial in Alzheimer’s disease patients in early stages of the disease.
In addition to composition of matter coverage, we also generally pursue claims directed to methods of making, nucleic acids, formulations, and methods of use of the product candidates. The method of use claims further include claims directed to patient selection criteria, biomarkers, disease subgroups, pharmacodynamic and clinical end-points, and dosage regimes.
In addition to composition of matter coverage, we also generally pursue claims directed to methods of making, nucleic acids, formulations, and methods of using the product candidates. The method of use claims further include claims directed to methods of treatment, patient selection criteria, biomarkers, disease subgroups, pharmacodynamic and clinical end-points, and dosage regimes.
This means that the FDA may not approve any other NDA or BLA application to market the same drug or biologic for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority to the product with orphan exclusivity, if FDA revokes the orphan drug designation, or if FDA finds that the holder of the orphan exclusivity has not assured the availability of sufficient quantities of the orphan product to meet the needs of patients with the disease or condition for which the drug was designated.
This means that the FDA may not approve any other new drug application (NDA) or biologics license application (BLA) application to market the same drug or biologic for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority to the product with orphan exclusivity, if FDA revokes the orphan drug designation, or if FDA finds that the holder of the orphan exclusivity has not assured the availability of sufficient quantities of the orphan product to meet the needs of patients with the disease or condition for which the drug was designated.
Microglia have been our focus and new scientific advances have made it possible to understand how these key innate immune cells in the brain represent a crucial focal point for potentially treating or preventing neurodegenerative diseases. 6 Figure 1.
Microglia have been our focus and new scientific advances have made it possible to understand how these key innate immune cells in the brain represent a crucial focal point for potentially treating or preventing neurodegenerative diseases. 5 Figure 1.
Following these changes, a small number of ARIA-related serious adverse events occurred in patients who are non-homozygous for the APOE e4 allele. We continue to implement earlier MRI monitoring, consistent with recently published guidelines for ARIA monitoring and management.
Following these changes, a small number of ARIA-related serious adverse events occurred in patients who are non-homozygous for the APOE e4 allele. We continue to implement earlier MRI monitoring, and are following recently published guidelines for ARIA monitoring and management.
Figure 12. vMRI data suggest slowing of ventricular enlargement and brain atrophy in latozinemab treated FTD- GRN patients enrolled in our Phase 2 trial. In our Phase 2 trial, we also assessed clinical outcomes using the CDR® plus NACC FTLD-SB scale.
Figure 12. vMRI data suggest slowing of ventricular enlargement and brain atrophy in latozinemab treated FTD- GRN patients enrolled in our open label Phase 2 trial. In our Phase 2 trial, we also assessed clinical outcomes using the CDR® plus NACC FTLD-SB scale.
There are two types of marketing authorizations. • The Community MA is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use (CHMP), of the European Medicines Agency (EMA), and is valid throughout the entire territory of the EEA.
There are two types of marketing authorizations. • The Community MA is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use (CHMP), of the EMA, and is valid throughout the entire territory of the EEA.
The PK and PD profile of AL101 following single and multiple IV doses support future development in chronic neurodegenerative conditions such as AD and PD. Figure 17. AL101 treatment increased PGRN levels in healthy volunteers enrolled in our Phase 1 trial.
The PK and PD profile of AL101 following single and multiple IV doses support future development in chronic neurodegenerative conditions such as AD and PD. Figure 15. AL101 treatment increased PGRN levels in healthy volunteers enrolled in our Phase 1 trial.
There are 11 multiple heritable forms of FTD; to date, researchers have identified over 70 inherited loss of function mutations in PGRN that lead to FTD. FTD- GRN patients represent 5% to 10% of all people with FTD. Figure 6.
There are multiple heritable forms of FTD; to date, researchers have identified over 70 inherited loss of function mutations in GRN that lead to FTD. FTD- GRN patients represent 5% to 10% of all people with FTD. Figure 6.
In addition, we continue to pursue a number of preclinical and research programs in our pipeline for indications including Alzheimer’s disease, Parkinson’s disease, and oncology. 9 Our Progranulin Program Our first development program is focused on modulating levels of PGRN, a key regulator of microglia function in the brain with strong genetic links to FTD and other neurodegenerative disorders.
In addition, we continue to pursue a number of preclinical and research programs in our pipeline for indications including Alzheimer’s disease and Parkinson’s disease. 8 Our Progranulin Program Our first development program is focused on modulating levels of PGRN, a key regulator of microglia function in the brain with strong genetic links to FTD and other neurodegenerative disorders.
In our Phase 1a trial (n=50) in healthy volunteers, latozinemab was well tolerated. In our Phase 1b portion of the trial (n=14) in FTD- GRN patients, there was a statistically significant increase in PGRN levels relative to baseline when compared to pooled placebo in plasma and in CSF at the prespecified follow-up time point.
In our Phase 1a trial (n=50) in healthy volunteers, latozinemab was well tolerated. In our Phase 1b portion of the trial (n=14) in FTD- GRN patients, there was a statistically significant increase in PGRN levels relative to baseline when compared to pooled placebo in plasma and in CSF at the pre-specified follow-up time point.
Even though the FDA has approved orphan drug status for latozinemab and AL101 for treatment of FTD, the FDA can still approve other drugs that have a different active ingredient for use in treating FTD.
Even though the FDA has approved orphan drug status for latozinemab for treatment of FTD, the FDA can still approve other drugs that have a different active ingredient for use in treating FTD.
Furthermore, AL002c, a form of AL002 with a murine Fc region, was shown to induce microglial proliferation, and amyloid plaque compaction and decrease dystrophic neurites associated with damaged neurons in a severe amyloid mouse model that expresses either the normal or genetic risk variant of the human TREM2. 21 Figure 20.
Furthermore, AL002c, a form of AL002 with a murine Fc region, was shown to induce microglial proliferation and amyloid plaque compaction and decrease dystrophic neurites associated with damaged neurons in a severe amyloid mouse model that expresses either the normal or genetic risk variant of the human TREM2. Figure 18.
A similar mechanism of action is also applicable for AL101. 12 Our PGRN Product Candidates Development Plan and Clinical Trial Results to Date Latozinemab is currently being studied in a global pivotal Phase 3 trial in both at-risk and symptomatic participants with FTD- GRN , named INFRONT-3.
A similar mechanism of action is also applicable for AL101. Our PGRN Product Candidates’ Development Plan and Clinical Trial Results to Date Latozinemab is currently being studied in a global pivotal Phase 3 trial in both at-risk and symptomatic participants with FTD- GRN , named INFRONT-3.
Individuals carry two copies of the PGRN gene that function together to produce healthy levels of PGRN throughout the body. Mutations in both copies of the PGRN gene lead to a neurodegenerative disease called neuronal ceroid lipofuscinosis, which is typified by childhood dementia, vision loss, epilepsy, and death.
Individuals carry two copies of the GRN gene that function together to produce healthy levels of PGRN throughout the body. Mutations in both copies of the GRN gene, resulting in homozygous loss-of-function, lead to a neurodegenerative disease called neuronal ceroid lipofuscinosis, which is typified by childhood dementia, vision loss, epilepsy, and death.
Based on the tolerability observed in our Phase 1a healthy volunteer trial, as well as encouraging biomarker data, we initiated the Phase 1b portion of the trial with AL002 in people with Alzheimer’s disease.
Based on the tolerability observed in our Phase 1a healthy volunteer trial, as well as encouraging biomarker data, we initiated the Phase 1b portion of the trial with AL002 in participants with Alzheimer’s disease.
We are developing therapies designed to counteract these pathologies simultaneously by restoring healthy immune function to the brain. Supporting our scientific approach, our research and drug discovery platform enables us to advance a broad portfolio of product candidates, validated by human genetics, which we believe will improve the probability of technical success over shorter development timelines.
We are developing therapies designed to counteract these pathologies simultaneously by restoring healthy immune function to the brain. Supporting our scientific approach, our research and drug discovery platform enables us to identify targets and advance a broad portfolio of product candidates, validated by human genetics, which we believe may improve the probability of technical success over shorter development timelines.
We have tested our PGRN program antibodies in various animal models, healthy volunteers, and FTD- GRN patients and have achieved significantly elevated, long-lasting levels of PGRN in the brain after intravenous administration. Figure 7. Mechanism of action for our PGRN programs. Latozinemab binds to SORT1 and prevents degradation of PGRN, increasing its circulating half-life significantly.
We have tested our PGRN program antibodies in various animal models, healthy volunteers, and FTD- GRN patients and have achieved significantly elevated, long-lasting levels of PGRN in the brain after intravenous administration. 11 Figure 7. Mechanism of action for our PGRN programs. Latozinemab (referred to as AL001) binds to SORT1 and prevents degradation of PGRN, increasing its circulating half-life significantly.
Our Approach The Role of the Innate Immune System and Microglia in Neurodegeneration Significant evidence in the last decade has shown that neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease, FTD, and ALS, are linked to a dysfunctional brain immune system.
Our Approach The Role of the Innate Immune System and Microglia in Neurodegeneration Significant evidence in the last decade has shown that neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease, FTD, and amyotrophic lateral sclerosis (ALS), are linked to a dysfunctional brain immune system.
With prominent academic collaborators, we demonstrated that AL002s, an antibody that is functionally similar to AL002 but cross-reacts to the mouse TREM2, can normalize gene expression signature associated with Alzheimer’s disease and reduce pathology in a mouse model of Alzheimer’s disease.
With prominent academic collaborators, we demonstrated that AL002s, an antibody that is functionally similar to AL002 but cross-reacts with mouse TREM2, can normalize gene expression signatures associated with Alzheimer’s disease and reduce pathology in a mouse model of Alzheimer’s disease.
MRI of frontal and temporal atrophy in FTD. Although FTD was poorly understood and thought to be rare, over the past decade the scientific community has gained a knowledge about the biology of FTD as well as an awareness of disease prevalence. FTD affects roughly 50,000 to 60,000 people in the United States and roughly 110,000 in the European Union.
MRI of frontal and temporal atrophy in FTD. 10 Although FTD was poorly understood and thought to be rare, over the past decade the scientific community has gained knowledge about the biology of FTD as well as an awareness of disease prevalence. FTD affects 50,000 to 60,000 people in the United States and approximately 110,000 in the European Union.
For more information on our collaboration with AbbVie see the section titled “Business—Strategic Alliance with AbbVie.” 19 Figure 18. Mechanism of action of our TREM2 activating product candidate AL002. There are currently no cures for Alzheimer’s disease.
For more information on our collaboration with AbbVie see the section titled “Business—Strategic Alliance with AbbVie.” Figure 16. Mechanism of action of our TREM2 activating product candidate AL002. There are currently no cures for Alzheimer’s disease.
During the term of the AbbVie Agreement, we and AbbVie are subject to exclusivity requirements prohibiting certain activities outside of the AbbVie Agreement directed to targets under the AbbVie Agreement. Intellectual Property. Ownership of intellectual property created in connection with the AbbVie Agreement is generally determined on the basis of inventorship.
During the term of the AbbVie Agreement, we and AbbVie are subject to exclusivity requirements prohibiting certain activities outside of the AbbVie Agreement directed to TREM2. Intellectual Property. Ownership of intellectual property created in connection with the AbbVie Agreement is generally determined on the basis of inventorship.
Using our drug discovery platform capabilities to identify targets that are validated by human genetics, disease biomarkers, and responsive patient populations, we believe that we are positioned for greater probability of technical success on more efficient timelines relative to historical drug development in neurodegeneration. Our Pipeline Programs Figure 3.
Using our drug discovery platform capabilities to identify targets that are validated by human genetics, disease biomarkers, and responsive patient populations, we believe that we are positioned for greater probability of technical success on more efficient timelines relative to historical drug development in neurodegeneration.
GSK may terminate the agreement with 180 days' notice at any time, but the Company does not need to repay any portion of the payments received. Governance. The collaboration is governed by a joint steering committee (JSC). The JSC may establish additional subcommittees to oversee particular projects or activities.
GSK may terminate the agreement with 180 days’ notice at any time, but we would not need to repay any portion of the payments received. Governance. The collaboration is governed by a joint steering committee (JSC). The JSC may establish additional subcommittees to oversee particular projects or activities.
The key tenets of our business strategy to achieve this goal include: • Building a leading, fully-integrated company focused on delivering innovative immuno-therapies, validated by human genetics, for the treatment of neurodegeneration.
The key tenets of our business strategy to achieve this goal include: • Building a leading, fully-integrated company focused on delivering innovative immunotherapies, validated by human genetics, for the treatment of neurodegeneration.
We therefore encourage our investors and others interested in our company to review the information that we make available on our website. 44
We therefore encourage our investors and others interested in our company to review the information that we make available on our website. 42
As of December 31, 2022, our patent portfolio contains over 50 families, which include 42 issued patents and over 500 pending patent applications that are directed to over 20 different targets and/or technologies and that are solely owned or we have rights to exclusive licenses by us.
As of December 31, 2023, our patent portfolio contains over 50 families, which include 79 issued patents and over 500 pending patent applications that are directed to over 20 different targets and/or technologies and that are solely owned or we have rights to exclusive licenses by us.
Latozinemab restores PGRN in plasma and CSF to levels seen in healthy volunteer age-matched controls In addition to assessing PGRN levels in plasma and CSF, we evaluated disease-associated proteins, including lysosomal (e.g., CTSD, LAMP1), complement (C1QB), and astrogliosis (GFAP) biomarkers along with NfL.
Latozinemab restores PGRN in plasma and CSF of FTD- GRN participants to levels seen in healthy volunteer age-matched controls. In addition to assessing PGRN levels in plasma and CSF, we evaluated disease-associated proteins, including lysosomal (e.g., CTSD, LAMP1), complement (C1QB), and astrogliosis (GFAP) biomarkers along with NfL.
Latozinemab treatment normalizes lysosomal and complement biomarkers in CSF symptomatic FTD- GRN patients enrolled in our Phase 2 trial.
Latozinemab treatment normalizes lysosomal and complement biomarkers in CSF symptomatic FTD- GRN patients enrolled in our open label Phase 2 trial.
Given the central physiological roles played by the distinct targets of our product candidates, we believe that there is significant potential for us to address multiple indications with single targets. Our goal is to expand the therapeutic and commercial potential of our targets and product candidates to additional indications, such as immuno-oncology.
Given the central physiological roles played by the distinct targets of our product candidates, we believe that there is significant potential for us to address multiple indications with single targets. Our goal is to expand the therapeutic and commercial potential of our targets and product candidates to additional indications.
The brain’s immune system undergoes gradual deterioration of functional characteristics as part of normal biological aging or due to harmful genetic mutations that are linked to neurodegeneration and are associated with accelerated senescence of the brain immune cells.
The brain’s immune system undergoes gradual deterioration of its functionality as part of normal biological aging or due to harmful genetic mutations that are linked to neurodegeneration and are associated with accelerated senescence of the brain immune cells.
The CDR® plus NACC FTLD-SB is the Clinical Dementia Rating Scale plus National Alzheimer’s Coordinating Center frontotemporal lobar degeneration sum of boxes rating scale developed for patients with FTD. Latozinemab treatment was estimated to slow disease progression by 48% in 12 patients at twelve months. Figure 13.
The CDR® plus NACC FTLD-SB is the Clinical Dementia Rating Scale plus National Alzheimer’s Coordinating Center frontotemporal lobar degeneration sum of boxes rating scale developed for patients with FTD. Latozinemab treatment was estimated to slow disease progression by 48% in 12 FTD- GRN patients at 12 months relative to matched GENFI2 controls. Figure 13.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurther, our product candidates are based on new approaches and novel technology, and we must identify and develop new biomarkers that are signs of a disease or condition and that can measure the impact of our product candidates on disease progression, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. 45 • We may encounter substantial delays in our clinical trials, or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all. • Our clinical trials may reveal significant adverse events, toxicities, or other side effects and may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates, which would prevent, delay, or limit the scope of regulatory approval and commercialization. • We are highly dependent on our key personnel, and if we are not successful in attracting, motivating, and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. • Our operations and financial results could continue to be adversely impacted by the COVID-19 pandemic, including the effects of subsequent variants, in the United States and the rest of the world, including potential supply chain issues and concerns. • The market price of our common stock may continue to experience volatility or decline, which could result in substantial losses for investors and could negatively impact our ability to conduct additional fundraising in the public markets.
Biggest changeFurther, our product candidates are based on new approaches and novel technology, and we must identify and develop new biomarkers that are signs of a disease or condition and that can measure impact on disease progression of our product candidates, which makes it difficult to predict the time and cost of product candidate development and subsequent regulatory approval. 43 • We may encounter substantial delays in our clinical trials or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all. • Our clinical trials may reveal significant adverse events, toxicities, or other side effects and may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates, which would prevent, delay, or limit the scope of regulatory approval and commercialization. • Our operations and financial results could be adversely impacted by the effects of worldwide economic conditions, including macroeconomic downturns stemming from increased inflation, supply chain and other economic impacts of the COVID-19 pandemic and geopolitical events. • We are highly dependent on our key personnel, and if we are not successful in attracting, motivating, and retaining highly qualified personnel, including as a result of layoffs and furloughs, pausing of recruiting efforts, or regrettable employee attrition, we may not be able to successfully implement our business strategy. • The market price of our common stock may continue to be volatile, which could result in substantial losses for investors and could negatively impact our ability to conduct additional fundraising in the public markets.
Even if we (or our collaborators or partners) are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our business, financial condition, results of operations, and our growth prospects could be negatively affected.
Even if we (or our collaborators or partners) are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdiction. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our business, financial condition, results of operations, and our growth prospects could be negatively affected.
We identify and develop product candidates that are designed to cross the blood brain barrier in sufficient quantity and potency to enable efficacious dosing in the brain and engage the intended target, and we must be able to identify and develop biomarkers and biomarker assays that can accurately identify signs of a disease or condition, assist us in selecting the right patient population, and demonstrate target engagement, pathway engagement, and measure the impact on disease progression of our product candidates.
We identify and develop product candidates that are designed to cross the blood brain barrier in sufficient quantity and potency to enable efficacious dosing in the brain and engage the intended target, and we must be able to identify and develop biomarkers and biomarker assays that can accurately identify signs of a disease or condition, assist us in selecting the right patient population, demonstrate target and pathway engagement, and measure the impact on disease progression of our product candidates.
The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical trials, and results of early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials.
The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical trials, and results of early-stage clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials.
Additionally, in July 2022, Biogen announced that the FDA accepted a NDA for tofersen, an drug for ALS associated with mutations in superoxide dismutase 1 (SOD1), and in September 2022, Amylyx Pharmaceuticals, Inc. announced that the FDA approved RELYVRIO™ (sodium phenylbutyrate and taurursodiol) for the treatment of adults with ALS.
Additionally, in July 2022, Biogen announced that the FDA accepted an NDA for tofersen, a drug for ALS associated with mutations in superoxide dismutase 1 (SOD1), and in September 2022, Amylyx Pharmaceuticals, Inc. announced that the FDA approved RELYVRIO™ (sodium phenylbutyrate and taurursodiol) for the treatment of adults with ALS.
If we or any of our third-party manufacturers encounter such difficulties, or fail to meet rigorously enforced regulatory standards, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.
If we or any of our third-party manufacturers encounter such difficulties, or fail to meet rigorously enforced regulatory standards, our ability to provide supply of our product candidates for clinical trials or our products, if approved, for patients, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.
We cannot be certain that the suppliers will continue to provide the quantities of these raw materials that are required or satisfy the anticipated specifications and quality requirements.
We cannot be certain that suppliers will continue to provide the quantities of these raw materials that are required or satisfy the anticipated specifications and quality requirements.
Among other things, our charter documents: • establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with each class serving staggered three-year terms; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • provide that our directors may only be removed for cause; • eliminate cumulative voting in the election of directors; • authorize our board of directors to issue shares of preferred stock and determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval; 95 • provide our board of directors with the exclusive right to elect a director to fill a vacancy or newly created directorship; • permit stockholders to only take actions at a duly called annual or special meeting and not by written consent; • prohibit stockholders from calling a special meeting of stockholders; • require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings; • authorize our board of directors, by a majority vote, to amend the bylaws; and • require the affirmative vote of at least 66 2/3% or more of the outstanding shares of common stock to amend many of the provisions described above.
Among other things, our charter documents: • establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with each class serving staggered three-year terms; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • provide that our directors may only be removed for cause; • eliminate cumulative voting in the election of directors; • authorize our board of directors to issue shares of preferred stock and determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval; • provide our board of directors with the exclusive right to elect a director to fill a vacancy or newly created directorship; • permit stockholders to only take actions at a duly called annual or special meeting and not by written consent; 95 • prohibit stockholders from calling a special meeting of stockholders; • require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings; • authorize our board of directors, by a majority vote, to amend the bylaws; and • require the affirmative vote of at least 66 2/3% or more of the outstanding shares of common stock to amend many of the provisions described above.
Accordingly, our future results could be harmed by a variety of factors, including: • economic weakness, including inflation, or political instability in particular in non-U.S. economies and markets; • differing and changing regulatory requirements in non-U.S. countries; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • difficulties in compliance with non-U.S. laws and regulations; • changes in non-U.S. regulations and customs, tariffs, and trade barriers; • changes in non-U.S. currency exchange rates and currency controls; • changes in a specific country’s or region’s political or economic environment; • shipping of biologics/drugs; • trade protection measures, import or export licensing requirements, or other restrictive actions by U.S. or non-U.S. governments; • negative consequences from changes in tax laws; (including the provisions of the recently enacted federal tax legislation titled the Inflation Reduction Act); • compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; • workforce uncertainty in countries where labor unrest is more common than in the United States; • difficulties associated with staffing and managing international operations, including differing labor relations; • potential liability under the FCPA, UK Bribery Act, or comparable foreign laws; and • business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods, droughts, extreme temperatures, and fires.
Accordingly, our future results could be harmed by a variety of factors, including: • economic weakness, including inflation, or political instability in particular in non-U.S. economies and markets; • differing and changing regulatory requirements in non-U.S. countries; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • difficulties in compliance with non-U.S. laws and regulations; • changes in non-U.S. regulations and customs, tariffs, and trade barriers; • changes in non-U.S. currency exchange rates and currency controls; • changes in a specific country’s or region’s political or economic environment; 90 • shipping of biologics/drugs; • trade protection measures, import or export licensing requirements, or other restrictive actions by U.S. or non-U.S. governments; • negative consequences from changes in tax laws; (including the provisions of the recently enacted federal tax legislation titled the Inflation Reduction Act); • compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; • workforce uncertainty in countries where labor unrest is more common than in the United States; • difficulties associated with staffing and managing international operations, including differing labor relations; • potential liability under the FCPA, UK Bribery Act, or comparable foreign laws; and • business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods, droughts, extreme temperatures, and fires.
Some of the factors that may cause the market price of our common stock to fluctuate or decline include: • the success of existing or new competitive products or technologies; • the timing and results of clinical trials for our current product candidates and any future product candidates that we may develop; • commencement or termination of collaborations for our product development and research programs; • failure to achieve development, regulatory, or commercialization milestones under our collaborations; • failure or discontinuation of any of our product development and research programs; • results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors, or announcements about new research programs or product candidates of our competitors; • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents, or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our research programs, clinical development programs, or product candidates that we may develop; • the results of our efforts to develop additional product candidates or products; 92 • actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts; • announcement or expectation of additional financing efforts; • sales of our common stock by us, our insiders, or other stockholders, such as if we use our at-the-market facility; • expiration of market standoff or lock-up agreements; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, political, industry, and market conditions, including a rising rate of inflation or a period of economic recession; and • the other factors described in this “Risk Factors” section.
Some of the factors that may cause the market price of our common stock to fluctuate or decline include: • the success of existing or new competitive products or technologies; • the timing and results of clinical trials for our current product candidates and any future product candidates that we may develop; • commencement or termination of collaborations for our product development and research programs; • failure to achieve development, regulatory, or commercialization milestones under our collaborations; • failure or discontinuation of any of our product development and research programs; • results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors, or announcements about new research programs or product candidates of our competitors; • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents, or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to any of our research programs, clinical development programs, or product candidates that we may develop; • the results of our efforts to develop additional product candidates or products; • actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts; • announcement or expectation of additional financing efforts; • sales of our common stock by us, our insiders, or other stockholders, such as if we use our at-the-market facility; • expiration of market standoff or lock-up agreements; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in estimates or recommendations by securities analysts, if any, that cover our stock; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, political, industry, and market conditions, including a rising rate of inflation or a period of economic recession; and • the other factors described in this “Risk Factors” section.
We anticipate that our expenses will increase substantially if and as we: • continue our research and discovery activities; • advance our research and drug discovery platform, including our target, patient, and biomarker selections; • progress our current and any future product candidates through preclinical and clinical development; • initiate and conduct additional preclinical, clinical, or other studies for our product candidates; • work with our contract development and manufacturing organizations (CDMOs) to scale up the manufacturing processes for our product candidates or, in the future, establish and operate a manufacturing facility; • change or add contract manufacturers or suppliers; • seek regulatory approvals and marketing authorizations for our product candidates; • establish sales, marketing, and distribution infrastructure to commercialize any products for which we obtain approval; • make milestone, royalty, or other payments due under any license or collaboration agreements; • take steps to seek protection of our intellectual property and defend our intellectual property against challenges from third parties; • obtain, maintain, protect, and enforce our intellectual property portfolio, including intellectual property obtained through license and collaboration agreements; • attract, hire, and retain qualified personnel, especially in light of a competitive hiring and compensation environment; • provide additional internal infrastructure to support our continued research and development operations and any planned commercialization efforts in the future; • implement additional internal systems and infrastructure related to cybersecurity; • meet the requirements and demands of being a public company; • withstand periods of rising rates of inflation; and • defend against any product liability claims or other lawsuits related to our products.
We anticipate that our expenses will increase substantially if and as we: • continue our research and discovery activities; • advance our research and drug discovery platform, including our target, patient, and biomarker selections; • progress our current and any future product candidates through preclinical and clinical development; • initiate and conduct additional preclinical, clinical, or other studies for our product candidates; • work with our CDMOs to scale up the manufacturing processes for our product candidates or, in the future, establish and operate a manufacturing facility; • change or add contract manufacturers or suppliers; • seek regulatory approvals and marketing authorizations for our product candidates; • establish sales, marketing, and distribution infrastructure to commercialize any products for which we obtain approval; • make milestone, royalty, or other payments due under any license or collaboration agreements; • take steps to seek protection of our intellectual property and defend our intellectual property against challenges from third parties; • obtain, maintain, protect, and enforce our intellectual property portfolio, including intellectual property obtained through license and collaboration agreements; • attract, hire, and retain qualified personnel, especially in light of a competitive hiring and compensation environment; • provide additional internal infrastructure to support our continued research and development operations and any planned commercialization efforts in the future; • implement additional internal systems and infrastructure related to cybersecurity; • meet the requirements and demands of being a public company; • withstand periods of rising rates of inflation; and • defend against any product liability claims or other lawsuits related to our products.
Any acquisition, collaboration, or strategic partnership may entail numerous risks, including: • increased operating expenses and cash requirements; • volatility with respect to the financial reporting related to such arrangements, such as our expected variability in the recognition of revenue each quarter from the AbbVie and GSK Agreement based on the percentage-of-completion basis under the applicable accounting rules; • assumption of indebtedness or contingent liabilities; • potential goodwill impairment resulting from such acquisitions; • issuance of our equity securities which would result in dilution to our stockholders; • assimilation of operations, intellectual property, products, and product candidates of an acquired company by our partners, including difficulties associated with integrating new personnel; • diversion of our management’s attention from our existing product programs and initiatives in pursuing such an acquisition, collaboration or strategic partnership; • retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; 89 • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; that may impact their ability to fulfill their obligations under such transaction; • risks that the other party to such a transaction may exercise its rights under the applicable agreement in a way that negatively impacts us; and • our inability to generate revenue from acquired or partnered intellectual property, technology, and/or products sufficient to meet our objectives or even to offset the associated transaction and maintenance costs.
Any acquisition, collaboration, or strategic partnership may entail numerous risks, including: • increased operating expenses and cash requirements; • volatility with respect to the financial reporting related to such arrangements, such as our expected variability in the recognition of revenue each quarter from the AbbVie and GSK Agreement based on the percentage-of-completion basis under the applicable accounting rules; • assumption of indebtedness or contingent liabilities; • potential goodwill impairment resulting from such acquisitions; • issuance of our equity securities which would result in dilution to our stockholders; • assimilation of operations, intellectual property, products, and product candidates of an acquired company by our partners, including difficulties associated with integrating new personnel; • diversion of our management’s attention from our existing product programs and initiatives in pursuing such an acquisition, collaboration or strategic partnership; • retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals, that may impact their ability to fulfill their obligations under such transaction; • risks that the other party to such a transaction may exercise its rights under the applicable agreement in a way that negatively impacts us; and • our inability to generate revenue from acquired or partnered intellectual property, technology, and/or products sufficient to meet our objectives or even to offset the associated transaction and maintenance costs.
For example: • others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we license or may own; • our future licensors or collaborators, might not have been the first to invent the claimed inventions covered by the issued patents or pending patent applications that we license in the future; 87 • we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights; • it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent application in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent application covering such intellectual property.
For example: • others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we license or may own; • our future licensors or collaborators, might not have been the first to invent the claimed inventions covered by the issued patents or pending patent applications that we license in the future; • we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights; • it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent application in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent application covering such intellectual property.
The degree of market acceptance of any product candidates we may develop, if approved for commercial sale, will depend on a number of factors, including: • the efficacy and safety as demonstrated in clinical trials and published in peer-reviewed journals; • the potential and perceived advantages compared to alternative treatments; • the ability to offer our products for sale at competitive prices; • sufficient third-party coverage or reimbursement; • the ability to offer appropriate patient access programs, such as co-pay assistance; • the extent to which physicians recommend our products to their patients; • convenience and ease of dosing and administration compared to alternative treatments; • the clinical indications for which the product candidate is approved by FDA, EMA, or other regulatory agencies; • product labeling or product insert requirements of the FDA, EMA, or other comparable foreign regulatory authorities, including any limitations, contraindications, or warnings contained in a product’s approved labeling; • restrictions on how the product is distributed; • the timing of market introduction of competitive products; • publicity concerning our products or competing products and treatments; • the strength of marketing and distribution support; and • the prevalence and severity of any side effects.
The degree of market acceptance of any product candidates we may develop, if approved for commercial sale, will depend on a number of factors, including: • the efficacy and safety as demonstrated in clinical trials and published in peer-reviewed journals; • the potential and perceived advantages compared to alternative treatments; • the ability to offer our products for sale at competitive prices; • sufficient third-party coverage or reimbursement; • the ability to offer appropriate patient access programs, such as co-pay assistance; • the extent to which physicians recommend our products to their patients; 57 • convenience and ease of dosing and administration compared to alternative treatments; • the clinical indications for which the product candidate is approved by FDA, EMA, or other regulatory agencies; • product labeling or product insert requirements of the FDA, EMA, or other comparable foreign regulatory authorities, including any limitations, contraindications, or warnings contained in a product’s approved labeling; • restrictions on how the product is distributed; • the timing of market introduction of competitive products; • publicity concerning our products or competing products and treatments; • the strength of marketing and distribution support; and • the prevalence and severity of any side effects.
Events that may prevent successful or timely initiation or completion of clinical trials include: • inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials; 52 • delays in confirming target engagement, patient selection, or other relevant biomarkers to be utilized in preclinical and clinical product candidate development; • delays in reaching a consensus with regulatory agencies on study design; • delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays in identifying, recruiting, and training suitable clinical investigators; • delays in obtaining required IRB/EC approval at each clinical trial site; • imposition of delays to clinical trials, including as a result of temporary or permanent clinical hold by regulatory agencies for a number of reasons (see for example our discussions of ARIA in other risks described in this “Risk Factors” section), including: • after review of an IND or amendment, CTA or amendment, or equivalent application or amendment; • as a result of a new safety finding that presents unreasonable risk to clinical trial participants; • as a result of modifications to clinical trial protocols or related documentation; • a negative finding from an inspection of our clinical trial operations or study sites; or • the finding that the investigational protocol or plan is clearly deficient to meet its stated objectives; • delays in identifying, recruiting, and enrolling suitable patients to participate in our clinical trials, and delays caused by patients withdrawing from clinical trials, or failing to return for post-treatment follow-up; • difficulty collaborating with patient groups and investigators; • failure by our CROs, other third parties, or us to adhere to clinical trial requirements; • failure to perform in accordance with the FDA’s or any other regulatory authority’s current good clinical practices (cGCPs) requirements, or applicable EMA or other regulatory guidelines in other countries; • occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • changes in the standard of care on which a clinical development plan was based, which may require new or additional trials; • the cost of clinical trials of our product candidates being greater than we anticipate; • clinical trials of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon product development programs; and • delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing.
Events that may prevent successful or timely initiation or completion of clinical trials include: • inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials; • delays in confirming target engagement, patient selection, or other relevant biomarkers to be utilized in preclinical and clinical product candidate development; • delays in reaching a consensus with regulatory agencies on study design; • delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays in identifying, recruiting, and training suitable clinical investigators; • delays in obtaining required IRB/EC approval at each clinical trial site; • imposition of delays to clinical trials, including as a result of temporary or permanent clinical hold by regulatory agencies for a number of reasons (see for example our discussions of ARIA in other risks described in this “Risk Factors” section), including: • after review of an IND or amendment, CTA or amendment, or equivalent application or amendment; • as a result of a new safety finding that presents unreasonable risk to clinical trial participants; • as a result of modifications to clinical trial protocols or related documentation; • a negative finding from an inspection of our clinical trial operations or study sites; or • the finding that the investigational protocol or plan is clearly deficient to meet its stated objectives; • delays in identifying, recruiting, and enrolling suitable patients to participate in our clinical trials, and delays caused by patients withdrawing from clinical trials, or failing to return for post-treatment follow-up; • difficulty collaborating with patient groups and investigators; • failure by our CROs, other third parties, or us to adhere to clinical trial protocols and other requirements; • failure to perform in accordance with the FDA’s or any other regulatory authority’s current good clinical practices (cGCPs) requirements, or applicable EMA or other regulatory guidelines in other countries; • occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • changes in the standard of care on which a clinical development plan was based, which may require new or additional trials; • the cost of clinical trials of our product candidates being greater than we anticipate; • clinical trials of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon product development programs; and 51 • delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing.
Factors that may inhibit our efforts to commercialize any approved product on our own include: • our inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel; • the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future approved products; • our inability to negotiate arrangements for formulary access, reimbursement, and other acceptance by payors; • the inability to price our products at a sufficient price point to ensure an adequate and attractive level of profitability; and our ability to recognize revenue from such prices; • restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population; 59 • the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and • unforeseen costs and expenses associated with creating an independent commercialization organization.
Factors that may inhibit our efforts to commercialize any approved product on our own include: • our inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel; • the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future approved products; • our inability to negotiate arrangements for formulary access, reimbursement, and other acceptance by payors; • the inability to price our products at a sufficient price point to ensure an adequate and attractive level of profitability, and our ability to recognize revenue from such prices; • restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population; • the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and • unforeseen costs and expenses associated with creating an independent commercialization organization.
Applications for our product candidates could fail to receive regulatory approval in an initial or subsequent indication for many reasons, including but not limited to the following: • the FDA, EMA, or comparable foreign regulatory authorities may disagree with the design, implementation, or the interpretation of the results of our clinical trials; • the FDA, EMA, or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately or insufficiently effective or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use; • the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval • the FDA, EMA, or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA, BLA, or other submission or to obtain regulatory approval in the United States or elsewhere; • we may be unable to demonstrate to the FDA, EMA or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio, on its own or when compared to the standard of care, is acceptable; • the FDA, EMA, or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures, and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and • the approval policies or regulations of the FDA, EMA, or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval or resulting in delays in our regulatory approval, including, for example, in connection with the FDA’s approval of Biogen’s Aduhelm in Alzheimer’s disease amid questions regarding the underlying data, as well as the ongoing government investigation of the FDA’s approval process for Aduhelm.
Applications for our product candidates could fail to receive regulatory approval in an initial or subsequent indication for many reasons, including but not limited to the following: • the FDA, EMA, or comparable foreign regulatory authorities may disagree with the design, implementation, or the interpretation of the results of our clinical trials; • the FDA, EMA, or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately or insufficiently effective or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use; • the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; • the FDA, EMA, or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA, BLA, or other submission or to obtain regulatory approval in the United States or elsewhere; • we may be unable to demonstrate to the FDA, EMA, or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio, on its own or when compared to the standard of care, is acceptable; • the FDA, EMA, or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures, and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and • the approval policies or regulations of the FDA, EMA, or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval or resulting in delays in our regulatory approval, including, for example, in connection with the FDA’s approval of 61 Biogen’s Aduhelm in Alzheimer’s disease amid questions regarding the underlying data, as well as the government investigation of the FDA’s approval process for Aduhelm.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. • Federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, impose criminal and civil penalties, including through civil “qui tam” or “whistleblower” actions, against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease, or conceal an obligation to pay money to the federal government.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. 68 • Federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, impose criminal and civil penalties, including through civil “qui tam” or “whistleblower” actions, against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease, or conceal an obligation to pay money to the federal government.
We will need to 88 effectively manage the size and capabilities of our organization and any future growth through significant responsibilities on members of management, including: • identifying, recruiting, integrating, retaining, and motivating additional employees; • managing our internal development efforts effectively, including the clinical and FDA review process for our current and future product candidates, while complying with our contractual obligations to collaborators and other third parties; • expanding our operational, financial and management controls, reporting systems, and procedures; and • managing increasing operational and managerial complexity.
We will need to effectively manage the size and capabilities of our organization and any future growth through significant responsibilities on members of management, including: • identifying, recruiting, integrating, retaining, and motivating additional employees; • managing our internal development efforts effectively, including the clinical and FDA review process for our current and future product candidates, while complying with our contractual obligations to collaborators and other third parties; • expanding our operational, financial and management controls, reporting systems, and procedures; and • managing increasing operational and managerial complexity.
Although we enter into nondisclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, CDMOs, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.
Although we enter into nondisclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, 76 CDMOs, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.
Moreover, if disputes over intellectual property that we have optioned or licensed prevent or impair our ability to maintain our current arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the 81 affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and growth prospects.
Moreover, if disputes over intellectual property that we have optioned or licensed prevent or impair our ability to maintain our current arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and growth prospects.
In the future, we may choose to build a focused sales, marketing, and commercial support infrastructure to sell, or participate in commercial activities with our collaborators for, some of our product candidates if and when they are approved. There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services.
In the future, we may choose to build a focused sales, marketing, and commercial support infrastructure to sell, or participate in commercial activities with our collaborators for, some of our product candidates if and when they are approved. 56 There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services.
Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise. Risks Related to Regulatory Approval and Other Legal Compliance Matters The regulatory approval processes of the FDA, EMA, and comparable foreign regulatory authorities are lengthy, time consuming, and inherently unpredictable.
Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise. 60 Risks Related to Regulatory Approval and Other Legal Compliance Matters The regulatory approval processes of the FDA, EMA, and comparable foreign regulatory authorities are lengthy, time consuming, and inherently unpredictable.
Additionally, the United States is experiencing an acute workforce shortage, which in turn, has created a very competitive wage environment that may increase the Company’s operating costs. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our consolidated financial condition and results of operations.
Additionally, the United States is experiencing an acute workforce shortage, which in turn, has created a very competitive wage environment that may increase the 94 Company’s operating costs. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our consolidated financial condition and results of operations.
It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find either exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we 96 may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.
It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find either exclusive-forum provision in our amended and restated bylaws 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.
Our reliance on genetic screening and use of biomarkers to align patient risk profiles with targeted intervention may eventually require us to develop and use companion diagnostics, which could impact product development costs and timelines depending on the specific diagnostic and any applicable regulatory requirements that would need to be met to enable its use.
Our reliance on genetic screening and use of biomarkers to align patient risk profiles with targeted intervention may eventually require us to develop and use companion diagnostics, which could impact product development costs and timelines depending on the specific diagnostic test and any applicable regulatory requirements that would need to be met to enable its use.
For example, the U.S. federal government has experienced and may in the future experience shutdown 63 or budget sequestration, which could result in significant reductions to the FDA’s budget, employees, and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates.
For example, the U.S. federal government has experienced and may in the future experience shutdown or budget sequestration, which could result in significant reductions to the FDA’s budget, employees, and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop our product candidates, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates, and accordingly, may not achieve our research, development, and commercialization goals.
If we are not able to effectively manage or expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop our product candidates, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates, and accordingly, may not achieve our research, development, and commercialization goals.
As a result, these stockholders, if they act together, may significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company that our other stockholders may believe is in their best interests.
As a result, these stockholders, if they act together, may significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company that our other 93 stockholders may believe is in their best interests.
The holder of an approved NDA, BLA, or MAA must submit new or 66 supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets.
The holder of an approved NDA, BLA, or MAA must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets.
If a third 83 party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and growth prospects.
If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and growth prospects.
There can be no assurance that the FDA, EMA, or any applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction, as regulatory authorities in different jurisdictions may impose different requirements for approval, 65 including requirements with respect to trial design or trial diversity.
There can be no assurance that the FDA, EMA, or any applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction, as regulatory authorities in different jurisdictions may impose different requirements for approval, including requirements with respect to trial design or trial diversity.
Despite our efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able 84 to obtain adequate remedies for such breaches. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
Despite our efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
We cannot be sure that submission of an IND or a clinical trial application (CTA) will result in the FDA or EMA, as applicable, allowing clinical trials to begin in a timely manner, if at all. Moreover, even if these trials begin, issues may arise that could suspend or terminate such clinical trials.
We cannot be sure that submission of 50 an IND or a clinical trial application (CTA) will result in the FDA or EMA, as applicable, allowing clinical trials to begin in a timely manner, if at all. Moreover, even if these trials begin, issues may arise that could suspend or terminate such clinical trials.
In addition, companies may be developing biosimilar products in other countries that could compete with our products, if approved. If competitors are able to obtain marketing approval for biosimilars referencing our product candidates, if approved, such products may become subject to competition from such biosimilars, with the attendant competitive pressure and potential adverse consequences.
In addition, companies may be developing biosimilar products in other countries that could compete with our products, if approved. If competitors are able to obtain marketing approval for biosimilars referencing our product candidates, if approved, such product candidates may become subject to competition from such biosimilars, with the attendant 59 competitive pressure and potential adverse consequences.
Moreover, we may expend our limited resources on programs that do not yield a successful product candidate or fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. We have identified over 100 immune system targets.
Moreover, we may expend our limited resources on programs that do not yield a successful product candidate or fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. We have identified over 100 potential immune system targets.
If any product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenue, and we may not become profitable. 60 Any products we commercialize may become subject to unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives, which would harm our business.
If any product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenue, and we may not become profitable. Any products we commercialize may become subject to unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives, which would harm our business.
In addition, we may need the 79 cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
Our NOLs may also be subject to limitations under state law. Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition. We are or may become subject to income and non-income taxes in the United States under federal, state, and local jurisdictions and in certain foreign jurisdictions in which we operate.
Additionally, our NOLs may also be subject to limitations under state law. Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition. We are or may become subject to income and non-income taxes in the United States under federal, state, and local jurisdictions and in certain foreign jurisdictions in which we operate.
We, and indirectly, our stockholders, will bear the 93 cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future offerings.
We, and indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future offerings.
We may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successful product liability claim or series of claims brought against us could adversely affect our results of operations, business, and 64 reputation.
We may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successful product liability claim or series of claims brought against us could adversely affect our results of operations, business, and reputation.
As a result, the U.S. government may have certain rights to resulting intellectual property. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the U.S. government to use the invention or to have others use the invention on its behalf.
As a result, the U.S. government may have certain rights to resulting intellectual property. When 78 new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the U.S. government to use the invention or to have others use the invention on its behalf.
Additionally, the 85 technology used in our product candidates is still in development and no products utilizing similar technology have yet reached the market. As such, there may be significant intellectual property related litigation and proceedings relating to our, and other third party, intellectual property and proprietary rights in the future.
Additionally, the technology used in our product candidates is still in development and no products utilizing similar technology have yet reached the market. As such, there may be significant intellectual property related litigation and proceedings relating to our, and other third party, intellectual property and proprietary rights in the future.
Uncertainties resulting from the initiation and 86 continuation of patent litigation or other proceedings against us could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings against us could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
We have hired, and expect that we will need to continue to hire, additional accounting, finance, and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company, and our management and other personnel have devoted and will continue to devote a substantial amount of time towards maintaining compliance with these requirements.
We have hired, and expect that we will need to continue to hire, additional accounting, finance, and other personnel in connection with our being, and our efforts to comply with the requirements of being, a public company, and our management and other personnel have devoted and will continue to devote a substantial amount of time towards maintaining compliance with these requirements.
To obtain revenues from the sales of our product candidates that are significant or large enough to achieve profitability, we must succeed, either alone or with third 47 parties, in developing, obtaining regulatory approval for, manufacturing, and marketing therapies with significant commercial success.
To obtain revenues from the sales of our product candidates that are significant or large enough to achieve profitability, we must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing, and marketing therapies with significant commercial success.
Our operations have required substantial amounts of cash since inception, and we expect our expenses to increase significantly in the foreseeable future. To date, we have financed our operations primarily through the sale of equity securities and upfront payments received in connection with our collaboration arrangements with AbbVie 48 and GSK.
Our operations have required substantial amounts of cash since inception, and we expect our expenses to increase significantly in the foreseeable future. To date, we have financed our operations primarily through the sale of equity securities and upfront payments received in connection with our collaboration arrangements with AbbVie and GSK.
Fast Track designation applies to both the product and the specific indication for which it is being studied. In December 2019, the FDA granted Fast Track designation for latozinemab and in January 2020, the FDA granted Fast Track designation for AL101, each for the treatment of patients with FTD carrying specific genetic mutations in the granulin gene.
Fast Track designation applies to both the product and the specific indication for which it is being studied. 65 In December 2019, the FDA granted Fast Track designation for latozinemab, and in January 2020, the FDA granted Fast Track designation for AL101, each for the treatment of patients with FTD carrying specific genetic mutations in the granulin gene.
As a result, our intellectual property may not provide us with rights to exclude others for sufficient period of time from commercializing products similar or identical to ours. Some of our patents and patent applications may be co-owned with third parties.
As a result, our intellectual property may not provide us with rights to exclude others for sufficient period of time from commercializing products similar or identical to ours. 77 Some of our patents and patent applications may be co-owned with third parties.
In addition, even where we have the right to control prosecution of patent applications we have licensed to and from collaborators, we may still be adversely affected or prejudiced by actions or inactions of our collaborators that took place prior to the date upon which we assumed control over patent prosecution.
In addition, even where we have the right to control prosecution of patent applications we have licensed to and from collaborators, we may still be adversely affected or prejudiced by actions or inactions of our collaborators that took place prior to the date upon which we assumed control of patent prosecution.
If the defense of any such claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates and other technologies.
If the 82 defense of any such claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates and other technologies.
The trading price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. We cannot predict the prices at which our common stock will trade.
The trading price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are 91 beyond our control. We cannot predict the prices at which our common stock will trade.
The principal factors and uncertainties that make investing in our company risky include, among others: • We are in the clinical stages of drug development and have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability. • We have incurred significant net losses in each year since our inception and anticipate that we will continue to incur net losses for the foreseeable future. • Drug development is a highly uncertain undertaking and involves a substantial degree of risk. • We will need to obtain substantial additional financing to complete the development and any commercialization of our product candidates, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate our commercialization efforts, product development, or other operations. • Due to the significant resources required for the development of our programs, and depending on our ability to access capital, we must prioritize development of certain product candidates.
The principal factors and uncertainties that make investing in our company risky include, among others: • We are in various stages of drug development and have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability. • We have incurred significant net losses in each year since our inception and anticipate that we will continue to incur net losses for the foreseeable future. • Drug development is a highly uncertain undertaking and involves a substantial degree of risk. • We will need to obtain substantial additional financing to complete the development and any commercialization of our product candidates, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate our commercialization efforts, product development, or other operations. • Due to the significant resources required for the development of our product candidates, and depending on our ability to access capital, we must prioritize development of certain product candidates.
Debt financing, if available, may be unfavorable terms, including interest rates and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
Debt financing, if available, may be on unfavorable terms, including interest rates, and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
We may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, data privacy, product liability, employment, class action or derivative, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings.
We may become subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, data privacy, product liability, employment, class action or derivative, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings.
Our current and anticipated future dependence upon others for the manufacture of any product candidates we may develop or medicines may adversely affect our future profit margins and our ability to commercialize any medicines that receive marketing approval on a timely and competitive basis.
Our current and anticipated future dependence upon others for the manufacture of any product candidates we may develop may adversely affect our future profit margins and our ability to commercialize any medicines that receive marketing approval on a timely and competitive basis.
In addition, the patent positions of companies in the development and commercialization of pharmaceuticals are particularly uncertain. Rulings from the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations.
In addition, the patent positions of companies in the development and commercialization of pharmaceuticals are particularly uncertain. Rulings from the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have narrowed the scope of patent protection available in certain circumstances and weakened the rights of 81 patent owners in certain situations.
To obtain regulatory approval in countries outside the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, manufacturing and controls, clinical trials, commercial sales, pricing, and distribution of our product candidates.
To obtain regulatory approval in countries outside the United States, we must comply with numerous and varying regulatory requirements of such countries regarding safety, efficacy, manufacturing and controls, clinical trials, commercial sales, pricing, and distribution of our product candidates.
Our drug development strategy is to clinically test and seek regulatory approval for our product candidates in indications in which we believe there is the most evidence that we will be able to quickly generate proof-of-concept data.
Our drug development strategy is to clinically test and seek regulatory approval for our product candidates in indications in which we believe there is the most evidence that we 47 will be able to quickly generate proof-of-concept data.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could, despite our efforts to comply, be subject to challenge under one or more of such laws.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could, despite our efforts to comply, be subject to challenge under 69 one or more of such laws.
Our decisions concerning the allocation of research, development, collaboration, management, and 49 financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial product and may divert resources away from better opportunities.
Our decisions concerning the allocation of research, development, collaboration, management, and financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial product and may divert resources away from better opportunities.
We have engaged in strategic collaborations in the past, such as our strategic collaborations with AbbVie, Innovent and GSK, and we may engage in various acquisitions, collaborations, and strategic partnerships in the future, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses.
We have engaged in strategic collaborations in the past, such as our strategic collaborations with AbbVie and GSK, and we may engage in various acquisitions, collaborations, and strategic partnerships in the future, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses.
If we 51 are unable to successfully identify, acquire, develop, and commercialize additional product candidates, our commercial opportunity may be limited. We may not be successful in our efforts to obtain approval for additional or expanded indications for our approved product candidates.
If we are unable to successfully identify, acquire, develop, and commercialize additional product candidates, our commercial opportunity may be limited. We may not be successful in our efforts to obtain approval for additional or expanded indications for our approved product candidates.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual 85 property portfolios.
There can be no assurance that the services of these independent organizations, advisors, and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements.
There can be no assurance that the 87 services of these independent organizations, advisors, and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements.
We do not expect to generate revenue from product sales for several years, if at all. The revenue we currently generate from our collaboration arrangements with AbbVie and GSK is variable and limited in amount.
We do not expect to generate revenue from product sales for several years, if at all. The revenue we currently generate from our collaboration arrangements with AbbVie and GSK is 44 variable and limited in amount.
As a result of our initial public 91 offering in February 2019 and follow-on public offering in January 2020, and other transactions that have occurred since our incorporation, we may have experienced such an ownership change.
As a result of our initial public offering in February 2019 and follow-on public offering in January 2020, and other transactions that have occurred since our incorporation, we may have experienced such an ownership change.
Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than they receive on the sale of approved 68 products, which could have a material impact on our business.
Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than they receive on the sale of approved products, which could have a material impact on our business.
If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us 75 on acceptable terms or at all.
If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all.
Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition. 73 Risks Related to Our Reliance on Third Parties We expect to depend on collaborations with third parties for the research, development, and commercialization of certain of the product candidates we may develop.
Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition. 71 Risks Related to Our Reliance on Third Parties We expect to depend on collaborations with third parties for the research, development, and commercialization of certain of the product candidates we may develop.
Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to: • regulatory authorities may withdraw approvals of such product and cause us to recall our products; • regulatory authorities may require additional warnings on the label; • we may be required to change the way the product is administered, monitor patients over the course of treatment, or conduct additional clinical trials or post-approval studies; • we may be required to create a Risk Evaluation and Mitigation Strategy plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, requiring pre-prescription screening or ongoing monitoring for ARIA and/or other adverse events, and/or other elements, such as boxed warning on the packaging, to assure safe use; • we could be sued and held liable for harm caused to patients; and • our reputation may suffer.
Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to: • regulatory authorities may withdraw approvals of such product and cause us to recall our products; • regulatory authorities may require additional warnings on the label; • we may be required to change the way the product is administered, monitor patients over the course of treatment, or conduct additional clinical trials or post-approval studies; 62 • we may be required to create a Risk Evaluation and Mitigation Strategy plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, pre-prescription screening or ongoing monitoring for ARIA and/or other adverse events, and/or other elements, such as boxed warning on the packaging (for example, as required for lecanemab), to assure safe use; • we could be sued and held liable for harm caused to patients; and • our reputation may suffer.
Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.
Additionally, products or technologies 55 developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.
If our collaborators fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, our rights as to such patents may be reduced or eliminated, our right to develop and commercialize any of our product candidates that are subject of such rights could be adversely affected, and we may have a reduced ability to prevent competitors from making, using, and selling competing products.
If our collaborators fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, our rights to such patents may be reduced or eliminated, our right to develop and commercialize any of our product candidates that are the subject of such rights could be adversely affected, and we may have a reduced ability to prevent competitors from making, using, and selling competing products.
A person or entity does not need to have 70 actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored databases within certain timeframes.
We also are required to register ongoing clinical trials and post the results of completed clinical trials on government-sponsored databases within certain timeframes.
Our limited operating history as a company makes any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by clinical-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties.
Our limited operating history as a company makes any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by clinical-stage biotechnology companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties.
We have received orphan drug designation from the FDA for latozinemab and AL101 for treatment of FTD and may seek orphan drug designation for some of our other product candidates, but we may be unable to obtain such designations or to maintain the benefits associated with orphan drug status, including market exclusivity, which may cause our revenue, if any, to be reduced.
We have orphan drug designation from the FDA for latozinemab for treatment of FTD and may seek orphan drug designation for some of our other product candidates, but we may be unable to obtain such designations or to maintain the benefits associated with orphan drug status, including market exclusivity, which may cause our revenue, if any, to be reduced.
Further, our product candidates are based on new approaches and novel technology, and we must identify and develop new biomarkers that are signs of a disease or condition and that can measure impact on disease progression of our product candidates, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.
Further, our product candidates are based on new approaches and novel technology, and we must identify and develop new biomarkers that are signs of a disease or condition and that can measure impact on disease progression of our product candidates, which makes it difficult to predict the time and cost of product candidate development and to subsequently obtain regulatory approval.
A number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products.
A number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance requirements and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products.
For any product candidates we have advanced into clinical trials, we may terminate such trials or the clinical program prior to their completion.
For any product candidates that have advanced into clinical trials, we may terminate such trials or the clinical program prior to their completion.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease approximately 18,700 square feet of additional office and laboratory space in Newark, California. We believe that these facilities will be adequate for our near-term needs. If required, we believe that suitable additional or alternative space would be available in the future on commercially reasonable terms.
Biggest changeWe also subleased approximately 9,300 square feet of our corporate headquarters in February 2023 with a lease term that will expire in February 2025. We lease approximately 18,700 square feet of additional office and laboratory space in Newark, California. We believe that these facilities will be adequate for our near-term needs.
The lease agreement also provides us a right of first offer to expand into available office space in the building. We subleased approximately 7,132 square feet of our corporate headquarters in November 2021 with a lease term that expired in December 2022.
The lease agreement also provides us a right of first offer to expand into available office space in the building. We subleased approximately 7,100 square feet of our corporate headquarters in November 2021 with a lease term that expired in December 2022.
Additionally, we subleased approximately 13,150 square feet of our corporate headquarters in May 2022 with a lease term that will expire in November 2023. We also subleased approximately 9,275 square feet of our corporate headquarters in February 2023 with a lease term that will expire in January 2025.
Additionally, we subleased approximately 13,150 square feet of our corporate headquarters in May 2022 with a lease term that expired in November 2023. We also subleased approximately 13,250 square feet of the Headquarters in November 2023 with a lease term that will expire in November 2024.
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If required, we believe that suitable additional or alternative space would be available in the future on commercially reasonable terms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of outcome, litigation, or other legal proceedings can have an adverse impact on us because of legal fees and settlement costs, diversion of management resources, and other factors. Item 4. Mine Saf ety Disclosures. Not applicable. 97 PART II
Biggest changeRegardless of outcome, litigation, or other legal proceedings can have an adverse impact on us because of legal fees and settlement costs, diversion of management resources, and other factors. Item 4. Mine Saf ety Disclosures. Not applicable. 98 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is publicly traded on the Nasdaq Global Select Market under the symbol "ALEC." Holders of Record As of February 21, 2023, there were approximately 7 stockholders of record of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is publicly traded on the Nasdaq Global Select Market under the symbol ”ALEC.” Holders of Record As of February 22, 2024, there were approximately 6 stockholders of record of our common stock.
The stockholder returns shown on the graph below are based on historical results and are not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 98 Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved].
The stockholder returns shown on the graph below are based on historical results and are not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 99 Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved].
An investment of $100 is assumed to have been made in our common stock and each index on February 7, 2019 (the first day of trading of our common stock) and its relative performance is tracked through December 31, 2022.
An investment of $100 is assumed to have been made in our common stock and each index on February 7, 2019 (the first day of trading of our common stock) and its relative performance is tracked through December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis was offset by a $9.6 million decrease in latozinemab mainly due to the cost sharing agreement with GSK. 102 Year Ended December 31, Dollar 2022 2021 Change (In thousands) Direct research and development expenses Latozinemab $ 22,118 $ 31,689 $ (9,571 ) AL101 7,751 6,728 1,023 AL002 34,805 25,941 8,864 AL044 7,546 9,935 (2,389 ) Other early stage programs 37,385 37,740 (355 ) Indirect research and development expenses Personnel related (including stock-based compensation) 76,063 58,519 17,544 Facilities and other unallocated research and development expenses 24,750 18,855 5,895 Total research and development expenses $ 210,418 $ 189,407 $ 21,011 General and Administrative Expenses General and administrative expenses were $61.0 million for the year ended December 31, 2022, compared to $55.0 million for the year ended December 31, 2021.
Biggest changeYear Ended December 31, Dollar 2023 2022 Change (In thousands) Direct research and development expenses Latozinemab $ 14,511 $ 22,118 $ (7,607 ) AL101 4,403 7,751 (3,348 ) AL002 51,490 34,805 16,685 Other programs 21,096 44,931 (23,835 ) Indirect research and development expenses Personnel related (including stock-based compensation) 76,956 76,063 893 Facilities and other unallocated research and development expenses 23,659 24,750 (1,091 ) Total research and development expenses $ 192,115 $ 210,418 $ (18,303 ) General and Administrative Expenses General and administrative expenses were $56.7 million for the year ended December 31, 2023, compared to $61.0 million for the year ended December 31, 2022.
Investing Activities For the year ended December 31, 2022, cash used in investing activities of $159.0 million was primarily related to the maturities of marketable securities of $402.0 million offset by purchases of marketable securities of $556.9 million.
For the year ended December 31, 2022, cash used in investing activities of $159.0 million was primarily related to the maturities of marketable securities of $402.0 million offset by purchases of marketable securities of $556.9 million.
This was due to the net loss of $133.3 million offset by an increase in deferred revenue of $66.4 million from the $200 million 104 upfront payment received less revenue recognized. In addition, we had non-cash charges of $46.1 million for stock-based compensation. For the year ended December 31, 2021, cash provided by operating activities was $298.6 million.
This was due to the net loss of $133.3 million offset by an increase in deferred revenue of $66.4 million from the $200 million upfront payment received less revenue recognized. In addition, we had non-cash charges of $46.1 million for stock-based compensation. For the year ended December 31, 2021,cash provided by operating activities was $298.6 million.
Financing Activities For the year ended December 31, 2022, cash provided by financing activities of $4.5 million was primarily from the exercise of options to purchase common stock. For the year ended December 31, 2021, cash provided by financing activities of $30.3 million was primarily from the exercise of options to purchase common stock.
For the year ended December 31, 2022, cash provided by financing activities of $4.5 million was primarily from the exercise of options to purchase common stock. 106 For the year ended December 31, 2021, cash provided by financing activities of $30.3 million was primarily from the exercise of options to purchase common stock.
Our future capital requirements will depend on many factors, including: • the timing and progress of preclinical and clinical development activities; including, without limitation, our collaboration efforts with AbbVie and GSK; • the number and scope of preclinical and clinical programs we decide to pursue; • successful enrollment in and completion of clinical trials; • our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and, if our product candidates are approved, commercial manufacturing; • our ability to maintain our current research and development programs and establish new research and development programs; • addition and retention of key research and development personnel; • our efforts to enhance operational, financial, and information management systems, and hire additional personnel, including personnel to support development of our product candidates; • negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter and performing our obligations in such collaborations; • the timing and amount of milestone and other payments we may receive under our collaboration arrangements; • the costs and timing of regulatory approvals; • our eventual commercialization plans for our product candidates; • the effects of inflationary pressures; and • the costs involved in prosecuting, defending, and enforcing patent claims and other intellectual property claims.
Our future capital requirements will depend on many factors, including: • the timing and progress of preclinical and clinical development activities; including, without limitation, our collaboration efforts with AbbVie and GSK; • the number and scope of preclinical and clinical programs we decide to pursue; • successful enrollment in and completion of clinical trials; • our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and, if our product candidates are approved, commercial manufacturing; • our ability to maintain our current research and development programs and establish new research and development programs; • addition and retention of key research and development personnel; • our efforts to enhance operational, financial, and information management systems, and hire additional personnel, including personnel to support development of our product candidates; • the costs associated with workforce reductions; • negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter and performing our obligations in such collaborations; • the timing and amount of milestone and other payments we may receive under our collaboration arrangements; • the costs and timing of regulatory approvals; • our eventual commercialization plans for our product candidates; 105 • the effects of inflationary pressures; and • the costs involved in prosecuting, defending, and enforcing patent claims and other intellectual property claims.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors” included elsewhere in this report. Overview We are a clinical stage biopharmaceutical company pioneering immuno-neurology, a novel therapeutic approach for the treatment of neurodegeneration.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors” included elsewhere in this report. Overview We are a clinical stage biotechnology company pioneering immuno-neurology, a novel therapeutic approach for the treatment of neurodegeneration.
Under the terms of our GSK Agreement, we received $700 million in upfront payments, of which $500 million was received in August 2021 and $200 million was received in January 2022. In addition, we will be eligible to receive up to an additional $1.5 billion in clinical development, regulatory, and commercial launch-related milestone payments for latozinemab and AL101.
Under the terms of the GSK Agreement, we received $700 million in upfront payments, of which $500 million was received in August 2021 and $200 million was received in January 2022. In addition, we will be eligible to receive up to an additional $1.5 billion in clinical development, regulatory, and commercial launch-related 101 milestone payments for latozinemab and AL101.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under arrangements, we perform the 105 following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligation.
In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under arrangements, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligations.
Liquidity and Capital Resources Since our inception through December 31, 2022, our operations have been financed primarily by our collaborations with AbbVie and GSK and the issuance and sale of convertible preferred stock and of common stock upon the completion of our IPO and follow-on offering.
Liquidity and Capital Resources Since our inception through December 31, 2023, our operations have been financed primarily by our collaborations with AbbVie and GSK and the issuance and sale of convertible preferred stock and of common stock upon the completion of our IPO and follow-on offering.
Alector and GSK are jointly developing latozinemab and AL101. In the United States, Alector and GSK will equally share profits and losses from commercialization of latozinemab and AL101. We may opt out of the sharing of development costs and of profit and losses from commercialization in the United States on a product-by-product basis.
In the United States, Alector and GSK will equally share profits and losses from commercialization of latozinemab and AL101. We may opt out of the sharing of development costs and of profit and losses from commercialization in the United States on a product-by-product basis.
Under the terms of our AbbVie Agreement, in addition to receiving the upfront payments from AbbVie, we may also be entitled to development and regulatory milestone payments, opt-in payments for continued development after proof-of-concept for AL002, and other future payments from profit sharing or royalties after commercialization of product candidates from such program.
Under the terms of the AbbVie Agreement, in addition to receiving the upfront payments from AbbVie, we may also be entitled to development and regulatory milestone payments, an opt-in payment for continued development of AL002, and other future payments from profit sharing or royalties after commercialization of product candidates from such program.
Specific program expenses include expenses associated with the development of our most advanced product candidates: latozinemab, which is being studied in a pivotal Phase 3 clinical trial, INFRONT-3, which has an ongoing Phase 2 clinical trial; AL002, which is being studied in a Phase 2 clinical trial; and AL101, for which we have completed a Phase 1 clinical trial.
Specific program expenses include expenses associated with the development of our most advanced product candidates: latozinemab, which is being studied in a pivotal Phase 3 clinical trial, INFRONT-3, and which has an ongoing Phase 2 clinical trial; AL002, which is being studied in a Phase 2 clinical trial; and AL101, which has an ongoing Phase 2 clinical trial.
General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees paid for accounting, auditing, consulting, and tax services, insurance costs, and facility costs not otherwise included in research and development expenses. 101 Other Income, Net Other income, net consists of interest earned on our cash equivalents and marketable securities and foreign currency transaction gains and losses incurred during the period.
General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees paid for accounting, auditing, consulting, and tax services, insurance costs, and facility costs not otherwise included in research and development expenses. Other Income, Net Other income, net consists primarily of interest earned on our cash equivalents and marketable securities.
We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, and incur expenses associated with hiring additional personnel to support our research and development efforts.
At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. 102 We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, and incur expenses associated with hiring additional personnel to support our research and development efforts.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2022 2021 2020 Cash provided by (used in) operating activities $ (20,329 ) $ 298,551 $ (166,734 ) Cash used in investing activities (159,014 ) (49,663 ) (105,051 ) Cash provided by financing activities 4,514 30,295 232,113 Operating Activities For the year ended December 31, 2022, cash used in operating activities was $20.3 million.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Cash provided by (used in) operating activities $ (184,162 ) $ (20,329 ) $ 298,551 Cash provided by (used in) investing activities 101,918 (159,014 ) (49,663 ) Cash provided by financing activities 2,550 4,514 30,295 Operating Activities For the year ended December 31, 2023, cash used in operating activities was $184.2 million.
The expense is recognized based on continued employment of the participants, regardless of achievement of the market condition. Expense related to the RSUs with market conditions is recognized using the accelerated attribution method. We account for forfeitures as they occur for all awards.
Expense related to the RSUs with market conditions is recognized using the accelerated attribution method. We account for forfeitures as they occur for all awards.
Stock-based compensation associated with RSUs is based on the fair value of our common stock on the grant date, which equals the closing price of our common stock on the grant date. We recognize expense over the vesting period of the awards. Expense for options and RSUs are recognized on a straight-line basis.
Stock-based compensation associated with restricted stock units (RSUs) is based on the fair value of our common stock on the grant date, which equals the closing price of our common stock on the grant date. We recognize expense over the vesting period of the awards.
We expect our expenses to continue to increase in connection with our ongoing activities, in particular as we continue to advance our product candidates and our discovery programs. In addition, we expect to incur additional costs associated with operating as a public company.
We expect our expenses to continue to increase in connection with our ongoing activities, in particular as we continue to advance our product candidates and our discovery programs. In addition, we expect to incur additional costs associated with operating as a public company. As of December 31, 2023, we had cash, cash equivalents, and marketable securities of $548.9 million.
In addition, we received $6.3 million cash from the exercise of options to purchase common stock Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (GAAP).
Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (GAAP).
The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. These assumptions include: Expected Term —The expected term represents the period that stock-based awards are expected to be outstanding.
We estimate the grant date fair value for options to purchase common stock, and the resulting stock-based compensation, using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions which determine the fair value of stock-based awards. These assumptions include: Expected Term —The expected term represents the period that stock-based awards are expected to be outstanding.
Future Funding Requirements Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs, and to a lesser extent, general and administrative expenditures.
As of December 31, 2023, we had an accumulated deficit of $710.1 million. 104 Future Funding Requirements Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs, and to a lesser extent, general and administrative expenditures.
Supporting our scientific approach, our research and drug discovery platform enables us to advance a broad portfolio of product candidates, validated by human genetics, which we believe will improve the probability of technical success over shorter development timelines. As a result, we have identified over 100 immune system targets.
Supporting our scientific approach, our research and drug discovery platform enables us to identify targets and advance a broad portfolio of product candidates, validated by human genetics, which we believe may improve the probability of technical success over shorter development timelines. Three product candidates, latozinemab (also referred to as AL001), AL002, and AL101 are in clinical development.
Revenues for research and development services are recognized as the program costs are incurred by measuring actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligation.
We recognize revenue from the upfront payments from GSK at a point in time for a development license and over time for research and development services. Revenues for research and development services are recognized as the program costs are incurred by measuring actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligation.
Further, we do not expect to generate revenue from product sales until such time, if ever, that we are able to successfully complete the development and obtain marketing approval for one of our product candidates. We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future.
To date, we have not had any products approved for sale and have not generated any revenue from product sales. Further, we do not expect to generate revenue from product sales until such time, if ever, that we are able to successfully complete the development and obtain marketing approval for one of our product candidates.
We may also choose to seek additional financing opportunistically. We may seek to raise capital through public equity or debt financings, license agreements, collaborative agreements or other arrangements with other companies, asset sales, or through other sources of financing. We expect to need to obtain substantial additional funding in the future for our research and development activities and continuing operations.
We may also choose to seek additional financing opportunistically. We may seek to raise capital through public equity or debt financings, license agreements, collaborative agreements or other arrangements with other companies, asset sales, or through other sources of financing.
Other Income, Net Other income, net was $7.8 million for the year ended December 31, 2022, compared to $1.0 million for the year ended December 31, 2021. The increase of $6.7 million was due to higher investment yields on our marketable securities compared to the prior year.
The increase of $18.8 million was due to higher investment yields on our marketable securities compared to the prior year. Income Tax Expense Income tax expense was $5.2 million for the year ended December 31, 2023, compared to $3.3 million for the year ended December 31, 2022.
As of December 31, 2022, we had $712.9 million of cash, cash equivalents, and marketable securities. As of December 31, 2022, we had an accumulated deficit of $579.7 million.
As of December 31, 2023, we had $548.9 million of cash, cash equivalents, and marketable securities.
The deferred revenue is expected to be recognized over the research and development period of the programs through proof-of-concept for AL002 and the completion of the initial Phase 2 clinical trials for specified indications for latozinemab and AL101. 100 Research and Development Expenses Research and development expenses account for a significant portion of our operating expenses.
The balance of deferred revenue was $293.8 million as of December 31, 2023, related to the AbbVie and GSK Agreements. The deferred revenue is expected to be recognized over the research and development period of the programs through proof-of-concept for AL002 and the completion of the initial Phase 2 clinical trials for specified indications for latozinemab and AL101.
If we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not experienced significant changes in our estimates of preclinical studies and clinical trial accruals.
If we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.
Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the measurement date with maturities approximately equal to the expected term. 106 Expected Dividend —The expected dividend rate is zero because we have not historically paid and do not expect for the foreseeable future to pay a dividend on our common stock.
Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the measurement date for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term.
We have incurred net losses in each year since inception and we expect to continue to incur net losses for the foreseeable future. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates.
We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We have incurred net losses in each year since inception and we expect to continue to incur net losses for the foreseeable future.
We also granted RSUs with market conditions to certain executives. The fair value of the RSUs with market conditions are estimated using a Monte Carlo simulation model. Assumptions and estimates utilized in the model include the stock price on grant date, risk-free interest rate, dividend yield, expected stock volatility, and the estimated period to achieve the market condition.
Assumptions and estimates utilized in the model include the stock price on grant date, risk-free interest rate, dividend yield, expected stock volatility, and the estimated period to achieve the market condition. The expense is recognized based on continued employment of the participants, regardless of achievement of the market condition.
Stock-based Compensation Stock-based compensation is measured at the date of grant, based on the estimated fair value of the award and recognized as expense over the employee’s requisite service period (usually the vesting period). We estimate the grant date fair value for options to purchase common stock, and the resulting stock-based compensation, using the Black-Scholes option-pricing model.
To date, we have not experienced significant changes in our estimates of preclinical studies and clinical trial accruals. 107 Stock-based Compensation Stock-based compensation is measured at the date of grant, based on the estimated fair value of the award and recognized as expense over the employee’s requisite service period (usually the vesting period).
Our operations have been financed primarily through our collaborations with AbbVie and GSK and the issuance and sale of convertible preferred stock and of common stock upon the completion of our initial public offering (IPO) and follow-on offering. We completed our IPO in February 2019, and received $168.2 million net proceeds, after deducting underwriting discounts and commissions and offering expenses.
We are advancing our clinical product candidates and research pipeline with our existing resources and in collaboration with our partners, GSK and AbbVie. 100 Our operations have been financed primarily through our collaborations with AbbVie and GSK and the issuance and sale of convertible preferred stock and of common stock upon the completion of our initial public offering (IPO) and follow-on offerings.
We record research and development expenses as incurred.
Research and Development Expenses Research and development expenses account for a significant portion of our operating expenses. We record research and development expenses as incurred.
Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 Year Ended December 31, Dollar 2022 2021 Change (In thousands) Collaboration revenue $ 133,617 $ 207,085 $ (73,468 ) Operating expenses: Research and development 210,418 189,407 21,011 General and administrative 61,033 55,038 5,995 Total operating expenses 271,451 244,445 27,006 Loss from operations (137,834 ) (37,360 ) (100,474 ) Other income, net 7,778 1,031 6,747 Loss before income taxes (130,056 ) (36,329 ) (93,727 ) Income tax expense 3,254 — 3,254 Net loss $ (133,310 ) $ (36,329 ) $ (96,981 ) Revenue Collaboration revenue was $133.6 million for the year ended December 31, 2022, compared to $207.1 million for the year ended December 31, 2021.
Comparison of the Years Ended December 31, 2023 and 2022 Year Ended December 31, Dollar 2023 2022 Change (In thousands) Collaboration revenue $ 97,062 $ 133,617 $ (36,555 ) Operating expenses: Research and development 192,115 210,418 (18,303 ) General and administrative 56,687 61,033 (4,346 ) Total operating expenses 248,802 271,451 (22,649 ) Loss from operations (151,740 ) (137,834 ) (13,906 ) Other income, net 26,561 7,778 18,783 Loss before income taxes (125,179 ) (130,056 ) 4,877 Income tax expense 5,212 3,254 1,958 Net loss $ (130,391 ) $ (133,310 ) $ 2,919 Revenue Collaboration revenue was $97.1 million for the year ended December 31, 2023, compared to $133.6 million for the year ended December 31, 2022.
Based on our current operating plan, we believe that our existing cash, cash equivalents, and marketable securities will enable us to fund our operations and capital expenditure requirements through 2025. We have based 103 this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
We reduced our workforce to better align our resources with our current strategic priorities and maintain our expectations with respect to our ability to fund our operations. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
Our net losses were $133.3 million, $36.3 million, and $190.2 million for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of $579.7 million.
Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were $130.4 million, $133.3 million, and $36.3 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $710.1 million.
Components of Results of Operations Revenue We have not generated any revenue from product sales and do not expect to do so in the near future. Our revenue to date has been primarily related to the AbbVie Agreement and GSK Agreement for the license and co-development of product candidates with those parties.
Our revenue to date has been primarily related to the AbbVie Agreement and GSK Agreement for the license and co-development of product candidates with those parties. We recognize revenue from the upfront payments and the milestone payment received from AbbVie over time as services are provided.
For the year ended December 31, 2020, cash used in investing activities of $105.1 million was primarily related to the purchase of marketable securities of $506.8 million offset by the proceeds from maturities of marketable securities of $406.8 million. In addition, we used cash for the purchase of $5.0 million of property and equipment.
Investing Activities For the year ended December 31, 2023, cash provided by investing activities of $101.9 million was primarily related to the maturities of marketable securities of $652.5 million offset by purchases of marketable securities of $551.7 million.
This was offset by a $55.8 million net increase to collaboration revenue under the AbbVie Agreement due to changes in estimated costs to satisfy the performance obligations resulting from the termination of the AL003 program, partially offset by increases in total expected costs for the AL002 program.
The decrease of $36.6 million was mainly due to $68.9 million of collaboration revenue recognized in the second quarter of 2022 due to changes in estimated costs to satisfy the performance obligations resulting from the termination of the AL003 program and a $27.0 million decrease in revenue recognized for the latozinemab programs.
For the year ended December 31, 2020, cash used in operating activities was $166.7 million. This was mainly due to the net loss of $190.2 million and the decrease in deferred revenue of $21.1 million as revenue was recognized related to the AbbVie Agreement.
This was mainly due to the net loss of $130.4 million. We also had a decrease in deferred revenue of $66.8 million and a decrease in refund liability of $24.5 million. This was offset by a non-cash charge of $42.8 million for stock-based compensation. For the year ended December 31, 2022, cash used in operating activities was $20.3 million.
For the year ended December 31, 2020, cash provided by financing activities of $232.1 million was primarily from net proceeds of the issuance of 9,602,500 shares of our common stock upon the completion of a follow-on public offering.
Financing Activities For the year ended December 31, 2023, cash provided by financing activities of $2.6 million was primarily from the exercise of options to purchase common stock and the issuance of stock from the 2019 Employee Stock Purchase Plan.
The decrease was also offset by $44.2 million higher revenue for GSK programs recognized over the initial Phase 2 clinical trials. Research and Development Expenses Research and development expenses were $210.4 million for the year ended December 31, 2022, compared to $189.4 million for the year ended December 31, 2021.
Revenues are recognized as the program costs are incurred by measuring actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligation. Research and Development Expenses Research and development expenses were $192.1 million for the year ended December 31, 2023, compared to $210.4 million for the year ended December 31, 2022.
Removed
Three product candidates, latozinemab (also referred to as AL001), AL002, and AL101 are in clinical development, and we continue to develop our research pipeline, including AL009 and AL008. We recently completed a prioritization review, focusing our development resources on our progranulin and TREM2 programs and extending our cash runway through 2025.
Added
We continue to develop our preclinical and research pipeline, and we are developing our proprietary blood brain barrier technology to potentially apply to next generation product candidates. We are focusing our development resources on latozinemab in FTD and AL002 and AL101 in Alzheimer’s disease.
Removed
We are advancing our clinical product candidates and research pipeline with our existing resources and in collaboration with our partners, GSK and AbbVie.
Added
On March 28, 2023, we committed to a plan to reduce our workforce by approximately 11% to better align our resources with our previously announced strategic prioritization of our late-stage progranulin and TREM2 immuno-neurology programs. We initiated such reduction in force impacting approximately 30 employees across the organization, effective March 29, 2023.
Removed
We completed a 99 follow-on offering in January 2020 and received $224.5 million net proceeds, after deducting underwriting discounts and commissions and offering expenses. To date, we have not had any products approved for sale and have not generated any revenue from product sales.
Added
As of December 31, 2023, we had cash, cash equivalents, and marketable securities of $548.9 million. In January 2024, we announced the closing of an underwritten public offering and the net proceeds from the offering were approximately $71.1 million.
Removed
We recognize revenue from the upfront payments from AbbVie over time as services are provided. We recognize revenue from the upfront payments from GSK at a point in time for a development license and over time for research and development services.
Added
Our cash, cash equivalents and marketable securities as of December 31, 2023 plus the net proceeds from the offering total $620.0 million, which we anticipate provides runway through 2026. Components of Results of Operations Revenue We have not generated any revenue from product sales and do not expect to do so in the near future.
Removed
The balance of deferred revenue was $491.6 million as of December 31, 2022, related to the AbbVie and GSK Agreements.
Added
Under the terms of the AbbVie Amendment signed in February 2023, the Company received a $17.8 million milestone payment in March 2023 for the dosing of the first patient in the LTE trial and $12.5 million payment in the second half of 2023 for the enrollment of additional patients.
Removed
At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates.
Added
Alector and GSK are jointly developing latozinemab and AL101. In May 2023, we and GSK amended the GSK Agreement. Under the terms of the GSK Amendment, we are responsible for funding and sharing in GSK’s and our development costs up to $140.5 million for the conduct of the initial Phase 2 clinical trial of AL101 in AD.
Removed
The decrease of $73.4 million was mostly due to the $173.4 million collaboration revenue recognized from the latozinemab FTD- GRN license provided as part of the GSK Agreement in 2021.
Added
Income Tax Expense Income tax expense consists of federal and state income tax provisions. Results of Operations The following table sets forth selected consolidated statements of operations data for the fiscal years indicated and the percentage change in such data from year to year. These historical operating results may not be indicative of the results for any future period.
Removed
The increase of $21.0 million was driven by a $17.5 million increase in personnel-related expenses, including stock-based compensation, due to an increase in headcount and issuance of equity grants to employees.
Added
A discussion of our results of operations for the comparison of the years ended December 31, 2022 and 2021 can be found on page 102 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 28, 2023.
Removed
In addition, we had an $8.9 million increase for AL002 as it further progresses in clinical trials and a $5.9 million increase in facilities and other unallocated research and development expenses from additional rent expense, headcount, and other overhead costs.
Added
This was offset by a $30.6 million increase in revenue recognized for the AL101 programs, including a cumulative non-cash revenue adjustment due to contract modification to have 103 GSK operationalize the AL101 Phase 2 study and a $29.0 million increase to collaboration revenue for the AL002 program due to the addition of AL002 LTE and patient replacement revenue in 2023.
Removed
The increase of $6.0 million was driven by a $4.9 million increase in personnel-related expenses, including stock-based compensation, due to an increase in headcount and issuance of equity grants to employees. We also had an increase of $1.1 million mainly related to information technology to support our growth.
Added
The decrease of $18.3 million was mainly due to the Company’s strategy to prioritize late-stage programs, higher cost share amounts with GSK for the latozinemab programs that are recorded as contra expense, less manufacturing expense due to the timing of production, and the Company's funding to GSK on the AL101 AD program being recorded as a reduction of our refund liability to collaboration partner.
Removed
Income Tax Expense Income tax expense was $3.3 million for the year ended December 31, 2022, compared to zero for the year ended December 31, 2021. Beginning January 1, 2022, the TCJA requires taxpayers to capitalize and amortize research and development expenses rather than take an immediate deduction pursuant to Section 174 of the Internal Revenue Code.
Added
The decrease of $4.3 million was mainly driven by a decrease in consulting expenses related to accounting, recruiting, IT, and other general expenses, plus a decrease in insurance costs. Other Income, Net Other income, net was $26.6 million for the year ended December 31, 2023, compared to $7.8 million for the year ended December 31, 2022.
Removed
The increase of $3.3 million was primarily due to the impact of this new law on the cash received from the GSK Agreement.
Added
In January 2024, we announced the closing of an underwritten public offering and the net proceeds from the offering were approximately $71.1 million. Our cash, cash equivalents and marketable securities as of December 31, 2023 plus the net proceeds from the offering total $620.0 million, which we anticipate provides runway through 2026.
Removed
This was partially offset by a non-cash charges of $30.5 million for stock-based compensation and $5.9 million for depreciation and amortization expense. We also had an increase of $12.2 million in accrued liabilities and accrued clinical supply costs, which offset the cash used in operating activities.
Added
We have an omnibus shelf registration statement on Form S-3 with the SEC, which became effective on May 1, 2023, which permits us to issue up to $400 million in common stock, other equity securities and/or debt securities.
Removed
For the year ended December 31, 2022, we recorded a net increase to collaboration revenue under the AbbVie Agreement due to changes in estimated costs to satisfy the performance obligations resulting from the termination of the AL003 program, partially offset by increases in total expected costs for the AL002 program.
Added
On November 7, 2023, we entered into an at-the-market sales agreement with TD Cowen pursuant to which we may offer and sell from time to time through TD Cowen up to $125,000,000 of shares of our common stock, in such share amounts as we may specify by notice to TD Cowen.
Added
On January 17, 2024, we entered into an underwriting agreement with Cantor, pursuant to which we offered and sold 10,869,566 shares of the Company’s common stock at a price per share of $6.57 paid by Cantor.
Added
The Company also granted Cantor an option exercisable for 30 days from the date of the underwriting agreement to purchase up to an additional 1,630,434 shares of common stock. We expect to obtain substantial additional funding in the future for our research and development activities and continuing operations.
Added
Expected Dividend —The expected dividend rate is zero because we have not historically paid and do not expect for the foreseeable future to pay a dividend on our common stock.
Added
Expense for options and RSUs that vest based only on a service condition is recognized on a straight-line basis. We also granted RSUs with market conditions to certain executives. The fair value of the RSUs with market conditions are estimated using a Monte Carlo simulation model.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+2 added−0 removed3 unchanged
Biggest changeDue to the generally short-term maturities of our cash equivalents and marketable securities, and the low risk profile of our marketable securities, an immediate 100 basis point increase or decrease in interest rates would cause a change in fair value of approximately $2.6 million as of December 31, 2022. Foreign Currency Risk Our expenses are generally denominated in U.S. dollars.
Biggest changeDue to the generally short-term maturities of our cash equivalents and marketable securities, and the low risk profile of our marketable securities, an immediate 100 basis point increase or decrease in interest rates would cause a change in fair value of approximately $2.1 million as of December 31, 2023.
To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not had a formal hedging program with respect to foreign currency. A 10% increase or decrease in current exchange rates would not have a material effect on our financial results. 107
To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not had a formal hedging program with respect to foreign currency. A 10% increase or decrease in current exchange rates would not have a material effect on our financial results. 109
We had cash, cash equivalents, and marketable securities of $712.9 million as of December 31, 2022, which consisted primarily of bank deposits, money market funds, and short-term government marketable securities. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us.
We had cash, cash equivalents, and marketable securities of $548.9 million as of December 31, 2023, which consisted primarily of bank deposits, money market funds, and government marketable securities. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us.
Added
We deposit cash and cash equivalents with high credit quality financial institutions to minimize risk with respect to any amounts in excess of insurance limitations. Cash and cash equivalents held at these deposit accounts are currently insured by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $250,000.
Added
As of 108 December 31, 2023, approximately $3.9 million exceeded the FDIC limit, and the significant majority of the Company’s operating cash is held at JPMorgan Chase & Co. Foreign Currency Risk Our expenses are generally denominated in U.S. dollars.

Other ALEC 10-K year-over-year comparisons