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What changed in Alector, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Alector, Inc.'s 2023 and 2024 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 2024 report.

+588 added−608 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-27)

Top changes in Alector, Inc.'s 2024 10-K

588 paragraphs added · 608 removed · 425 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

145 edited+82 added−136 removed216 unchanged
Biggest changeOur compensation and benefits include: • Competitive employee base salaries and short-term incentive bonus opportunity; • Stock-based compensation awards to encourage an ownership mindset and align employees to Alector’s long-term success; • Retirement savings options and matching contributions; • Healthcare and other benefits for all full-time employees and their dependents, including dedicated mental health, fertility, and caregiving programs; • Generous paid time off for all full-time employees; and • Parental leave and other leave options available to all employees Employee Growth and Development We are committed to employee growth and development, and we support this in a variety of ways, including through a seminar program of visiting academics, in-house training programs (for all employees and specifically for people managers to ensure quality management of their direct reports and teams), and quarterly employee/manager check-ins to discuss career development goals and success.
Biggest changeOur compensation and benefits include: • Competitive employee base salaries and short-term incentive bonus opportunities; • Stock-based compensation awards to encourage an ownership mindset and align employees to Alector’s long-term success; • Retirement savings options and matching contributions; • Healthcare and other benefits for all full-time employees and their dependents, including dedicated mental health, fertility, and caregiving programs; • Generous paid time off for all full-time employees; and • Parental leave and other leave options available to all employees.
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.
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 product candidates to additional indications.
The benefits of Breakthrough Therapy designation include the same benefits as Fast Track designation, plus intensive guidance from the FDA to ensure an efficient drug development program. Latozinemab for the Treatment of FTD Our first product candidate, latozinemab, is a human recombinant monoclonal antibody that increases the levels of PGRN in the brains of FTD- GRN patients.
The benefits of Breakthrough Therapy designation include the same benefits as Fast Track designation, plus intensive guidance from the FDA to ensure an efficient drug development program. Latozinemab for the Treatment of FTD-GRN Our first product candidate, latozinemab, is a human recombinant monoclonal antibody that increases the levels of PGRN in the brains of FTD- GRN patients.
(1) The control group included N = 44 age-matched procured control samples, (2) at Baseline N = 11 FTD- GRN participants, (3) at 6 months treatment with latozinemab N = 9 FTD- GRN participants, and (4) at 12 months treatment with latozinemab N = 10 FTD- GRN participants Figure 10.
(1) The control group included N = 44 age-matched procured control samples, (2) at Baseline N = 11 FTD- GRN participants, (3) at 6 months treatment with latozinemab N = 9 FTD- GRN participants, and (4) at 12 months treatment with latozinemab N = 10 FTD- GRN participants. Figure 9.
GSK will also conduct the initial Phase 2 trial for AL101 in Alzheimer’s disease. Development costs will be shared 60% by GSK and 40% by us, except that we will solely bear the development costs of the initial Phase 2 clinical trials under the development plan, and the parties will share manufacturing development costs equally.
GSK will also conduct the initial Phase 2 trial for AL101 in Alzheimer’s disease. Development costs will be shared 60% by GSK and 40% by us, except that the parties will share manufacturing development costs equally, and we will solely bear the development costs of the initial Phase 2 clinical trials under the development plan.
Drug Development In the United States, the FDA regulates drugs under the Food, Drug, and Cosmetic Act (FDCA) and biologics under the FDCA and the Public Health Service Act (PHSA). Both drugs and biologics also are subject to other federal, state and local statutes and regulations.
Drug Development In the United States, the FDA regulates drugs under the Food, Drug, and Cosmetic Act (FDCA) and biologics under the FDCA and the Public Health Service Act (PHSA). Both drugs and biologics are also subject to other federal, state and local statutes and regulations.
The FDA subsequently granted full approval of lecanemab based on the cognitive endpoint. Under the FDA’s accelerated approval pathway, a surrogate endpoint that is reasonably likely to predict a clinical benefit to patients may serve as the basis for an accelerated approval, subject to subsequent confirmatory studies.
Under the FDA’s accelerated approval pathway, a surrogate endpoint that is reasonably likely to predict a clinical benefit to patients may serve as the basis for an accelerated approval, subject to subsequent confirmatory studies. The FDA subsequently granted full approval of lecanemab based on the cognitive endpoint.
Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the EU clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the EU, the EU Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the member state regimes.
Although the EU Clinical Trials Directive 2001/20/EC (Directive) has sought to harmonize the EU clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the EU, the EU Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the member state regimes.
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.
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.
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.
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 37 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.
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.
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.
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.
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 12.
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.
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 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.
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.
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, and Parkinson’s disease, 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. 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.
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.
Despite latozinemab's orphan drug designation, the FDA can still approve other drugs that have a different active ingredient for use in treating FTD. Furthermore, orphan drug exclusivity does not 31 prevent the FDA from approving another marketing application for the same drug product for a different indication before the expiration of the orphan exclusivity period.
Despite latozinemab's orphan drug designation, the FDA can still approve other drugs that have a different active ingredient for use in treating FTD. Furthermore, orphan drug exclusivity does not prevent the FDA from approving another marketing application for the same drug product for a different indication before the expiration of the orphan exclusivity period.
As further described below, we intend to strengthen the patent protection of our product candidates and technologies through additional patent application filings. PGRN Programs We own six patent families directed to our PGRN programs, latozinemab and AL101, which include seven issued U.S. patents, covering the compositions and uses of our PGRN program product candidates.
As further described below, we intend to strengthen the patent protection of our product candidates and technologies through additional patent application filings. PGRN Programs We own seven patent families directed to our PGRN programs, latozinemab and AL101, which include seven issued U.S. patents, covering the compositions and uses of our PGRN program product candidates.
We anticipate our product candidates will compete with therapies approved for treating the symptoms of neurodegenerative diseases and therapies approved or currently in clinical studies intended to halt or slow the progression of neurodegenerative disease that are being developed by a number of companies and institutions.
We anticipate our product candidates will compete with therapies approved for treating the symptoms of neurodegenerative diseases and therapies approved or currently in clinical studies intended to halt or slow the progression of neurodegenerative disease that are being marketed or developed by a number of companies and institutions.
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.
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.
Furthermore, orphan drug exclusivity does not prevent the FDA from approving another marketing application for the same drug product for a different indication before the expiration of the orphan exclusivity period. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Furthermore, orphan drug exclusivity does not prevent the FDA or EMA from approving another marketing application for the same drug product for a different indication before the expiration of the orphan exclusivity period. Orphan Drug Designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. We use Alector, the Alector logo, and other marks as trademarks in the United States and other countries.
We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. 42 We use Alector, the Alector logo, and other marks as trademarks in the United States and other countries.
If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the Member States Concerned).
If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling or packaging proposed by the 38 RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the Member States Concerned).
For more information on our collaboration with GSK see the section titled “Business—Strategic Alliance with GSK.” Latozinemab received orphan drug designation from the FDA for the treatment of FTD, as well as Fast Track designation and Breakthrough Therapy designation for the treatment of patients with FTD- GRN .
For more information on our collaboration with GSK see the section titled “Business—Strategic Alliance with GSK.” Latozinemab received Orphan Drug Designation from the FDA and EMA for the treatment of FTD, as well as Fast Track Designation and Breakthrough Therapy Designation from the FDA for the treatment of patients with FTD- GRN .
These ten GENFI2 patients were identified based on the CDR® NACC FTLD SB at baseline and further 14 refined by matching based on age, NfL levels, and clinical diagnosis at baseline, all done on a blinded basis without access to longitudinal results.
These ten GENFI2 patients were identified based on the CDR ® NACC FTLD SB at baseline and further refined by matching based on age, NfL levels, and clinical diagnosis at baseline, all done on a blinded basis without access to longitudinal results.
For a drug product to receive federal reimbursement under the Medicaid or Medicare Part B programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program.
For a drug product to receive federal reimbursement under the Medicaid or Medicare Part B programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate 39 in the 340B drug pricing program.
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.
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.
Intellectual Property Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to enforce our proprietary rights against infringers.
Intellectual Property Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to enforce 26 our proprietary rights against infringers.
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.
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.
For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
For example, the European Union provides options for its member states to restrict the range of medicinal 40 products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
In addition, results from these 15 Phase 1 studies showed that latozinemab was generally well tolerated, with no drug-related serious adverse events or dose-limiting adverse events reported in the trial. Figure 14. Latozinemab restores PGRN levels in symptomatic and asymptomatic FTD- GRN patients back to the normal range as seen in healthy volunteers.
In addition, results from these 14 Phase 1 studies showed that latozinemab was generally well tolerated, with no drug-related serious adverse events or dose-limiting adverse events reported in the trial. Figure 13. Latozinemab restores PGRN levels in symptomatic and asymptomatic FTD- GRN patients back to the normal range as seen in healthy volunteers.
Upon our exercise of the option with respect to a target, we are subject to an obligation to devote commercially reasonable efforts to commercialize products using the optioned rights to such target. The assigned and licensed patent rights we obtained from these option exercises are described in more detail above under the section titled “Business—Intellectual Property.” Financial terms.
Upon our exercise of the option with respect to a target, we are subject to an obligation to devote commercially reasonable efforts to commercialize products using the optioned rights to such target. The assigned and licensed patent rights we obtained from these option exercises are described in more detail above under the section titled “Business—Intellectual Property.” Intellectual Property.
As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. 28 Regulatory requirements for approval of therapies for the treatment of neurodegenerative diseases are evolving. For example, two agents, aducanumab and lecanemab, received accelerated approval from the FDA based on a surrogate endpoint, the reduction of amyloid beta plaque in the brain.
As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. 29 Regulatory requirements for approval of therapies for the treatment of neurodegenerative diseases are evolving. For example, two agents, aducanumab and lecanemab, received accelerated approval from the FDA based on a surrogate endpoint, the reduction of amyloid beta plaque in the brain.
Results from up to 12 symptomatic FTD- GRN patients treated over 12 months in an open-label study showed that latozinemab was well tolerated. Treatment with latozinemab restored PGRN in both plasma and CSF to levels seen in healthy volunteer age-matched controls for the duration of treatment. 12 Figure 8.
Results from up to 12 symptomatic FTD- GRN patients treated over 12 months in an open-label study showed that latozinemab was well tolerated. Treatment with latozinemab restored PGRN in both plasma and CSF to levels seen in healthy volunteer age-matched controls for the duration of treatment. Figure 7.
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.
Individuals typically 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 LOF, lead to a neurodegenerative disease called neuronal ceroid lipofuscinosis, which is typified by childhood dementia, vision loss, epilepsy, and death.
Patients with FTD exhibit a range of personality-related symptoms, including compulsive behavior, lack of restraint, apathy, and anxiety as well as language and behavioral problems. The rate of disease progression in FTD is faster than in Alzheimer’s disease. Average life expectancy in FTD patients is seven to 10 years after the start of symptoms.
Patients with FTD exhibit a range of personality-related symptoms, including compulsive behavior, lack of restraint, apathy, and anxiety as well as language and behavioral problems. The rate of disease progression in FTD is faster than in Alzheimer’s disease. Average life expectancy in FTD patients is seven to ten years after the start of symptoms.
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.
Figure 11. 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.
As part of our broad manufacturing strategy to expedite the manufacturing of our product candidates and minimize manufacturing risk, we currently have established relationships with several CDMOs for the manufacturing of our drug substance or product candidates. We do not have long-term supply agreements and we purchase our required drug product through development manufacturing services agreement.
As part of our broad manufacturing strategy to expedite the manufacturing of our product candidates and minimize manufacturing risk, we currently have established relationships with CDMOs for the manufacturing of our drug substance or product candidates. We do not have long-term supply agreements and we purchase our required drug product through development manufacturing services agreements.
Any agency or judicial enforcement action could have a material adverse effect on us. 27 Any future product candidates must be approved by the FDA through either a BLA or NDA process before they may be legally marketed in the United States.
Any agency or judicial enforcement action could have a material adverse effect on us. 28 Any future product candidates must be approved by the FDA through either a BLA or NDA process before they may be legally marketed in the United States.
The Food and Drug 32 Omnibus Reform Act (FDORA) reformed the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.
The Food and Drug Omnibus Reform Act (FDORA) reformed the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on 33 an expedited basis for non-compliance with post-approval requirements.
National Academy of Sciences and National Institute of Medicine Thomas Christian Südhof, M.D., Ph.D. Departments of Molecular and Cellular Physiology and Neurosurgery at Stanford University Human Capital Resources Our human capital resources are a key factor in our ability to achieve our mission.
National Academy of Sciences and National Institute of Medicine Thomas C. Südhof, M.D., Ph.D. Departments of Molecular and Cellular Physiology and Neurosurgery at Stanford University Human Capital Resources Our human capital resources are a key factor in our ability to achieve our mission.
We leverage our advanced antibody engineering capabilities to design and optimize biotherapeutics. We employ gene expression profiling, proteomics, brain imaging, and data on disease pathology as well as our own preclinical and clinical data to continually refine our proprietary immuno-neurology algorithms and methodologies.
We leverage our advanced antibody engineering capabilities to design and optimize biotherapeutics. We employ gene expression profiling, proteomics, brain imaging, and data on disease pathology as well as our own preclinical and clinical data to continually refine our proprietary algorithms and methodologies.
Contract manufacturers often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Any of these actions or events could have a material impact on the availability of our products.
Contract manufacturers may encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Any of these actions or events could have a material impact on the availability of our products.
The BPCIA attempts to minimize duplicative testing, and thereby lower development costs and increase patient access to affordable treatments.
BPCIA attempts to minimize duplicative testing, and thereby lower development costs and increase patient access to affordable treatments.
We believe that these platform capabilities provide us with the tools to solve the conceptual and technical challenges associated with development of drug candidates for neurodegeneration. We rely on proprietary immuno-neurology bioinformatics algorithms and methodologies to analyze large genetic datasets from diseased and healthy individuals, brain-based gene expression profiling and proteomics, and human pathology.
We believe that these capabilities provide us with the tools to solve the conceptual and technical challenges associated with development of drug candidates for neurodegeneration. We rely on proprietary bioinformatics algorithms and methodologies to analyze large genetic datasets from diseased and healthy individuals, brain-based gene expression profiling and proteomics, and human pathology.
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.
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 4.
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.
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 approach and discovery capabilities. • Applying our proprietary capabilities to rapidly advance our product candidates through clinical proof-of-concept studies and beyond.
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.
The key tenets of our business strategy to achieve this goal include: • Building a leading, fully-integrated company focused on delivering innovative therapies, validated by human genetics, for the treatment of neurodegeneration.
The first two patent families are expected to expire in 2036, the third patent family is expected to expire in 2039, the fourth patent family is expected to expire in 2040, the fifth patent family is expected to expire in 2041, and the sixth patent family is expected to expire in 2042, in all cases excluding any patent term adjustments and any patent term extensions.
The first two patent families are expected to expire in 2036, the third patent family is expected to expire in 2039, the fourth patent family is expected to expire in 2040, the fifth patent family is expected to expire in 2041, and the sixth patent family is expected to expire in 2042, and the seventh patent family is expected to expire in 2045, in all cases excluding any patent term adjustments and any patent term extensions.
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 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 neurofilament light chain (NfL).
We have partnered with GSK to develop and commercialize our 9 PGRN product candidates.
We have partnered with GSK to develop and commercialize our PGRN product candidates.
FTD symptoms have an insidious onset with clinical symptoms usually appearing between 45 to 65 years of age at an average age of 58. Hence, FTD is considered an early-onset dementia as compared to late-onset Alzheimer’s disease and is more common than Alzheimer’s disease in early-onset dementia under the age of 60 years. Figure 5.
FTD symptoms have an insidious onset with clinical symptoms usually appearing between 45 to 65 years of age at an average age of 58. Hence, FTD is considered an early-onset dementia as compared to late-onset Alzheimer’s disease and is more common than Alzheimer’s disease in early-onset dementia under the age of 60 years. 9 Figure 3.
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.
In our Phase 2 trial results presented in 2021, many of these disease-relevant 12 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. Figure 8.
We fund Adimab’s research in connection with our collaboration, in accordance with the terms and limitations described in the 2014 Adimab Agreement. We also have potential milestone payments per program for use of antibodies and low- to mid-single digit royalty payments for commercial sales of products incorporating such antibodies.
We funded Adimab’s research in connection with our collaboration, in accordance with the terms and limitations described in the 2014 Adimab Agreement. We also have potential milestone payments per program for use of antibodies and low- to mid-single digit royalty payments for commercial sales of products 25 incorporating such antibodies.
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).
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. 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).
Recently, the FDA authorized the state of Florida to import certain prescription drugs from Canada for a period of two years to help reduce drug costs, provided that Florida’s Agency for Health Care Administration meets the requirements set forth by the FDA. Other states may follow Florida.
In January 2024, the FDA authorized the state of Florida to import certain prescription drugs from Canada for a period of two years to help reduce drug costs, provided that Florida’s Agency for Health Care Administration meets the requirements set forth by the FDA. Other states may follow Florida.
We believe that our future success depends, in part, on our ability to continue to identify, recruit, retain, incentivize, and integrate our employees, advisors, and consultants. Employee Profile As of December 31, 2023, we had 244 full-time employees, 76% of whom were engaged in research and development activities.
We believe that our future success depends, in part, on our ability to continue to identify, recruit, retain, incentivize, and integrate our employees, advisors, and consultants. Employee Profile As of December 31, 2024, we had 238 full-time employees, 76% of whom were engaged in research and development activities.
We therefore encourage our investors and others interested in our company to review the information that we make available on our website. 42
We therefore encourage our investors and others interested in our company to review the information that we make available on our website. 43
This permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that has not yet been approved. It is unclear how future litigation, legislation, agency decisions, and administrative actions will impact the scope of orphan drug exclusivity.
This permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that has not yet been approved. It is unclear how future litigation, legislation, agency decisions, and administrative actions will impact the scope of orphan drug exclusivity. In June 2024, the U.S.
Administered via intravenous peripheral infusion, latozinemab functions by blocking the SORT1 degradation mechanism for PGRN and increasing the circulating half-life of the functional PGRN in the brain. We are initially developing latozinemab for the treatment of symptomatic FTD due to a progranulin gene mutation.
Administered via intravenous peripheral infusion, latozinemab functions by blocking the SORT1 degradation mechanism for PGRN and increasing the half-life of the functional PGRN in the brain. We are initially developing latozinemab for the potential treatment of symptomatic FTD due to a GRN gene mutation.
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.
The pharmacokinetics and pharmacodynamics profile of AL101 following single and multiple IV doses support future development in chronic neurodegenerative conditions such as AD and PD. 16 Figure 15. AL101 treatment increased PGRN levels in healthy volunteers enrolled in our Phase 1 trial.
The 2014 Adimab Agreement expires on the twelfth anniversary of the first commercial sale of the products created under the collaboration, on a product-by-product and country-by-country basis. The licenses we and Adimab granted to each other do not survive, subject to certain limitations.
The 2014 Adimab Agreement is set to expire on the twelfth anniversary of the first commercial sale of the products created under the collaboration, on a product-by-product and country-by-country basis. The licenses we and Adimab granted to each other do not survive, subject to certain limitations.
According to the FDA’s 2024 fee schedule for prescription drug user fees, which became effective on October 1, 2023, and will remain in effect through September 30, 2024, the user fee for an application requiring clinical data, such as an NDA or BLA, is approximately $4.0 million.
According to the FDA’s FY 2025 fee schedule for prescription drug user fees, which became effective on October 1, 2024, and will remain in effect through September 30, 2025, the user fee for an application requiring clinical data, such as an NDA or BLA, is approximately $4.3 million.
Abbreviated Licensure Pathway of Biological Products as Biosimilar or Interchangeable The Patient Protection and Affordable Care Act, or ACA, signed into law in 2010, includes the BPCIA, which created an abbreviated approval pathway for biological products shown to be highly similar to an FDA-licensed reference biological product.
Abbreviated Licensure Pathway of Biological Products as Biosimilar or Interchangeable The Patient Protection and Affordable Care Act, or ACA, signed into law in 2010, includes the Biologics Price Competition and Innovation Act of 2009 (BPCIA), which created an abbreviated approval pathway for biological products shown to be highly similar to an FDA-licensed reference biological product.
Potential Additional Applications for Latozinemab In order to treat any other neurodegenerative diseases including FTD patients other than those with GRN mutations with latozinemab, we will be required to conduct additional clinical studies to obtain the applicable approvals for those specific patient populations.
Potential Additional Applications for Latozinemab In order to treat any other neurodegenerative diseases including FTD patients other than those with GRN mutations with latozinemab, we will be required to conduct additional clinical studies in those specific patient populations.
PDUFA also imposes an annual program fee for each marketed human drug or biologic ($416,734 in 2024) and an annual establishment fee on facilities used to manufacture prescription drugs and biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.
PDUFA also imposes an annual program fee for each marketed human drug or biologic ($403,889 in 2025) and an annual establishment fee on facilities used to manufacture prescription drugs and biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.
Our discovery capabilities are central to our efforts to rapidly identify new product candidates with compelling clinical promise. We will continue to invest in our research and discovery efforts, including evolving our proprietary analytical tools and assays, to validate our identified immune system targets and generate additional targets and product candidates.
Our discovery capabilities are central to our efforts to rapidly identify new product candidates with compelling clinical potential. We will continue to invest in 5 our research and discovery efforts, including evolving our proprietary analytical tools and assays, to validate our identified targets and generate additional targets and product candidates.
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 trial for AL101 in Alzheimer’s disease.
In May 2023, we and GSK amended the GSK Agreement (the GSK Amendment). Under the terms of the GSK Amendment, we are responsible for funding GSK’s and our development costs up to $140.5 million for the conduct of the initial Phase 2 trial of AL101 in early AD.
Latozinemab has been granted orphan drug designation by FDA for treatment of FTD, and AL101 also had orphan drug designation until we withdrew the IND for FTD and decided to pursue larger indications, such as AD and PD, for that product candidate.
Latozinemab has been granted orphan drug designation by FDA for treatment of FTD, and AL101 also had orphan drug designation until we withdrew the IND for FTD and decided to pursue larger indications, such as Alzheimer's disease and Parkinson’s disease, for that product candidate.
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.
Using our drug discovery 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. 6 Our Pipeline Programs Figure 1.
MD administration of AL101 increased plasma and CSF PGRN levels, with a higher elevation observed in the AL101 30 mg/kg MD IV group than in the AL101 300 mg MD SC group.
Three volunteers received MD IV placebo. MD administration of AL101 increased plasma and CSF PGRN levels, with a higher elevation observed in the AL101 30 mg/kg MD IV group than in the AL101 300 mg MD SC group.
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.
For the FDA, orphan drug exclusivity lasts for seven years, meaning the FDA may not approve any other New Drug Application (NDA) or Biologics License Application 8 (BLA) for the same drug or biologic for the same indication for seven years, except in limited circumstances such as if the other drug or biologic shows clinical superiority to the product with orphan exclusivity, if the FDA revokes the Orphan Drug Designation, or if the 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.
In January 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the applicable court ruling, it intends to continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved.
This appellate court decision created uncertainty in the application of orphan drug exclusivity. In January 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the applicable court ruling, it intends to continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved.
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.
The GSK Agreement became effective on August 17, 2021. 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 such case, we will no longer conduct development or commercialization of that product and the Company will receive tiered royalties on net sales in the United States instead of a share of profits or losses.
In such case, we will no longer conduct development or commercialization of that product, the 24 Company will receive tiered royalties on net sales in the United States instead of a share of profits or losses, and certain milestones will be reduced. Governance.
The 2014 Adimab Agreement granted us an exclusive option to obtain certain rights relating to a specified number of antibodies discovered or optimized by Adimab directed against the targets we selected.
We had an exclusive option to obtain certain rights relating to a specified number of antibodies discovered or optimized by Adimab directed against the targets we selected.
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.
Our Research and Discovery Engine Our research and drug discovery engine leverages human genetic datasets, advanced tools in bioinformatics and imaging, and insights in neurodegeneration to: (1) identify genetically validated targets that play a critical role in the development of multiple neurodegenerative diseases, and rapidly develop 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.
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.
As of December 31, 2024, our patent portfolio contains over 60 families, which include 128 issued patents and over 500 pending patent applications that are directed to over 25 different targets and/or technologies and that are solely owned or we have rights to exclusive licenses by us.
Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug or biologic, findings from animal or in vitro testing that suggest a significant risk for human volunteers and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA. 30 Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug or biologic, findings from animal or in vitro testing that suggest a significant risk for human volunteers and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
Generally, if a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan drug exclusivity.
Generally, if a product with Orphan Drug Designation from either the FDA or EMA subsequently receives the first approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan drug exclusivity.
The option extended to ownership of patent rights specifically covering the sequences of such antibodies, and the right to obtain worldwide, royalty-bearing, sublicensable licenses under certain technology owned or developed by Adimab to research, develop, make, have made, use, sell, offer to sell, import and export such antibodies and products based on such antibodies for all human therapeutic, prophylactic and diagnostic uses.
Upon exercise, we would own patent rights specifically covering the sequences of such antibodies, and a worldwide, royalty-bearing, sublicensable licenses under certain technology owned or developed by Adimab to research, develop, make, have made, use, sell, offer to sell, import and export such antibodies and products based on such antibodies for all human therapeutic, prophylactic and diagnostic uses.

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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 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.
Biggest changeIf we fail to successfully identify and develop additional product candidates from our research and drug discovery platform, our commercial opportunity may be limited. • We may not be successful in our efforts to carry out our obligations under our collaborations for our product development and research programs; for instance, without limitation, we may not complete in a timely manner or at all our contractual obligations to GSK. • We may not be successful in our efforts to obtain approval for additional or expanded indications for any product candidates that receive approval for a given indication. • We have concentrated a substantial portion of our research and development efforts on the treatment of neurodegenerative diseases, a field that has seen both limited success in drug development and evolving standards for regulatory approval. 44 • We may not accurately predict the time and cost of development and subsequent regulatory approval for our product candidates, which are based on innovative approaches and technologies to address the complex mechanisms underlying neurodegeneration. • We may not be successful in developing product candidates that effectively compete with therapeutics that are developed or commercialized by our competitors, including therapeutics that affect the same biological targets or pathways. • 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 pandemics or other public health outbreaks and geopolitical events and conflicts. • 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 has been, and 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. • Our existing cash, cash equivalents, and marketable securities may not be sufficient to fund our future operating expenses and capital expenditure requirements. • Our existing or future indebtedness and any associated debt covenants on our business and growth prospects.
Moreover, the neurodegenerative field is characterized by strong and increasing competition, and a strong emphasis on intellectual property. We may face competition with respect to any of our product candidates that we seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide.
Moreover, the neurodegenerative field is characterized by strong and increasing competition, with a strong emphasis on intellectual property. We may face competition with respect to any of our product candidates that we seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide.
Following full approval of lecanemab in July 2023, CMS reiterated that it would broadly cover the medication while continuing to gather data. Additionally, for drugs that FDA has not determined to have shown a clinical benefit or that received an accelerated approval, Medicare will provide coverage in FDA or National Institutes of Health approved clinical trials.
Following full approval of lecanemab in July 2023, CMS reiterated that it would broadly cover the medication while continuing to gather data. Additionally, for drugs that the FDA has not determined to have shown a clinical benefit or that received an accelerated approval, Medicare will provide coverage in FDA or National Institutes of Health approved clinical trials.
We rely on certain patent rights and proprietary technology from third parties that are important or necessary to the development of our product candidates, and development and commercialization of our product candidates are subject to the terms and conditions of certain collaboration agreements with third parties. For example, in 2014 we entered into the Adimab Collaboration Agreement with Adimab.
We rely on certain patent rights and proprietary technology from third parties that are important or necessary to the development of our product candidates, and development and commercialization of our product candidates are subject to the terms and conditions of certain collaboration agreements with third parties. For example, in 2014 we entered into the Adimab Collaboration Agreement.
On July 28, 2023, President Biden issued an Executive Order that emphasized a preference for domestic manufacturing for subject inventions under the Bayh Dole Act. On December 7, 2023, the National Institutes of Science and Technology (NIST) published a draft framework for expanding the use of the government’s march-in rights under Bayh Dole.
On July 28, 2023, President Biden issued an Executive Order that emphasized a preference for domestic manufacturing for subject inventions under the Bayh Dole Act (Bayh Dole). On December 7, 2023, the National Institutes of Science and Technology (NIST) published a draft framework for expanding the use of the government’s march-in rights under Bayh Dole.
Market conditions and changing circumstances, some of which may be beyond our control, could impair our ability to access our existing cash, cash equivalents and investments and to timely pay key vendors and others.
Market conditions and changing circumstances, some of which may be beyond our control, could impair our ability to access our existing cash, cash equivalents and investments and to timely pay key vendors and others.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation. • The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and their respective implementing regulations, impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security, and transmission of individually identifiable health information without appropriate authorization. • The federal Physician Payment Sunshine Act, created under the ACA, and its implementing regulations, require applicable manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the U.S.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation. • The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and their respective implementing regulations, impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security, and transmission of individually identifiable health information without appropriate authorization. • The federal Physician Payment Sunshine Act, created under the ACA, and its implementing regulations, require applicable manufacturers of drugs, devices, biologicals, and medical supplies for 71 which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the U.S.
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.
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 Agreements 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.
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.
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; 93 • 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.
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.
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.
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.
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 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.
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.
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; 98 • 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; • 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.
If we are not able to comply with the requirements of Section 404 or if we or our independent registered public accounting firm are unable to attest to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline and we could be subject to sanctions or investigations by NASDAQ, the SEC, or other regulatory authorities, which would require additional financial and management resources.
If we are not able to comply with the requirements of Section 404 or if we or our independent registered public accounting firm are unable to attest to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline and we could be subject to sanctions or investigations 97 by NASDAQ, the SEC, or other regulatory authorities, which would require additional financial and management resources.
We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.
We have adopted a code of business conduct and ethics and other policies, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws.
Our competitors also may obtain FDA, EMA, or other regulatory approval for their products more rapidly than we may obtain approval for ours, including through fast track designation, priority review, accelerated approval or breakthrough therapy designation, and may obtain orphan drug exclusivity from the FDA for indications our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to enter the market.
Our competitors also may obtain FDA, EMA, or other regulatory approval for their products more rapidly than we may obtain approval for ours, including through fast track 57 designation, priority review, accelerated approval or breakthrough therapy designation, and may obtain orphan drug exclusivity from the FDA for indications our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to enter the market.
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.
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.
If a breakdown, cyberattack, or other information security breach or incident occurs, it could cause damage to or interruptions or other disruptions in our operations or those of third parties with which we engage, and could result in damage to, the loss or unavailability of, or misappropriation or other unauthorized use or processing of, sensitive data, including personal information and confidential information, such as our intellectual property or financial information, and a material disruption of our development programs and our business operations.
If a breakdown, cyberattack, or other information security breach or incident occurs, it could cause damage to or interruptions or other disruptions in our operations or those of third parties, with which we engage, and could result in damage to, the loss or unavailability of, or misappropriation or other unauthorized use or processing of, sensitive data, including personal information and confidential information, such as our intellectual property or financial information, and a material disruption of our research and development programs and our business operations.
While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, there can be no assurance that our efforts will prevent service disruptions, or prevent or identify vulnerabilities or security breaches or incidents, that 89 could adversely affect our business and operations or result in the loss, unavailability, or corruption of, or inappropriate access to or use of, confidential, personal, or other sensitive information or company resources.
While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, there can be no assurance that our efforts will prevent service disruptions, or prevent or identify vulnerabilities or security breaches or incidents, that could adversely affect our business and operations or result in the loss, unavailability, or corruption of, or inappropriate access to or use of, confidential, personal, or other sensitive information or company resources.
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic.
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States of that drug or biologic.
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.
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 63 • 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, as seen, 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 government investigation of the FDA’s approval process for Aduhelm.
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.
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.
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.
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.
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.
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 49 timelines depending on the specific diagnostic test and any applicable regulatory requirements that would need to be met to enable its use.
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.
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 90 be able to obtain regulatory approval of our product candidates, and accordingly, may not achieve our research, development, and commercialization goals.
Such a license may not be available on commercially reasonable terms or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property.
Such a license may not be available on commercially reasonable terms or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our 87 competitors gaining access to the same intellectual property.
As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay or render commercially inviable our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the product in that country.
As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay or render commercially inviable commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the product in that country.
The U.S. government may exercise its march-in rights if it determines that action is necessary because we fail to achieve the practical application of the government funded technology, or because action is necessary to alleviate health or safety needs, to meet requirements for public use under federal regulations, or to give preference to U.S. industry.
The U.S. government may exercise its march-in rights if it determines that action is necessary because we fail to achieve the practical application of the government funded technology, or because action is necessary to alleviate health or safety needs, to meet requirements for public use 81 under federal regulations, or to give preference to U.S. industry.
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.
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 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; 53 • imposition of delays to clinical trials, including as a result of temporary or permanent clinical hold by regulatory agencies for any 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 • 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.
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.
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 competitive pressure and potential adverse consequences.
This could lower the price that we receive for any approved product. There may be further federal and state legislation and regulations 67 designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.
This could lower the price that we receive for any approved product. There may be further federal and state legislation and regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.
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.
In addition, we may need the 80 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.
For those product candidates that are subject to regulation as biological drug products, we will need to demonstrate that they are safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.
For those product candidates that are subject to regulation as biological drug products, we will need to demonstrate that they are sufficiently safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.
This 10-year marketing exclusivity period will be extended to 11 years if, during the first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies.
This 10-year marketing exclusivity period will be extended to 11 years if, during the first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical 61 benefits compared with existing therapies.
Further, FDA recently authorized the state of Florida to import certain prescription drugs from Canada for a period of two years to help reduce drug costs, provided that Florida’s Agency for Health Care Administration meets the requirements set forth by the FDA. Other states may follow Florida.
Further, the FDA recently authorized 69 the state of Florida to import certain prescription drugs from Canada for a period of two years to help reduce drug costs, provided that Florida’s Agency for Health Care Administration meets the requirements set forth by the FDA. Other states may follow Florida.
These laws and regulations include the General Data Protection Regulation (GDPR) in the European Union and similar requirements in other jurisdictions, as well as state privacy laws within the United States. These security and data protection and privacy-related laws and regulations are evolving and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.
These laws and regulations include the General Data Protection Regulation (GDPR) in the European Union and similar requirements in other jurisdictions, as well as privacy laws within the United States. These security and data protection and privacy-related laws and regulations are evolving and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.
In certain circumstances, we rely on our collaborators or licensing partners to pay these fees due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. government agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process.
In certain circumstances, we rely on our collaborators or licensing partners to pay these fees due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. 83 government agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process.
We and our business counterparties, including third parties on which we rely, may be unable to anticipate or prevent techniques used to obtain unauthorized access to or to compromise our or our business counterparties’ systems because such techniques change frequently and are generally not detected until after an incident has occurred.
We and our business counterparties, including third parties on which we rely, may be unable to anticipate or prevent outages or to anticipate or prevent techniques used to obtain unauthorized access to or to compromise our or our business counterparties’ systems because such techniques change frequently and are generally not detected until after an incident has occurred.
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing, or distribution of pharmaceutical products. To achieve commercial success for any approved product for which we retain sales and marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to third parties.
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing, or distribution of pharmaceutical products. To achieve commercial success for any approved product for which we 58 retain sales and marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to third parties.
In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities.
In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our 72 current or past facilities and at third-party facilities.
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.
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.
Our agreements with Adimab, AbbVie, GSK, and other agreements we enter into in the future may not provide exclusive rights to use certain intellectual property and technology retained by the collaborator in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future.
Our agreements with Adimab, GSK, and other agreements we enter into in the future may not provide exclusive rights to use certain intellectual property and technology retained by the collaborator in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future.
Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
Litigation may be necessary to defend against these claims. If we fail in defending any such 86 claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
Likewise, data privacy or security breaches or breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade secrets, or personal information of our employees, patients, customers, or other business partners, may be exposed to unauthorized persons or to the public or may otherwise be misused.
Likewise, data privacy or security breaches or breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade 91 secrets, or personal information of our employees, patients, customers, or other business partners, may be exposed to unauthorized persons or to the public or may otherwise be misused.
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.
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.
In particular, in 2010, the Patient Protection and Affordable Care Act, or Affordable Care Act (ACA) was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research.
In particular, in 2010, the Patient Protection and ACA was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research.
It is possible that new legislation or regulations may impose new obligations and requirements on similarly situated companies, and these laws or regulations may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction, that can result in new or modified compliance obligation or that may be inconsistent with our policies and practices.
It is possible that new legislation or regulations may impose new obligations and requirements on similarly situated companies, and these laws or regulations may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction, that can result in new or modified compliance obligations or that may be inconsistent with our policies and practices.
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.
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.
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, 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: 64 • 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, pre-prescription screening or ongoing monitoring for adverse events (such as ARIA-like 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.
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.
The degree of market acceptance of any product candidate 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; 59 • 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 the 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.
Our ability to successfully commercialize any products that we may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations.
The ability to successfully commercialize any products that we may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations.
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.
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.
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 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.
We do not expect to pay any dividends for the foreseeable future. Investors may never obtain a return on their investment. You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future.
We do not expect to pay any dividends for the foreseeable future. Investors may never obtain a return on their investment. Investors should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future.
In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to regulatory approval.
In many jurisdictions outside the United States, a product candidate 65 must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to regulatory approval.
If we or any partner we work with fails to comply with the regulatory requirements in international 63 markets or fails to receive applicable marketing approvals, our target market will be reduced, and our ability to realize the full market potential of our product candidates will be harmed.
If we or any partner we work with fails to comply with the regulatory requirements in international markets or fails to receive applicable marketing approvals, our target market will be reduced, and our ability to realize the full market potential of our product candidates will be harmed.
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.
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 recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations.
In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or 95 disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations.
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.
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 51 candidates.
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.
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.
Any performance failure on the part of the suppliers could delay the development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.
Any performance failure on the part of the suppliers could delay the 78 development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.
These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds 99 favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
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.
Our decisions concerning the allocation of research, development, collaboration, management, and financial resources toward particular technology, 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 and may in the future engage in acquisitions, collaborations, or strategic partnerships, which may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We have engaged in strategic collaborations and may in the future engage in acquisitions, collaborations, or strategic partnerships, which may increase our capital requirements, dilute our stockholders, cause us to incur additional debt or assume contingent liabilities, and subject us to other risks.
As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights.
As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay opportunities with other product candidates or other diseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights.
In addition, changing circumstances, including periods of rising inflation, may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control.
In addition, changing circumstances, including periods of rising inflation, may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of 48 circumstances beyond our control.
We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be 62 able to obtain, sufficient capital to pay such amounts.
We currently are and may continue in the future to conduct clinical trials for our product candidates outside the United States, and the FDA, EMA, and applicable foreign regulatory authorities may not accept data from such trials.
We currently are conducting and may continue in the future to conduct clinical trials for our product candidates outside the United States, and the FDA, EMA, and applicable foreign regulatory authorities may not accept data from such trials.
Many of the risks relating to product development, regulatory approval, and commercialization described in this “Risk Factors” section also apply to the activities of our collaborators and any negative impact on our collaborators may adversely affect us.
Many of the risks relating to product development, regulatory approval, and commercialization described in this “Risk Factors” 76 section also apply to the activities of our collaborators and any negative impact on our collaborators may adversely affect us.
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.
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.
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.
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.
Changes in tax laws (including provisions of the IRA), regulations, or rulings, changes in interpretations of existing laws and regulations, or changes in accounting principles could negatively or materially affect our financial position, cash flows and results of operations.
Changes in tax laws (including provisions of the IRA), regulations, or rulings, changes in interpretations 94 of existing laws and regulations, or changes in accounting principles could negatively or materially affect our financial position, cash flows and results of operations.
In the past, the U.S. government has experienced budgetary shutdowns and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities.
In the past, the U.S. government has experienced budgetary shutdowns and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees 73 and stop critical activities.
There are a number of large pharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of neurodegenerative diseases, including FTD, Alzheimer’s disease, Parkinson's disease, and ALS.
There are a number of large pharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of neurodegenerative diseases, including FTD, Alzheimer’s disease, and Parkinson's disease.
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.
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.
In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.
In addition, there 88 could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.
Collaborations involving our research programs, or any product candidates we may develop, pose risks to us, including the following: • collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations; • collaborators may decide to not pursue development and commercialization of any product candidates we develop or may elect not to continue or renew development or commercialization programs, for example, based on clinical trial results, changes in the collaborator’s strategic focus or available funding, the collaborator’s assessment regarding the commercial viability of the product candidate, or external factors such as an acquisition that diverts resources or creates competing priorities or collaborators may elect to fund or commercialize a competing product; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, provide insufficient quantities of materials for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing; • collaborations may be terminated in their entirety or with respect to certain product candidates or technologies and, if so terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates or technologies; • collaborators may not properly obtain, maintain, enforce, or defend intellectual property or proprietary rights relating to our product candidates or research programs or may use our proprietary information in such a way as to expose us to potential litigation or other intellectual property related proceedings, including proceedings challenging the scope, ownership, validity, and enforceability of our intellectual property; • collaborators may own or co-own intellectual property covering our product candidates or research and development programs that results from our collaboration with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates or research programs; • we may need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us; 72 • collaborators may control certain interactions with regulatory authorities, which may impact our ability to obtain and maintain regulatory approval of our product candidates; • disputes may arise between the collaborators and us that result in the delay or termination of the research, development, or commercialization of our product candidates or research programs or that result in costly litigation or arbitration that diverts management attention and resources; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or research programs if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • collaborators may restrict us from researching, developing, or commercializing certain products or technologies without their involvement; • collaborators with manufacturing, marketing, or distribution rights to one or more product candidates may not commit sufficient resources to the manufacture, marketing, or distribution of such product candidates; • we may lose certain valuable rights under circumstances identified in our collaborations, including if we undergo a change of control; • collaborators may grant sublicenses to our technology or product candidates or undergo a change of control, and the sublicensees or new owners may decide to take the collaboration in a direction which is not in our best interest; • collaborators may become bankrupt, which may significantly delay our research or development programs, or may cause us to lose access to valuable technology, know-how, or intellectual property of the collaborator relating to our products, product candidates, or research programs; • key personnel at our collaborators may leave, which could negatively impact our ability to productively work with our collaborators; • collaborations may require us to incur short and long-term expenditures, issue securities that dilute our stockholders, or disrupt our management and business; • if our collaborators do not satisfy their obligations under our agreements with them, if they terminate our collaborations with them, or if we fail to satisfy our obligations to our collaborators, we may not be able to develop or commercialize product candidates as planned; • the terms of a collaboration agreement may be amended in a manner that could negatively impact us; • collaborations may require us to share in development and commercialization costs pursuant to budgets that we do not fully control, and our failure to share in such costs could have a detrimental impact on the collaboration or our ability to share in revenue generated under the collaboration; • collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all; and • if a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our development or commercialization program under such collaboration could be delayed, diminished, or terminated.
We cannot predict the success of our current collaborations or any collaboration that we may enter into. 74 Collaborations involving our research programs, or any product candidates we may develop, pose risks to us, including the following: • collaborators generally have significant discretion in determining the efforts and resources that they will apply to collaborations; • collaborators may decide to not pursue development and commercialization of any product candidates we develop or may elect not to continue or renew development or commercialization programs, for example, based on clinical trial results, changes in the collaborator’s strategic focus or available funding, the collaborator’s assessment regarding the commercial viability of the product candidate, or external factors such as an acquisition that diverts resources or creates competing priorities or collaborators may elect to fund or commercialize a competing product; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, provide insufficient quantities of materials for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing; • collaborations may be terminated in their entirety or with respect to certain product candidates or technologies and, if so terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates or technologies; • collaborators may not properly obtain, maintain, enforce, or defend intellectual property or proprietary rights relating to our product candidates or research programs or may use our proprietary information in such a way as to expose us to potential litigation or other intellectual property related proceedings, including proceedings challenging the scope, ownership, validity, and enforceability of our intellectual property; • collaborators may own or co-own intellectual property covering our product candidates or research and development programs that results from our collaboration with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates or research programs; • we may need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us; • collaborators may control certain interactions with regulatory authorities, which may impact our ability to obtain and maintain regulatory approval of our product candidates; • disputes may arise between the collaborators and us that result in the delay or termination of the research, development, or commercialization of our product candidates or research programs or that result in costly litigation or arbitration that diverts management attention and resources; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or research programs if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • collaborators may restrict us from researching, developing, or commercializing certain products or technologies without their involvement; • collaborators with manufacturing, marketing, or distribution rights to one or more product candidates may not commit sufficient resources to the manufacture, marketing, or distribution of such product candidates; • we may lose certain valuable rights under circumstances identified in our collaborations, including if we undergo a change of control; • collaborators may grant sublicenses to our technology or product candidates or undergo a change of control, and the sublicensees or new owners may decide to take the collaboration in a direction which is not in our best interest; 75 • collaborators may become bankrupt, which may significantly delay our research or development programs, or may cause us to lose access to valuable technology, know-how, or intellectual property of the collaborator relating to our products, product candidates, or research programs; • key personnel at our collaborators may leave, which could negatively impact our ability to productively work with our collaborators; • collaborations may require us to incur short and long-term expenditures, issue securities that dilute our stockholders, or disrupt our management and business; • if our collaborators do not satisfy their obligations under our agreements with them, if they terminate our collaborations with them, or if we fail to satisfy our obligations to our collaborators, we may not be able to develop or commercialize product candidates as planned; • the terms of a collaboration agreement may be amended in a manner that could negatively impact us; • collaborations may require us to share in development and commercialization costs pursuant to budgets that we do not fully control, and our failure to share in such costs could have a detrimental impact on the collaboration or our ability to share in revenue generated under the collaboration; • collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all; and • if a present or future collaborator of ours were to be involved in a business combination, such as a merger or acquisition, the continued pursuit and emphasis on our development or commercialization program under such collaboration could be delayed, diminished, or terminated.
Developing product candidates and, if approved, commercializing our products for treatment of neurodegenerative diseases subjects us to a number of challenges, including obtaining disease modifying activity and efficacious dose in target tissue and obtaining regulatory approval from the FDA and other regulatory authorities who have only a limited set of precedents to rely on.
Developing product candidates and, if approved, commercializing our products for treatment of neurodegenerative diseases subject us to a number of challenges, including obtaining disease modifying activity and efficacious dose in target tissue and obtaining regulatory approval from the FDA and other regulatory authorities who have only a limited set of precedents to rely on.
Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster, global pandemics, or other business interruption. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster, geopolitical events, global pandemics, or other business interruption. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
In the event that one of our current third-party collaborators discontinues its collaboration with us, we may not be able to find a suitable alternative collaboration partner or partners, or we may need to obtain and expend additional and unanticipated capital to maintain our current development programs.
In the event that another of our current third-party collaborators discontinues its collaboration with us, we may not be able to find a suitable alternative collaboration partner or partners, or we may need to obtain and expend additional and unanticipated capital to maintain our current development programs.
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 NDA or BLA application to market the same drug or biologic for the same indication for seven years, except in limited circumstances such as if the same drug or biologic shows clinical superiority to the product with orphan exclusivity, if the FDA revokes the orphan drug designation, or if the 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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Head of Cybersecurity is regularly informed about developments in cybersecurity, including potential threats and innovative risk management techniques in the interest of effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The Head of Cybersecurity oversees the processes for monitoring our information systems, including periodic system audits to identify potential vulnerabilities and third-party audits and evaluations.
Biggest changeOur Head of Cybersecurity is regularly informed about developments in cybersecurity, including potential threats and innovative risk management techniques in the interest of effective prevention, detection, mitigation, and 100 remediation of cybersecurity incidents. The Head of Cybersecurity oversees the processes for monitoring our information systems, including periodic system audits to identify potential vulnerabilities and third-party audits and evaluations.
The Head of Cybersecurity, or a delegate, provides quarterly reports to the audit committee on the effectiveness and overall status of our cybersecurity program, and is responsible for reporting to the audit committee information about our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses. 97
The Head of Cybersecurity, or a delegate, provides quarterly reports to the audit committee on the effectiveness and overall status of our cybersecurity program, and is responsible for reporting to the audit committee information about our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeWe also subleased approximately 9,300 square feet of our corporate headquarters in February 2023 with a lease term that will expire in July 2025. We lease approximately 18,700 square feet of additional office and laboratory space in Newark, California.
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.
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 expired in November 2024.
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In August 2024, we approved a plan to transition operations from our laboratory and office space in Newark, California to our South San Francisco headquarters. Our intention is to sublease the Newark facility. We believe that our South San Francisco facilities will be adequate for our near-term needs.

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. 98 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. 101 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 22, 2024, there were approximately 6 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 21, 2025, there were approximately 5 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. 99 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. 102 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, 2023.
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, 2024.
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We are also prohibited from declaring or paying any cash dividends under our Loan Agreement.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe 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.
Biggest changeOther Income, Net Other income, net was $26.1 million for the year ended December 31, 2024, compared to $26.6 million for the year ended December 31, 2023. The decrease of $0.5 million was due to lower interest income from a reduction in marketable securities used to fund our operations.
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.
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.
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.
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. 105 Other Income, Net Other income, net consists primarily of interest earned on our cash equivalents and marketable securities.
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.
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 milestone payments for latozinemab and AL101.
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.
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 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.
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.
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 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; • the effects of inflationary pressures; and 108 • the costs involved in prosecuting, defending, and enforcing patent claims and other intellectual property claims.
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 will continue to require additional capital to develop our product candidates and fund operations for the foreseeable 103 future. We have incurred net losses in each year since inception and we expect to continue to incur net losses for the foreseeable future.
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).
To date, we have not experienced significant changes in our estimates of preclinical studies and clinical trial accruals. 110 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).
The expected volatility was derived from the historical stock volatilities of comparable peer public companies within our industry. These companies are considered to be comparable to our business over a period equivalent to the expected term of the stock-based awards. In 2020, we began giving weight to our own historical volatility in the determination of expected volatility.
The expected volatility was derived from the historical stock volatilities of comparable peer public companies within our industry. Those companies were considered to be comparable to our business over a period equivalent to the expected term of the stock-based awards. In 2020, we began giving weight to our own historical volatility in the determination of expected volatility.
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.
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. 109 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.
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.
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 $119.0 million, $130.4 million, and $133.3 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $829.1 million.
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.
Liquidity and Capital Resources Since our inception through December 31, 2024, 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 equity and debt financings.
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.
A discussion of our results of operations for the comparison of the years ended December 31, 2023 and 2022 can be found on page 103 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 27, 2024.
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.
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 AL101, which is being studied in a PROGRESS-AD Phase 2 clinical trial.
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.
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. 106 Research and Development Expenses Research and development expenses were $185.9 million for the year ended December 31, 2024, compared to $192.1 million for the year ended December 31, 2023.
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.
Stock-based compensation associated with restricted stock units (RSUs) that vest based only on a service condition 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.
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.
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.
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.
As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $413.4 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.
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.
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.
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.
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.
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.
Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Cash used in operating activities $ (229,905 ) $ (184,162 ) $ (20,329 ) Cash provided by (used in) investing activities 107,131 101,918 (159,014 ) Cash provided by financing activities 81,540 2,550 4,514 Operating Activities For the year ended December 31, 2024, cash used in operating activities was $230.0 million.
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.
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 late-stage clinical biotechnology company with a mission to make degenerative brain disorders history.
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.
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.
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.
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 equity and debt financings.
Outside of the United States, GSK will be responsible for commercialization of latozinemab and AL101 for all indications, and we will be eligible for double-digit tiered royalties. We expect that our revenue for the next several years will be derived primarily from the AbbVie and GSK Agreements.
Outside of the United States, GSK will be responsible for commercialization of latozinemab and AL101 for all indications, and we will be eligible for double-digit tiered royalties. Under the terms of the AbbVie Agreement, we received upfront payments.
Year 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.
Year Ended December 31, Dollar 2024 2023 Change (In thousands) Direct research and development expenses Latozinemab $ 13,909 $ 14,511 $ (602 ) AL101 4,656 4,403 253 AL002 50,222 51,490 (1,268 ) Other programs 16,908 21,096 (4,188 ) Indirect research and development expenses Personnel related (including stock-based compensation) 75,909 76,956 (1,047 ) Facilities and other unallocated research and development expenses 24,336 23,659 677 Total research and development expenses $ 185,940 $ 192,115 $ (6,175 ) General and Administrative Expenses General and administrative expenses were $59.6 million for the year ended December 31, 2024, compared to $56.7 million for the year ended December 31, 2023.
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.
The Monte Carlo model uses the fair value inputs on the grant date to run simulations and take an average of possible outcomes. 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.
For the year ended December 31, 2021, cash used in investing activities of $49.7 million was primarily related to the maturities of marketable securities of $286.3 million offset by purchases of marketable securities of $343.4 million and sales of marketable securities of $10.7 million.
Investing Activities For the year ended December 31, 2024, cash provided by investing activities of $107.1 million was primarily related to the maturities of marketable securities of $573.6 million offset by purchases of marketable securities of $467.7 million.
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.
The deferred revenue is expected to be recognized over the research and development period of the programs through the completion of the initial Phase 2 clinical trials for specified indications for latozinemab and AL101. 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.
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.
Comparison of the Years Ended December 31, 2024 and 2023 Year Ended December 31, Dollar 2024 2023 Change (In thousands) Collaboration revenue $ 100,558 $ 97,062 $ 3,496 Operating expenses: Research and development 185,940 192,115 (6,175 ) General and administrative 59,615 56,687 2,928 Total operating expenses 245,555 248,802 (3,247 ) Loss from operations (144,997 ) (151,740 ) 6,743 Other income, net 26,076 26,561 (485 ) Loss before income taxes (118,921 ) (125,179 ) 6,258 Income tax expense 128 5,212 (5,084 ) Net loss $ (119,049 ) $ (130,391 ) $ 11,342 Revenue Collaboration revenue was $100.6 million for the year ended December 31, 2024, compared to $97.1 million for the year ended December 31, 2023.
As of December 31, 2023, we had $548.9 million of cash, cash equivalents, and marketable securities.
As of December 31, 2024, we had $413.4 million of cash, cash equivalents, and marketable securities. As of December 31, 2024, we had an accumulated deficit of $829.1 million.
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.
On November 25, 2024, we committed to a plan to reduce our workforce by approximately 17% to better align our resources with our strategic priorities. We initiated such reduction in force impacting approximately 41 employees across the organization.
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 expect to incur additional costs associated with operating as a public company. 107 As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $413.4 million, which we anticipate provides runway through 2026.
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.
Financing Activities For the year ended December 31, 2024, cash provided by financing activities of $81.5 million was primarily from the issuance of common stock of $71.1 million upon a public offering and the debt issuance of $9.4 million.
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.
Income Tax Expense Income tax expense was $0.1 million for the year ended December 31, 2024, compared to $5.2 million for the year ended December 31, 2023. The decrease was due to the full recognition of GSK revenue for tax purposes in 2023.
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.
We borrowed $10,000,000 principal amount of the initial tranche of Term Loans on the closing date of the Loan Agreement. We expect to obtain substantial additional funding in the future for our research and development activities and continuing operations.
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.
The increase of $3.5 million was mainly due to a $15.9 million increase in revenue recognized for the AL002 program and a $9.8 million increase in revenue recognized for the latozinemab programs, offset by a $22.2 million decrease in revenue recognized for the AL101 programs.
Removed
Immuno-neurology targets immune dysfunction as a root cause of multiple pathologies that are drivers of degenerative brain disorders. We are developing therapies designed to counteract these pathologies simultaneously by restoring healthy immune function to the brain.
Added
Our robust portfolio of therapies is focused on counteracting the devastating progression of neurodegenerative diseases, particularly in areas of high unmet need where therapeutic options are limited.
Removed
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.
Added
We are at the forefront of a scientific and clinical revolution, committed to understanding the complex mechanisms that drive neurodegenerative diseases, including the roles of toxic misfolded proteins, deficient proteins, and lysosomal, immune system, and neuronal dysfunction. We aim to develop product candidates that remove toxic proteins, replace critical deficient proteins, and restore immune and nerve cells to normal function.
Removed
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.
Added
To pursue this aim, we are advancing a portfolio of programs that address genetically validated targets. These programs leverage our deep understanding of the genetic underpinnings of these diseases, combined with our expertise in drug development, proprietary protein engineering, antibody discovery, and our innovative Alector Brain Carrier (ABC) technology for blood-brain barrier transport.
Removed
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.
Added
We are advancing ABC, our proprietary, versatile blood-brain barrier (BBB) technology platform and selectively applying it within our portfolio. ABC aims to enhance the delivery of therapeutics, achieve deeper brain penetration and efficacy at lower doses, and ultimately improve patient outcomes while reducing costs.
Removed
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.
Added
With a singular focus on transforming brain health, our research and drug discovery engine enables us to identify targets and develop a broad portfolio of product candidates validated by human genetics.
Removed
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.
Added
These candidates, including those utilizing ABC technology, are designed to cross the BBB in sufficient quantity and potency to enable efficacious delivery to the brain and engage the intended targets.
Removed
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.
Added
We seek 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. We believe this may improve the probability of technical success over shorter development timelines.
Removed
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.
Added
Our clinical development portfolio includes latozinemab (AL001) and AL101/GSK4527226, while our preclinical and research pipeline features several candidates, including ADP037-ABC, ADP050-ABC, ADP056, and ADP063-ABC/ADP064-ABC.
Removed
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.
Added
In January 2025, AbbVie decided to terminate the TREM2 collaboration program, which resulted in termination of the AbbVie Agreement. 104 We expect that our revenue for the next several years will be derived primarily from the GSK Agreement. The balance of deferred revenue was $195.8 million as of December 31, 2024, related to the GSK Agreement.
Removed
This was due to the net loss of $36.3 million offset by an increase in deferred revenue of $292.9 million from the $500 million upfront payment received in the third quarter of 2021 from GSK. In addition, we had non-cash charges of $40.8 million for stock-based compensation and $6.3 million for depreciation and amortization expense.
Added
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.
Removed
Accrued Research and Development Expenses We record accrued expenses for estimated preclinical study and clinical trial expenses.
Added
The decrease of $6.2 million was mainly due to the Company’s strategy to prioritize selected programs.
Added
The increase of $2.9 million was mainly due to the impairment of the right-of-use asset and the leasehold improvements as we approved a plan to transition operations from our laboratory and office space in Newark, California to our South San Francisco headquarters.
Added
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.
Added
Additionally, on November 14, 2024, we entered into the Loan Agreement with our subsidiary, Alector LLC, as a co-borrower, the Lenders, and Hercules Capital, Inc., in its capacity as administrative agent and collateral agent for itself and the Lenders, pursuant to which we may access up to two tranches of Term Loans in an aggregate principal amount of up to $50,000,000.
Added
The initial tranche of Term Loans provides for an aggregate principal amount of up to $25,000,000 through June 30, 2026, subject to the satisfaction of certain conditions. The second tranche of Term Loans provides for up to $25,000,000 and is available at the sole discretion of the Lenders.
Added
This was mainly due to the net loss of $119.0 million. We also had a decrease in deferred revenue of $100.6 million and a decrease in refund liability of $46.0 million. This was offset by a non-cash charge of $39.5 million for stock-based compensation. For the year ended December 31, 2023, cash used in operating activities was $184.2 million.
Added
For the year ended December 31, 2024, we recorded an 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 AL002 program. Accrued Research and Development Expenses We record accrued expenses for estimated preclinical study and clinical trial expenses.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed3 unchanged
Biggest changeAs 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.
Biggest changeAs of December 31, 2024, approximately $1.1 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.
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.
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 111 are currently insured by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $250,000.
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
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. 112
Due 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.
Due 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 $1.8 million as of December 31, 2024.
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.
We had cash, cash equivalents, and marketable securities of $413.4 million as of December 31, 2024, 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.

Other ALEC 10-K year-over-year comparisons