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What changed in Arcturus Therapeutics Holdings Inc.'s 10-K — 2022 vs 2023

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

+500 added−460 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-29)

Top changes in Arcturus Therapeutics Holdings Inc.'s 2023 10-K

500 paragraphs added · 460 removed · 317 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

164 edited+111 added−79 removed139 unchanged
Biggest changeGlobal Manufacturing Footprint 27 For the near future, we expect to continue to rely on third-party CDMOs for the supply of drug substance and finished drug product for our current product candidates, including to support the launch of our first commercial product. Our CDMOs are compliant with CGMPs and other rules and regulations prescribed by foreign regulatory authorities.
Biggest changeAs the market for COVID vaccines shifts from multi-dose vial formats to lower and single-dose vial formats, we continue, with our collaborator CSL Seqirus, to evaluate and advance manufacturing process and capabilities and technology transfers, and prepare for commercialization of COVID vaccines. 34 Global Manufacturing Footprint For the near future, we expect to continue to rely on third-party CDMOs for the supply of drug substance and finished drug product for our current product candidates, including to support the launch of our first commercial product.
We continue to expand our library of proprietary lipids, termed ATX, with over 250 to date. Our preclinical studies have shown that formulations can be customized for the indication and target cell type of interest, and we have also demonstrated that our formulation process is scalable and reproducible. Our LUNAR platform is described in more detail below.
We continue to expand our library of proprietary lipids, termed ATX, with over 250 to date. Our preclinical studies have shown that formulations can be customized for the indication and target cell type of interest, and we have also demonstrated that our proprietary formulation process is scalable and reproducible. Our LUNAR platform is described in more detail below.
As the world pivots from a pandemic to an endemic response to SARS-CoV-2 infections, primary and booster vaccines that induce a robust and durable immunity against current and emerging variants of concern (“VOCs”) can help to reduce the infection and disease burden for both the public and the health care systems globally.
As the world pivots from a pandemic to an endemic response to SARS-CoV-2 infections, primary and booster vaccines that induce robust and durable immunity against current and emerging variants of concern (“VOCs”) can help to reduce the infection and disease burden for both the public and the health care systems globally.
In February 2022, Vinbiocare provided safety and immunogenicity data from the placebo-controlled Phase 1/2/3a portions of the study with approximately 1,000 participants. In April 2022, Vinbiocare shared results from the vaccine safety and efficacy analysis of Phase 3b participants. The vaccine primary efficacy endpoint in the placebo-controlled Phase 3b portion of the study was met.
In February 2022, Vinbiocare provided safety and immunogenicity data from the placebo-controlled Phase 1/2/3a portions of the study with approximately 1,000 participants. In April 2022, Vinbiocare shared results from the vaccine safety and efficacy analysis of Phase 3b participants. The primary efficacy endpoint in the placebo-controlled Phase 3b portion of the study was met.
Increasing evidence supports that immunity against the neuraminidase (NA), the second most abundant influenza surface protein, along with hemagglutinin (HA) specific immunity protects against influenza disease (Krammer et al, mBIO, 2018). While most currently licensed vaccines contain some neuraminidase, the amount is not standardized, and currently licensed vaccines do not induce robust anti-neuraminidase immune responses.
Increasing evidence supports that immunity against neuraminidase (NA), the second most abundant influenza surface protein, along with hemagglutinin (HA) specific immunity protects against influenza disease (Krammer et al, mBIO, 2018). While most currently licensed vaccines contain some neuraminidase, the amount is not standardized, and currently licensed vaccines do not induce robust anti-neuraminidase immune responses.
This allows airway cells to produce functional human CFTR protein using native translational machinery and protein trafficking pathways which could result in the treatment of the underlying defect that causes CF lung disease, regardless of the specific mutation. The Cystic Fibrosis Foundation (“CFF”) has partnered with us to support development of this therapy.
This allows airway cells to produce functional human CFTR protein using native translational machinery and protein trafficking pathways which could result in the treatment of the underlying defect that causes CF lung disease, regardless of the specific mutation. The Cystic Fibrosis Foundation (the “CFF”) has partnered with us to support development of this therapy.
Lipoprotein(a), Lp(a), is a causal risk factor for cardiovascular disease. Numerous epidemiological studies have shown an association between higher circulating Lp(a) concentrations and an increased risk of atherosclerotic and aortic calcification cardiovascular disease. Lipid-lowering drugs do not effectively reduce Lp(a) levels that are mainly regulated by the genomic structure of the apo(a) gene named LPA.
Lp(a) Lipoprotein(a), Lp(a), is a causal risk factor for cardiovascular disease. Numerous epidemiological studies have shown an association between higher circulating Lp(a) concentrations and an increased risk of atherosclerotic and aortic calcification cardiovascular disease. Lipid-lowering drugs do not effectively reduce Lp(a) levels that are mainly regulated by the genomic structure of the apo(a) gene named LPA .
LPA is expressed only in the liver and natural homozygous loss of this gene in humans has not been associated with adverse phenotypes, which makes the LPA a candidate for genome editing therapies. We designed and tested our LUNAR TALEN LPA technology in primary human hepatocytes and in a transgenic mouse model containing the human LPA gene.
LPA is expressed only in the liver and natural homozygous loss of this gene in humans has not been associated with adverse phenotypes, which makes LPA a candidate for genome editing therapies. We designed and tested our LUNAR-TALEN-LPA technology in primary human hepatocytes and in a transgenic mouse model containing the human LPA gene.
The FDA may grant deferrals for submission of data or full or partial waivers. Unless 34 otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. The FDA reviews all NDAs or BLAs submitted to determine if they are substantially complete before it accepts them for filing.
The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. The FDA reviews all NDAs or BLAs submitted to determine if they are substantially complete before it accepts them for filing.
(“CSL Seqirus”), a part of CSL Limited, and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens. The CSL Collaboration Agreement became effective on December 8, 2022.
(“CSL Seqirus”), a part of CSL Limited and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases and global non-exclusive rights to pandemic pathogens. The CSL Collaboration Agreement became effective on December 8, 2022.
We are leveraging our proprietary LUNAR platform and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs. We continue to expand this platform by adding new innovative delivery solutions that allow us to expand our discovery efforts.
We are leveraging our proprietary LUNAR platform and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs. We continue to expand this platform by adding new innovative delivery solutions that allow us to expand our efforts.
Results from the arms where participants were dosed with five (5) mcg of ARCT-154 as a booster after at least five months of being vaccinated with two doses of Comirnaty (Pfizer-BioNTech) showed encouraging increases in levels of neutralizing antibody activity against D614G and several variants of concern (VoCs) and variants of interest (VoIs).
Results from the arms where participants were dosed with five mcg of ARCT-154 as a booster after at least five months of being vaccinated with two doses of Comirnaty (Pfizer-BioNTech) showed encouraging increases in levels of neutralizing antibody activity against D614G and several variants of concern (VoCs) and variants of interest (VoIs).
Elimination of PCSK9 protein after editing the Pcsk9 target gene Bottom Left: LUNAR-PCSK9 TALEN mRNA dosing of mice at time Day 0 irreversibly reduces levels of PCSK9 in circulation. Bottom Right: Genome editing evaluation by sequencing shows INDEL (insertion/deletions) only in DNA extracted from the liver but not from other tissues.
Elimination of PCSK9 protein after editing the Pcsk9 target gene Bottom Left: LUNAR-PCSK9 TALEN mRNA dosing of mice at time Day 0 reduces levels of PCSK9 in circulation. Bottom Right: Genome editing evaluation by sequencing shows INDEL (insertion/deletions) only in DNA extracted from the liver but not from other tissues .
Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in 36 restrictions on a product, manufacturer, or holder of an approved NDA or BLA, including withdrawal of the product from the market.
Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA or BLA, including withdrawal of the product from the market.
The public may read and copy any materials that we file with the SEC electronically through the SEC website (www.sec.gov). The information contained on the SEC’s website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be part thereof. 38
The public may read and copy any materials that we file with the SEC electronically through the SEC website (www.sec.gov). The information contained on the SEC’s website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be part thereof.
The Phase 3 arm of the Phase 1/2/3 study was initiated in September 2021. The study enrolled over 19,000 adult subjects in Vietnam, including individuals with medical conditions putting them at higher risk of severe complications of COVID-19. The Phase 3 placebo-controlled efficacy portion of the study enrolled over 16,000 participants.
The Phase 3 arm of the Phase 1/2/3 study was initiated in September 2021. The study enrolled over 19,000 adult subjects in Vietnam, including individuals with medical conditions, putting them at higher risk of severe complications of COVID-19. The Phase 3b placebo-controlled efficacy portion of the study enrolled over 16,000 participants.
For evaluation of the LUNAR TALEN mRNA strategy, we designed TALEN pairs targeting either the mouse Pcsk9 gene or the human LPA gene which are involved in lipid metabolism and are associated with cardiovascular disease. The Pcsk9 gene is expressed only in the mouse liver, and the PCSK9 protein is then secreted into the blood circulation.
For evaluation of the LUNAR TALEN mRNA strategy, we designed TALEN pairs targeting either the mouse Pcsk9 gene or the human LPA gene which are involved in lipid metabolism and are associated with cardiovascular disease. PCSK9 The Pcsk9 gene is expressed only in the liver, and the PCSK9 protein is secreted into the blood circulation.
Drug Development Process 32 In the United States, the development, manufacturing, and marketing of human drugs and vaccines are subject to extensive regulation. The FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (“FDCA”) and implementing regulations, and biological products, including vaccines, under provisions of the FDCA and the Public Health Service Act (“PHSA”).
Drug Development Process In the United States, the development, manufacturing, and marketing of human drugs and vaccines are subject to extensive regulation. The FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (“FDCA”) and implementing regulations, and biological products, including vaccines, under provisions of the FDCA and the Public Health Service Act (“PHSA”).
Our STARR mRNA Technology In addition to our LUNAR lipids technology, our platform technologies include our distinct and proprietary self-amplifying RNA (saRNA) platform, termed STARR. The STARR platform includes proprietary algorithms that 26 inform the design and optimization of saRNA to enhance expression of the applicable antigen while minimizing structures that might inhibit expression.
Our STARR ® mRNA Technology In addition to our LUNAR lipids technology, our platform technologies include our distinct and proprietary self-amplifying RNA (saRNA) platform, termed STARR. The STARR platform includes proprietary algorithms that inform the design and optimization of saRNA to enhance expression of the applicable antigen while minimizing structures that might inhibit expression.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due to safety concerns or non-compliance.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before 40 the clinical trial can begin. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due to safety concerns or non-compliance.
HBE cells cultured in this manner undergo extensive differentiation, resulting in an in vitro model that is representative of the in vivo airway. The cells exhibit a pseudostratified morphology and are comprised of a heterogeneous cell population, including ionocytes, ciliated, basal, and secretory cells.
HBE cells cultured in this manner undergo extensive differentiation, resulting in an in vitro model that is representative of the in vivo airway epithelium. The cells exhibit a pseudostratified morphology and are comprised of a heterogeneous cell population, including ionocytes, ciliated, basal, and secretory cells.
Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either submit new information, addressing all of the deficiencies identified in the letter, or withdraw the application.
Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a 42 condition for approval. If a complete response letter is issued, the applicant may either submit new information, addressing all of the deficiencies identified in the letter, or withdraw the application.
Clinical trials must be conducted in accordance with the FDA’s regulations comprising the good clinical practices requirements. Further, each clinical 33 trial must be reviewed and approved by an independent institutional review board (“IRB”) at or servicing each institution at which the clinical trial will be conducted.
Clinical trials must be conducted in accordance with the FDA’s regulations comprising the good clinical practices requirements. Further, each clinical trial must be reviewed and approved by an independent institutional review board (“IRB”) at or servicing each institution at which the clinical trial will be conducted.
Life-threatening episodes of high ammonia levels can occur, requiring treatment with dialysis or hemofiltration. These treatments do not address the underlying cause of disease and there remains a high unmet need for an effective treatment.
Life-threatening episodes of high ammonia levels can still occur, requiring treatment with dialysis or hemofiltration. These treatments do not address the underlying cause of disease and there remains a high unmet need for an effective treatment.
Ultragenyx On October 26, 2015, we entered into a Research Collaboration and License Agreement with Ultragenyx, which was later amended in 2017, 2018 and during the second quarter of 2019 (as amended, the “Ultragenyx Agreement”).
Ultragenyx 36 On October 26, 2015, we entered into a Research Collaboration and License Agreement with Ultragenyx, which was later amended in 2017, 2018 and during the second quarter of 2019 (as amended, the “Ultragenyx Agreement”).
Under the Ultragenyx Agreement, we have granted Ultragenyx exclusivity (i) with respect to development targets, to the development and commercialization of products containing nucleic acid technology, and (ii) with respect to reserved targets, the development and commercialization of any product containing nucleic acid products or utilizing LUNAR lipid-mediated delivery technology.
Under the Ultragenyx Agreement, we granted Ultragenyx exclusivity (i) with respect to development targets, to the development and commercialization of products containing nucleic acid technology, and (ii) with respect to reserved targets, the development and commercialization of any product containing nucleic acid products or utilizing LUNAR lipid-mediated delivery technology.
Any product candidate that we develop must be authorized or approved by the FDA before it may be legally marketed in the United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries. U.S.
Any product candidate that 39 we develop must be authorized or approved by the FDA before it may be legally marketed in the United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries. U.S.
The regulatory approval of marketing authorization application of an investigational drug or biological product is similar to that required in the United States, with the exception of, among other things, country-specific document requirements.
The 43 regulatory approval of marketing authorization application of an investigational drug or biological product is similar to that required in the United States, with the exception of, among other things, country-specific document requirements.
Left: A significant increase in chloride activity was observed in cultured cells from CF donors (F508del) treated with LUNAR-CFTR (ARCT-032) compared to those treated with LUNAR-TdTomato (negative control).
Left: A significant increase in chloride activity was observed in cultured cells from CF donors (F508del) treated 19 with LUNAR-CFTR (ARCT-032) compared to those treated with LUNAR-TdTomato (negative control).
Potential competitors include, but are not limited to, Ultragenyx which is advancing a gene therapy program for OTC in clinical development, and Moderna which has a therapeutic candidate in pre-clinical development.
Potential competitors include, but are not limited to, Ultragenyx which is advancing a gene therapy 44 program for OTC in clinical development, and Moderna which has a therapeutic candidate in pre-clinical development.
The vaccine would encode an antigen that would be specifically presented by (or associated with) a tumor, such that the vaccination would elicit T cell responses that recognize and attack the tumor. We have applied our learnings from our more-advanced LUNAR-COVID-19 program to establish both STARR (self-amplifying) and conventional mRNA platforms for immuno-oncology therapy.
We contemplate that the vaccine would encode an antigen(s) that would be specifically presented by (or associated with) a tumor, such that the vaccination would elicit T cell responses that recognize and attack the tumor. We have applied our learnings from our more-advanced LUNAR-COVID-19 vaccine program to establish both STARR (self-amplifying) and conventional mRNA platforms for immuno-oncology therapy.
Our recent collaboration with CSL, a global leader in vaccines, will allow us to compete better on the world stage within the COVID and influenza markets.
Our recent collaboration with CSL, a global leader in vaccines, will allow us to compete better commercially on the world stage within the COVID and influenza markets.
Currently no cure exists for OTC deficiency apart from liver transplant; however, this treatment comes with significant risk of complications such as organ rejection, and transplant recipients must take immunosuppressant drugs for the rest of their lives. Current standard of care for OTC deficiency is a low-protein diet, dietary supplements, and ammonia scavengers to try to prevent accumulation of ammonia.
Currently no cure exists for OTC deficiency apart from liver transplant; however, this treatment comes with significant risks and complications such as organ rejection, and transplant recipients must take immunosuppressant drugs for the rest of their lives. Current standard of care for OTC deficiency is a low-protein diet, dietary supplements, and ammonia scavengers to try to prevent accumulation of ammonia.
Moreover, the same level of efficacy was achieved with a single administration of a 0.2 ug dose of the STARR vaccine. 21 With various LUNAR ® formulations, conventional mRNA vaccine expressing the AH1 antigen also demonstrated a robust T cell response (Panel B) and reduction of tumor growth with anti-PD1/PDL1 treatment in the syngeneic mouse model.
Moreover, the same level of efficacy was achieved with a single administration of a 0.2 ug dose of the STARR vaccine. 27 With various LUNAR formulations, conventional mRNA vaccine expressing the AH1 antigen also demonstrated a robust T cell response (Panel B) and reduction of tumor growth with anti-PD1/PDL1 treatment in the syngeneic mouse model.
Other treatments are required to target Class I mutations (no CFTR produced; approximately 10% of CF cases worldwide), and people who are intolerant or have poor response to CFTR modulator therapies. We are initially focusing ARCT-032 on these groups of patients, as they currently have the highest unmet needs for CF therapies.
Other treatments are required to target Class I mutations (no CFTR produced; approximately 10% of CF cases worldwide), and people who are intolerant or have poor response to CFTR modulator therapies. We are initially focusing ARCT-032 on these groups of patients, as they currently have the highest unmet need for CF therapies.
Among other collaboration arrangements, • we have a collaboration with CSL Seqirus for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases; • we are partnering with Ultragenyx to develop mRNA therapeutic candidates for rare disease targets; • we have received funding from the CFF to support our LUNAR-CF development program; • we have a contract with BARDA to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform; and • we are partnering with Curevac N.V.
Among other collaboration arrangements, • we have a collaboration with CSL Seqirus for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases; • we have received funding from the CFF to support our LUNAR-CF development program; • we are partnering with Ultragenyx to develop mRNA therapeutic candidates for rare disease targets; and • we have a contract with BARDA to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform.
Enabling Technologies – Immuno-oncology Cell-based therapies for hematologic malignancies using chimeric antigen receptor (CAR) T cells have made incredible advances in the past decade. The success of CAR-T cells in immuno-oncology has led to a growing number of therapies utilizing other immune cell types engineered to express a variety of immunomodulatory molecules.
Enabling Technologies – Immuno-oncology Cell-based therapies for hematologic malignancies using chimeric antigen receptor (CAR) T cells have made significant advances in the past decade. The success of CAR-T cells in immuno-oncology has led to a growing number of therapies utilizing other immune cell types engineered to express a variety of immunomodulatory molecules.
STARR™ Our STARR technology is our proprietary self-amplifying mRNA (or saRNA) technology platform. When combined with a delivery system, such as our lipid-mediated delivery system LUNAR, the STARR technology has the potential to generate a protective immune response or drive therapeutic protein expression to prevent against or treat a variety of diseases.
STARR ® Our STARR technology is our proprietary self-amplifying mRNA (or sa-mRNA) technology platform. When combined with a delivery system, such as our lipid-mediated delivery system LUNAR, the STARR technology has the potential to generate a protective immune response or drive therapeutic protein expression to prevent against or treat a variety of diseases.
Through the above efforts, our versatile LUNAR platform continues to drive internal and partner programs. ATX Lipid Design and In Vivo Screening Process As mentioned above, we have generated a growing library of more than 250 proprietary ATX lipids.
Through the above efforts, our versatile LUNAR platform continues to drive internal and partner programs. ATX Lipid Design and In Vivo Screening Process As mentioned above, we have generated a growing library of more than 300 proprietary ATX lipids.
Yet, despite their promise, extensive challenges still exist with this therapeutic approach. Some of the issues include toxicity, potential for insertional mutagenesis of the CAR construct and an ex vivo manufacturing process that is complex, time consuming and costly. We believe that our LUNAR-I/O approach has the potential to ameliorate some of these issues. For example: 1.
Yet, despite their promise, extensive challenges still exist with this therapeutic approach. Some of the issues include toxicity, potential for insertional mutagenesis of the CAR construct, T cell malignancies, and an ex vivo manufacturing process that is complex, time consuming and costly. We believe that our LUNAR-I/O approach has the potential to ameliorate some of these issues. For example: 1.
With intramuscular administration of the STARR vaccine (two doses of 10 ug), treated with a checkpoint inhibitor (CPI), anti-PD1/PDL1 antibody, led to a drastic reduction of tumor growth in comparison to the CPI treatment by itself (Panel A).
With intramuscular administration of the STARR vaccine (two doses of 10 ug), treated with a checkpoint inhibitor (CPI), anti-PD1/PDL1 antibody, led to a substantial reduction of tumor growth in comparison to the CPI treatment by itself (Panel A).
To date, we have manufactured and supplied gram quantities of drug substance, and scaled-up and validated our finished drug products (COVID Vaccine) through our CDMOs for clinical studies, EUA, stockpiling and commercial readiness. We have developed, and continue to dedicate, resources to advance our sophisticated manufacturing know-how, including formulation of lipid nanoparticles, which improves manufacturing efficiency and capacity.
To date, we have manufactured and supplied gram quantities of drug substance, and scaled-up and validated our finished drug products (COVID Vaccine) through our CDMOs for clinical studies, and commercial readiness. We continue to dedicate, resources to advance our sophisticated manufacturing know-how, including formulation of lipid nanoparticles, which improves manufacturing efficiency and capacity.
Dietary restriction (low protein diet) has been the main therapeutic treatment to control Phe levels and, although successful, outcomes are not always optimal and patients often have difficulty adhering to it.
Dietary restriction (low protein diet) has been the main therapeutic treatment to control Phe levels and, although successful, outcomes are not always optimal, and patients often have difficulty adhering to restrictions.
Based on these promising data, we are expanding these platform development efforts. LUNAR Safety (i.v. administration) ARCT-810 Nonclinical Safety Profile Arcturus has instituted a robust ATX lipid screening paradigm to ensure that we identify formulations with suitable properties for the intended drug’s target product profile, whether is it a protein replacement therapy, a gene editing treatment, or a vaccine.
Based on these promising data, we are expanding these platform development efforts. 32 LUNAR Safety (i.v. administration) LUNAR-CF - ARCT-032 Nonclinical Safety Profile Arcturus has instituted a robust ATX lipid screening paradigm to ensure that we identify formulations with suitable properties for the intended drug’s target product profile, whether is it a protein replacement therapy, a gene editing treatment, or a vaccine.
Self-amplifying RNA-based prophylactic vaccines developed with STARR may trigger rapid and prolonged antigen expression within host cells affording patients protective immunity against infectious pathogens.
Self-amplifying RNA-based prophylactic vaccines developed with STARR may trigger rapid and prolonged antigen expression within host cells affording individuals protective immunity against infectious pathogens.
Claims also cover the composition of matter, formulation, and use of our therapeutic candidates to prevent and/or treat target diseases including OTC deficiency, CF, HBV, and COVID-19. Our issued patents are expected to expire between 2028 and 2042, without taking into account any possible patent term extensions.
Claims also cover the composition of matter, formulation, and use of our therapeutic candidates to prevent and/or treat target diseases including OTC deficiency, CF and COVID-19. If issued, our patents are expected to expire between 2028 and 2044, without taking into account any possible patent term extensions.
CF is a multi-system disease that may also affect the pancreas, intestines, liver, sinuses, reproductive tract and sweat glands. The median predicted survival of CF patients born between 2017-2022 in the United States is approximately 53 years, and the cause of most of the mortality and morbidity is due to the lung disease.
CF is a multi-system disease that may also affect the pancreas, intestines, liver, sinuses, reproductive tract and sweat glands. The median predicted survival of CF patients born between 2018-2022 in the United States is approximately 56 years, and the cause of most of the mortality and morbidity is due to the lung disease.
We are aware of product candidates of the following companies that we consider as competitors or future competitors to ARCT-032: Moderna/Vertex, Eloxx Pharmaceuticals, Recode, 4DMT, Spirovant, SalioGen and Splisense. Human Capital As of December 31, 2022, we had approximately 170 employees, all of which were full-time.
We are aware of product candidates of the following companies that we consider as competitors or future competitors to ARCT-032: Moderna/Vertex, Eloxx Pharmaceuticals, Recode, 4DMT, Spirovant, SalioGen and Splisense. Human Capital As of December 31, 2023, we had approximately 180 employees, all of which were full-time.
LUNARhCFTR = ARCT-032; LUNARdT = LUNAR-TdTomato; MCC = mucociliary clearance; VX-770 = ivacaftor. 16 Note: x-axis represents time in minutes. After VX-770 washout, G551D CFTR ferrets were treated as shown and PET/CT scanned. MCC was assessed post first dose.
LUNARhCFTR = ARCT-032; LUNARdT = LUNAR-TdTomato; MCC = mucociliary clearance; VX-770 = ivacaftor. 22 Note: x-axis represents time in minutes. Figure 5: After VX-770 washout, G551D CFTR ferrets were treated as shown and PET/CT scanned. MCC was assessed post first dose.
Current palliative therapies for CF lung disease are directed towards existing lung disease and to prevent the progression of the disease. These treatments include aerosolized mucolytics, antibiotics, and airway clearance techniques that are time-consuming and represent a significant treatment burden for people with CF. Many CF patients ultimately suffer from a critical decline in lung function and require lung transplants.
Current non-curative therapies for CF lung disease are directed towards disease severity and to prevent the progression of the disease. These treatments include aerosolized mucolytics, antibiotics, and airway clearance techniques that are time-consuming and represent a significant treatment burden for people with CF. Many CF patients ultimately suffer from a critical decline in lung function and require lung transplants.
Examination of the targeted PCSK9 DNA sequence extracted from different organs did not show any DNA modifications except for the liver, which is explained by the liver specificity of this LUNAR formulation (Figure 1. Bottom Right). 19 Figure1. Top: PCSK9 involvement in LDL-Cholesterol metabolism. PCSK inhibits LDL-Receptor activity and increases LDL-Cholesterol in circulation.
Examination of the targeted PCSK9 DNA sequence extracted from different organs did not show any DNA modifications except for the liver, which is explained by the liver specificity of this LUNAR formulation (Figure below. Bottom Right). 24 Figure: Top: PCSK9 involvement in LDL-Cholesterol metabolism. PCSK inhibits LDL-Receptor activity and increases LDL-Cholesterol in circulation.
Ammonia is a toxic waste product produced from the breakdown of protein. OTC is a critical enzyme in the urea cycle, which takes place in liver cells and converts ammonia to urea which is eliminated in the urine. In patients with OTC deficiency, ammonia accumulates in the blood and is toxic to the brain and liver.
Ammonia is a toxic waste product produced from the breakdown of protein. OTC is a critical enzyme in the urea cycle, which takes place in liver cells and converts ammonia to harmless urea which is eliminated by the kidneys. In patients with OTC deficiency, ammonia accumulates in the blood and is toxic to the brain and liver.
Discovery Program - Phenylketonuria (PKU) Phenylketonurea (PKU) is an inherited metabolic disease characterized by the buildup of the amino acid phenylalanine in the body due to the lack or deficient activity of the enzyme responsible of its metabolism, phenylalanine hydroxilase (PAH).
Discovery Program Discovery Program – Phenylketonuria (PKU) Phenylketonurea (PKU) is an inherited metabolic disease characterized by the buildup of the amino acid phenylalanine (Phe) in the body due to the lack or deficient activity of the enzyme responsible for its metabolism, phenylalanine hydroxylase (PAH).
The LUNAR ® PKU program attempts to address the unmet needs of PKU patients by delivering a functional PAH protein as mRNA formulated in LUNAR lipid nanoparticles to the PAH-deficient liver, restoring PAH function and reducing blood Phe to healthy levels.
The LUNAR PKU program attempts to address the unmet needs of PKU patients by delivering mRNA encoding the PAH protein formulated in LUNAR lipid nanoparticles to the PAH-deficient liver, restoring PAH function and reducing blood Phe to healthy levels.
In collaboration with the University of Iowa and supported by the Cystic Fibrosis Foundation, a double transgenic ferret model of CF was used to assess transduction of bronchial epithelial cells in diseased ferrets. Ferrets with the G551D mutation maintained on VX-770 (ivacaftor) developed a CF phenotype including thick mucus in the lungs when they were withdrawn from VX-770 treatment.
In collaboration with the University of Iowa and supported by the Cystic Fibrosis Foundation, a double transgenic ferret model of CF was used to assess transduction of bronchial epithelial cells in diseased ferrets. Ferrets with the G551D mutation maintained on VX-770 (ivacaftor) developed a CF phenotype including thick mucus in the lungs upon withdrawal from VX-770 treatment.
Biodegradable, highly optimized for each cell type 23 LUNAR-platform development The development of our LUNAR platform is focused on continuous innovation and advancement in the following areas: • Design and incorporate novel ATX lipids and formulations to enrich our library of proprietary ATX lipids for target cell/tissue specificity, improved tolerability and translatability to larger species; • Develop and improvise manufacturing processes for LUNAR formulations to ensure RNA encapsulation across compositions and scales; • Develop stabilization strategies (e.g. lyophilized presentation) for LUNAR formulations to mitigate frozen storage; and • Continually assess and improvise LUNAR screening funnel to enable rigorous selection of ATX lipids for various programs.
This degradation prevents ATX lipids from accumulating inside the cell and causing toxicity. 29 Biodegradable, highly optimized for each cell type LUNAR-platform development The development of our LUNAR platform is focused on continuous innovation and advancement in the following areas: • Design and incorporate novel ATX lipids and formulations to enrich our library of proprietary ATX lipids for target cell/tissue specificity, improved tolerability and translatability to larger species; • Develop and improvise manufacturing processes for LUNAR formulations to ensure RNA encapsulation across compositions and scales; • Develop stabilization strategies (e.g. lyophilized presentation) for LUNAR formulations to mitigate frozen storage; and • Continually assess and improvise LUNAR screening funnel to enable rigorous selection of ATX lipids for various programs.
Nucleic acid therapeutics represent a significant advancement in targeted medicines and several of this class of therapeutics are being developed by public and private companies.
Nucleic acid therapeutics represent a significant advancement in targeted medicines and several of these therapeutics are being developed by public and private companies.
CureVac On January 1, 2018, we entered into a Development and Option Agreement with CureVac, which was amended on May 3, 2018 and later restated on September 28, 2018 (as amended and restated, the “Development and Option Agreement”).
CureVac On January 1, 2018, we entered into a Development and Option Agreement with CureVac, which was amended on May 3, 2018, restated on September 28, 2018 and amended on July 24, 2019 (as amended and restated, the “Development and Option Agreement”).
OTC deficiency is the most common of the urea cycle disorders, a group of inherited metabolic disorders that are associated with reduced ability to eliminate ammonia from the body and has a population of over 5,000 patients in the United States and is prevalent in approximately one in 14,000 to one in 77,000 people worldwide.
OTC deficiency is the most common of the urea cycle disorders, a group of inherited metabolic disorders that are associated with reduced ability to eliminate ammonia from the body. There are over 5,000 people with OTC deficiency in the United States and the prevalence is approximately one in 14,000 to one in 77,000 people worldwide.
Further, in the event of a license, sale or other transfer of the product or our development program technology (including a change of control transaction), we will pay CFF a percentage of such license, sale or transfer payments actually received by us or our shareholders (subject to a royalty cap). On August 1, 2019, we amended the CFF Agreement.
Further, in the event of a license, sale or other transfer of the product or our development program technology (including a change of control transaction), we will pay CFF a percentage of such license, sale or transfer payments actually received by us or our shareholders (subject to a royalty cap).
Our team continues to advance in the area of producing LUNAR lipid formulated nucleic acid product candidates in a scalable and highly reproducible manner, reducing the costs of goods for the therapies in our pipeline.
Our team continues to advance our LUNAR lipid formulated nucleic acid platform in a scalable and highly reproducible manner, reducing the costs of goods for the therapies in our pipeline.
The submission of an NDA or BLA is subject to the payment of substantial user fees ($3,242,063 for 2023); a waiver of such fees may be obtained under certain limited circumstances.
The submission of an NDA or BLA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.
STARR vaccine expressing a tumor antigen led to a significant reduction of the tumor growth rate of a colorectal cancer cell line, CT26. B. T responses elicited by conventional mRNA cancer vaccine by various LUNAR ® formulations.
Figure: Antitumor activity and T cell response by Arcturus cancer vaccines. A. STARR vaccine expressing a tumor antigen led to a significant reduction of the tumor growth rate of a colorectal cancer cell line, CT26. B. T responses elicited by conventional mRNA cancer vaccine by various LUNAR formulations.
There are only two approved treatments for PKU: Palynziq®, which requires injections that may lead to an immune response, and the synthetic PAH co-factor, BH4, Kuvan®, which only helps a subpopulation of PKU patients.
There are only two approved treatments for PKU: Palynziq®, which requires injections that may lead to an immune response against Palynziq® as it is an enzyme derived from bacteria, and the synthetic PAH co-factor, BH4, Kuvan®, which only helps a subpopulation of PKU patients.
With such collaborations we have established an Integrated Global Supply Chain Network with our primary and secondary sourcing contract development & manufacturing organizations (CDMOs) based in the United States, EU and Asia for producing critical raw materials, drug substance, and packaged finished product.
We have built a global manufacturing footprint with our partners, including Aldevron, Catalent, Recipharm, Polymun and ARCALIS. With such collaborations, we have established an Integrated Global Supply Chain Network with our primary and secondary sourcing contract development & manufacturing organizations (CDMOs) based in the United States, EU and Asia for producing critical raw materials, drug substance, and packaged finished product.
Our STARR platform is described in more detail below. 5 Development Programs Our Internal Programs Pipeline Vaccines in Development According to the National Foundation for Infectious Diseases, over 50,000 people die each year due to vaccine-preventable diseases and related complications in the United States alone.
Development Programs Our Internal Programs Pipeline Vaccines in Development According to the National Foundation for Infectious Diseases, over 50,000 people die each year due to vaccine-preventable diseases and related complications in the United States alone.
As such, we are developing the next generation of mRNA vaccines, which have demonstrated encouraging antibody data, including neutralizing antibodies against several variants of concern, including Omicron, boosting pre-existing immunity to SARS-CoV-2.
As such, through the CSL collaboration, we are developing the next generation of mRNA vaccines, which have demonstrated encouraging immunogenicity data, including neutralizing antibody responses against various variants of concern, including Omicron, boosting pre-existing immunity to SARS-CoV-2.
We are eligible to potentially receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We also are entitled to potentially receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields.
We received an up-front payment of $200.0 million, with the potential to receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We also are entitled to potentially receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields.
The general objectives of these therapies include: • to increase the amount of a functioning target protein by introducing a functional gene or mRNA that encodes for a protein that replaces a malfunctioning protein (mRNA therapy, CRISPR, gene therapy); • to restore a functional protein by correcting its encoding mRNA sequence; • to reduce the amount of a target protein in a patient by binding to and destroying the associated target mRNA (antisense and small interfering RNA (“siRNA”)); and • to introduce proteins from viruses or malfunctioning proteins in certain cancers to train the immune system to recognize and clear these proteins (nucleic acid vaccines).
The general objectives of these therapies include: • to introduce a gene product (e.g., mRNA, CRISPR, gene therapy) that encodes for a functional protein to replace an absent or defective protein; • to restore a functional protein by correcting its encoding mRNA sequence; • to reduce the amount of a target protein in a patient by binding to and destroying the associated target mRNA (antisense and small interfering RNA (“siRNA”)); and 5 • to introduce proteins from viruses or malfunctioning proteins obtained from certain cancers to train the immune system to recognize these proteins and clear these viruses or cancer cells (nucleic acid vaccines).
In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants, scientific advisors or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
To the extent that our employees, consultants, scientific advisors or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
We believe that these POC results from the two platforms hints for the possible applicability to various types of cancer with flexibility in dosing regimens. Our current effort focuses on the selection of neoantigens and other tumor-specific antigens encoded in the cancer vaccines. These antigens can be shared among patients, and therefore have more target patient populations.
We believe that these POC results from the two platforms hints for the possible applicability to various types of cancer with flexibility in dosing regimens. Our current effort focuses on the selection of neoantigens, and other common tumor-specific antigens encoded in the cancer vaccines.
As shown in figure below, the mucociliary clearance in CF ferrets treated with ARCT-032 (green line) was about twice that of the ‘VX-770 Off’ baseline (black line), and comparable to or greater than that for ‘VX-770 On’ (turquoise line) after a single administration. Similar results were obtained from ferrets treated with four doses of ARCT-032.
As shown in figure below, after a single administration of ARCT-03 the mucociliary clearance in CF ferrets 2 (green line) was about twice that of the ‘VX-770 Off’ baseline (black line), and comparable to or greater than that for ‘VX-770 On’ (turquoise line).
Our patent portfolio includes the following patents and pending patent applications for LUNAR, UNA and the use of LNA in certain RNA medicines: • LUNAR – As of March 24, 2023, we own 19 U.S. patents, 12 U.S. pending patent applications, 4 international patent application (“PCT”), 29 foreign granted patents, and 61 foreign pending patent applications covering the composition of matter, manufacture of lipid nanoparticles (including lyophilization), and use of our LUNAR technology for nucleic acid delivery and drug delivery. • UNA, mRNA and LNA – As of March 24, 2023, we own 22 U.S. patents, 10 U.S. pending patent applications, 3 PCT applications, 71 foreign patents and 31 foreign pending patent applications covering methods and uses of LNA, UNA oligomer and mRNA therapeutics, and compositions of UNA oligomers or mRNA to treat specific target diseases. • STARR – In 2019, we began to develop our STARR platform which combines our proprietary LUNAR delivery systems with technologies that enable self-transcribing and self-amplifying RNA.
Our patent portfolio includes the following patents and pending patent applications for LUNAR, UNA and the use of LNA in certain RNA medicines: • LUNAR ® – As of February 26, 2024, we own 20 U.S. patents, 12 U.S. pending patent applications, one international patent application (“PCT”), 56 foreign granted patents, and 91 foreign pending patent applications covering the composition of matter, manufacture of lipid nanoparticles (including lyophilization), and use of our LUNAR technology for nucleic acid delivery and drug delivery. • UNA, tRNA, mRNA and LNA – As of February 26, 2024, we own 25 U.S. patents, 23 U.S. pending patent applications, three PCT applications, 83 granted foreign patents and 58 foreign pending patent applications covering methods and uses of LNA, UNA oligomer and mRNA therapeutics, tRNA constructs, and compositions of UNA oligomers or mRNA to treat specific target diseases. • STARR ® – In 2019, we began to develop our STARR platform which combines our proprietary LUNAR delivery systems with technologies that enable self-transcribing and self-amplifying RNA.
Phase 3 Non-Inferiority Study of ARCT-154 in Japan Meiji is sponsoring a randomized, multicenter, Phase 3, observer-blind, active-controlled comparative study to evaluate safety and immunogenicity of a booster shot of ARCT-154 and to evaluate non-inferiority of ARCT-154 as a booster.
Pivotal Phase 3 Non-Inferiority Study of ARCT-154 in Japan Meiji is sponsoring a randomized, multicenter, Phase 3, observer-blind, active-controlled comparative study to evaluate the safety and immunogenicity of a booster dose of ARCT-154 and to evaluate the non-inferiority of ARCT-154 over COMIRNATY (Monovalent, Original strain).
Approximately 800 people are newly-diagnosed with cystic fibrosis each year in the United States. Cystic fibrosis is caused by one of more than 2,000 known mutations in the CFTR gene. These mutations have been grouped into several different classes based on the mechanism by which they cause reduction in the production and/or function of the CFTR protein.
CF is caused by one of more than 2,000 known mutations in the CFTR gene. These mutations have been grouped into several different classes based on the mechanism by which they cause reduction in the production and/or function of the CFTR protein.
This vaccine was designed to promote immune responses to the spike protein of the SARS-CoV-2 virus, the critical part of the virus that allows infection to occur. Our next generation vaccine candidate, ARCT-154 is based on the same platform as ARCT-021.
This vaccine was designed to promote immune responses to the spike protein of the SARS-CoV-2 virus, the critical part of the virus that allows infection to occur. Our next-generation COVID-19 vaccine candidate, ARCT-154, is also based on our STARR (self-amplifying mRNA) technology platform and our LUNAR platform.
Data from participants with verified COVID-19 were left out of the analysis. Phase 1/2/3 Study in Vietnam During 2021, we entered into a collaboration with Vinbiocare Biotechnology Joint Stock Company (“Vinbiocare”), a member company of the Vingroup Joint Stock Company (Vingroup) group of companies.
Pivotal Phase 1/2/3 Study in Vietnam During 2021, we entered into a collaboration with Vinbiocare Biotechnology Joint Stock Company (“Vinbiocare”), a member company of the Vingroup Joint Stock Company (Vingroup) group of companies.
Certain Risks to Intellectual Property We seek to protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach.
We seek to protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
A CTA was filed in December 2022 for the first-in-human study, and the first two cohorts have been successfully dosed. An extensive portfolio of nonclinical studies support the advancement of ARCT-032 to the clinic. Our comprehensive data set showcasing the potential for ARCT-032 as a disease-modifying treatment has been presented at the major CF conferences in North America and Europe.
An extensive portfolio of nonclinical studies supported the advancement of ARCT-032 to the clinic. Our comprehensive data set showcasing the potential for ARCT-032 as a disease-modifying treatment has been presented at the major CF conferences in North America and Europe.
However, the majority of these companies use conventional mRNA (not self-amplifying) and egg-based vaccine technology as the basis for their COVID-19 vaccines. LUNAR-FLU Vaccine We have partnered our influenza vaccine franchise with CSL Seqirus. We consider the following companies as some of the competitors or future competitors to our partnered LUNAR-Flu vaccine franchise: Pfizer, BioNTech, Moderna, and Sanofi.
Dozens of other companies are continuing to develop COVID-19 vaccines. However, the majority of these companies use conventional mRNA (not self-amplifying) and egg-based vaccine technology as the basis for their COVID-19 vaccines. LUNAR-FLU Vaccine We have partnered our influenza vaccine franchise with CSL Seqirus.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFDA, that it is sufficiently safe and effective to achieve any marketing approval (including any emergency use authorization) or to have a plausible clinical path to an approval. • There is significant competition in the development of a vaccine against COVID-19, some competitors’ vaccines are already widely accepted in the market, and many of our competitors have substantially greater financial, scientific and other resources than we have. • If we are unable to generate successful results from preclinical and clinical studies of our product candidates, or experience significant delays in doing so, our business may be materially harmed. • Our platform focuses on nucleic acid technology, and mRNA drug products in particular, which are relatively new and any adverse results from nucleic acid or mRNA technologies in the industry could significantly impact our ability to develop and commercialize marketable products. • We may not be successful in our efforts to identify or discover potential product candidates. 39 • If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. • We may find it difficult to identify and enroll patients in our clinical studies, and the limited number of patients who have the diseases for which certain of our product candidates are being studied could delay or prevent clinical studies of certain of our product candidates. • If any of our product candidates cause undesirable side effects or have other properties impacting safety, their regulatory approval could be prevented, delayed or limited. • Even if we complete the necessary preclinical studies and clinical trials, we may not obtain regulatory approval to commercialize a product candidate and we cannot, therefore, predict the timing of any revenue from a future product. • Even if we obtain regulatory approval for a product candidate, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties. • We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates that may be more profitable or for which there is a greater likelihood of success. • If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business. • Manufacturing issues may arise that could increase product and regulatory approval costs or delay or hinder commercialization. • If our alliance partners do not perform in accordance with the terms of our agreements, our potential to generate future revenue from these programs would be significantly reduced and our business would be materially and adversely harmed. • We face significant competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively. • The commercial success of our product candidates will depend upon the acceptance of these product candidates by the medical community, including physicians, patients and healthcare payors. • If we are unable to establish cost-effective sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenues. • If we obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business. • If our strategic alliances are unsuccessful or are terminated, we may be unable to commercialize certain product candidates and generate revenues. • If the outside contractors we rely on to conduct some aspects of our compound formulation, research and studies do not perform satisfactorily and meet deadlines, development of our product candidates could be delayed or precluded. • If the contract manufacturers we rely on to produce the supply of our preclinical and clinical product candidates, including materials for the manufacture of our product candidates, do not timely deliver adequate quantities of quality materials, development and commercialization of our product candidates would be hindered. • Any disruption in the supply chain of raw materials for, or in the manufacturing capacity and timing for the manufacture of drug substance or drug product for, our product candidates may cause a delay in 40 developing and commercializing these product candidates and limit the revenues that we could generate. • If the contract research organizations and clinical trial sites we rely on to conduct, supervise and monitor our clinical trials perform in an unsatisfactory manner, it may harm our business. • If we are unable to obtain or protect intellectual property rights related to our future products and product candidates, we may not be able to compete effectively in our markets. • Claims that we infringe the intellectual property rights of others, especially in the crowded and competitive field of mRNA patents, may prevent or delay our development and commercialization efforts. • If we fail to obtain licenses to necessary intellectual property or do not comply with our obligations in license agreements, we could lose important rights. • We may be involved in lawsuits to protect or enforce our patents or to defend against third party intellectual property claims, which could be expensive, time consuming and unsuccessful. • U.S.
Biggest changeRegulators may refuse to approve our current or an updated COVID-19 vaccine candidate containing an updated variant strain in Japan and elsewhere. • Regulatory authorities may change views and recommendations, which could lead to more challenging regulatory paths to approvals and to more expensive clinical and commercial efforts. • Even with the approval in Japan of our partnered next generation COVID-19 vaccine candidate, ARCT-154, we might not achieve any sales in Japan. • Regulatory authorities may change views and recommendations, which could lead to more challenging regulatory paths to approvals and to more expensive clinical and commercial efforts. • There is significant competition in the development of a vaccine against COVID-19, some competitors’ vaccines are already widely accepted in the market, and many of our competitors have substantially greater financial, scientific and other resources than we have. • If we are unable to generate successful results from preclinical and clinical studies of our product candidates, or experience significant delays in doing so, our business may be materially harmed. • Our platform focuses on nucleic acid technology, and mRNA drug products in particular, which are relatively new and any adverse results from nucleic acid or mRNA technologies in the industry could significantly impact our ability to develop and commercialize marketable products. • Changes to our drug product format could significantly impact our timeline to commercialize our products. • We may not be successful in our efforts to identify or discover potential product candidates. • We may find it difficult to identify and enroll patients in our clinical studies, and the limited number of patients who have the diseases for which certain of our product candidates are being studied could delay or prevent clinical studies of certain of our product candidates. • If any of our product candidates cause undesirable side effects or have other properties impacting safety, their regulatory approval could be prevented, delayed or limited. • Even if we obtain regulatory approval for a product candidate, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties. • If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business. • Manufacturing issues may arise that could increase product and regulatory approval costs or delay or hinder commercialization. 46 • If our strategic alliances are unsuccessful or are terminated, we may be unable to commercialize certain product candidates and generate revenues. • If the contract manufacturers we rely on to produce the supply of our preclinical and clinical product candidates, including materials for the manufacture of our product candidates, do not timely deliver adequate quantities of quality materials, development and commercialization of our product candidates would be hindered. • Any disruption in the supply chain of raw materials for, or in the manufacturing capacity and timing for the manufacture of drug substance or drug product for, our product candidates may cause a delay in developing and commercializing these product candidates and limit the revenues that we could generate. • If the contract research organizations and clinical trial sites we rely on to conduct, supervise and monitor our clinical trials perform in an unsatisfactory manner, it may harm our business. • If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectively in our markets. • Claims that we infringe the intellectual property rights of others, especially in the crowded and competitive field of mRNA patents, may prevent or delay our development and commercialization efforts. • If we fail to obtain licenses to necessary intellectual property or do not comply with our obligations in license agreements, we could lose important rights. • We may be involved in lawsuits to protect or enforce our patents or to defend against third party intellectual property claims, which could be expensive, time consuming and unsuccessful. • U.S.
The extent and timing of any product revenue is highly unpredictable because regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval for many reasons including: • regulatory authorities disagreeing with the design or implementation of our clinical trials; • such authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States, such as our phase 1/2/3 clinical trial of ARCT-154 conducted in Vietnam; 50 • unfavorable or unclear results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or foreign regulatory agencies for approval; • serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates; • the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; • we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; • such authorities may not agree that the data collected from clinical trials of our product candidates are acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and such authorities may impose requirements for additional preclinical studies or clinical trials; • such authorities may disagree regarding the formulation, labeling and/or the specifications of our product candidates; • such authorities may find deficiencies in the manufacturing processes or facilities of manufacturers with which we contract for clinical and commercial supplies; or • regulations or interpretations of such authorities may significantly change in a manner rendering our or any of our potential future collaborators’ clinical data insufficient for approval.
The extent and timing of any product revenue is highly unpredictable because regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval for many reasons including: • regulatory authorities disagreeing with the design or implementation of our clinical trials; • such authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States, such as our phase 1/2/3 clinical trial of ARCT-154 conducted in Vietnam; • unfavorable or unclear results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or foreign regulatory agencies for approval; • serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates; • the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; • we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; • such authorities may not agree that the data collected from clinical trials of our product candidates are acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and such authorities may impose requirements for additional preclinical studies or clinical trials; • such authorities may disagree regarding the formulation, labeling and/or the specifications of our product candidates; • such authorities may find deficiencies in the manufacturing processes or facilities of manufacturers with which we contract for clinical and commercial supplies; or • regulations or interpretations of such authorities may significantly change in a manner rendering our or any of our potential future collaborators’ clinical data insufficient for approval.
We are subject to a number of risks associated with our dependence on our relationships with our collaboration partners, including: • our collaboration partners may terminate their collaboration agreements with us for reasons specified in the collaboration agreements, including our breach; • the need for us to identify and secure on commercially reasonable terms the services of third parties to perform key activities, including development and commercialization activities, currently performed by our collaboration partners in the event that a collaboration partner was to terminate its collaboration with us; • adverse decisions by a collaboration partner regarding the amount and timing of resource expenditures for the commercialization, distribution, and sale of our drug products; • failure by a collaboration partner to perform its duties under its collaboration agreement with us (e.g., its failure to comply with regulatory requirements; • failure by a collaboration partner to timely deliver accurate and complete financial information to us or to maintain adequate and effective internal control over its financial reporting may negatively affect our ability to meet our financial reporting obligations as required by the SEC; • collaboration partners’ and their affiliates’ development and commercialization of products that compete directly or indirectly with our products or products candidates; • decisions by a collaboration partner to prioritize other of its current or future products more highly than our drug products or our product candidates when it performs its duties; • possible disagreements with a collaboration partner as to the timing, nature and extent of our development plans or distribution and sales and marketing plans; and • the financial returns to us, if any, under our collaboration agreements depend in large part on the achievement of milestones and generation of product sales, and if our partners fail to perform or satisfy their obligations under the collaboration agreement, the development and commercialization of our drug 44 products could be delayed, hindered or may not occur and our business and prospects could be materially and adversely affected.
We are subject to a number of risks associated with our dependence on our relationships with our collaboration partners, including: • our collaboration partners may terminate their collaboration agreements with us for reasons specified in the collaboration agreements, including our breach; • the need for us to identify and secure on commercially reasonable terms the services of third parties to perform key activities, including development and commercialization activities, currently performed by our collaboration partners in the event that a collaboration partner was to terminate its collaboration with us; • adverse decisions by a collaboration partner regarding the amount and timing of resource expenditures for the commercialization, distribution, and sale of our drug products; • failure by a collaboration partner to perform its duties under its collaboration agreement with us (e.g., its failure to comply with regulatory requirements; • failure by a collaboration partner to timely deliver accurate and complete financial information to us or to maintain adequate and effective internal control over its financial reporting may negatively affect our ability to meet our financial reporting obligations as required by the SEC; • collaboration partners’ and their affiliates’ development and commercialization of products that compete directly or indirectly with our products or products candidates; • decisions by a collaboration partner to prioritize other of its current or future products more highly than our drug products or our product candidates when it performs its duties; • possible disagreements with a collaboration partner as to the timing, nature and extent of our development plans or distribution and sales and marketing plans; and • the financial returns to us, if any, under our collaboration agreements depend in large part on the achievement of milestones and generation of product sales, and if our partners fail to perform or satisfy their obligations under the collaboration agreement, the development and commercialization of our drug products could be delayed, hindered or may not occur and our business and prospects could be materially and adversely affected.
Events which may result in a delay or unsuccessful completion of clinical development include: • delays in reaching an agreement with the FDA or other regulatory authorities on final trial design; • delays in submitting or acceptance of, an application for authorization to administer an investigational new drug product to humans through the submission or acceptance of an IND application to the FDA, or foreign regulatory authority; • imposition of a clinical hold of our clinical trial operations or trial sites by the FDA or other regulatory authorities; • delays in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites; • our inability to adhere to clinical trial requirements directly or with third parties such as CROs; • clinical trial site or CRO non-compliance with GCPs, GLPs, or other regulatory requirements; • inability or failure of clinical trial sites to adhere to the clinical trial protocol; • delays in obtaining required IRB approval at each clinical trial site, or an IRB suspending or terminating a trial; • delays in recruiting suitable patients to participate in a trial; • delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites; • delays in having patients complete participation in a trial or return for post-treatment follow-up; • delays caused by patients dropping out of a trial due to protocol procedures or requirements, product side effects or disease progression; 48 • clinical sites dropping out of a trial to the detriment of enrollment; • time required to add new clinical sites; or • delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials.
Events which may result in a delay or unsuccessful completion of clinical development include: • delays in reaching an agreement with the FDA or other regulatory authorities on final trial design; • delays in submitting or acceptance of, an application for authorization to administer an investigational new drug product to humans through the submission or acceptance of an IND application to the FDA, or foreign regulatory authority; • imposition of a clinical hold of our clinical trial operations or trial sites by the FDA or other regulatory authorities; • delays in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites; • our inability to adhere to clinical trial requirements directly or with third parties such as CROs; • clinical trial site or CRO non-compliance with GCPs, GLPs, or other regulatory requirements; • inability or failure of clinical trial sites to adhere to the clinical trial protocol; • delays in obtaining required IRB approval at each clinical trial site, or an IRB suspending or terminating a trial; • delays in recruiting suitable patients to participate in a trial; • delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites; • delays in having patients complete participation in a trial or return for post-treatment follow-up; • delays caused by patients dropping out of a trial due to protocol procedures or requirements, product side effects or disease progression; • clinical sites dropping out of a trial to the detriment of enrollment; • time required to add new clinical sites; or • delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials.
If any of our alliance partners do not elect to pursue the development and commercialization of our development candidates or if they terminate the strategic alliance, then, depending on the event: • development of product candidates subject to our alliances may be terminated or significantly delayed; • our cash expenditures could increase significantly if it is necessary for us to hire additional employees and allocate limited resources to the development and commercialization of product candidates that were previously funded, or expected to be funded, by our alliance partners; • we could bear all of the risks and costs related to the further development and commercialization of product candidates that were previously the subject of our strategic alliance, including the reimbursement of third parties; and • in order to fund further development and commercialization, we may need to seek out and establish alternative strategic alliances with other parties; this may not be possible, or we may not be able to do so on terms which are acceptable to us, in which case it may be necessary for us to limit the size or scope of one or more of our programs, increase our expenditures, or seek additional funding by other means.
If any of our alliance partners do not elect to pursue the development and commercialization of our development candidates or if they terminate the strategic alliance, then, depending on the event: • development of product candidates subject to our alliances may be terminated or significantly delayed; • our cash expenditures could increase significantly if it is necessary for us to hire additional employees and allocate limited resources to the development and commercialization of product candidates that were previously funded, or expected to be funded, by our alliance partners; • we could bear the risks and costs related to the further development and commercialization of product candidates that were previously the subject of our strategic alliance, including the reimbursement of third parties; and • in order to fund further development and commercialization, we may need to seek out and establish alternative strategic alliances with other parties; this may not be possible, or we may not be able to do so on terms which are acceptable to us, in which case it may be necessary for us to limit the size or scope of one or more of our programs, increase our expenditures, or seek additional funding by other means.
If any of our product candidates receives marketing approval, and causes serious, unexpected, or undesired side effects, a number of potentially significant negative consequences could result after we begin commercialization, including: • regulatory authorities may withdraw, suspend, or limit their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy; • regulatory authorities may require the addition of labeling statements, such as warnings or contraindications; • we may be required to change the way the product is administered or conduct additional clinical trials or post-marketing surveillance; • we could be sued and held liable for harm caused to patients; or • our reputation may suffer.
If any of our product candidates receives marketing approval, and causes serious, unexpected, or undesired side effects, a number of potentially significant negative consequences could result after we begin commercialization, including: • regulatory authorities may withdraw, suspend, or limit their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy; 57 • regulatory authorities may require the addition of labeling statements, such as warnings or contraindications; • we may be required to change the way the product is administered or conduct additional clinical trials or post-marketing surveillance; • we could be sued and held liable for harm caused to patients; or • our reputation may suffer.
Our ability to ultimately recognize revenue from our strategic relationships will depend upon the ability and willingness of our alliance partners to successfully meet their respective responsibilities under our agreements with them. 55 Our ability to recognize revenues from strategic alliances may be impaired by several factors, including: • an alliance partner may shift its priorities and resources away from our programs due to a change in its business strategies, or a merger, acquisition, sale or downsizing of its company or business unit; • an alliance partner may cease development in therapeutic areas which are the subject of our strategic alliances; • an alliance partner may change the success criteria for a particular program or potential product candidate thereby delaying or ceasing development of such program or candidate; • a significant delay in initiation of certain development activities by an alliance partner will also delay payment to us of milestones tied to such activities, thereby impacting our ability to fund our own activities; • an alliance partner could develop a product that competes, either directly or indirectly, with our product candidate; • an alliance partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product; • an alliance partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements; • an alliance partner may exercise its rights under the agreement to terminate a strategic alliance; • a dispute may arise between us and an alliance partner concerning the research, development or commercialization of a program or product candidate resulting in a delay in payments of milestones or royalties, or the termination of a program, and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and • an alliance partner may use our proprietary information or intellectual property in such a way as to invite litigation from a third party or fail to maintain or prosecute intellectual property rights such that our rights in such property are jeopardized.
Our ability to ultimately recognize revenue from our strategic relationships will depend upon the ability and willingness of our alliance partners to successfully meet their respective responsibilities under our agreements with them. 62 Our ability to recognize revenues from strategic alliances may be impaired by several factors, including: • an alliance partner may shift its priorities and resources away from our programs due to a change in its business strategies, or a merger, acquisition, sale or downsizing of its company or business unit; • an alliance partner may cease development in therapeutic areas which are the subject of our strategic alliances; • an alliance partner may change the success criteria for a particular program or potential product candidate thereby delaying or ceasing development of such program or candidate; • a significant delay in initiation of certain development activities by an alliance partner will also delay payment to us of milestones tied to such activities, thereby impacting our ability to fund our own activities; • an alliance partner could develop a product that competes, either directly or indirectly, with our product candidate; • an alliance partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product; • an alliance partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements; • an alliance partner may exercise its rights under the agreement to terminate a strategic alliance; • a dispute may arise between us and an alliance partner concerning the research, development or commercialization of a program or product candidate resulting in a delay in payments of milestones or royalties, or the termination of a program, and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and • an alliance partner may use our proprietary information or intellectual property in such a way as to invite litigation from a third party or fail to maintain or prosecute intellectual property rights such that our rights in such property are jeopardized.
The success of our product candidates will depend on several factors, including the following: • successfully designing preclinical studies which may be predictive of clinical outcomes; • successful enrollment in clinical trials and completion of preclinical and clinical studies with favorable results; • receipt of marketing approvals from applicable regulatory authorities; • obtaining and maintaining patent and trade secret protection for future product candidates; • establishing and maintaining manufacturing relationships with third parties or establishing our own manufacturing capability; and • successfully commercializing our products, if approved, including successfully establishing a sales force, marketing and distribution infrastructure, whether alone or in collaboration with others.
The success of our product candidates will depend on several factors, including the following: • successfully designing preclinical studies which may be predictive of clinical outcomes; • successful enrollment in clinical trials and completion of preclinical and clinical studies with favorable results; • receipt of marketing approvals from applicable regulatory authorities; • obtaining and maintaining patent and trade secret protection for future product candidates; 54 • establishing and maintaining manufacturing relationships with third parties or establishing our own manufacturing capability; and • successfully commercializing our products, if approved, including successfully establishing a sales force, marketing and distribution infrastructure, whether alone or in collaboration with others.
If we are unable to establish effective alliances to enable the sale of our product candidates, if approved, to healthcare professionals and in geographical regions, including the United States, that will not be covered by our own marketing and sales force, or if our potential future strategic alliance partners do not successfully commercialize the product candidates that may be approved, our ability to generate revenues from product sales will be adversely affected.
If we are unable to establish effective alliances to enable the sale of our product 60 candidates, if approved, to healthcare professionals and in geographical regions, including the United States, that will not be covered by our own marketing and sales force, or if our potential future strategic alliance partners do not successfully commercialize the product candidates that may be approved, our ability to generate revenues from product sales will be adversely affected.
In the past, medicines, biotechnology and pharmaceutical companies have experienced significant stock price volatility, particularly when associated with binary events such as clinical trials results and product approvals. If we face such litigation, it could result in substantial costs, divert management’s attention and resources, and have a very material adverse effect on our business, operating results and prospects.
In the 76 past, medicines, biotechnology and pharmaceutical companies have experienced significant stock price volatility, particularly when associated with binary events such as clinical trials results and product approvals. If we face such litigation, it could result in substantial costs, divert management’s attention and resources, and have a very material adverse effect on our business, operating results and prospects.
In such event, it could become more difficult to dispose of, or obtain accurate price quotations for our common stock and there would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further. Item 1B. Unresolve d Staff Comments None.
In such event, it could become more difficult to dispose of, or obtain accurate price quotations for our common stock and there would likely also be 77 a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further. Item 1B. Unresolve d Staff Comments None.
If we are unable to promptly enroll an adequate number of patients in our studies for the foregoing or other reasons, the timeline for conducting studies and obtaining regulatory approval of potential products may be delayed, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenue from any of these product candidates could be delayed or prevented.
If we are unable to promptly enroll an adequate number of patients in our studies for the foregoing or other reasons, the timeline for conducting studies and obtaining regulatory approval of potential products will be delayed, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenue from any of these product candidates could be delayed or prevented.
The FDA may also require a risk evaluation and mitigation strategy as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
The FDA may also require a risk evaluation and mitigation strategy as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution 58 methods, patient registries and other risk minimization tools.
Even if our patents are issued and are not challenged or invalidated, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed.
Even if our patents are issued and are not challenged or invalidated, our patents and patent applications may not adequately protect our intellectual property or products, or prevent others from designing around our claims. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed.
Although we intend to establish a sales organization if we are able to obtain approval to market any product candidates for niche markets in the United States, we will also consider the option to enter 53 into strategic alliances for future product candidates in the United States if commercialization requirements exceed our available resources.
Although we intend to establish a sales organization if we are able to obtain approval to market any product candidates for niche markets in the United States, we will also consider the option to enter into strategic alliances for future product candidates in the United States if commercialization requirements exceed our available resources.
It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act. To the extent that we continue to generate taxable losses for United States federal income tax purposes, unused NOLs will carry forward to offset future taxable income (subject to any applicable limitations), if any.
It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act. To the extent that we continue to generate taxable losses for United States federal income tax purposes, unused NOLs will carry forward to offset future taxable income (subject to any 51 applicable limitations), if any.
If we pursued these activities on our own, it would significantly increase our capital and infrastructure requirements, might limit the indications we are able to pursue for our drug products and our product candidates, and could prevent us from effectively developing and commercializing our drug products and our product candidates.
If we pursued these activities on our own, it would significantly increase our capital and infrastructure 50 requirements, might limit the indications we are able to pursue for our drug products and our product candidates, and could prevent us from effectively developing and commercializing our drug products and our product candidates.
Any inability to timely and successfully complete preclinical and clinical development, whether independently or with our strategic alliance partners, could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties.
Any inability to 56 timely and successfully complete preclinical and clinical development, whether independently or with our strategic alliance partners, could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties.
Our ability to generate revenues from product sales depends heavily on our success in: • completing our research and development of product candidates; 42 • initiating and completing clinical trials for product candidates with favorable results; • seeking, obtaining, and maintaining marketing approvals for product candidates that successfully complete clinical trials; • establishing and maintaining supply and manufacturing relationships with capable parties; • launching and commercializing product candidates for which we may obtain marketing approval, with an alliance partner or, if launched independently, successfully establishing a sales force, marketing and distribution infrastructure; • maintaining, protecting and expanding our intellectual property portfolio; and • attracting, hiring and retaining qualified personnel.
Our ability to generate revenues from product sales depends heavily on our success in: • completing our research and development of product candidates; 48 • initiating and completing clinical trials for product candidates with favorable results; • seeking, obtaining, and maintaining marketing approvals for product candidates that successfully complete clinical trials; • establishing and maintaining supply and manufacturing relationships with capable parties; • launching and commercializing product candidates for which we may obtain marketing approval, with an alliance partner or, if launched independently, successfully establishing a sales force, marketing and distribution infrastructure; • maintaining, protecting and expanding our intellectual property portfolio; and • attracting, hiring and retaining qualified personnel.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or 59 future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
In order to regain compliance with such requirement, the 69 closing bid price of our common stock would need to meet or exceed $1.00 per share for at least 10 consecutive business days during the compliance period.
In order to regain compliance with such requirement, the closing bid price of our common stock would need to meet or exceed $1.00 per share for at least 10 consecutive business days during the compliance period.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of civil, criminal and administrative penalties, damages, fines, possible exclusion from Medicare, Medicaid and other government healthcare programs, additional reporting requirements and/or oversight, particularly if we become subject to a corporate integrity agreement or similar agreement to 61 resolve allegations of non-compliance, disgorgement, imprisonment, and contractual damages.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of civil, criminal and administrative penalties, damages, fines, possible exclusion from Medicare, Medicaid and other government healthcare programs, additional reporting requirements and/or oversight, particularly if we become subject to a corporate integrity agreement or similar agreement to 69 resolve allegations of non-compliance, disgorgement, imprisonment, and contractual damages.
If these outside parties terminate their engagements with us or do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated 56 study plans and protocols, we will not be able to complete, or may be delayed in completing, the necessary preclinical studies to enable us or our strategic alliance partners to select viable product candidates for IND submissions and will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates.
If these outside parties terminate their engagements with us or do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated 63 study plans and protocols, we will not be able to complete, or may be delayed in completing, the necessary preclinical studies to enable us or our strategic alliance partners to select viable product candidates for IND submissions and will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates.
If we are unable to establish cost-effective sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenues.
If we are unable to establish cost-effective sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenues from product sales.
A large number of biopharmaceutical companies, academic institutions and other organizations currently have programs to develop COVID-19 vaccine candidates and many are further along in development of their vaccine candidates.
A large number of biopharmaceutical companies, academic institutions and other organizations currently have programs to develop COVID-19 vaccine candidates and many are further along in development of their vaccine 53 candidates.
The ACA included a number of provisions that may reduce the profitability of drug products, including revising the rebate methodology for covered outpatient drugs under the Medicaid Drug Rebate Program, extending 63 Medicaid rebates to individuals enrolled in Medicaid managed care plans, and requiring drug manufacturers to pay an annual fee based on their market share of prior year total sales of branded programs to certain federal health care programs.
The ACA included a number of provisions that may reduce the profitability of drug products, including revising the rebate methodology for covered outpatient drugs under the Medicaid Drug Rebate Program, extending 71 Medicaid rebates to individuals enrolled in Medicaid managed care plans, and requiring drug manufacturers to pay an annual fee based on their market share of prior year total sales of branded programs to certain federal health care programs.
Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines. 57 In addition, if our alliance partners elect to control manufacturing for certain programs, we may lose control over the manufacturing activities for the product candidate, which would reduce our level of manufacturing process development and would make the success of such programs dependent on our partners’ ability to manufacture timely and properly.
Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines. 64 In addition, if our alliance partners elect to control manufacturing for certain programs, we may lose control over the manufacturing activities for the product candidate, which would reduce our level of manufacturing process development and would make the success of such programs dependent on our partners’ ability to manufacture timely and properly.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY If we are unable to obtain or protect intellectual property rights related to our future products and product candidates, we may not be able to compete effectively in our markets.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectively in our markets.
Our share price could be subject to wide fluctuations in response to a variety of factors, including but not limited to the following factors: 67 • adverse results or delays in preclinical studies or clinical trials; • inability to obtain additional funding; • any delay in filing an application for authorization to commence a clinical trial of, or for authorization or approval to market, any of our product candidates and any adverse development or perceived adverse development with respect to the FDA’s review of that IND or BLA; • failure to maintain our existing strategic alliances or enter into new alliances; • failure of our strategic alliance partners to elect to develop and commercialize product candidates under our alliance agreements or the termination of any programs under our alliance agreements; • failure by us or our licensors and strategic alliance partners to prosecute, maintain or enforce our intellectual property rights; • failure to successfully and timely develop and commercialize our product candidates; • changes in laws or regulations applicable to our preclinical and clinical development activities, product candidates or future products; • inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices; • adverse regulatory decisions; • introduction of new products, services or technologies by our competitors; • failure to meet or exceed financial projections we may provide to the public; • failure to meet or exceed the estimates and projections of the investment community; • the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic alliance partners or our competitors; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • additions or departures of key scientific or management personnel; • significant lawsuits, including patent or licensing matters; • changes in the market valuations of similar companies; • sales of our common stock by us or our shareholders in the future; and • trading volume of our common stock.
Our share price could be subject to wide fluctuations in response to a variety of factors, including but not limited to the following factors: • adverse results or delays in preclinical studies or clinical trials; • inability to obtain additional funding; • any delay in filing an application for authorization to commence a clinical trial of, or for authorization or approval to market, any of our product candidates and any adverse development or perceived adverse development with respect to the FDA’s review of that IND or BLA; • failure to maintain our existing strategic alliances or enter into new alliances; • failure of our strategic alliance partners to elect to develop and commercialize product candidates under our alliance agreements or the termination of any programs under our alliance agreements; • failure by us or our licensors and strategic alliance partners to prosecute, maintain or enforce our intellectual property rights; • failure to successfully and timely develop and commercialize our product candidates; 75 • failure to successfully and timely develop and validate manufacturing processes and product presentations; • changes in laws or regulations applicable to our preclinical and clinical development activities, product candidates or future products; • inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices; • adverse regulatory decisions; • introduction of new products, services or technologies by our competitors; • failure to meet or exceed financial projections we may provide to the public; • failure to meet or exceed the estimates and projections of the investment community; • the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic alliance partners or our competitors; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • additions or departures of key scientific or management personnel; • significant lawsuits, including patent or licensing matters; • changes in the market valuations of similar companies; • sales of our common stock by us or our shareholders in the future; and • trading volume of our common stock.
Or, in order to continue development, manufacture or sale of a product, we may need to obtain a license from the owner of intellectual property, which may not be available on commercially reasonable terms or at all. 59 If we fail to obtain licenses to necessary intellectual property or do not comply with our obligations in license agreements, we could lose important rights.
In order to continue development, manufacture or sale of a product, we may need to obtain a license from the owner of intellectual property, which may not be available on commercially reasonable terms or at all. 66 If we fail to obtain licenses to necessary intellectual property or do not comply with our obligations in license agreements, we could lose important rights.
If key regulatory authorities, such as the FDA, determine that our data is inadequate or unacceptable, or make the path to regulatory approval more difficult, we may not be able to achieve regulatory approval (including EUA) and any additional study may prove too costly for us to conduct without a strategic partner.
If key regulatory authorities, such as the FDA, determine that our data is inadequate or unacceptable, or make the path to regulatory approval more difficult, we may not be able to achieve regulatory approval and any additional study may prove too costly for us to conduct without a strategic partner.
Pfizer, Moderna and Johnson & Johnson have received full approvals or emergency use authorization from the FDA and many other health regulatory authorities throughout the world, and other biopharmaceutical companies have received approvals or authorizations from many health regulatory authorities other than the FDA, for their COVID-19 vaccines and have already commercialized them on a large scale and have vaccinated billions of people around the world.
Pfizer, Moderna and Novavax have received full approvals or emergency use authorization from the FDA and many other health regulatory authorities throughout the world, and other biopharmaceutical companies have received approvals or authorizations from many health regulatory authorities other than the FDA, for their COVID-19 vaccines and have already commercialized them on a large scale and have vaccinated billions of people around the world.
In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, future product candidates. A portion of our current cash balance is expected to be utilized during 2023 to fund our continued preclinical and clinical development activities for our pipeline, including manufacturing activities to support such development activities.
In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, future product candidates. A portion of our current cash balance is expected to be utilized during 2024 to fund our continued preclinical and clinical development activities for our pipeline, including manufacturing activities to support such development activities.
If any collaboration partner were to terminate our collaborative relationship with it unilaterally, we would need to undertake development, commercialization or distribution or sale activities for our drug products and product candidates solely at our own expense, and/or seek one or more other partners for some or all of these activities worldwide.
If any collaboration partner were to terminate our collaborative relationship unilaterally, we would need to undertake development, commercialization or distribution or sale activities for our drug products and product candidates solely at our own expense, and/or seek one or more other partners for some or all of these activities worldwide.
Our CROs are not our employees, and we are not be able to control whether or not they devote sufficient time and resources to our clinical and nonclinical programs.
Our CROs are not our employees, and we are not able to control whether or not they devote sufficient time and resources to our clinical and nonclinical programs.
The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information 66 systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded.
The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information 73 systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded.
In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted.
In addition, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as well as rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted.
FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties in 2023 of $13,508 to $27,018 per false claim or statement, which are adjusted for inflation. • The civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. • The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes civil and criminal penalties for, among other things, 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 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), knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare. 62 • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and its implementing regulations, which imposes certain requirements on certain types of individuals and entities, such as healthcare providers, health plans and healthcare clearing houses, known as “covered entities,” as well as their “business associates,” independent contractors or agents of covered entities that receive or obtain individually identifiable health information in connection with providing a service on behalf of a covered entity, relating to the privacy, security and transmission of individually identifiable health information. • The federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS, information related to payments or other transfers of value made to physicians, and further requires applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.
FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties. • The civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. • The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes civil and criminal penalties for, among other things, 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 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), knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare. 70 • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and its implementing regulations, which imposes certain requirements on certain types of individuals and entities, such as healthcare providers, health plans and healthcare clearing houses, known as “covered entities,” as well as their “business associates,” independent contractors or agents of covered entities that receive or obtain individually identifiable health information in connection with providing a service on behalf of a covered entity, relating to the privacy, security and transmission of individually identifiable health information. • The federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS, information related to payments or other transfers of value made to physicians, and further requires applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.
GENERAL RISK FACTORS The market price of our common stock has been, and is expected to continue to be, highly volatile and investors may not be able to resell shares at or above the price at which they purchased the shares. The trading price of our common stock is likely to continue to be volatile.
The market price of our common stock has been, and is expected to continue to be, highly volatile and investors may not be able to resell shares at or above the price at which they purchased the shares. The trading price of our common stock is likely to continue to be volatile.
Our focus on nucleic acid technology for developing drugs as opposed to more proven technologies for drug development increases the risks associated with the ownership of our common stock. If we are not successful in developing any product candidates using nucleic acid technology, we may be required to change the scope and direction of our product development activities.
Our focus on nucleic acid technology for developing drugs as opposed to more proven technologies for drug development increases the risks associated with our business. If we are not successful in developing any product candidates using nucleic acid technology, we may be required to change the scope and direction of our product development activities.
As of December 31, 2022, we had approximately 170 employees. In the future we may expand our employee base to increase our managerial, scientific, operational, commercial, financial and other resources and we may hire more consultants and contractors.
As of December 31, 2023, we had approximately 180 employees. In the future we may expand our employee base to increase our managerial, scientific, operational, commercial, financial and other resources and we may hire more consultants and contractors.
As of December 31, 2022, we had unrestricted cash and cash equivalents of $391.9 million, which we expect should be sufficient to fund currently planned operations for the near future. But if our plans change or we face unexpected circumstances, our capital resources may be depleted more rapidly than we currently anticipate.
As of December 31, 2023, we had unrestricted cash and cash equivalents of $292.0 million, which we expect should be sufficient to fund currently planned operations for the near future. But if our plans change or we face unexpected circumstances, our capital resources may be depleted more rapidly than we currently anticipate.
Our future payments from CSL Seqirus are dependent on our ability to execute by meeting key product development and other milestones within the contract. We have not recognized any revenue from product sales since our inception. As of December 31, 2022, we had an accumulated deficit of $338.1 million.
Our future payments from CSL Seqirus are dependent on our ability to execute by meeting key product development and other milestones within the contract. We have not recognized any revenue from product sales since our inception. As of December 31, 2023, we had an accumulated deficit of $367.9 million.
If we or our strategic partners fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency may: • issue a warning letter asserting that we are in violation of the law; • seek an injunction or impose civil or criminal penalties or monetary fines; • suspend or withdraw regulatory approval; • suspend any ongoing clinical trials; • refuse to approve a pending NDA or supplements to an NDA submitted by us; • seize product or require a product recall; or • refuse to allow us to enter into supply contracts, including government contracts. 51 Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
If we or our strategic partners fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency may: • issue a warning letter asserting that we are in violation of the law; • seek an injunction or impose civil or criminal penalties or monetary fines; • suspend or withdraw regulatory approval; • suspend any ongoing clinical trials; • refuse to approve a pending NDA or supplements to an NDA submitted by us; • seize product or require a product recall; or • refuse to allow us to enter into supply contracts, including government contracts.
There have been a number of legislative and regulatory proposals to change the healthcare system in the United States and in some foreign jurisdictions that could affect our ability to sell products profitably. These legislative and/or regulatory changes may negatively impact the reimbursement for drug products, following approval.
Failure to obtain timely formulary approval will limit our commercial success. 61 There have been a number of legislative and regulatory proposals to change the healthcare system in the United States and in some foreign jurisdictions that could affect our ability to sell products profitably. These legislative and/or regulatory changes may negatively impact the reimbursement for drug products, following approval.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.
Thus, even if we succeed in bringing a product to market, it may not be considered medically necessary or cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis. 54 In addition, we cannot be certain if and when we will obtain formulary approval to allow us to sell any products into our target markets.
Thus, even if we succeed in bringing a product to market, it may not be considered medically necessary or cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis.
If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. 55 Before obtaining marketing approval from regulatory authorities for the sale of product candidates, we or our strategic alliance partners must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans.
Delays in achieving approval to conduct and in completing our clinical studies will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenue.
Delays in achieving approval to conduct and in completing our clinical studies will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition, and prospects significantly.
You should carefully consider the fuller risk factor disclosure set forth in this Annual Report, in addition to the other information herein, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. • We have a limited operating history and, with exception for fiscal year 2022 have incurred significant operating losses since our inception and still anticipate that we will continue to incur significant operating losses for the foreseeable future. • We have never generated any revenue from product sales, have generated only limited collaboration and grant revenue since inception, and may never be profitable in the long term. • We expect that we will need to raise additional capital in the future, which may not be available on acceptable terms, or at all. • We are highly dependent upon our relationship with CSL Seqirus to further research, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases.
You should carefully consider the fuller risk factor disclosure set forth in this Annual Report, in addition to the other information herein, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. • We have a limited operating history, have incurred significant losses since our inception (with the exception of fiscal year 2022) and anticipate that we will continue to incur significant losses for the foreseeable future. • We have never generated any revenue from product sales, have generated only limited collaboration and grant revenue since inception, and may never be profitable in the long term. 45 • We expect that we will need to raise additional capital in the future, which may not be available on acceptable terms, or at all. • We are dependent upon relationships with our collaboration partners, and the failure of these relationships could negatively affect our business and results of operations. • We are exposed to interest rate risk, including under our loan agreements. • Our debt contains customary default clauses, a breach of which may result in acceleration of the repayment of some or all of this debt. • We are highly dependent upon our relationship with CSL Seqirus to further research, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases. • Even if our COVID-19 vaccine candidate is commercialized, it might not have a profitable commercial market. • Our partnered next generation COVID-19 vaccine candidate, ARCT-154, only has marketing approval in Japan and may never achieve marketing approval in any other countries.
A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.
The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.
We may be unable to raise sufficient amounts of additional capital when needed and on acceptable terms, which could require us to: • significantly delay, scale back or discontinue the development or commercialization of any future product candidates; • seek strategic alliances for research and development programs or clinical trials at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or • relinquish or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourselves. 43 We are highly dependent upon our relationship with CSL Seqirus to further research, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases.
We may be unable to raise sufficient amounts of additional capital when needed and on acceptable terms, which could require us to: • significantly delay, scale back or discontinue the development or commercialization of any future product candidates; • seek strategic alliances for research and development programs or clinical trials at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or • relinquish or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourselves. 49 We are dependent upon relationships with our collaboration partners, and the failure of these relationships could negatively affect our business and results of operations.
Any of these occurrences may harm our business, financial condition, and prospects significantly. 49 If any of our product candidates cause undesirable side effects or have other properties impacting safety, their regulatory approval could be prevented, delayed or limited.
If any of our product candidates cause undesirable side effects or have other properties impacting safety, their regulatory approval could be prevented, delayed or limited.
Various extensions may be available; however, the life of a patent, and the protection it affords is limited. Once the patent life has expired for a product, we may be open to competition from generic medications.
Various extensions may be available; however, the life of a patent, and the protection it affords is limited. Once the patent life has expired for a product, we may be open to competition from generic medications. Further, if we encounter delays in regulatory approvals, the period during which we could market a product candidate under patent protection could be reduced.
The fulfillment of our obligations under the CSL Collaboration Agreement may require significant deployment of our resources, which could disrupt or delay our ability to pursue other programs, including our platform development and development of other product candidates.
The fulfillment of our obligations under the CSL Collaboration Agreement may require significant deployment of our resources, which could disrupt or delay our ability to pursue other programs, including our platform development and development of other product candidates. Even if our COVID-19 vaccine candidate is commercialized, it might not have a profitable commercial market.
If any country that has price controls or reimbursement limitations for pharmaceutical products does not allow favorable reimbursement and pricing arrangements for any of our products, our sales and profits from that product could be severely limited.
If any country that has price controls or reimbursement limitations for pharmaceutical products does not allow favorable reimbursement and pricing arrangements for any of our products, our sales and profits from that product could be severely limited. Historically, products launched in the EU do not follow price structures of the U.S. and generally tend to be priced significantly lower.
On August 31, 2022, the Company entered into a cost reimbursement contract with BARDA to support the development of a low-dose pandemic influenza candidate based on Arcturus’ proprietary self-amplifying messenger RNA-based vaccine platform. The contract with BARDA, as with most U.S.
Government agencies have special contracting authority that gives them the ability to terminate and/or modify their contracts with us. On August 31, 2022, we entered into a cost reimbursement contract with BARDA to support the development of a low-dose pandemic influenza candidate based on Arcturus’ proprietary self-amplifying messenger RNA-based vaccine platform. The contract with BARDA, as with most U.S.
We may also be subject to claims that former employers or other parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims.
We may also be subject to claims that former employers or other parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. We may not be successful in defending these claims, and if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.
If we are unable to generate successful results from preclinical and clinical studies of our product candidates, or experience significant delays in doing so, our business may be materially harmed. We have no products approved for commercial marketing and all of our product candidates are in preclinical or clinical development.
These and other competitive pressures could have a material adverse effect our business. If we are unable to generate successful results from preclinical and clinical studies of our product candidates, or experience significant delays in doing so, our business may be materially harmed.
As a result, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could negatively impact our future cash flows. We do not intend to pay dividends on our common stock so any returns to investors will be limited to the value of our shares.
As a result, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could negatively impact our future cash flows.
If our computer systems are compromised, we could be subject to fines, damages, litigation and enforcement actions, and we could lose trade secrets, the occurrence of which could harm our business.
As a result, we may not be able to address these techniques proactively or implement adequate preventative measures. If our computer systems are compromised, we could be subject to fines, damages, litigation and enforcement actions, 72 and we could lose trade secrets, the occurrence of which could harm our business.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be highly uncertain. The patent applications that we own or in-license may fail to result in patents with claims that cover our products or methods in the United States or in other countries.
The patent applications that we own or in-license may fail to result in patents with claims that cover our products or methods in the United States or in other countries.
FDA in January 2023, the committee members voted unanimously on harmonizing the vaccine strain composition of primary series and booster doses used in the U.S. to a single composition, the result of which could be that the composition of all vaccines administered currently would be a bivalent vaccine (e.g., original plus Omicron BA.4/BA.5).
For example, at a meeting of the Vaccines and Related Biological Products Advisory Committee (VRBPAC) of the FDA in January 2023, the committee members voted to harmonize the vaccine strain composition of primary series and booster doses used in the U.S. to a single composition, the result of which was to favor bivalent vaccines (e.g., original plus Omicron BA.4/BA.5).
In addition, any sustained disruption in internet access provided by other companies could harm our business. 65 Business interruptions could delay us in the process of developing our future products. Our headquarters is located in San Diego, California.
In addition, any sustained disruption in internet access provided by other companies could harm our business. Business interruptions could delay us in the process of developing our future products. Our headquarters is located in San Diego, California. We are vulnerable to natural disasters such as earthquakes, mudslides, floods and wildfires, as well as other events that could disrupt our operations.
We depend on alliance partners for financial and scientific resources for the clinical development, manufacture and commercialization of certain of our product candidates. These alliances will likely provide us with limited control over the course of development of a product candidate, especially once a candidate has reached the stage of clinical development.
These alliances will likely provide us with limited control over the course of development of a product candidate, especially once a candidate has reached the stage of clinical development.
Our defense of a patent or patent application in such a proceeding may not be successful and, even if successful, may result in substantial costs and distract our management and other employees.
Our business could be harmed if the prevailing party does not offer us a license at all, or on commercially reasonable terms. Our defense of a patent or patent application in such a proceeding may not be successful and, even if successful, may result in substantial costs and distract our management and other employees.
Our business could be further materially and adversely affected by our competitors commercialization of their vaccines before we development of our vaccine candidate is completed or approval is sought; if they develop and commercialize one or more COVID-19 vaccines that are safer, more effective against multiple variants, have fewer or less severe side effects, have broader market 46 acceptance, are more convenient or are less expensive than any vaccine candidate that we may develop.
If they develop and commercialize one or more COVID-19 vaccines that are safer, more effective against multiple variants, have fewer or less severe side effects, have broader market acceptance, are more convenient or are less expensive than any vaccine candidate that we develop, then our COVID-19 vaccine candidate may not achieve any commercial success even if it is approved.
If we cannot, with and through our partner, develop and commercialize a vaccine that adequately addresses some of these shortcomings of vaccines currently on the market, we cannot expect to have commercial success.
If we cannot, with and through our partner, develop and commercialize a vaccine that adequately addresses some of these shortcomings of vaccines currently on the market, we cannot expect to have commercial success. 52 Our partnered next generation COVID-19 vaccine candidate, ARCT-154, only has marketing approval in Japan and may never achieve marketing approval in any other countries.
The occurrence of any event or penalty described above may inhibit our ability to commercialize our future products, if approved, and generate revenues.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our future products, if approved, and generate revenues.
For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage. 68 Failure to comply with these requirements could subject us to enforcement actions by the SEC, divert management’s attention, damage our reputation, and adversely affect our business, results of operations, or financial condition.
For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage.
The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our product candidates or products.
Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our product candidates or products. For example, unanticipated adverse effects could result from the use of our future products or product candidates which may result in a potential product liability claim.
We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing, regulatory and manufacturing organizations.
Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing, regulatory and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors.
We are vulnerable to natural disasters such as earthquakes, mudslides, floods and wildfires, as well as other events that could disrupt our operations. We do not carry insurance for earthquakes or other natural disasters and we may not carry sufficient business interruption insurance to compensate us for losses that may occur.
We do not carry insurance for earthquakes or other natural disasters, and we may not carry sufficient business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our business operations. U.S.
For example, our clinical trials may encounter technical, regulatory or other difficulties. Additionally, our strategic alliance collaborators may elect not to pursue the development and commercialization of any of our product candidates that are subject to their respective strategic alliance agreements with us. Any of these events would increase our development costs more than we expect.
For example, our clinical trials may encounter technical, regulatory or other difficulties. Any of these events would increase our development costs more than we expect.
FDA, that it is sufficiently safe and effective to achieve any marketing approval (including any emergency use authorization) or to have a plausible clinical path to an approval. Clinical trial results are inherently uncertain, and a significant portion of our potential success and business prospects currently depend on our partnered COVID-19 vaccine program.
Clinical trial results are inherently uncertain, and a significant portion of our potential success and business prospects currently depend on our partnered COVID-19 vaccine program.
Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, drug products that are more effective, safer or less costly than any product candidate that we may develop. The commercial success of our product candidates will depend upon the acceptance of these product candidates by the medical community, including physicians, patients and healthcare payors.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, drug products that are more effective, safer or less costly than any product candidate that we may develop.
Our patents could be prevented from issuing or be invalidated after issuance for many reasons, including: • relevant prior art relating to our patents and patent applications; or • third party challenges to their validity, enforceability or scope, which may result in patents being narrowed or invalidated. 58 If the patent applications we hold or have in-licensed with respect to our programs or product candidates fail to issue or are invalidated or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize, future products.
Our patents could be prevented from issuing or be invalidated after issuance for many reasons, including: • relevant prior art relating to our patents and patent applications; or • third party challenges to their validity, enforceability or scope, which may result in patents being narrowed or invalidated.
Consequently, any predictions about our future success or viability, or any evaluation of our business and prospects, is difficult and may not be accurate.
Consequently, any predictions about our future success or viability, or any evaluation of our business and prospects, is difficult and may not be accurate. In 2023 we recognized a significant portion of our revenue from non-recurring milestone payments and license revenue under our collaboration agreement with CSL Seqirus.
Obtaining formulary approval from hospitals and from pharmacy benefits payors can be an expensive and time-consuming process. Failure to obtain timely formulary approval will limit our commercial success.
In addition, we cannot be certain if and when we will obtain formulary approval to allow us to sell any products into our target markets. Obtaining formulary approval from hospitals and from pharmacy benefits payors can be an expensive and time-consuming process.
Historically, products launched in the EU do not follow price structures of the U.S. and generally tend to be priced significantly lower RISKS RELATED TO OUR RELIANCE ON OUTSIDE PARTIES If our strategic alliances are unsuccessful or are terminated, we may be unable to commercialize certain product candidates and generate revenues.
RISKS RELATED TO OUR RELIANCE ON OUTSIDE PARTIES If our strategic alliances are unsuccessful or are terminated, we may be unable to commercialize certain product candidates and generate revenues. We depend on alliance partners for financial and scientific resources for the clinical development, manufacture and commercialization of certain of our product candidates.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pro perties We have four properties located in San Diego, California. Our principal place of business is located at 10628 Science Center Drive, Suite 250, and consists of approximately 24,700 square feet of office space and laboratory space leased through March 2025. We have the right to extend this lease for an additional five-year term.
Biggest changeItem 2. Pro perties We have two properties located in San Diego, California. Our principal place of business is located at 10628 Science Center Drive, Suite 250, and consists of approximately 24,700 square feet of office space and laboratory space leased through March 2025. We have the right to extend this lease for an additional five-year term.
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On February 16, 2020, we entered into a short-term lease for additional office and laboratory space located in close proximity to our main office at 10578 Science Center Drive, Suite 150. The additional space of approximately 11,750 square feet is leased through March 2025.
Removed
On February 26, 2021, we entered into a short-term lease for additional office and laboratory space located in close proximity to our main office at 10240 Science Center Drive, Suite 100. The additional space of approximately 4,312 square feet is leased for a term of twelve months. We have the right to extend this lease for an additional twelve months.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business, and the results of litigation and claims are inherently unpredictable and uncertain. We are not currently a party to any legal proceedings. Item 4.
Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business, and the results of litigation and claims are inherently unpredictable and uncertain. We are not currently a party to any material legal proceedings. Item 4.
Mine Saf ety Disclosures Not applicable. 70 PART II
Mine Saf ety Disclosures Not applicable. 79 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 70 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 71 Item 6. [Reserved] 71 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 72 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 80 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 79 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 80 Item 6. Reserved 81 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 82 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 90 Item 8.

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 Holders of Common Stock As of March 21, 2023, there were 10 registered holders of record of our common stock. As of such date, there were 26,555,483 shares of our common stock issued and outstanding.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities Market for our Common Stock Our common stock is listed on the Nasdaq under the symbol “ARCT”. Holders of Common Stock As of March 4, 2024, there were 10 registered holders of record of our common stock.
Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.
Any future determination related to our dividend policy will be made at the discretion of the Board and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors the Board may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report. 80 Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Our common stock is listed on the Nasdaq under the symbol “ARCT”. Dividends We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business.
We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business.
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As of such date, there were 26,915,243 shares of our common stock issued and outstanding. Our common stock is listed on the Nasdaq under the symbol “ARCT”. We believe that there are a substantially greater number of beneficial owners of our common stock. Dividends We have never declared or paid any cash dividends on our common stock.
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Stock Performance Graph The following graph compares the Company’s cumulative stockholder return since December 31, 2018 with the Nasdaq Composite Index, and the Nasdaq Biotechnology Index. The graph is based on the assumption that $100 had been invested in Company common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur future funding requirements are difficult to forecast and will depend on many factors, including the following: • the development of our partnered LUNAR-COV19 and LUNAR-FLU vaccine candidates; • the achievement of milestones under our strategic alliance agreements; • maintaining and/or expanding our manufacturing network and capabilities; • the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish; • the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates; • the number and characteristics of product candidates that we pursue; • the outcome, timing and cost of regulatory approvals; • delays that may be caused by changing regulatory requirements; • the cost and timing of hiring new employees to support our continued growth; • the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims; • the costs and timing of procuring clinical and commercial supplies of our product candidates; • the costs and timing of establishing sales, marketing and distribution capabilities; • the costs associated with legal proceedings; • the costs associated with potential litigation related to collaboration agreements; and • the extent to which we acquire or invest in businesses, products or technologies.
Biggest changeIf we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations. 84 Our future funding requirements are difficult to forecast and will depend on many factors, including but not limited to the following: • the development of our LUNAR-COV19 and LUNAR-FLU vaccine candidates; • the achievement of milestones under our strategic alliance agreements; • maintaining and/or expanding our manufacturing network and capabilities; • the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish, including those with CSL Seqirus and CSL Seqirus’ arrangement with Meiji, and any related payments thereunder; • the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates; • the number and characteristics of product candidates that we pursue; • the outcome, timing and cost of regulatory approvals; • delays that may be caused by changing regulatory requirements; • the cost and timing of hiring new employees to support our continued growth; • the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims; • the costs and timing of procuring clinical and commercial supplies of our product candidates; • the costs and timing of establishing sales, marketing and distribution capabilities; • the costs associated with legal proceedings; • the costs associated with potential litigation related to collaboration agreements; and • the extent to which we acquire or invest in businesses, products or technologies.
Financing Activities Net cash used in financing activities in 2022 was $2.9 million, primarily from principal payments on long-term debt of $5.0 million, partially offset by proceeds from the exercise of stock options of $1.7 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.4 million.
Net cash used in financing activities in 2022 was $2.9 million, primarily from principal payments on long-term debt of $5.0 million, partially offset by proceeds from the exercise of stock options of $1.7 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.4 million.
We discuss the estimates we make related to the relative stand-alone selling price of a license in detail above under “Allocating the transaction price to our performance obligations.” Research and Development Expenses, Including Clinical Trial Accruals/Expenses Research and development costs consist of salaries and benefits, including related stock-based compensation, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and 79 development activities on our behalf, such as clinical research organizations, or CROs, and contract manufacturing organizations, or CDMOs.
We discuss the estimates we make related to the relative stand-alone selling price of a license in detail above under “Allocating the transaction price to our performance obligations.” Research and Development Expenses, Including Clinical Trial Accruals/Expenses Research and development costs consist of salaries and benefits, including related stock-based compensation, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities on our behalf, such as clinical research organizations, or CROs, and contract manufacturing organizations, or CDMOs.
(“CSL Seqirus”), a part of CSL Limited, and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens. The CSL Collaboration Agreement became effective on December 8, 2022.
(“CSL Seqirus”), a part of CSL Limited, and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases and global non-exclusive rights to pandemic pathogens. The CSL Collaboration Agreement became effective on December 8, 2022.
We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made. Our historical clinical accrual estimates have not been materially different from our actual costs.
We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made. Our historical clinical trial accrual estimates have not been materially different from our actual costs.
Research and development costs are expensed as incurred. Clinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these clinical trial activities to third parties. Third-party clinical trial expenses include investigator fees, site and patient costs, CRO costs, and costs for central laboratory testing and data management.
Research and development costs are expensed as incurred. 89 Clinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these clinical trial activities to third parties. Third-party clinical trial expenses include investigator fees, site and patient costs, CRO costs, and costs for central laboratory testing and data management.
We will be eligible to potentially receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We will also be entitled to potentially receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields.
We will be eligible to receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We will also be entitled to receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields.
Allocating the transaction price to each of our performance obligations When we allocate the transaction price to more than one performance obligation, we make estimates of the relative stand-alone selling price of each performance obligation because we do not typically sell our goods or services on a stand-alone basis.
Allocating the transaction price to each of our performance obligations When we allocate the transaction price to more than one performance obligation, we make estimates of the relative stand-alone selling price of each performance obligation because we do not typically sell our goods or 88 services on a stand-alone basis.
The following are our significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results. Revenue Recognition Research and development revenue under collaborative agreements 78 We recognize research and development revenue from several collaboration agreements.
The following are our significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results. Revenue Recognition Research and development revenue under collaborative agreements We recognize research and development revenue from several collaboration agreements.
Revenues We enter into arrangements with pharmaceutical and biotechnology partners and government agencies that may contain upfront payments, license fees for research and development arrangements, research and development 76 funding, milestone payments, option exercise and exclusivity fees and royalties on future sales.
Revenues We enter into arrangements with pharmaceutical and biotechnology partners and government agencies that may contain upfront payments, license fees for research and development arrangements, research and development funding, milestone payments, option exercise and exclusivity fees and royalties on future sales.
CSL Seqirus will receive exclusive global rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens. We received an up-front payment of $200.0 million during the fourth quarter of 2022.
CSL Seqirus received exclusive global rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens. We received an up-front payment of $200.0 million during the fourth quarter of 2022.
These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our results of operations and financial condition. We describe our significant accounting policies more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2022.
These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our results of operations and financial condition. We describe our significant accounting policies more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2023.
We received an upfront payment in aggregate of $40.0 million as part of the License and Supply Agreements.
We received an upfront payment in aggregate of $40.0 million as part of the Vinbiocare License and Supply Agreements.
The estimate of the relative stand-alone selling price requires us in some cases to make significant judgements. In cases where we deliver a license at the start of an agreement, we use valuation methodologies, such as costs to recreate plus margin, to value the license.
The estimate of the relative stand-alone selling price requires us in some cases to make significant judgments. In cases where we deliver a license at the start of an agreement, we use valuation methodologies, such as costs to recreate plus margin, to value the license.
We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.
We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing when and as needed. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.
If we are not able to achieve planned milestones, incur costs in excess of our forecasts, or do not meet covenant requirements of our debt, we will need to reduce discretionary spending, discontinue the development of some or all of our programs, which will delay part of our development programs, all of which will have a material adverse effect on our ability to achieve our intended business objectives.
If we are not able to achieve planned milestones or incur costs in excess of our forecasts, we will need to reduce discretionary spending, discontinue the development of some or all of our programs, which will delay part of our development programs, all of which will have a material adverse effect on our ability to achieve our intended business objectives.
Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we achieve sustainable revenues and profit from operations. As of December 31, 2022, we had an accumulated deficit of $338.1 million.
Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we 82 achieve sustainable revenues and profit from operations. As of December 31, 2023, we had an accumulated deficit of $367.9 million.
General Financial Resources A portion of our current cash balance of $391.9 million is expected to be utilized during fiscal year 2023 to fund (i) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate (ii) advances to our LUNAR-CF program in clinical trials, (iii) expenses incurred prior to customer payments under the CSL Collaboration Agreement and (iv) continued exploratory activities related to our platform and other general administrative activities. 74 Our future capital requirements are difficult to forecast and will depend on many factors that are out of our control.
General Financial Resources A portion of our current cash balance is expected to be utilized during fiscal year 2024 to fund (i) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (ii) advances to our LUNAR-CF program in clinical trials, (iii) expenses incurred prior to customer payments under the CSL Collaboration Agreement and BARDA agreement and (iv) continued exploratory activities related to our platform and other general administrative activities.
Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing shareholders. We expect to continue to incur additional losses in the long term, and we will need to execute on milestones within the CSL Collaboration Agreement, raise additional debt or equity financing or enter into additional partnerships to fund development.
We expect to continue to incur additional losses in the long term, and we will need to execute on milestones within the CSL Collaboration Agreement, raise additional debt or equity financing or enter into additional partnerships to fund development.
We were released from all liens under the Western Alliance Agreement. CSL Seqirus, Inc. Collaboration and License Agreement We entered into the CSL Collaboration Agreement with Seqirus, Inc. (“CSL Seqirus”), a part of CSL Limited, one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize of self-amplifying mRNA vaccines.
Collaboration and License Agreement We entered into the CSL Collaboration Agreement with CSL Seqirus, a part of CSL Limited, one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize mRNA vaccines.
We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes can allow us to deliver on the next generation of nucleic acid medicines. Our vaccines franchise, led by our self-amplifying mRNA based COVID-19 program, made significant strides in 2022.
We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes can allow us to deliver on the next generation of nucleic acid medicines.
Overview We are a late-stage clinical messenger RNA medicines and vaccine company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases.
Overview We are a global messenger RNA medicines company focused on the development of infectious disease vaccines and therapeutics for liver and respiratory rare diseases.
During the year ended December 31, 2022, we incurred increased rent and associated costs related to a new facility we took possession of in April 2022. Facilities and equipment expenses are expected to increase in the near term due to increased rent expense related to our new facility.
Facilities and equipment expenses increased during the year ended December 31, 2023 as a result of increased rent and associated costs related to a new facility we took possession of in April 2022. Facilities and equipment expenses are not expected to increase significantly during the next twelve months.
The net change in assets and liabilities was primarily due to an increase in deferred revenue of $32.8 million, an increase in accrued liabilities of $4.1 million and a decrease in right-of-use assets of $1.4 million, partially offset by an increase in prepaid expenses and other current assets of $2.3 million, a decrease in lease liabilities of $1.4 million, an increase in accounts receivable of $1.2 million and a decrease in accounts payable of $0.8 million.
The net change in assets and liabilities was primarily due to an increase in deferred revenue of $38.6 million, a decrease in right-of-use assets of $4.0 million and a decrease in prepaid and other current assets of $1.2 million.
Year Ended December 31, (in thousands) 2022 2021 Operating expenses: Research and development, net $ 147,751 $ 173,760 General and administrative 46,071 41,451 Total $ 193,822 $ 215,211 The following table presents our total research and development expenses by category: Year Ended December 31, (in thousands) 2022 2021 External pipeline development expenses: LUNAR-COVID, net $ 65,136 $ 100,626 LUNAR-OTC, net 8,898 7,296 Early stage programs 9,440 5,573 Discovery technologies 13,864 20,279 External platform development expenses: Personnel related expenses 41,951 34,861 Facilities and equipment expenses $ 8,462 $ 5,125 Total research and development expenses, net $ 147,751 $ 173,760 Research and Development Expenses, net Our research and development expenses consist primarily of external manufacturing costs, in-vivo research studies and clinical trials performed by contract research organizations, clinical and regulatory consultants, personnel related expenses, facility related expenses and laboratory supplies related to conducting research and development activities.
Year Ended December 31, (in thousands) 2023 2022 Operating expenses: Research and development, net $ 192,133 $ 147,751 General and administrative 52,871 46,071 Total $ 245,004 $ 193,822 86 The following table presents our total research and development expenses by category: Research and Development Expenses, net Year Ended December 31, (in thousands) 2023 2022 External pipeline development expenses: LUNAR-COVID, net $ 81,704 $ 65,136 LUNAR-OTC, net 9,315 8,898 BARDA 5,465 95 Early stage programs 13,808 9,345 Discovery technologies 17,600 13,864 External platform development expenses: Personnel related expenses 52,605 41,951 Facilities and equipment expenses $ 11,636 $ 8,462 Total research and development expenses, net $ 192,133 $ 147,751 Our research and development expenses consist primarily of external manufacturing costs, in-vivo research studies and clinical trials performed by contract research organizations, clinical and regulatory consultants, personnel related expenses, facility related expenses and laboratory supplies related to conducting research and development activities.
The following table summarizes our total revenues for the periods indicated: Year Ended December 31, (in thousands) 2022 2021 Collaboration revenue $ 205,755 $ 12,359 Grant revenue 244 - Total $ 205,999 $ 12,359 Revenue increased by $193.6 million during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
The following table summarizes our total revenues for the periods indicated: Year Ended December 31, (in thousands) 2023 2022 Collaboration revenue $ 157,748 $ 205,755 Grant revenue 9,051 244 Total $ 166,799 $ 205,999 Revenue decreased by $39.2 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
In the COVID-19 field, we will lead activities for certain regulatory filings for ARCT-154 in the US and Europe and for research and development activities of a next-generation COVID vaccine candidate. CSL Seqirus will lead and be responsible for all other research and development in COVID-19, influenza and the other fields.
The CSL Collaboration Agreement sets forth how CSL Seqirus and we shall collaborate to research and develop vaccine candidates. In the COVID-19 field, we will lead activities for certain regulatory filings for ARCT-154 in the US and Europe and for research and development activities of a next-generation COVID vaccine candidate.
General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits for our executive, administrative and accounting functions and professional service fees for legal and accounting services as well as other general and administrative expenses.
General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits for our executive, administrative and accounting functions and professional service fees for legal and accounting services as well as other general and administrative expenses. General and administrative expenses were $52.9 million and $46.1 million for the year ended December 31, 2023 and 2022, respectively.
Net cash used in operating activities in 2021 was $135.0 million and consisted net loss of $203.7 million less non-cash adjustments of $36.0 million, plus a net change in assets and liabilities of $32.6 million. Non-cash items primarily included stock-based compensation of $28.9 million, acquired in-process research and development expense of $5.0 million and depreciation and amortization of $1.2 million.
Net cash provided by operating activities in 2022 was $32.0 million and consisted of net income of $9.3 million and non-cash adjustments of $35.2 million, plus a net change in assets and liabilities of $12.6 million. Non-cash items primarily included stock-based compensation of $30.6 million and depreciation and amortization of $1.5 million.
The following table shows a summary of our cash flows for the year ended December 31, 2022 and 2021: Year Ended December 31, (in thousands) 2022 2021 Cash provided by (used in): Operating activities $ 31,993 $ (135,043 ) Investing activities (7,726 ) (3,406 ) Financing activities (2,859 ) 48,016 Net increase (decrease) in cash and restricted cash $ 21,408 $ (90,433 ) Operating Activities Net cash provided by operating activities in 2022 was $32.0 million and consisted of net income of $9.3 million and non-cash adjustments of $35.2 million, plus a net change in assets and liabilities of $12.6 million.
The following table shows a summary of our cash flows for the years ended December 31, 2023 and 2022: Year Ended December 31, (in thousands) 2023 2022 Cash provided by (used in): Operating activities $ (18,099 ) $ 31,993 Investing activities (2,901 ) (7,726 ) Financing activities (24,087 ) (2,859 ) Net increase (decrease) in cash and restricted cash $ (45,087 ) $ 21,408 Operating Activities Net cash used in operating activities in 2023 was $18.1 million and consisted of net loss of $29.7 million offset by adjustments of $4.2 million and a net change in assets and liabilities of $7.4 million.
We believe that our current cash position will be sufficient to meet our anticipated cash requirements through at least the next twelve months, assuming, among other things, no significant unforeseen expenses, continued funding from partners at anticipated levels and our payment obligations continuing to follow the current maturity schedule under our long-term credit facility referenced in Note 7 to our consolidated financial statements in this Annual Report.
As a result, we will require additional capital to fund our operations in order to support our long-term plans. We believe that our current cash position will be sufficient to meet our anticipated cash requirements through at least the next twelve months, assuming, among other things, no significant unforeseen expenses and continued funding from partners at anticipated levels.
Finance income (expense), net Year Ended December 31, (in thousands) 2022 2021 Interest income $ 2,581 $ 753 Interest expense (3,001 ) (2,674 ) Total $ (420 ) $ (1,921 ) Interest income is generated on cash and cash equivalents. The increase in interest income from 2021 to 2022 was primarily the result of increased interest rates.
Finance income (expense), net Year Ended December 31, (in thousands) 2023 2022 Interest income $ 17,359 $ 2,581 Interest expense (767 ) (3,001 ) Total $ 16,592 $ (420 ) Interest income is generated on cash and cash equivalents.
Non-cash items primarily included stock-based compensation of $30.6 million and depreciation and amortization of $1.5 million.
Non-cash items primarily included stock-based compensation of $34.6 million and depreciation and amortization of $3.0 million offset by a gain on debt extinguishment of $34.0 million.
Pursuant to a third-party study agreement executed in December 2022 with Meiji Seika Pharma Co., Ltd. (“Meiji”), a Japanese leader in the area of infectious disease, a Phase 3 clinical trial of ARCT-154 was initiated in Japan by Meiji to evaluate safety and immunogenicity of a booster shot of ARCT-154, and to evaluate non-inferiority of ARCT-154 as a booster.
(“Meiji”), a Japanese leader in the area of infectious disease, completed dosing of a Phase 3 clinical trial of ARCT-154 in Japan to evaluate the safety and immunogenicity of a booster dose of ARCT-154, and to assess the non-inferiority of ARCT-154 to a licensed mRNA vaccine, administered as a booster.
The BARDA Contract is to support our non-clinical and pre-clinical development, early-stage clinical development through Phase 1, and associated drug product manufacturing, regulatory and quality-assurance activities over a period of three years. It provides for reimbursement by BARDA of 73 our permitted costs up to $63.2 million.
Department of Health and Human Services 83 (“HHS”) to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform. The BARDA Contract is to support our non-clinical and pre-clinical development, early-stage clinical development through Phase 1, and associated drug product manufacturing, regulatory and quality-assurance activities over a period of three years.
Net cash provided by financing activities of $48.0 million for 2021 consisted of net proceeds from the Singapore Loan of $46.6 million, proceeds from the exercise of stock options of $0.9 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.5 million. 75 Funding Requirements We anticipate that we will continue to generate annual net losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products.
Funding Requirements We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products.
Discovery technologies represents our efforts to expand our product pipeline and are primarily related to pre-partnered studies and new capabilities assessment. For several of our programs, the activities are part of our collaborative and other relationships and the expenses may be partially 77 offset with funds that have been awarded to the Company.
For some of our programs, the activities are part of our collaborative and other relationships, and the expenses may be partially offset with funds that have been awarded to the Company. The expenses primarily consist of external manufacturing costs, lab supplies, equipment, and consulting and professional fees.
If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that we will be able to obtain additional needed financing on acceptable terms or at all.
Our future capital requirements are difficult to forecast and will depend on many factors that are out of our control. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected.
Additionally, during the fourth quarter of 2022, we received a $200.0 million upfront payment from CSL 72 Seqirus and expect to receive future payments primarily from meeting future milestones related to the arrangement. At December 31, 2022, we had $391.9 million in unrestricted cash and cash equivalents.
Additionally, we received milestone payments of $23.8 million from CSL Seqirus subsequent to December 31, 2023. We expect to receive future payments from CSL Seqirus primarily by meeting future milestones related to the CSL Collaboration Agreement. At December 31, 2023, the Company’s balance of cash and cash equivalents, including restricted cash, was $348.9 million. CSL Seqirus, Inc.
Grant from the Biomedical Advanced Research and Development Authority On August 31, 2022, we entered into a cost reimbursement contract (the “BARDA Contract”) with BARDA to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform.
Grant from the Biomedical Advanced Research and Development Authority On August 31, 2022, we entered into a cost reimbursement contract (the “BARDA Contract”) with the Biomedical Advanced Research and Development Authority (“BARDA”), a division of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) within the U.S.
The trial targeted a total of 780 adult participants, with half in the ARCT-154 group and half in a comparator group (Comirnaty®, Pfizer-BioNTech), and completed enrollment with 828 participants in February 2023. Our activities since inception have consisted principally of performing research and development activities, clinical research activities, general and administrative activities and raising capital to fund those efforts.
These Phase 3 study results were used to support the approval of ARCT-154 in Japan for primary immunization and as a booster dose. Our activities since inception have consisted principally of performing research and development activities, clinical research activities, general and administrative activities and raising capital to fund those efforts.
The collaboration combines CSL Seqirus’ established global vaccine commercial and manufacturing infrastructure with Arcturus’ manufacturing expertise and innovative STARR™ self-amplifying mRNA vaccine and LUNAR ® delivery platform technologies. Under the framework of our collaboration with CSL Seqirus, we are evaluating in preclinical studies the efficacy and safety of a seasonal influenza vaccine (our LUNAR-FLU mRNA vaccine candidate).
The collaboration (“CSL Collaboration”) combines CSL Seqirus’ established global vaccine commercial and manufacturing infrastructure with Arcturus’ manufacturing expertise and innovative STARR self-amplifying mRNA and LUNAR delivery platform technologies. Our vaccines franchise, led by our self-amplifying mRNA-based COVID-19 program, made significant strides in 2023, highlighted by the marketing authorization approval in Japan of ARCT-154.
Liquidity and Capital Resources Overview Since our inception, we have funded our operations principally with proceeds from the sale of capital stock and debt obtained through a term loan as well as revenues earned through collaborative agreements and government contracts.
Liquidity and Capital Resources From the Company’s inception through the year ended December 31, 2023, the Company has funded its operations principally with the proceeds from revenues earned through collaboration agreements and government contracts, the sale of capital stock and long-term debt. During fiscal year 2023, we received milestone payments totaling $147.9 million from CSL Seqirus.
We expect that our research and development efforts and associated costs will increase and continue to be substantial over the next several years as our collaboration with CSL Seqirus progresses. Early stage programs represent programs that are in the pre-clinical or Phase 1 clinical stage and may be partnered or unpartnered, including the CF program.
The increase was primarily offset by a decrease of clinical-related expenses of $5.0 million. We expect that our research and development efforts and associated costs will continue to be substantial over the next several years as our pipeline progresses.
The increase in revenue during 2022 primarily relates to $154.4 million of increased revenue related to the CSL Collaboration Agreement executed in the fourth quarter of 2022, an increase in revenue of $20.2 million related to the agreement with Vinbiocare, an increase of $12.5 million related to the recognition of reservation fees from the Israeli MOH and an increase of $6.1 million related to the Janssen collaboration which was terminated during the fourth quarter of 2022.
The decrease during 2023 primarily relates to decreases in revenue of the following: (i) $25.2 million related to the termination of the agreement with Vinbiocare during 2022, (ii) $12.5 million related to the recognition of revenue for agreement with the Israeli Ministry of Health during 2022, (iii) $8.5 million related to the termination of the agreement with Janssen during 2022 and (iv) $1.9 million related to the completion of the amortization of the upfront payment from the UGX agreement during the second quarter of 2023.
The increase in interest expense during 2022 as compared to the prior year period was primarily a result of additional accrued interest expense on the Singapore Loan that was funded in January 2021 and increased interest expense on the Western Loan Agreement related to increased interest rates.
Interest expense decreased during the year ended 2023 as compared to the year ended 2022 as no interest expense was incurred subsequent to the first quarter of 2023. This was a result of the extinguishment of the Western Alliance loan and forgiveness of the Singapore Loan.
In April 2022, the Phase 1/2/3 study in Vietnam of ARCT-154, our lead self-amplifying mRNA vaccine candidate, completed dosing of over 19,000 participants and we announced that ARCT-154 met its primary efficacy endpoint in the study. In November 2022, we entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc.
The approval is the world’s first for a self-amplifying RNA (sa-mRNA) COVID-19 Vaccine. In August 2023, we successfully completed the 12-month safety follow-up of the pivotal Phase 1/2/3 study in Vietnam of ARCT-154 that completed dosing in April 2022 of over 19,000 participants. In February 2023, Meiji Seika Pharma Co., Ltd.
The expenses primarily consist of external manufacturing costs, lab supplies, equipment, and consulting and professional fees. Both early stage programs and discovery technologies expenses are expected to steadily increase over the coming years.
Both early-stage programs and discovery technologies expenses are expected to steadily increase over the coming years. Personnel related expenses primarily consist of employee salaries and benefits, share-based compensation and consultants. Although such expenses increased during 2023 as compared to 2022, we expect that they will not increase over the next twelve months.
Removed
Pursuant to the Third Amendment to the Western Loan Agreement (as amended, the “Western Alliance Agreement”), Western Alliance Bank (“Western Alliance”) agreed to make a term loan to us on October 30, 2019, in the amount of $15.0 million (the “Term Loan”). The Term Loan bears interest at a floating rate ranging from 1.25% to 2.75% above the prime rate.
Added
In June 2020, we initiated our first clinical study, a Phase 1 study for our mRNA-based therapeutic candidate for ornithine transcarbamylase (“OTC”) deficiency. We launched our COVID-19 vaccine program in March 2020, and in November 2023, our self-amplifying mRNA vaccine against COVID-19, ARCT-154, received marketing approval in Japan.
Removed
The amendment further provides that the Term Loan has a maturity date of October 30, 2023. In October of 2021, we entered into a Fifth Amendment to the Western Loan Agreement, which provided for a six month extension to the interest only period which moves the first principal payment to May 1, 2022.
Added
In November 2022, we entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc.
Removed
On March 14, 2023, the Western Alliance Agreement was terminated (the “Termination”) upon the receipt by Western Alliance of a payoff amount of approximately $7.36 million from us.
Added
Meiji conducted the study under its exclusive partnership with CSL Seqirus for distribution of ARCT-154 in Japan. The study enrolled 828 adult participants, with half in the ARCT-154 group and half in a comparator group (Comirnaty®, Pfizer-BioNTech).
Removed
The payoff amount was made by Arcturus to Western Alliance from available cash on hand, pursuant to a payoff letter, and included payment of (i) approximately $7.02 million in principal and interest, (ii) $300,000 fee payable upon prepayment as a result of prior FDA approval of an IND, (iii) $35,000 in prepayment charges and (iv) de minimis amounts for various operational fees.
Added
The results of this study demonstrated that a booster dose of ARCT-154 elicited a numerically higher immune response (meeting the non-inferiority criteria) against the original Wuhan-Hu-1 virus strain and a superior immune response against Omicron BA.4/5 subvariant of SARS-CoV-2 virus compared to a booster dose of the conventional mRNA vaccine Comirnaty®.
Removed
In March 2023, Arcturus achieved development milestones, including milestones associated with nominating next generation vaccine candidates, resulting in $90.0 million due from CSL Seqirus. The CSL Collaboration Agreement sets forth how CSL Seqirus and us shall collaborate to research and develop vaccine candidates.
Added
CSL Seqirus will lead and be responsible for all other research and development in COVID-19, influenza and the other fields.
Removed
During the year ended December 31, 2022, we incurred $0.2 million that is expected to be reimbursed during the first quarter of 2023.
Added
Wells Fargo Credit Agreement On April 21, 2023, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc. entered into a credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) whereby Wells Fargo agreed to make a $50.0 million revolving credit line available to the Company (the “Wells Fargo Loan”) with each Wells Fargo Loan evidenced by a revolving line of credit note (each, a “Note”).
Removed
Grants from the Economic Development Board of the Republic of Singapore On March 4, 2020, we were awarded a grant (“Grant 1”) from the EDB to support the co-development of a potential COVID-19 vaccine program with the Duke-NUS Medical School.
Added
Borrowings under the agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Wells Fargo Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York.
Removed
Grant 1 provided for up to S$14.0 million (approximately US$10.0 million using the exchange rate at the time the grant contract was entered into) in grants to support the development of the vaccine.
Added
If an Event of Default (as defined in the credit agreement) occurs, then all Wells Fargo Loans shall bear interest at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default.
Removed
Grant 1 has been paid in full by the EDB as a result of the achievement of certain milestones related to the progress of the development of the vaccine, as set forth in the award agreement. The funds received have been recognized as contra research and development expense.
Added
The term of the agreement is two years, with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25% of the Wells Fargo Loan amount for each such renewal. There is no penalty for terminating the agreement.
Removed
The parties are in continued negotiations with respect to amendments of Grant 1. The Company does not believe there will be any further obligations related to this grant. On October 2, 2020, we were awarded another grant (“Grant 2”) from the EDB to support the clinical development of a potential COVID-19 vaccine (ARCT-021).
Added
There is no penalty for terminating the facility prior to the maturity date of the Wells Fargo Note. As collateral, the Company has agreed to pledge $55.0 million in cash to be held at the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.
Removed
Grant 2 provides for up to S$9.3 million (approximately US$6.7 million) to support the clinical development of the vaccine candidate for costs incurred in Singapore subject to certain conditions. Grant 2 is to be paid in two installments upon the achievement of certain milestones related to the progress of the development of the vaccine candidate.
Added
It provides for reimbursement by BARDA of our permitted costs up to $63.2 million.
Removed
We received the first installment of $3.6 million in the fourth quarter of 2020. A portion of the funds received were recognized as contra research and development expense as costs were incurred during the fourth quarter of 2020.
Added
There can be no assurance that we will be able to obtain additional needed financing on acceptable terms or at all. Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing shareholders.
Removed
As costs were incurred during fiscal year 2021, we recognized the remaining amount of the first installment as contra expense for Grant 2. The parties are in continued negotiations with respect to amendments of Grant 2. The Company does not believe there will be any further obligations related to this grant.
Added
This was partially offset by an increase in accounts receivable of $29.3 million, a decrease in accounts payable and accrued liabilities of $2.9 million and a decrease lease liabilities of $4.3 million.
Removed
Manufacturing Support Agreement On November 7, 2020, we entered into the EDB “Support Agreement” with the EDB. Pursuant to the EDB Support Agreement, the EDB agreed to make a term loan (the “Singapore Loan”) of US$62.1 million, subject to the satisfaction of customary deliveries, to support the manufacture of the LUNAR-COV19 vaccine candidate (ARCT-021).
Added
Investing Activities Net cash used in investing activities of $2.9 million in 2023 and $7.7 million in 2022 reflected the acquisition of property and equipment. 85 Financing Activities Net cash used in financing activities in 2023 was $24.1 million, primarily from principal payments on long-term debt of $27.4 million, partially offset by proceeds from the exercise of stock options of $2.7 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.6 million.
Removed
On March 23, 2023, we and the EDB agreed to certain amendments to the EDB Agreement, including that (i) the audit of the funds utilized for ARCT-021 is to be completed on March 22, 2023, (ii) EDB waiving the loan and interest on funds used to manufacture ARCT-021, (iii) upon audit completion we will pay EDB interest (calculated at 4.5% per annum) and principal for outstanding funds not used for ARCT-021 by March 30, 2023 and (iv) the delivery requirement of ARCT-021 shall be waived.
Added
The decrease was primarily offset by increases in the revenue of $8.8 million related to the increase in reimbursable research and development expenses for the grant agreement with BARDA and $0.1 million related to other material transfer agreements during the year ended 2023. Operating Expenses Our operating expenses consist of research and development and general and administrative expenses.
Removed
The result of this notice is that we paid $17.1 million to Singapore and released the ARCT-021 liability in the amount of $33.3 million during the first quarter of 2023.
Added
Research and development expenses were $192.1 million for the year ended December 31, 2023, compared with $147.8 million in the comparable period last year, primarily reflecting increased manufacturing costs of $27.4 million, an increase of $6.7 million in personnel related costs, an increase in consulting expenses of $3.7 million, an increase of $3.2 million in facilities expense and an increase of contra research and development expenses recognized of $8.4 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitat ive Disclosures About Market Risk Our primary exposure to market risk is interest income and expense sensitivity, which is affected by changes in the general level of United States interest rates. Due to the nature of our investments and term loan, we believe that we are not subject to any material market risk exposure.
Biggest changeItem 7A. Quantitative and Qualitat ive Disclosures About Market Risk Our primary exposure to market risk is interest income and expense sensitivity, which is affected by changes in the general level of United States interest rates. Due to the nature of our investments, we believe that we are not subject to any material market risk exposure.

Other ARCT 10-K year-over-year comparisons