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What changed in Arcturus Therapeutics Holdings Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Arcturus Therapeutics Holdings Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+485 added−521 removedSource: 10-K (2025-03-06) vs 10-K (2024-03-14)

Top changes in Arcturus Therapeutics Holdings Inc.'s 2024 10-K

485 paragraphs added · 521 removed · 314 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

134 edited+106 added−157 removed123 unchanged
Biggest changeOur 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.
Biggest changeOur patent portfolio is built upon a strategy of robust protection for our LUNAR and STARR ® platforms as described below: • LUNAR – Our patent holdings continue to grow in scope and territory for our LUNAR platform with patents and patent applications directed to composition of matter including chemical structures for our growing library of proprietary lipids, manufacture of lipid nanoparticles (including lyophilization), and use of our LUNAR technology for nucleic acid delivery and drug delivery in more than 50 countries around the world. • 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.
We anticipate that further patents will be filed as we continue to innovate with respect to our STARR platform and that current applications covering these developments in our STARR platform, if granted, will last until 2044, not including any patent term extensions. Patent Terms The term of individual patents depends on the countries in which they are obtained.
We anticipate that further patents will be filed as we continue to innovate with respect to our STARR platform and that current applications covering these developments in our STARR platform, if granted, will last until 2044, not including any patent term extensions. 26 Patent Terms The term of individual patents depends on the countries in which they are obtained.
Under the CSL Collaboration Agreement, CSL Seqirus receives global exclusive rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases. Specifically, the collaboration agreement grants CSL Seqirus a license to our STARR mRNA technology and LUNAR lipid-mediated delivery, as well as mRNA drug substance and drug product manufacturing expertise.
Under the CSL Collaboration Agreement, CSL Seqirus receives global exclusive rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other infectious diseases. Specifically, the collaboration agreement grants CSL Seqirus a license to our STARR mRNA technology and LUNAR lipid-mediated delivery, as well as mRNA drug substance and drug product manufacturing expertise.
The new discovery programs rely on the evidence of superior immunogenicity, durability, and breadth of immune response compared to conventional mRNA vaccines, as observed in the COVID-19 program. Lyme disease is a bacterial infection and is the most common vector-borne disease in the United States. Infection can spread to joints, the heart and the nervous system.
The discovery programs rely on the evidence of superior immunogenicity, durability, and breadth of immune response compared to conventional mRNA vaccines, as observed in the COVID-19 program. Lyme disease is a bacterial infection and is the most common vector-borne disease in the United States. Infection can spread to joints, the heart and the nervous system.
CSL has also been 35 granted global non-exclusive rights in the field of pandemic preparedness (i.e., pathogens identified as priority diseases by the WHO), with the right to convert to an exclusive license. The CSL Collaboration Agreement sets forth how the parties will collaborate to research and develop vaccine candidates.
CSL has also been granted global non-exclusive rights in the field of pandemic preparedness (i.e., pathogens identified as priority diseases by the WHO), with the right to convert to an exclusive license. The CSL Collaboration Agreement sets forth how the parties will collaborate to research and develop vaccine candidates.
The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and provides oversight for the clinical trial until completed. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1.
The IRB also approves the form and content of the 28 informed consent that must be signed by each clinical trial subject or his or her legal representative and provides oversight for the clinical trial until completed. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1.
Failure to comply with FDA requirements can have negative consequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.
Failure to comply with FDA requirements can have negative 30 consequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.
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.
We have manufactured and supplied gram quantities of drug substance, and have 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.
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 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. 33
Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA has 10 months from acceptance of filing in which to complete its initial review of a standard NDA or BLA and respond to the applicant, and six months from acceptance of filing for a priority NDA or BLA.
Under the goals and policies agreed to by the FDA under the 29 Prescription Drug User Fee Act (“PDUFA”), the FDA has 10 months from acceptance of filing in which to complete its initial review of a standard NDA or BLA and respond to the applicant, and six months from acceptance of filing for a priority NDA or BLA.
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.
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.
Due to such designation, if ARCT-810 achieves approval for a pediatric indication in the original 17 rare pediatric disease product application in the United States, Arcturus (or the sponsor of ARCT-810) is eligible to receive a voucher for priority review of a subsequent marketing application for a different product.
Due to such designation, if ARCT-810 achieves approval for a pediatric indication in the original rare pediatric disease product application in the United States, Arcturus (or the sponsor of ARCT-810) is eligible to receive a voucher for priority review of a subsequent marketing application for a different product.
For example, we recently presented data at the North American Cystic Fibrosis Conference in November 2023 that demonstrated that a single dose of ARCT-032, administered in the airways of CF ferrets by microsprayer, effectively doubled the mucociliary transport rate in vivo.
For example, we presented data at the North American Cystic Fibrosis Conference in November 2023 that demonstrated that a single dose of ARCT-032, administered in the airways of CF ferrets by microsprayer, effectively doubled the mucociliary transport rate in vivo.
In addition, we are entitled to receive a 40% share of net profits from COVID-19 vaccine sales and up to low double-digit royalties of annual net sales for vaccines against influenza, pandemic preparedness and three additional respiratory infectious diseases.
In addition, we are entitled to receive a 40% share of net profits from COVID-19 vaccine sales and up to low double-digit royalties of annual net sales for vaccines against influenza, pandemic preparedness and three additional infectious diseases.
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.
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.
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.
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.
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.
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.
As part of a collaboration with Vinbiocare, ARCT-154, our investigational next-generation, self-amplifying mRNA-based vaccine for COVID-19, was advanced into a Phase 1/2/3 study in Vietnam, funded and sponsored by Vinbiocare (the “Vinbiocare Study”). The trial is randomized, observer-blinded, placebo, and active-controlled and is intended to assess the safety, immunogenicity, and efficacy of ARCT-154.
As part of a collaboration with Vinbiocare, ARCT-154, our next-generation, self-amplifying mRNA-based vaccine for COVID-19, was advanced into a Phase 1/2/3 study in Vietnam, funded and sponsored by Vinbiocare (the “Vinbiocare Study”). The trial was randomized, observer-blinded, placebo and active-controlled, and intended to assess the safety, immunogenicity, and efficacy of ARCT-154.
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.
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 nitrogenscavengers to try to prevent accumulation of ammonia.
This platform has been shown to deliver effective protection against COVID-19 and has been optimized to elicit robust immunogenicity with acceptable reactogenicity at a lower dose than conventional mRNA vaccines with the aspiration of creating a highly effective influenza vaccine for use in general and high-risk populations.
This platform has been shown to deliver effective protection against COVID-19 and has been optimized to elicit robust immunogenicity with acceptable reactogenicity at a lower dose than conventional mRNA vaccines with the objective of creating a highly effective influenza vaccine for use in general and high-risk populations.
Working with CSL Seqirus, we have generated a comprehensive non-clinical data package to support the initiation of the Phase 1 clinical trial with a novel influenza mRNA vaccine candidate. A Phase 1 dose-finding safety and immunogenicity study was initiated in January 2024 in Australia and is ongoing.
Working with CSL Seqirus, we generated a comprehensive non-clinical data package to support the initiation of the Phase 1 clinical trial with a novel influenza sa-mRNA vaccine candidate. A Phase 1 dose-finding safety and immunogenicity study was initiated in January 2024 in Australia and is ongoing.
We are aware of several other companies that are working to develop nucleic acid medicines, including gene therapy, gene editing, mRNA (including saRNA), siRNA, and antisense therapeutics. Many of these companies, such as Genevant Sciences and Acuitas Therapeutics, are also developing nucleic acid delivery platforms which compete with LUNAR technology.
We are aware of several other companies that are working to develop nucleic acid medicines, including gene therapy, gene editing, mRNA (including sa-mRNA), siRNA, and antisense therapeutics. Many of these companies, such as Genevant Sciences and Acuitas Therapeutics, are also developing nucleic acid delivery platforms which compete with LUNAR technology.
There are close to 40,000 children and adults living with cystic fibrosis in the United States (and an estimated 105,000 people have been diagnosed with CF across 94 countries), and CF can affect people of every racial and ethnic group. Approximately 800 people are newly diagnosed with CF each year in the United States.
There are close to 40,000 children and adults living with CF in the United States (and an estimated 105,000 people have been diagnosed with CF across 94 countries), and CF can affect people of every racial and ethnic group. Approximately 800 people are newly diagnosed with CF each year in the United States.
Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed.
Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. Once the Clinical Trial Application (“CTA”) is approved in accordance with a country’s requirements, clinical trial development may proceed.
Preclinical data in OTC-deficient murine models have demonstrated that dosing of LUNAR-OTC results in robust OTC protein expression and activity, thereby improving ureagenesis, reducing plasma ammonia, and increasing survival. The Phase 1, double-blind, placebo-controlled, single-dose, dose-escalation study of ARCT-810 in healthy volunteers, completed in November 2020, demonstrated favorable safety, tolerability and PK profiles.
Preclinical data in OTC-deficient murine models have demonstrated that dosing of LUNAR-OTC results in robust OTC protein expression and activity, thereby improving ureagenesis, reducing plasma ammonia, and increasing survival. A Phase 1 double-blind, placebo-controlled, dose-escalation study of ARCT-810 in healthy volunteers, completed in November 2020, and demonstrated favorable safety, tolerability and PK profiles.
The study enrolled 930 healthy adults and individuals with comorbidities, who previously received three to five doses of mRNA COVID-19 vaccines, including the last booster at least three months prior to recruitment. The study will compare the investigational vaccine, ARCT-2301 and COMIRNATY (ancestral strain and BA.4/5), to evaluate safety and immunogenicity between observer-blind groups.
The study enrolled 930 healthy adults and individuals with comorbidities, who previously received three to five doses of mRNA COVID-19 vaccines, including the last booster at least three months prior to recruitment, and compared the investigational vaccine (ARCT-2301) and COMIRNATY (ancestral strain and BA.4/5) to evaluate safety and immunogenicity between observer-blind groups.
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.
We continue to expand our library of proprietary synthetic lipids, termed ATX, with over 300 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.
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.
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, COVID-19 and Influenza. If issued, our patents are expected to expire between 2028 and 2045, without taking into account any possible patent term extensions.
Key Attributes of Our LUNAR Lipid-Mediated Delivery Technology We have designed our LUNAR lipid-mediated delivery platform to address major challenges with nucleic acid medicine delivery, including transfection efficiency, adverse immune reactions and liver damage. LUNAR formulations are a multi-component, lipid-mediated drug delivery system that utilizes our proprietary lipids, called ATX lipids.
Key Attributes of Our LUNAR Lipid-Mediated Delivery Technology We have designed our LUNAR lipid-mediated delivery platform to address major challenges with nucleic acid medicine delivery, including transfection efficiency, adverse immune reactions and liver damage. LUNAR is a multi-component, lipid-mediated drug delivery system that utilizes our proprietary lipids, called ATX lipids.
On August 1, 2019, we entered into an amendment to the CFF Agreement.
On August 1, 2019, we entered into an amendment to the CFF 24 Agreement.
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).
Pivotal Phase 3 Non-Inferiority Study of KOSTAIVE (ARCT-154) in Japan Meiji sponsored 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).
We continue to conduct exploratory platform development activities, including the evaluation of genome editing, and new targeting approaches, where our LUNAR and STARR platforms could potentially be useful for identification and development of additional products for our portfolio.
We conducted exploratory platform development activities, including the evaluation of genome editing, and new targeting approaches, where our LUNAR and STARR platforms could potentially be useful for identification and development of additional products for our portfolio.
These claims cover the use of our core platform technologies including the use of LUNAR and lipid components to deliver nucleic acids, the use of UNA oligomers for therapeutics and reagents, the use of LNA oligomers for therapeutics, specific nucleic acid modalities for treating disease, as well as our proprietary technology regarding the design, manufacture, and purification of nucleic acids for use in therapy.
These claims cover the use of our core platform technologies including the use of LUNAR ® and lipid components to deliver nucleic acids, specific nucleic acid modalities for treating disease, as well as our proprietary technology regarding the design, manufacture, and purification of nucleic acids for use in therapy.
Phase 3 Study of Bivalent Version of COVID-19 Vaccine Candidate in Japan On September 29, 2023, Meiji initiated an additional Phase 3 clinical study with a bivalent version of our COVID-19 vaccine candidate (ancestral strain, ARCT-154 and Omicron BA.4/5) to further support immunogenicity and safety data for our self-amplifying mRNA platform, which may facilitate the timely release of future seasonal 13 updates of our COVID-19 vaccine against evolving variants of concern.
Phase 3 Study of Bivalent Version of KOSTAIVE (COVID-19 Vaccine) Candidate in Japan In September 2023, Meiji initiated a Phase 3 clinical study with ARCT-2301, a bivalent version of KOSTAIVE (ancestral strain and Omicron BA.4/5) to further support immunogenicity and safety data for our self-amplifying mRNA platform, which may facilitate the timely release of future seasonal updates of our COVID-19 vaccine against evolving variants of concern.
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.
Self-amplifying RNA-based prophylactic vaccines developed with STARR trigger rapid and prolonged antigen expression within host cells which may provide protective immunity against infectious pathogens.
We have retained worldwide development and commercialization rights to ARCT-810. LUNAR-OTC has received orphan drug designation from the FDA and the EMA for treatment of OTC deficiency. ARCT-810 was also successfully granted Fast Track Designation in May 2023 and Rare Pediatric Disease Designation (RPDD) in June 2023.
We have retained worldwide development and commercialization rights to ARCT-810. LUNAR-OTC has received Orphan Drug Designation from the FDA and Orphan Medicinal Product Designation from the EMA for treatment of OTC deficiency. ARCT-810 was also granted Fast Track Designation in and Rare Pediatric Disease Designation (RPDD).
Below we have included what we believe to be the competitive landscape for certain of the medicines that we currently have in development. Vaccine Franchise LUNAR-COV19 Vaccines (ARCT-154) Our vaccine franchise is based on our self-amplifying and self-replicating STARR technology platform and our lipid nanoparticle delivery platform called LUNAR.
Below we have included what we believe to be the competitive landscape for certain of the medicines that we currently have in development. LUNAR-COVID-19 Vaccine (KOSTAIVE ® ) Our vaccine franchise is based on our self-amplifying and self-replicating STARR technology platform and our lipid nanoparticle delivery platform called LUNAR.
However, we face competition at the technology platform and therapeutic indication levels from both large and small biopharmaceutical companies, academic institutions, governmental agencies and public and private research institutions. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.
As a result, we face competition at the technology platform and therapeutic indication levels from both large and small biopharmaceutical companies, academic institutions, governmental agencies and public and private research institutions. 31 Many of our competitors, including those with strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.
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.
Among other collaboration arrangements, • we have a collaboration with CSL Seqirus for vaccines against SARS-CoV-2 (COVID-19), influenza and three other infectious diseases; • we have received funding from the CFF to support our LUNAR-CF development program; and 23 • 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.
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.
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.
Marketing Authorization Approval of ARCT-154 in Japan 7 In November 2023, ARCT-154 received marketing authorization approval from the Japanese Ministry of Health, Labour and Welfare for use as a primary immunization and booster in Japan.
Approval of KOSTAIVE in Japan KOSTAIVE (ARCT-154 version) received marketing authorization approval in November 2023 from the Japanese Ministry of Health, Labour and Welfare for use as a primary immunization and booster in Japan for adults 18 years and older.
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.
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.
Lung Franchise: ARCT-032 (LUNAR-CF) The lead candidate of our lung franchise is ARCT-032, which is an mRNA therapeutic candidate for cystic fibrosis based on our proprietary drug substance mRNA technology platform and our LUNAR lipid nanoparticle delivery platform.
Lung Franchise ARCT-032 (LUNAR-CF) The lead candidate of our lung franchise is ARCT-032, an mRNA therapeutic candidate for cystic fibrosis based on our proprietary drug substance mRNA technology platform and our LUNAR lipid nanoparticle delivery platform has advanced into Phase 2 clinical development.
LUNAR96 and LUNAR98 formulations were tested for EPO expression in non-human primates at a single dose and assayed for secreted EPO in the blood 24 hours after IV administration. Both LUNAR96 and LUNAR98 yielded significantly higher expression levels than the positive control, LUNAR2 further confirming the superior performance of the new LUNAR formulations.
Figure 4: C9G and C9I formulations were tested for EPO expression in non-human primates at a single dose and assayed for secreted hEPO in the blood six hours after IV administration. Both C9G and C9I yielded significantly higher expression levels than the positive control, B2G further confirming the superior performance of the new LUNAR formulations.
The figure below the mouse human EPO expression figure shows the clearance of the LUNAR lipids from the liver 48 hours after administration of 0.1mg/kg and 0.3 mg/kg RNA doses. LUNAR 96, 97 and 98 yielded much higher expression levels of EPO than LUNAR 2, the positive control for both doses tested.
Figure 3: shows the clearance of the LUNAR lipids from the mouse liver 48 hours after administration of 0.1mg/kg and 0.3 mg/kg RNA doses. C9G, C9H and C9I yielded much higher expression levels of EPO than B2G, the positive control for both doses tested.
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).
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). Moreover, the same level of efficacy was achieved with a single administration of a 0.2 ug dose of the STARR vaccine.
We selected these diseases based on high unmet medical needs, good understanding of the path forward in vaccine target selection, and demonstration of proof of concept, as well as platform advantages that may be translated in a favorable vaccine product.
We selected these diseases based on high unmet medical needs, good understanding of the path forward in vaccine target selection, and demonstration of proof of concept, as well as platform advantages that may be translated in a favorable vaccine product. Discovery Programs – HPV Arcturus is advancing the development of a post-exposure HPV therapeutic vaccine candidate.
We anticipate that these grants will be used to fund the construction 37 of a factory and the purchase of capital equipment to support current Good Manufacturing Practice (cGMP) production of mRNA drug substance and mRNA drug product operations.
The grants were used to fund the construction of a factory and the purchase of capital equipment to support current Good Manufacturing Practice (cGMP) production of mRNA drug substance and mRNA drug product operations.
(“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.
In December 2022 we entered into a Collaboration and License Agreement (“CSL Collaboration Agreement”) with 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 infectious diseases and global non-exclusive rights to pandemic pathogens.
In November 2017, Alcobra Ltd., an Israeli limited company, merged with our company, changed its name to Arcturus Therapeutics Ltd. (“Arcturus Israel”), and commenced trading on Nasdaq under the symbol “ARCT.” On June 17, 2019, we redomiciled to the United States (the “Redomiciliation”) and changed our name to Arcturus Therapeutics Holdings Inc. Our Internet address is www.arcturusrx.com.
(“Arcturus Israel”), and commenced trading on Nasdaq under the symbol “ARCT.” On June 17, 2019, we redomiciled to the United States (the “Redomiciliation”) and changed our name to Arcturus Therapeutics Holdings Inc. Our Internet address is www.arcturusrx.com.
Therefore, we plan to continue to file patent applications in jurisdictions around the world as we discover and develop novel nucleic acid technology platforms and novel nucleic acid therapeutic candidates. We cannot guarantee that future applications will be issued.
Therefore, we plan to continue to file patent applications in jurisdictions around the world as we discover and develop novel nucleic acid technology platforms and novel nucleic acid therapeutic candidates. We cannot guarantee that future applications will be issued. Our Patent Portfolio As of January 31, 2025, we own over 500 patents and pending patent applications.
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.
Our STARR mRNA Technology Our distinct and proprietary self-amplifying mRNA (sa-mRNA) platform (STARR) includes proprietary algorithms that inform the design and optimization of sa-mRNA to enhance expression of the applicable antigen while minimizing structures that might inhibit expression.
To date, approximately $165 million has been awarded to ARCALIS by the Japanese government, subject to certain terms and conditions, to build mRNA Drug Substance, mRNA Drug Product manufacturing capabilities and to construct a DNA template manufacturing facility.
To date, approximately $165 million has been awarded to ARCALIS by the Japanese government, subject to certain terms and conditions, to build mRNA Drug Substance, mRNA Drug Product manufacturing capabilities and to construct a DNA template manufacturing facility. On November 14, 2024, Meiji Seika Pharma announced its investment in ARCALIS.
This investment has led to key innovations ensuring that our LUNAR formulated drug product candidates have optimal characteristics for therapeutic use, which we believe sets us apart from other nucleic acid therapeutics and lipid-mediated delivery platforms. As such, we consider ourselves a leader in the research and development of systemically administered mRNA therapeutics.
This investment has led to key innovations ensuring that our LUNAR formulated drug product candidates have optimal characteristics for therapeutic use, which we believe sets us apart from other nucleic acid therapeutics and lipid-mediated delivery platforms.
The LUNAR lipids that were screened were LUNAR96, LUNAR97, LUNAR98 and LUNAR2 at 0.1 mg/kg 0.3 mg/kg RNA doses. LUNAR lipid 2 formulation is a positive control to which expression from the other formulations is compared. Mice were bled 24 hours after injection and assayed for EPO, a secreted protein.
The LUNAR lipids that were screened were C9G, C9H, C9I and B2G at 0.1 mg/kg and 0.3 mg/kg RNA doses. LUNAR lipid B2G formulation is a positive control to which expressions from the other formulations are compared. Mice were bled 6 hours after injection and assayed for EPO, a secreted protein.
We evaluated this targeting agent in an LDLR-deficient mouse model and found that only the LUNAR formulations with this targeting agent were able to deliver mRNA to the hepatocytes compared to LUNAR formulations that did not contain the targeting agent.
Therefore, we evaluated this targeting agent in an LDLR-deficient mouse model and found that only the LUNAR formulations with this targeting agent were able to deliver mRNA to the hepatocytes compared to LUNAR formulations that did not contain the targeting agent. Based on this promising data, we are expanding these platform development efforts.
The ATX lipid formulated RNAs must meet specific chemical and biophysical acceptance criteria before being tested for biological activity. RNA formulations meeting all acceptance criteria are first screened for protein expression in mice. Active candidates are then tested for tolerability and preliminary tissue clearance rates following administration. Active candidates are further verified by evaluating protein expression in non-human primates.
RNA formulations meeting all acceptance criteria are first screened for protein expression in mice. Active candidates are then tested for tolerability and preliminary tissue clearance rates following administration. Active candidates are further verified by evaluating protein expression in non-human primates.
The contract provides for reimbursement by BARDA of Arcturus’ permitted costs incorporated into the contract, up to $63.2 million. The contract does not include the purchase of any pandemic influenza vaccine that eventually may be developed. The contract is terminable by BARDA at any time under specified circumstances, including for convenience.
The contract does not include the purchase of any pandemic influenza vaccine that eventually may be developed. The contract is terminable by BARDA at any time under specified circumstances, including for convenience.
Characterization and optimization of the aerosolized LUNAR formulations in targeting airway epithelium have been achieved in rodent (mice, rat) and nonrodent models (ferret, NHP) as depicted in the image using a reporter mRNA encapsulated in LUNAR.
Lung Targeting Aerosol capabilities have been developed for the CF program using our proprietary lipid nanoparticle delivery platform, LUNAR. Characterization and optimization of the aerosolized LUNAR formulations in targeting airway epithelium have been achieved in rodent (mice, rat) and nonrodent models (ferret, NHP) as depicted in the image using a reporter mRNA encapsulated in LUNAR.
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.
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, Novavax, and Sanofi.
A Phase 1b study in stable OTC-deficient adults completed dosing in the United States in August 2023. The trial is designed to assess safety, tolerability and pharmacokinetics of a single dose of ARCT-810, as well as exploratory biomarkers of drug activity. The Phase 1b study is a single ascending dose, placebo-controlled study that enrolled 16 adults with mild OTCD.
A single ascending dose, placebo-controlled study Phase 1b study in 16 stable mild OTC-deficient adults was completed in the United States in September 2023. The trial assessed safety, tolerability and pharmacokinetics of a single dose of ARCT-810, and exploratory biomarkers of drug activity.
Lipids are molecules that contain hydrocarbons and make up the building blocks of the structure and function of living cells. Examples of lipids include fats, oils, waxes, certain hormones, and most of the cell membrane that is not made up of protein. LUNAR is designed to address technical challenges facing the delivery of nucleic acid medicines into cells.
LUNAR is comprised of a mixture of biodegradable synthetic lipids and naturally occurring lipids. Lipids are molecules that contain hydrocarbons and make up the building blocks of the structure and function of living cells. Examples of lipids include fats, oils, waxes and phospholipids. LUNAR is designed to address technical challenges facing the delivery of nucleic acid medicines into cells.
We designed the ATX lipid to be rapidly biodegradable by engineering chemical structural components, called esters, into the ATX backbone that are sensitive to cellular enzymes, called esterases.
We designed the ATX lipid to be rapidly biodegradable by engineering chemical structural components, called esters, into the ATX backbone that are sensitive to cellular enzymes, called esterases. This degradation prevents ATX lipids from accumulating inside the cell and causing toxicity.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life. 41 U.S. review and approval processes The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product.
U.S. review and approval processes The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product.
Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues.
Our proprietary LNP delivery system, LUNAR ® (“LUNAR”), is intended to address the major hurdle in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues. LUNAR may enable multiple nucleic acid medicines.
ARCT-810 received Orphan Drug Designation from the FDA and the European Medicines Agency (the “EMA”) for treatment of OTC deficiency. ARCT-810 was also granted Fast Track Designation in May 2023 and Rare Pediatric Disease Designation in June 2023.
ARCT-810 has received Orphan Drug Designation from the FDA and Orphan Medicinal Product Designation from the European Medicines Agency (the “EMA”) for treatment of OTC deficiency, as well as Fast Track Designation and Rare Pediatric Disease Designation from the FDA.
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.
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, manufacture and incorporate novel ATX lipids into formulations to enrich our library of proprietary ATX lipids for target cell/tissue specificity, improved tolerability and translatability to larger species; • Develop, optimize and innovate 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 the need for frozen storage and to extend shelf-life; and • Continually optimize and innovate LUNAR screening paradigm to enable rigorous selection of ATX lipids for various therapeutic programs and routes of administration. 15 Through the above efforts, our versatile LUNAR platform continues to drive internal and partner programs.
Our Proprietary mRNA and Protein Design Technology The mRNA programs in our pipeline benefit from our in-house expertise in protein and mRNA design, which helps us address many of the known challenges that face the viability of mRNA therapeutics today.
Thus, with these innovations we believe that we have substantially improved both the potency and tolerability of our LUNAR platform. Our Proprietary mRNA and Protein Design Technology The mRNA programs in our pipeline benefit from our in-house expertise in protein and mRNA design, which helps us address many of the known challenges that face the viability of mRNA therapeutics today.
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.
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. Competition Our Business in General The RNA pipeline across the biopharma industry is expansive, with mostly early-stage assets.
These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Mergers and acquisitions, recently and into the future, may result in resource concentration among a potentially consolidated number of competitors.
We believe our technology should provide an excellent platform to address genetically inherited rare diseases. Specifically, we are focusing on developing medicines to treat people with rare respiratory and liver diseases who currently have limited or no treatment options.
Despite recent progress, there is more work to be done to overcome the scientific, operational and financial challenges that arise. 11 We believe our technology should provide an excellent platform to address genetically inherited rare diseases. Specifically, we are focusing on developing medicines to treat people with rare respiratory and liver diseases who currently have limited or no treatment options.
The mouse liver clearance figure shows that the residual amount of LUNAR96 and LUNAR98 were below the limit of detection and the residual amount of LUNAR97 was at least 10-fold less than the remaining amount of LUNAR2 at the 0.1 mg/kg RNA dose and at least two-fold less than the residual amount of LUNAR2 at the higher RNA dose.
It also shows that the residual amount of C9G and C9I were below the limit of detection and the residual amount of C9H was at least 10-fold less than the remaining amount of B2G at the 0.1 mg/kg RNA dose and at least two-fold less than the residual amount of B2G at the higher RNA dose.
The design of ATX lipids is an iterative process based on in vivo protein expression and tolerability results from previous ATX lipid candidates. New ATX lipids are chemically synthesized and used to package both siRNAs for inhibiting target protein expression and mRNAs expressing a secreted protein.
The design of ATX lipids is an iterative process based on in vivo protein expression and tolerability results from previous ATX lipid candidates. New ATX lipids are chemically synthesized and used to package mRNAs expressing a secreted protein. The ATX lipid formulated RNAs must meet specific chemical and biophysical acceptance criteria before being tested for biological activity.
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. The flu industry is rapidly shifting to utilizing mRNA-based platforms in addition to traditional (egg-based) technologies. Liver Franchise ARCT-810 (LUNAR-OTC) Our liver franchise has advanced into mid-stage clinical development with ARCT-810 in Phase 2 clinical development.
The flu industry is rapidly shifting to utilizing mRNA-based platforms in addition to other non-egg based technologies and traditional (egg-based) technologies. Liver Franchise ARCT-810 (LUNAR-OTC) Our liver franchise has advanced into mid-stage clinical development with ARCT-810 in Phase 2 clinical development.
The commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, are more convenient or are less expensive than any products we may develop in our respective areas.
The commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, are more convenient or are less expensive than any products we may develop in our respective areas. Our collaboration with CSL Seqirus may allow us to compete commercially on the world stage within the COVID and influenza markets.
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.
Clinical Studies of KOSTAIVE (COVID-19 vaccine) In connection with the development of KOSTAIVE, we have conducted or are conducting the studies described below. 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.
The Rare Pediatric Disease Designation is designed to recognize rare pediatric diseases in which the serious or life-threatening manifestations primarily affect patients from birth to 18 years of age.
ARCT-032 has received Orphan Drug Designation by the FDA and Orphan Medicinal Product Designation by the EMA. The FDA also granted Rare Pediatric Disease Designation for ARCT-032. The Rare Pediatric Disease Designation is designed to recognize rare pediatric diseases in which the serious or life-threatening manifestations primarily affect patients from birth to 18 years of age.
The following results are from an in vivo mRNA expression study which identified three new highly active LUNAR lipids with regard to protein expression in non-human primates compared to the positive control. 30 31 In the top two figures, mice were injected intravenously with 4 different LUNAR lipid formulations containing mRNA expressing human erythropoietin (EPO).
The following results are from an in vivo mRNA expression study which identified three new highly active LUNAR lipids with regard to protein expression in non-human primates compared to the positive control.
This franchise has advanced into late-stage clinical development including ARCT-154 in two Phase 3 clinical studies. We have partnered our COVID-19 vaccine franchise with CSL Seqirus. We consider the following companies with approved or late-stage clinical development vaccines as some of our competitors or future competitors to our partnered COVID-19 vaccine franchise: Pfizer/BioNTech, Moderna, Janssen, AstraZeneca, Novavax, and HDT Bio.
We consider the following companies with approved or late-stage clinical development vaccines as some of our competitors or future competitors to our partnered COVID-19 vaccine franchise: Pfizer/BioNTech, Moderna, Janssen, AstraZeneca, Novavax, and HDT Bio. Dozens of other companies are continuing to develop COVID-19 vaccines.
ATX lipids are rationally designed to fit their respective applications and vary depending on the target cell type and route of administration. We perform extensive formulation screening for each nucleic acid therapeutic candidate to determine the optimal ATX lipid and LUNAR composition for the particular nucleic acid therapeutic candidate, the desired route of administration, and target cell type.
We perform extensive formulation screening for each nucleic acid therapeutic candidate to determine the optimal ATX lipid to be used and the appropriate excipient composition (LUNAR composition) for the nucleic acid therapeutic candidate, the desired route of administration, and target cell type.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

116 edited+21 added−25 removed228 unchanged
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.
Biggest changeDespite the approval of KOSTAIVE in Europe, KOSTAIVE has not, and might never, achieve commercialization in Europe. • 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. 34 • 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. • The commercial success of our product candidates will depend in part upon the acceptance of our product candidates by the medical community, including physicians, patients and healthcare payors. • 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 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 has been and is likely to continue to be volatile.
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.
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. • 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 58 investment interests held by physicians and their immediate family members.
We anticipate that our expenses will increase substantially if and as we: • continue our research and development of our product candidates, both independently and under our strategic alliance agreements; • seek to identify additional targets and product candidates; • acquire or in-license other products and technologies; • advance product candidates into and through clinical trials; • seek marketing approvals for any product candidates that successfully complete clinical trials; • establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; • maintain, expand and protect our intellectual property portfolio; • hire additional clinical, regulatory, research, executive and administrative personnel; and • create additional infrastructure to support our operations and our product development and planned future commercialization efforts.
We anticipate that our expenses will increase substantially if and as we: • continue our research and development of our product candidates, both independently and under our strategic alliance agreements; • seek to identify additional targets and product candidates; • acquire or in-license other products and technologies; • advance product candidates into and through clinical trials; • seek marketing approvals for any product candidates that successfully complete clinical trials; • establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; • maintain, expand and protect our intellectual property portfolio; • hire additional clinical, regulatory, research, executive and administrative personnel; and 36 • create additional infrastructure to support our operations and our product development and planned future commercialization efforts.
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.
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.
It is also still unclear if the vaccines will enable adequate long-term protection, as (i) many vaccinated individuals have become ill due to “breakthrough infections” and have transmitted the virus to many others, (ii) there are millions of individuals who refuse to be vaccinated or who cannot be vaccinated due to pre-existing conditions, (iii) it is unclear how long the vaccine protection will last, and (iv) genetic mutations or variants of the virus already have had, and are expected to continue to have, an adverse impact on the efficacy of available vaccines.
It is also still unclear if the vaccines will enable adequate long-term protection, as (i) many vaccinated individuals have become ill due to “breakthrough infections” and have transmitted the virus to many others, (ii) there are millions of individuals who refuse to be vaccinated or who cannot be vaccinated due to pre-existing 40 conditions, (iii) it is unclear how long the vaccine protection will last, and (iv) genetic mutations or variants of the virus already have had, and are expected to continue to have, an adverse impact on the efficacy of available vaccines.
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 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 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 do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic alliance, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may 47 relinquish valuable rights to that product candidate through strategic alliance, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.
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.
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 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.
Therefore, even if we and CSL Seqirus can get through the extremely costly, long and risky process of developing and obtaining regulatory approval to market a vaccine, it may not be commercially successful. This failure could be due to reduced demand for COVID-19 vaccines, lower prices, distribution problems, competitors’ products or many other reasons.
Therefore, even if we and CSL Seqirus can get through the extremely costly, long and risky process of developing and obtaining regulatory approval to market a vaccine globally, it may not be commercially successful. This failure could be due to reduced demand for COVID-19 vaccines, lower prices, distribution problems, competitors’ products or many other reasons.
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.
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.
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.
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.
If the U.S. government decides to 67 exercise these rights, it is not required to engage us as its contractor in connection with doing so. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.
If the U.S. government decides to exercise these rights, it is not required to engage us as its contractor in connection with doing so. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.
Furthermore, if any competitors are successful in producing a more efficacious vaccine or other treatment for COVID-19, or if any competitors are able to manufacture and distribute any such vaccines or treatments with greater efficiency, there may be a diversion of potential governmental and other funding away from us and toward such other parties.
Furthermore, if any competitors are successful in producing a more efficacious vaccine or other treatment for COVID-19, or if any competitors are able 41 to manufacture and distribute any such vaccines or treatments with greater efficiency, there may be a diversion of potential governmental and other funding away from us and toward such other parties.
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.
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, and we could lose trade secrets, the occurrence of which could harm our business.
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.
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.
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.
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.
RISKS RELATED TO THE DEVELOPMENT AND COMMERCIALIZATION OF PRODUCT CANDIDATES 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.
RISKS RELATED TO THE DEVELOPMENT AND COMMERCIALIZATION OF PRODUCT CANDIDATES 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 infectious diseases.
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.
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.
These laws may impact, among other things, our proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by the federal government and by the U.S. states and foreign jurisdictions in which we conduct our business.
These laws may impact, among other things, our proposed sales, marketing and education 57 programs. In addition, we may be subject to patient privacy regulation by the federal government and by the U.S. states and foreign jurisdictions in which we conduct our business.
In particular, we are subject to various risks resulting from inherent unknowns and uncertainties in the drug development process, as well as changing economic, political, industry, regulatory, business and financial conditions. The risks and uncertainties described below are not the only ones we face.
In particular, we are subject to various risks resulting from inherent unknowns and uncertainties in the drug development and commercialization process, as well as changing economic, political, industry, regulatory, business and financial conditions. The risks and uncertainties described below are not the only ones we face.
Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or could allow our competitors to bring products to market before we do, which would impair our ability to successfully commercialize our product candidates.
Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or could allow our competitors to bring products to market 44 before we do, which would impair our ability to successfully commercialize our product candidates.
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 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.
If we fail to obtain any of these licenses at a reasonable cost and on reasonable terms, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly.
If we fail to obtain any of 55 these licenses at a reasonable cost and on reasonable terms, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly.
Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.
Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed 43 their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.
In November 2022, we entered into the CSL Collaboration Agreement with CSL Seqirus, for the research, manufacture and global commercialization of self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases.
In November 2022, we entered into the CSL Collaboration Agreement with CSL Seqirus, for the research, manufacture and global commercialization of self-amplifying mRNA vaccines against COVID-19, influenza and three other infectious diseases.
Government agencies have special contracting authority that gives them the ability to terminate and/or modify their contracts with us. • Our business is subject to audit by the U.S.
Government agencies have special contracting authority that gives them the ability to terminate and/or modify their contracts with us. 35 • Our business is subject to audit by the U.S.
If the prevalence of COVID-19 and public concern about the virus continues to decline, the potential market opportunity will shrink for our COVID-19 vaccine under our collaboration with CSL Seqirus. As further COVID-19 vaccines are approved, production of existing COVID-19 vaccines improves and the COVID-19 impact transitions from pandemic to endemic stage, there may be downward pressure on prices.
If the prevalence of COVID-19 and public concern about the virus continues to decline, the potential market opportunity will shrink for KOSTAIVE under our collaboration with CSL Seqirus. As further COVID-19 vaccines are approved, production of existing COVID-19 vaccines improves and the COVID-19 impact transitions from pandemic to endemic stage, there may be downward pressure on prices.
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 have not 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.
New investors could also be issued securities with rights superior to those of our existing shareholders. On December 23, 2022, we entered into a Controlled Equity Offering℠ Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) and Wells Fargo Securities, LLC (“Wells Fargo”), relating to shares of our common stock.
New investors could also be issued securities with rights superior to those of our existing shareholders. On December 23, 2022, we entered into a Controlled Equity Offering℠ Sales Agreement (as amended, the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) and Wells Fargo Securities, LLC (“Wells Fargo”), relating to shares of our common stock.
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.
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. 65 Item 1B. Unresolve d Staff Comments None.
We expect our research and development expenses to substantially increase in connection with our ongoing activities, particularly as we advance our product candidates towards and through clinical trials. We may need to raise additional capital to support our operations and such funding may not be available to us on acceptable terms, or at all.
We expect our research and development expenses to substantially increase in connection with our ongoing activities, particularly as we advance our product candidates towards and through clinical trials. We expect that we will need to raise additional capital to support our operations and such funding may not be available to us on acceptable terms, or at all.
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.
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; • 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; 63 • 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; • disappointing commercial sales, or profit share or royalty revenue amounts; • 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.
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.
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 2024 we recognized a significant portion of our revenue from non-recurring milestone payments and license revenue under our collaboration agreement with CSL Seqirus.
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.
Although we might 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.
As part of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, management identified a material weakness related to information technology general controls (“ITGCs”) for information systems and applications that are relevant to the preparation of the consolidated financial statements.
As previously reported, as part of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, management identified a material weakness related to information technology general controls (“ITGCs”) for information systems and applications that are relevant to the preparation of the consolidated financial statements.
In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $200,000,000 from time to time through Cantor or Wells Fargo, each acting as our sales agent.
In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $200,000,000 from time to time through Cantor, Wells Fargo, or William Blair, each acting as our sales agent.
All Loans shall bear interest during an Event of Default (as defined in the Credit Agreement) at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default (as defined in the Credit Agreement). As of December 31, 2023, we had no outstanding balance under the Credit Agreement.
All Loans shall bear interest during an Event of Default (as defined in the Credit Agreement) at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default (as defined in the Credit Agreement). As of December 31, 2024, we had no outstanding balance under the Credit Agreement.
Any exercise by the government of any of the foregoing rights could harm our business, financial condition, results of operations and prospects. 68 RISKS RELATED TO OUR BUSINESS OPERATIONS AND INDUSTRY We may need to expand our organization and may experience difficulties in managing this growth, which could disrupt our operations.
Any exercise by the government of any of the foregoing rights could harm our business, financial condition, results of operations and prospects. 56 RISKS RELATED TO OUR BUSINESS OPERATIONS AND INDUSTRY We may need to expand our organization and may experience difficulties in managing this growth, which could disrupt our operations.
If our remediations of these material weaknesses are not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, we may not be able to accurately and timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and the price of our common stock may decline.
If our remediations of this material weakness are not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, we may not be able to accurately and timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and the price of our common stock may decline.
The degree of market acceptance of any product candidates will depend on a number of factors, including: • demonstration of clinical safety and efficacy compared to other products; • the relative convenience, ease of administration and acceptance by physicians, patients and healthcare payors; • the prevalence and severity of any adverse events; • limitations or warnings contained in the FDA-approved label for such products; • availability of alternative treatments; • pricing and cost-effectiveness; • the effectiveness of our, or any of our collaborators’, sales and marketing strategies; • our ability to obtain hospital or payor formulary approval; • our ability to obtain and maintain sufficient coverage from healthcare payors and adequate reimbursement; and • the willingness of patients to pay out-of-pocket in the absence or inadequacy of coverage by healthcare payors.
The degree of market acceptance of any product candidates will depend on a number of factors, including: • demonstration of clinical safety and efficacy compared to other products; • the relative convenience, ease of administration and acceptance by physicians, patients and healthcare payors; • the prevalence and severity of any adverse events; • limitations or warnings contained in the FDA-approved label for such products; • availability of alternative treatments; • pricing and cost-effectiveness; • the commercial packaging and product presentation preferences; • the effectiveness of our, or any of our collaborators’, sales and marketing strategies; • our ability to obtain hospital or payor formulary approval; 48 • our ability to obtain and maintain sufficient coverage from healthcare payors and adequate reimbursement; and • the willingness of patients to pay out-of-pocket in the absence or inadequacy of coverage by healthcare payors.
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.
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. 46 Additional delays may result if an FDA advisory committee recommends restrictions on approval or recommends non-approval.
Government, and a negative audit could adversely affect our business. • We have identified material weaknesses in our internal control over financial reporting, and determined that our disclosure controls and procedures were not effective.
Government, and a negative audit could adversely affect our business. • We have identified a material weakness in our internal control over financial reporting, and determined that our disclosure controls and procedures were not effective.
Even if we complete the necessary preclinical studies and clinical trials, we 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 complete the necessary preclinical studies and clinical trials, we are required to obtain regulatory approval to commercialize a product candidate and we cannot, therefore, predict the timing of any revenue from a future product.
If we cannot successfully defend against product liability claims, we could incur substantial liability and costs.
If we cannot 59 successfully defend against product liability claims, we could incur substantial liability and costs.
If we obtain approval to commercialize any approved products outside of the United States, we expect that we will be subject to additional risks related to entering into international business relationships, including: • different regulatory requirements for drug approvals in foreign countries; • differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls; • reduced protection for intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
As a result, we are and expect that we will be subject to additional risks related to entering into international business relationships, including: • different regulatory requirements for drug approvals in foreign countries; • differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls; • reduced protection for intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; 49 • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
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.
As of December 31, 2024, we had unrestricted cash and cash equivalents of $237.0 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.
Even with the partnering of our COVID-19 program, we are already at a significant competitive disadvantage to those companies with vaccines on the market, as well as many other competitors pursuing vaccine candidates. Many other competitors have significantly greater product candidate development, manufacturing and marketing resources than we do.
Even with the partnering of our COVID-19 program and initial commercialization in Japan, we are already at a significant competitive disadvantage to those companies with vaccines on the market, as well as many other competitors pursuing vaccine candidates. Many other competitors have significantly greater product candidate development, manufacturing and marketing resources than we do.
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.
There is significant competition in the COVID-19 vaccine market, 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.
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.
Our ability to generate revenues from product sales depends heavily on our success in: • the commercialization efforts of our collaboration partner, CSL Seqirus; • completing our research and development of product candidates; • 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.
Exposure to interest rate risk results from our debt obligations, including the credit agreement entered into on April 21, 2023 by our wholly-owned subsidiary, Arcturus Therapeutics, Inc., and Wells Fargo Bank, National Association (the “Credit Agreement”), providing for a revolving credit line evidenced by a revolving line of credit note (the “Note”).
Exposure to interest rate risk results from our debt obligations, including the credit agreement entered into on April 21, 2023 and amended on June 26, 2024 by our wholly-owned subsidiary, Arcturus Therapeutics, Inc., and Wells Fargo Bank, National Association (as amended, the “Credit Agreement”), providing for a revolving credit line evidenced by a revolving line of credit note (the “Note”).
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, 2024, we had approximately 176 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.
Our manufacturing process for our current COVID-19 vaccine candidates include a step for lyophilization to enhance the stability of the vaccine product. The additional step of lyophilization adds time and costs to the overall production output, which could adversely impact the production volumes and profitability of our COVID-19 vaccines if approval to market a vaccine is achieved.
Our manufacturing process for KOSTAIVE includes a step for lyophilization to enhance the stability of the vaccine product. The additional step of lyophilization adds time and costs to the overall production output, which could adversely impact the production volumes and profitability of our COVID-19 vaccines if approval to market a vaccine is achieved.
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.
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, 2024, we had an accumulated deficit of $448.8 million.
Other than the approval of ARCT-154 in Japan, we have no products approved for commercial marketing and all of our product candidates are in preclinical or clinical development.
Other than the approval of KOSTAIVE in Japan and Europe, we have no products approved for commercial marketing and all of our product candidates are in preclinical or clinical development.
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.
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 whether or not permitted under agreement with them, 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; 51 • 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 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.
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.
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; • disagreements with our collaboration partners regarding the satisfaction of milestones; • 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; • 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. 38 Due to these factors and other possible disagreements with our collaboration partners, we may be delayed or prevented from further developing, manufacturing or commercializing our drug products or our product candidates or we may become involved in litigation or arbitration, which would be time consuming and expensive.
Our continued development efforts for our COVID-19 vaccine could face increased research and development costs, including for clinical trials, non-clinical studies and CMC, when updating COVID-19 vaccines containing new variants of concern based on WHO and FDA recommendations.
KOSTAIVE could face increased research and development costs, including for clinical trials, non-clinical studies and CMC, when updating COVID-19 vaccines containing new variants of concern based on WHO and FDA recommendations.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein. For further discussion of the material weaknesses identified and our remedial efforts, see Item 9A. Controls and Procedures.
The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein. For further discussion of the material weakness identified and our remedial efforts, see Item 9A. Controls and Procedures.
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.
With a limited number of patients and limited duration of exposure in such trials, rare and severe side effects of our product candidates may not be uncovered until a significantly larger number of patients are exposed to the product candidate. 45 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.
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.
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 not 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 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 infectious diseases. • KOSTAIVE might not have a profitable commercial market. • KOSTAIVE only has marketing approval in Japan and Europe and may never achieve marketing approval in any other countries. • 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 commercialization of KOSTAIVE in Japan, there might not be meaningful sales in Japan.
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.
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 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.
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 current or 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 or current product candidates that we otherwise would seek to develop or commercialize ourselves.
If we are unable to successfully remediate our existing material weaknesses or any future material weakness or other deficiencies in our internal control over financial reporting: the accuracy and timing of our financial reporting may be adversely affected; our liquidity, our access to capital markets and the perceptions of our creditworthiness; we may be unable to maintain compliance with applicable securities laws, Nasdaq listing requirements, and the covenants under our debt instruments regarding the timely filing of periodic reports; we may be subject to regulatory investigations and penalties; and investors may lose confidence in our financial reporting.
As such, we concluded that our disclosure controls and procedures were not effective as of December 31, 2024. 62 If we are unable to successfully remediate our existing material weakness or any future material weakness or other deficiencies in our internal control over financial reporting: the accuracy and timing of our financial reporting may be adversely affected; our liquidity, our access to capital markets and the perceptions of our creditworthiness; we may be unable to maintain compliance with applicable securities laws, Nasdaq listing requirements, and the covenants under our debt instruments regarding the timely filing of periodic reports; we may be subject to regulatory investigations and penalties; and investors may lose confidence in our financial reporting.
In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. We have identified material weaknesses in our internal control over financial reporting, and determined that our disclosure controls were not effective.
In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. We have identified a material weakness in our internal control over financial reporting, and determined that our disclosure controls were not effective as of December 31, 2023 and December 31, 2024.
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.
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. KOSTAIVE only has marketing approval in Japan and Europe and may never achieve marketing approval in any other countries.
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.
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. KOSTAIVE might not have a profitable commercial market.
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.
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. 52 We rely on outside contractors to produce the supply of our preclinical and clinical product candidates, and we intend to rely on outside contractors to produce future clinical supplies of product candidates and commercial supplies of any approved product candidates.
We evaluate and implement such attributes based on our considerations of regulatory and commercial potential, along with scientific feasibility. There can be no assurance that the format and processes of any of our products is sufficient to achieve regulatory approval for commercialization per planned timelines.
We evaluate and implement the product presentation attributes based on our considerations of regulatory and commercial potential, along with scientific feasibility. There can be no assurance that the product presentation or characteristics of any of our products will be sufficient to achieve regulatory approval or commercialization per planned timelines.
Additional delays may result if an FDA advisory committee recommends restrictions on approval or recommends non-approval. In addition, we or our strategic alliance partners may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process.
In addition, we or our strategic alliance partners may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process.
In addition, companies trading in the stock market in general, and Nasdaq in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
In addition, companies trading in the stock market in general, and Nasdaq in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies, particularly companies in our industry.
In that case, we may not be able to identify and successfully implement an alternative product development strategy. Changes to our drug product format could significantly impact our timeline to commercialize our products. Each of our products, including our COVID-19 vaccine candidates, has a certain drug product format and utilizes certain manufacturing processes.
In that case, we may not be able to identify and successfully implement an alternative product development strategy. Changes to our drug product presentation could significantly impact our timeline to commercialize our products. Each of our products, including KOSTAIVE, has a certain drug product presentation.
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.
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. 50 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.
Sales of a substantial number of shares of our common stock in the public market by our existing shareholders could cause our share price to fall. If our existing shareholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline significantly.
If our existing shareholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline significantly.
There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access.
In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access.
Even if one or more of the product candidates that we independently develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.
Even if our internal product candidates are approved for commercial sale, or KOSTAIVE continues to achieve approvals in more countries, we anticipate incurring significant costs associated with commercializing any approved product. Even if we generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.
We may identify significant impurities, which could result in increased scrutiny by the regulatory agencies, delays in clinical programs and regulatory approval, increases in our operating expenses, or failure to obtain or maintain approval for product candidates or any approved products.
We may identify significant impurities, which could result in increased scrutiny by the regulatory agencies, delays in clinical programs and regulatory approval, increases in our operating expenses, or failure to obtain or maintain approval for product candidates or any approved products. The robustness of our manufacturing supply chain to support commercial distribution has not been meaningfully tested.
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.
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.
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.
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 53 development and would make the success of such programs dependent on our partners’ ability to manufacture timely and properly.
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. 65 If we do not prevail in any challenge to our intellectual property rights, we could be required to cease using the related technology or to license rights to it from the prevailing party.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeReporting to Board of Directors The Executive Director of IT, in his capacity, regularly informs the Chief Financial Officer (CFO) and Chief Legal Officer (CLO) of all aspects related to cybersecurity risks and incidents. This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing us.
Biggest changeReporting to Board of Directors The Vice President of IT and the Director of IT Infrastructure and Security, in their respective capacity, inform the Chief Financial Officer (CFO) and Chief Legal Officer (CLO) of cybersecurity risks and incidents.
Item 1C. Cyber security Risk management and strategy We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. Managing Material Risks & Integrated Overall Risk Management We have implemented tools, processes and strategies to promote a company-wide culture of cybersecurity risk management.
Item 1C. Cyber security Risk management and strategy We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. Managing Material Risks & Integrated Overall Risk Management We have implemented tools and strategies to promote a company-wide culture of cybersecurity risk management.
The Audit Committee is composed of board members with diverse expertise including, risk management, and finance, equipping them to oversee cybersecurity risks effectively.
The Audit Committee is composed of board 66 members with diverse expertise including, risk management, and finance, equipping them to oversee cybersecurity risks effectively.
Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Board, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues. See Item 1A “Risk Factors” – “Risks Related to Business Operations and Industry.”
Furthermore, significant cybersecurity matters, and strategic risk management decisions are required to be escalated to the Board, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues. See Item 1A “Risk Factors” – “Risks Related to Business Operations and Industry.”
Risk Management Personnel Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the Executive Director of IT and the Associate Director of IT Infrastructure and Security. Our IT Leadership team oversees our governance programs, tests our compliance with standards, remediates known risks, stays informed of significant developments in the cybersecurity domain, and leads our employee training program.
Risk Management Personnel Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the Vice President of IT and the Director of IT Infrastructure and Security. Our IT Leadership team oversees our governance programs, tests our compliance with standards, remediates known risks, stays informed of significant developments in the cybersecurity domain, and leads our employee training program.
Monitor Cybersecurity Incidents The Executive Director of IT is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents.
Monitor Cybersecurity Incidents The Vice President of IT is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents.
In the event of a cybersecurity incident, the Executive Director of IT is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
In the event of a cybersecurity incident, the Vice President of IT is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.
In cooperation with the Executive Director of IT, the Associate Director of IT Infrastructure and Security implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities.
In cooperation with the Vice President of IT, the Director of IT Infrastructure and Security implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities.
Risks from Cybersecurity Threats We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing. Governance We have implemented standard operating procedures to define the channels by which cybersecurity threats are communicated to the Company's Board of Directors (the “Board”).
Risks from Cybersecurity Threats We have not encountered cybersecurity challenges that have materially affected or are reasonably likely to materially affect our operations or financial standing. Governance We have implemented standard operating procedures to define the channels by which cybersecurity threats are communicated to the Company's Board of Directors (the “Board”).
This ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our IT Department works closely with our leadership and key operating personnel to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.
This ensures that cybersecurity considerations are an integral part of our decision-making process. Our IT Department works closely with our leadership and key operating personnel to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.
The Audit Committee receives briefings on cybersecurity risks from the Executive Director of IT or the Chief Legal Officer as described below in “Management’s Role Managing Risk.” Management’s Role Managing Risk 78 The Executive Director of IT and the Chief Legal Officer (“CLO”) play a pivotal role in informing the Audit Committee on cybersecurity risks.
The Audit Committee receives briefings on cybersecurity risks from the Vice President of IT or the Chief Legal Officer as described below in “Management’s Role Managing Risk.” Management’s Role Managing Risk The Vice President of IT, Chief Legal Officer (“CLO”) and the Director of IT Infrastructure and Security, play a pivotal role in informing the Audit Committee on cybersecurity risks.
Oversee Third-party Risk Because we are aware of the risks associated with third-party service providers, we conduct thorough security assessments of all third-party providers before engagement to ensure compliance with industry cybersecurity standards and frameworks. This includes assessments performed by our Executive Director of IT, who oversees the Company's cybersecurity function.
Oversee Third-party Risk Because we are aware of the risks associated with third-party service providers, we conduct thorough security assessments of all determined high-risk third-party providers as deemed necessary, before engagement to ensure compliance with industry cybersecurity standards and frameworks. This includes assessments performed by our Vice President of IT, who oversees the Company's cybersecurity function.
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Our information security function and our Vice President of Information Technology help identify, assess and manage the Company’s cybersecurity threats and risks.
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This group works to identify and assess risks from cybersecurity threats by monitoring and evaluating our threat environment and the Company’s risk profile using various methods in certain contexts, including, for example, manual tools, subscribing to reports and services that identify cybersecurity threats, analyzing reports of threat actors, conducting scans of certain environments, evaluating certain threats reported to us, conducting threat and vulnerability assessments, using external intelligence feeds, and using third parties to conduct tabletop incident response exercises and other tests.
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Depending on the environment, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our information systems and data, including, for example: incident detection and response, disaster recovery/business continuity policies, encryption of certain data, network security controls and data segmentation for certain systems, access controls, physical security, asset management and tracking, systems monitoring, annual mandated employee training, penetration testing, cybersecurity insurance, and dedicated cybersecurity staff.
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The current Vice President of IT, who is responsible for assessment and management of cybersecurity risks, has over 20 years of experience in information and technology security, including senior roles at several companies in the pharmaceutical industry, and possesses the requisite education, skills, experience, and industry certifications expected of an individual assigned to these duties .

Item 2. Properties

Properties — owned and leased real estate

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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.
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 2027.
We believe that our properties are suitable for the conduct of our business.
We believe that our properties are suitable for the conduct of our business. 67
On September 29, 2021, we entered into a lease agreement for office, research and development, engineering and laboratory space located at 10285 Science Center Drive, San Diego, California. The additional space of approximately 43,234 square feet is leased for a term of 10 years and 8 months. The leased premises will serve as an addition to Arcturus’ existing properties.
On September 29, 2021, we entered into a lease agreement for office, research and development, engineering and laboratory space located at 10285 Science Center Drive, San Diego, California. The additional space of approximately 43,234 square feet is leased for a term of 10 years and 8 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 material 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.
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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 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.
Biggest changeItem 4. Mine Safety Disclosures 68 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 68 Item 6. Reserved 69 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 70 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 78 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities 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.
Biggest changeThe graph is based on the assumption that $100 had been invested in Company common stock. 68 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.
Item 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.
Item 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 3, 2025, there were nine registered holders of record of 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.
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.
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.
Stock Performance Graph The following graph compares the Company’s cumulative stockholder return since December 31, 2019 with the Nasdaq Composite Index, and the Nasdaq Biotechnology Index.
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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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Because many of our outstanding shares are held in accounts with brokers and other institutions, the number of beneficial owners is significantly greater than the number of record holders. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeOur 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. 73 The following table shows a summary of our cash flows for the years ended December 31, 2024 and 2023: Year Ended December 31, (in thousands) 2024 2023 Cash provided by (used in): Operating activities $ (59,747 ) $ (18,099 ) Investing activities (648 ) (2,901 ) Financing activities 5,418 (24,087 ) Net decrease in cash and restricted cash $ (54,977 ) $ (45,087 ) Operating Activities Net cash used in operating activities was $59.7 million for the year ended December 31, 2024, compared to $18.1 million for the year ended December 31, 2023.
We generally recognize as license revenue the total amount of the transaction price we determine to be the allocated to the performance obligation based upon the relative stand-alone selling price of a license when we deliver the license to our partner.
We generally recognize as license revenue the total amount of the transaction price we determine to be allocated to the performance obligation based upon the relative stand-alone selling price of a license when we deliver the license to our partner.
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.
Department of Health and Human Services (“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.
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.
CSL Seqirus received exclusive global rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other 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.
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.
The original 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.
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.
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.
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.
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.
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.
General Financial Resources A portion of our current cash balance is expected to be utilized during fiscal year 2025 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.
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.
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 Loan), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York.
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”).
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 (as amended, the “Wells Fargo Loan”) with each Wells Fargo Loan evidenced by a revolving line of credit note (each, a “Note”).
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.
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.” 77 Research and Development Expenses, Including Clinical Trial Accruals/Expenses Research and development costs consist of salaries and benefits, including share-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.
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.
There is no penalty for terminating the facility prior to the maturity date of the Wells Fargo Loan. 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.
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.
Collaboration and License Agreement In 2022, 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.
The research and development revenue we recognize each period is comprised of several types of revenue, including license fees, amortization from upfront payments, milestone payments, option exclusivity fees and other services. Each of these types of revenue require us to make various judgments and estimates.
The revenue we recognize each period is comprised of several types of revenue, including license fees, amortization from upfront payments, milestone payments, research and development and other services. Each of these types of revenue require us to make various judgments and estimates.
Our collaboration agreements typically contain promised goods and services, including technology licenses or options to obtain technology licenses, research and development and regulatory services. Upon entering into a collaboration agreement, we are required to make the following judgments: Identifying the performance obligations contained in the agreement Our assessment of what constitutes a separate performance obligation requires us to apply judgment.
Our collaboration agreements typically contain promised goods and services, including technology licenses or options to obtain technology licenses, research and development and regulatory services. Upon entering into a collaboration agreement, we are required to make the following judgments: 76 Identifying the performance obligations and measuring progress Our assessment of what constitutes a separate performance obligation requires us to apply judgment.
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.
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 $52.8 million and $52.9 million for the years ended December 31, 2024 and 2023, respectively.
Early-stage programs represent programs that are in the pre-clinical or Phase 1 clinical stage and may be partnered or unpartnered, including the LUNAR-CF and LUNAR-FLU programs. Discovery technologies represent our efforts to expand our product pipeline and are primarily related to pre-partnered studies and new capabilities assessment.
Early-stage programs represent programs that are in the pre-clinical or Phase 1 clinical stage and may be partnered or unpartnered, and primarily includes the LUNAR-FLU program which is partnered with CSL Seqirus. Discovery technologies represent our efforts to expand our product pipeline and are primarily related to pre-partnered studies and new capabilities assessment.
Our ability to transition to profitability is dependent on executing on milestones within the CSL Collaboration Agreement and identifying and developing successful mRNA drug and vaccine candidates.
Our ability to transition to profitability is dependent on regulatory approvals and subsequent sales of KOSTAIVE, executing on milestones within the CSL Collaboration Agreement and identifying and developing other successful mRNA drug and vaccine candidates.
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.
A few of our programs are part of our collaborative relationships. The related expenses may be partially offset with funds that have been reimbursed or awarded to the Company and consist of external manufacturing costs, lab supplies, equipment, and consulting and professional fees.
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.
During fiscal year 2024, we received milestone payments totaling $96.0 million from CSL Seqirus. We expect to receive future payments from CSL Seqirus primarily by meeting future milestones related to the CSL Collaboration Agreement. At December 31, 2024, the Company’s balance of cash and cash equivalents, including restricted cash, was $293.9 million. CSL Seqirus, Inc.
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.
Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing shareholders. 72 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.
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.
The decrease was primarily offset by an increase in the revenue of $4.8 million related to the increase in reimbursable research and development expenses for the grant agreement with BARDA. Operating Expenses Our operating expenses consist of research and development and general and administrative expenses.
Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues.
Our proprietary LNP delivery system, LUNAR® (“LUNAR”), is intended to address the major hurdle in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues. LUNAR may enable multiple nucleic acid medicines.
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.
As of December 31, 2024, we had an accumulated deficit of $448.8 million. Liquidity and Capital Resources From the Company’s inception through the year ended December 31, 2024, 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.
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.
There can be no assurance that we will be able to obtain additional needed financing on acceptable terms or at all.
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.
The following table summarizes our total revenues for the periods indicated: Years Ended December 31, Change 2024 vs 2023 (in thousands) 2024 2023 Change % Collaboration revenue $ 138,389 $ 157,748 $ (19,359 ) -12 % Grant revenue 13,921 9,051 4,870 54 % Total $ 152,310 $ 166,799 $ (14,489 ) -9 % Revenue decreased by $14.5 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
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 overall increase was offset by decreased manufacturing-related expenses due to lower costs associated with drug product supply agreements related to the LUNAR-COVID program during the year ended December 31, 2024. 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.
It provides for reimbursement by BARDA of our permitted costs up to $63.2 million.
It provides for reimbursement by BARDA of our permitted costs up to $63.2 million. As of December 31, 2024, the remaining available funding net of revenue earned was $40.0 million.
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.
Finance income (expense), net Years Ended December 31, Change 2024 vs 2023 (in thousands) 2024 2023 Change % Interest income $ 15,195 $ 17,359 $ (2,164 ) -12 % Interest expense - (768 ) 768 -100 % Total $ 15,195 $ 16,591 $ (1,396 ) -8 % Interest income is generated on cash and cash equivalents.
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.
Years Ended December 31, Change 2024 vs 2023 (in thousands) 2024 2023 Change % Operating expenses: Research and development, net $ 195,156 $ 192,133 $ 3,023 2 % General and administrative 52,823 52,871 (48 ) 0 % Total $ 247,979 $ 245,004 $ 2,975 1 % The following table presents our total research and development expenses by category: Research and Development Expenses, net Year Ended December 31, Change 2024 vs 2023 (in thousands) 2024 2023 Change % LUNAR-COVID $ 70,464 $ 81,262 $ (10,798 ) -13 % LUNAR-OTC 9,509 9,315 194 2 % BARDA 7,807 5,465 2,342 43 % LUNAR-CF, net 17,227 14,666 2,561 17 % Early-stage programs 16,096 12,460 3,636 29 % Discovery technologies 6,278 6,405 (127 ) -2 % Payroll and benefits 57,474 50,924 6,550 13 % Facilities and equipment 10,301 11,636 (1,335 ) -11 % Total research and development expenses, net $ 195,156 $ 192,133 $ 3,023 2 % 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.
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.
The decrease in interest income from 2023 to 2024 was the result of lower interest rates during the year ended 2024 and a decrease in cash and cash equivalents. Interest expense decreased during the year ended 2024 as compared to the year ended 2023 as no interest expense has been incurred since to the first quarter of 2023.
We do not typically include any payments we may receive in the future in our initial transaction price since the payments are typically not probable because they are contingent upon certain future events.
Determining the transaction price, including any variable consideration To determine the transaction price, we review the amount of consideration we are eligible to earn under the agreement. We apply a constraint to any payments we may receive in the future to avoid significant reversals since the payments are typically not probable because they are contingent upon certain future events.
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.
Overview We are a messenger RNA medicines company focused on the development of infectious disease vaccines and opportunities within liver and respiratory rare diseases. We developed the world’s first approved self-amplifying messenger RNA (sa-mRNA) vaccine, KOSTAIVE® (“KOSTAIVE”). KOSTAIVE achieved approval in Japan in 2023 as a vaccine against COVID-19.
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.
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. Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we achieve sustainable revenues and profit from operations.
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.
Sales of KOSTAIVE began in Japan in October 2024, marking our transition to a commercial stage company. We have several key platform technologies that we leverage to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and for rare genetic disorders with significant unmet medical needs.
(“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.
(“CSL Seqirus”), a part of CSL Limited and one of the world’s leading influenza vaccine providers, on the development and commercialization of mRNA vaccines for COVID-19, influenza and certain other infectious diseases. We made significant progress in 2024.
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.
Investing Activities Net cash used in investing activities of $0.6 million in 2024 and $2.9 million in 2023 reflected the acquisition of property and equipment. Financing Activities Net cash provided by financing activities was $5.4 million for the year ended December 31, 2024, compared to a net cash outflow of $24.1 million in 2023 ,representing a $29.5 million increase.
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.
These costs decreased during 2024 as compared to 2023 as we downsized from three to two facilities. Facilities and equipment expenses are not expected to increase during the next twelve months.
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.
Although such expenses increased during 2024 as compared to 2023, we expect that they will not increase over the next twelve months due to reduced share-based compensation. 75 Facilities and equipment expenses include rent, common area maintenance (“CAM”) costs, depreciation, shipping costs and various other costs related to the operation of our two office and laboratory locations.
Specifically, we are required to identify which goods and services we are required to provide under the contract are distinct, if any. Determining the transaction price, including any variable consideration To determine the transaction price, we review the amount of consideration we are eligible to earn under the agreement.
Specifically, we are required to identify which goods and services we are required to provide under the contract are distinct, if any. For performance obligations that are satisfied over time, we typically use the percentage-of-completion method which requires us to estimate the total forecasted costs required to complete the performance obligation.
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 remaining decrease is primarily due to a decrease of $1.8 million related to the completion of the amortization of the upfront payment during 2023 from the 2015 Research Collaboration and License Agreement with Ultragenyx 74 Pharmaceuticals, Inc., as well as $0.7 million less revenue in 2024 due the termination of the 2017 Research Collaboration and License Agreement with Janssen Pharmaceuticals, Inc.
The net change in assets and liabilities was primarily due to a decrease in deferred revenue of $14.7 million, a decrease in lease liabilities of $4.5 million, and increase in prepaid and other current assets of $3.6 million and a decrease in accounts payable of $3.1 million, partially offset by an increase in accrued liabilities of $9.4 million, a decrease in right-of-use assets of $3.3 million and a decrease in accounts receivable of $0.6 million.
These impacts were partially offset by a $57.4 million improvement in accounts receivable, as payments from CSL and BARDA were received in 2024 and a $6.5 million increase in accrued liabilities, primarily due to the timing of bonus accruals.
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.
Research and development expenses were $195.2 million for the year ended December 31, 2024, compared with $192.1 million for the year ended December 31, 2023, primarily reflecting increased payroll and benefits costs due to share-based compensation expense, progress within our BARDA, LUNAR-CF, and LUNAR-FLU programs, and clinical trial costs for the LUNAR-COVID program.
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In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR ® , has the potential to enable multiple nucleic acid medicines, and our proprietary self-amplifying mRNA technology (Self-Transcribing and Replicating RNA, or STARR ® , technology) has the potential to provide longer-lasting RNA and sustained protein expression at lower dose levels as compared to conventional mRNA .
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Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found within Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.
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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.
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Current mRNA medicines have two critical components: the messenger RNA (“mRNA”) constructs and the lipid nanoparticles (“LNP”) which help deliver the mRNA to disease-relevant target tissues. We believe we are among the world leaders in both areas.
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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.
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We have extensive expertise in the design and optimization of mRNA constructs, including with respect to a type of mRNA technology known as self-amplifying mRNA (sa-mRNA). Our proprietary self-amplifying mRNA technology platform, or STARR® (“STARR”), has been demonstrated to induce a longer-lasting and broader humoral immune response at lower dose levels than conventional mRNA-based vaccines.
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In November 2022, we entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc.
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The approval of KOSTAIVE in Japan was a significant milestone which validates our LUNAR and STARR platforms, as well as sa-mRNA more generally as a meaningful modality. Finally, we have significant expertise and valuable know-how in the development and scalability of complex and robust manufacturing processes required to deliver the next generation of nucleic acid medicines.
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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.
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Our internal pipeline includes RNA therapeutic candidates to potentially treat ornithine transcarbamylase (OTC) deficiency and cystic fibrosis (CF), both rare diseases. In our vaccine program, we have partnered with Seqirus, Inc.
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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.
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Commercial sales of KOSTAIVE began in October 2024 in Japan by Meiji Seika Pharma (“Meiji”), CSL Seqirus’ exclusive partner in Japan, marking the first commercial sales of an Arcturus-developed product. In February 2025, we received approval of KOSTAIVE from the European Commission (EC), which provided further validation of our platform by another significant regulatory authority.
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(“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.
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KOSTAIVE is the brand name approved in Japan and Europe for ARCT-154, which is the version of the sa-mRNA COVID vaccine encoding the ancestral strain of SARS-CoV-2, and also for updated variant-specific versions of this vaccine. We may use KOSTAIVE or the specific internally generated name, such as ARCT-154, ARCT-2301 and ARCT-2303, to identify a version of the vaccine.
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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).
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We initiated dosing in a Phase 1 clinical trial of a novel seasonal influenza sa-mRNA vaccine candidate under our collaboration with CSL Seqirus in January 2024. In December 2024, we initiated dosing of an sa-mRNA vaccine candidate against pandemic avian influenza (bird flu) in a Phase 1 trial funded by the Biomedical Advanced Research and Development Authority (“BARDA”).
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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®.
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In our OTC program, we completed dosing of eight subjects in August 2024 in a Phase 2 double-blind multiple-dose study of ARCT-810. In the second quarter of 2024, we expanded the Phase 2 clinical program of ARCT-810 with an open-label, multiple-dose study which initiated dosing in December 2024.
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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.
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ARCT-810 has 70 received Orphan Drug Designation from the FDA and Orphan Medicinal Product Designation from the European Medicines Agency (the “EMA”) for treatment of OTC deficiency, as well as Fast Track Designation and Rare Pediatric Disease Designation from the FDA.
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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.
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In our CF program, we initiated dosing in December 2024 in a Phase 2 multiple ascending dose study of ARCT-032 designed to identify a safe and effective dose in people with Class I (null) CFTR mutations and other CF patients who do not benefit from CFTR modulators.
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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.
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In July 2024, we completed dosing and follow-up visits for seven participants in a safety and tolerability Phase 1b clinical study in New Zealand of ARCT-032 in adults with CF. ARCT-032 has received Orphan Drug Designation by the FDA and Orphan Medicinal Product Designation by the EMA for the treatment of CF, and Rare Pediatric Disease Designation from the FDA.
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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.
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We also improved our platform technologies and advanced our early-stage research activities and manufacturing process development and operations. We conducted exploratory platform development activities, including the evaluation of genome editing, and new targeting approaches, where our LUNAR and STARR platforms could potentially be useful for identification and development of additional products for our portfolio.
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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.
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Also, with our sourcing partners, we manufactured cGMP (current good manufacturing practices) batches yielding significant quantities of clinical trial materials for global studies of our candidates, and with our collaborator, CSL Seqirus, we have established commercial production processes for the COVID-19 vaccine program.
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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.
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On June 26, 2024, the parties entered into 71 Amendment No. 1 to the Wells Fargo Loan, whereby the term was extended by one year to April 2026. As of December 31, 2024, no borrowings were made against the Wells Fargo Loan.
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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.
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If 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.
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These increases in expenses resulted primarily from increased personnel expenses due to increased headcount and salaries, increased travel and consulting expenses as well as increased rent expense 87 associated with the new facility. We expect that general and administrative expenses will remain consistent during the next twelve months.
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The $41.6 million increase in cash used was primarily driven by a $93.8 million year-over-year impact from deferred revenue, as 2023 benefited from a $38.6 million deferred revenue inflow, while 2024 saw a $55.2 million outflow due to revenue recognition exceeding new milestone payments under the CSL collaboration agreement.
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The increase in interest income from 2022 to 2023 was the result of higher interest rates during the year ended 2023 and an increase in cash due to large amounts received under the CSL Seqirus agreement during the fourth quarter of 2022.
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Additionally, the increase in cash outflows was due to a higher net loss and the absence of a $34.0 million debt extinguishment gain recognized in 2023.
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Critical Accounting Policies and Estimates We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). As such, we make certain estimates, judgments and assumptions that we believe are reasonable, based upon information available to us.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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We do not have any foreign currency or other derivative financial instruments.
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We do not hold a material balance in foreign currencies or engage in derivative financial instruments that could materially impact our financial position. 78

Other ARCT 10-K year-over-year comparisons