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

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

+614 added−582 removedSource: 10-K (2024-03-25) vs 10-K (2023-03-23)

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

614 paragraphs added · 582 removed · 457 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

142 edited+33 added−34 removed283 unchanged
Biggest changeAmong the Affordable Care Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following: ▪ an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; ▪ an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or AMP; ▪ a Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; ▪ extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; ▪ expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; ▪ expansion of the entities eligible for discounts under the 340B Drug Discount Program; 36 ▪ a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; ▪ expansion of healthcare fraud and abuse laws, including the FCA and the federal Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance; ▪ a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; ▪ requirements to report certain financial arrangements with physicians and teaching hospitals; ▪ a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians; ▪ establishment of a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare & Medicaid spending; and ▪ a licensure framework for follow on biologic products.
Biggest changeFor example, the Affordable Care Act: increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; required collection of rebates for drugs paid by Medicaid-managed care organizations; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs; implemented a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; expanded eligibility criteria for Medicaid programs; created a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare and Medicaid Innovation at CMS, or CMMI, to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following: ▪ completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices, or GLP, regulations; ▪ submission to the FDA of an IND, which must become effective before clinical studies may begin and must be updated annually or when significant changes are made; ▪ approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before the study is commenced; ▪ performance of adequate and well-controlled human clinical studies to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose; ▪ preparation of and submission to the FDA of a biologics license application, or BLA, for product candidates that are manufactured in biological systems like itolizumab (EQ001), or a New Drug Application, or NDA, for product candidates like EQ101 or EQ102 that are manufactured through chemical synthesis, after completion of all pivotal clinical studies that includes substantial evidence of safety, purity and potency from results of nonclinical testing and clinical studies; ▪ a determination by the FDA within 60 days of its receipt of a BLA or NDA to file the application for review; ▪ satisfactory completion of an FDA Advisory Committee review, if applicable; ▪ satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with current good manufacturing practice, or cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices, or GCP; and ▪ FDA review and approval, or licensure, of the BLA or NDA to permit commercial marketing of the product for particular indications for use in the United States.
The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following: ▪ completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices, or GLP, regulations; ▪ submission to the FDA of an IND, which must become effective before clinical studies may begin and must be updated annually or when significant changes are made; ▪ approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before the study is commenced; ▪ performance of adequate and well-controlled human clinical studies to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose; ▪ preparation of and submission to the FDA of a biologics license application, or BLA, for product candidates that are manufactured in biological systems like itolizumab (EQ001), or a New Drug Application, or NDA, for product candidates like EQ101 or EQ302 that are manufactured through chemical synthesis, after completion of all pivotal clinical studies that includes substantial evidence of safety, purity and potency from results of nonclinical testing and clinical studies; ▪ a determination by the FDA within 60 days of its receipt of a BLA or NDA to file the application for review; ▪ satisfactory completion of an FDA Advisory Committee review, if applicable; ▪ satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with current good manufacturing practice, or cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices, or GCP; and ▪ FDA review and approval, or licensure, of the BLA or NDA to permit commercial marketing of the product for particular indications for use in the United States.
Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, 28 which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical study if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.
Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical study if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.
It selectively blocks those three key pathogenic cytokines while preserving non-pathogenic signaling related to the other g C cytokine family members, IL-4, IL-7 and IL-21 ( Figure 2). EQ101 has demonstrated clinical proof-of-concept as a novel tri-specific cytokine inhibitor through a completed Phase 1/2 clinical study in cutaneous T cell lymphoma, or CTCL, a 9 dermato-oncology indication.
It selectively blocks those three key pathogenic cytokines while preserving non-pathogenic signaling related to the other g C cytokine family members, IL-4, IL-7 and IL-21 ( Figure 2). EQ101 has demonstrated clinical proof-of-concept as a novel tri-specific cytokine inhibitor through a completed Phase 1/2 clinical study in cutaneous T cell lymphoma, or CTCL, a dermato-oncology indication.
Government Regulation and Product Approval The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing.
Government Regulation and Product Approval The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, 26 effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing.
If granted, any patents that issue from this PCT application are expected to expire in 2041, absent any patent term adjustments or extensions. We also co-own one pending patent application family with the University of Houston System, which relates to diagnostic methods for using itolizumab to treat LN and is pending in the United States, Australia, Canada, and New Zealand.
If granted, any patents that issue from this patent family are expected to expire in 2041, absent any patent term adjustments or extensions. We also co-own one pending patent application family with the University of Houston System, which relates to diagnostic methods for using itolizumab to treat LN and is pending in the United States, Australia, Canada, and New Zealand.
While these therapies have improved 5-year survival for LN patients, as many as 50-75% of patients are refractory to treatment and those that respond will likely relapse within five years. In those patients who are refractory or relapse after initial treatment with induction therapy, there is no consensus or strong evidence to support what treatments may be effective.
While these therapies have improved 5-year survival for LN patients, as many as 50-75% of patients are refractory to treatment and those that respond will likely relapse within five years. In those patients who are refractory or relapse after 19 initial treatment with induction therapy, there is no consensus or strong evidence to support what treatments may be effective.
Further complicating the gluten-free treatment strategy, 5% of adult patients 16 can develop a refractory form of celiac disease, characterized by severe villous atrophy and the presence of abnormal intraepithelial lymphocytes, or IELs, which is considered the early stages of enteropathy associated T cell lymphoma, a potentially lethal condition not confined to intestinal epithelia.
Further complicating the gluten-free treatment strategy, 5% of adult patients can develop a refractory form of celiac disease, characterized by severe villous atrophy and the presence of abnormal intraepithelial lymphocytes, or IELs, which is considered the early stages of enteropathy associated T cell lymphoma, a potentially lethal condition not confined to intestinal epithelia.
We are also required to pay royalties on tiers of aggregate annual net sales of Biocon Products by us, our affiliates and our sublicensees in the United States and Canada at percentages from the mid-single digits to sub-teen double digits and on tiers of aggregate annual net sales of Biocon Products by us and our affiliates (but not our sublicensees) in Australia and New Zealand, in each case, subject to adjustments in certain circumstances.
We are also required to pay royalties on tiers of aggregate annual net sales of Biocon Products by us, our affiliates and our sublicensees in the United States and Canada at 8 percentages from the mid-single digits to sub-teen double digits and on tiers of aggregate annual net sales of Biocon Products by us and our affiliates (but not our sublicensees) in Australia and New Zealand, in each case, subject to adjustments in certain circumstances.
Failure to report accurately could result in penalties. In addition, many states also govern the reporting of payments or other transfers of value, many of which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.
Failure to report timely and accurately could result in penalties. In addition, many states also govern the reporting of payments or other transfers of value, many of which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.
In November 2019, OFAC notified us that after careful consideration, which included consultation with the FDA, OFAC determined that itolizumab falls within the definition of “Cuban-origin pharmaceutical” and, as such, the general licenses at section 515.547(b) and (c) of the CACR authorize the conduct of clinical studies for itolizumab for the purpose of seeking 38 approval for the drug from the FDA.
In November 2019, OFAC notified us that after careful consideration, which included consultation with the FDA, OFAC determined that itolizumab falls within the definition of “Cuban-origin pharmaceutical” and, as such, the general licenses at section 515.547(b) and (c) of the CACR authorize the conduct of clinical studies for itolizumab for the purpose of seeking approval for the drug from the FDA.
Four escalating dose levels of 0.5 mg/kg, 1.0 mg/kg, 2.0 mg/kg and 4.0 mg/kg were administered weekly by IV infusion for up to 74 weeks. The study found that EQ101 was well-tolerated, with no DLTs, no infusion reactions, and no deaths, and only one subject discontinued participation due to an adverse event.
Four escalating 11 dose levels of 0.5 mg/kg, 1.0 mg/kg, 2.0 mg/kg and 4.0 mg/kg were administered weekly by IV infusion for up to 74 weeks. The study found that EQ101 was well-tolerated, with no DLTs, no infusion reactions, and no deaths, and only one subject discontinued participation due to an adverse event.
Bioniz also evaluated EQ101 in an open-label Phase 1/2 dose-ranging clinical study of patients with large granular lymphocyte leukemia, or LGLL, or refractory cutaneous T cell lymphoma, or rCTCL, to characterize the safety, tolerability, clinical efficacy, and PK/PD of EQ101. The study enrolled 50 subjects, 30 with refractory CTCL and 20 with LGLL.
Bioniz also evaluated EQ101 in an open-label Phase 1/2 dose-ranging clinical study of patients with large granular lymphocyte leukemia, or LGLL, or refractory cutaneous T cell lymphoma, or rCTCL, to characterize the safety, tolerability, clinical efficacy, and PK/PD of EQ101. The study enrolled 50 subjects, 30 with rCTCL and 20 with LGLL.
In addition, the pathologic activation by IL-9 of mast cells that produce and secrete Th2 cytokines (IL-5, IL-6 and IL-13) and TGF and facilitate antigen presentation of the hair follicle to these cytotoxic T cells has been implicated in AA. Several clinical studies have been conducted with JAK inhibitors for the treatment of AA.
In addition, the pathologic activation by IL-9 of mast cells that produce and secrete Th2 cytokines (IL-5, IL-6 and IL-13) and TGF b and facilitate antigen presentation of the hair follicle to these cytotoxic T cells has been implicated in AA. Several clinical studies have been conducted with JAK inhibitors for the treatment of AA.
We believe itolizumab (EQ001) has the potential to be a best-in-class treatment for aGVHD based on its ability to target the underlying biology of GVHD in a highly selective way. Further, this approach is also promising as we consider future development in the prevention of GVHD and the treatment of chronic GVHD, or cGVHD.
We believe itolizumab (EQ001) has the potential to be a best-in-class treatment for aGVHD based on its ability to target the underlying biology of GVHD in a 17 highly selective way. Further, this approach is also promising as we consider future development in the prevention of GVHD and the treatment of chronic GVHD, or cGVHD.
During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical studies to demonstrate the safety, purity and potency of its product.
During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a 31 full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical studies to demonstrate the safety, purity and potency of its product.
The BPCIA also created certain 32 exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law. The BPCIA is complex and continues to be interpreted and implemented by the FDA.
The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law. The BPCIA is complex and continues to be interpreted and implemented by the FDA.
We believe co-stimulatory checkpoints are attractive drug targets for the treatment of immuno-inflammatory diseases, and more recently they have become a focus of development in immuno-inflammation. 12 CD6 is a co-stimulatory receptor that plays an integral role in modulating T cell activation, proliferation, differentiation and trafficking.
We believe co-stimulatory checkpoints are attractive drug targets for the treatment of immuno-inflammatory diseases, and more recently they have become a focus of development in immuno-inflammation. CD6 is a co-stimulatory receptor that plays an integral role in modulating T cell activation, proliferation, differentiation and trafficking.
The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
The FCPA also obligates companies whose securities are listed in the United States to comply with 36 accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application related to the patent. A U.S. patent also may be afforded a patent term adjustment, or PTA, under certain circumstances to compensate for delays in obtaining the patent from the USPTO.
In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application related to the patent. A U.S. patent also may be afforded a patent term adjustment, or PTA, under certain circumstances to 24 compensate for delays in obtaining the patent from the USPTO.
At the end of the period of 2 1/2 years from the first priority date of the patent application, separate patent applications can be pursued in any of the PCT member states either by direct national filing or, in some cases by filing through a regional patent organization, such as the European Patent Organization.
At the end of the period of 2½ years from the first priority date of the patent application, separate patent applications can be pursued in any of the PCT member states either by direct national filing or, in some cases by filing through a regional patent organization, such as the European Patent Organization.
Other potential consequences include, among other things: ▪ restrictions on the marketing or manufacturing of a product, mandated modification of promotional materials or issuance of corrective information, issuance by FDA or other regulatory authorities of safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product, or complete withdrawal of the product from the market or product recalls; ▪ fines, warning or untitled letters or holds on post-approval clinical studies; 31 ▪ refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals; ▪ product seizure or detention, or refusal of the FDA to permit the import or export of products; or ▪ injunctions, consent decrees or the imposition of civil or criminal penalties.
Other potential consequences include, among other things: ▪ restrictions on the marketing or manufacturing of a product, mandated modification of promotional materials or issuance of corrective information, issuance by FDA or other regulatory authorities of safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product, or complete withdrawal of the product from the market or product recalls; 30 ▪ fines, warning or untitled letters or holds on post-approval clinical studies; ▪ refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals; ▪ product seizure or detention, or refusal of the FDA to permit the import or export of products; or ▪ injunctions, consent decrees or the imposition of civil or criminal penalties.
A total of 43 healthy 11 subjects received at least 1 dose of EQ101 in each of the two studies. EQ101 was considered well-tolerated with no deaths, serious or severe treatment-emergent adverse events, infusion reactions or dose-limiting toxicities, or DLTs.
A total of 43 healthy subjects received at least 1 dose of EQ101 in each of the two studies. EQ101 was considered well-tolerated with no deaths, serious or severe treatment-emergent adverse events, infusion reactions or dose-limiting toxicities, or DLTs.
We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the 27 governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.
We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.
Regulatory authorities, the IRB or the sponsor may suspend a clinical study at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the study is unlikely to meet its stated objectives.
Regulatory authorities, the IRB or the sponsor 27 may suspend a clinical study at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the study is unlikely to meet its stated objectives.
We cannot be sure that reimbursement will be available for any product that we commercialize and, if coverage and reimbursement are available, what the level of reimbursement will be. Coverage may also be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities.
We cannot be sure that coverage will be available for any product that we commercialize and, if coverage is available, what the level of reimbursement will be. Coverage may also be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities.
The completed Type A portion was a MAD study involving 35 SLE patients to evaluate the safety, tolerability, PK, PD, and clinical activity of SC doses of itolizumab (EQ001) ranging from 0.4 mg/kg to 3.2 mg/kg Q2W.
The Type A portion was a MAD study involving 35 SLE patients to evaluate the safety, tolerability, PK, PD, and clinical activity of SC doses of itolizumab (EQ001) ranging from 0.4 mg/kg to 3.2 mg/kg Q2W.
This family includes three issued U.S. patents, two issued Australian patents, 24 patents in European states, one issued Hong Kong patent, one issued Japanese patent, and one issued Korean patent. Also pending are applications in the United States, Australia, Canada, China, Europe, Hong Kong, India Japan, and Korea.
This family includes three issued U.S. patents, two issued Australian patents, 24 patents in European states, one issued Hong Kong patent, one issued Japanese patent, one issued Indian patent, and one issued Korean patent. Also pending are applications in the United States, Australia, Canada, China, Europe, Hong Kong, India Japan, and Korea.
As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit.
As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical 29 benefit.
Should Ono exercise its Option to acquire our rights to 8 itolizumab (EQ001), the aforementioned milestone payments and royalties potentially owed to Biocon would become Ono’s responsibility, and the potential royalties on sales of itolizumab (EQ001) outside of the Equillium Territory would become Ono’s right.
Should Ono exercise its Option to acquire our rights to itolizumab (EQ001), the aforementioned milestone payments and royalties potentially owed to Biocon would become Ono’s responsibility, and the potential royalties on sales of itolizumab (EQ001) outside of the Equillium Territory would become Ono’s right.
The high degree of selectivity for IL-15 and IL-21 inhibition aligns well with the demonstrated key involvement of these two cytokines that work synergistically in driving the pathology in celiac disease and other inflammatory gut and hepatic disorders. 10 Figure 3: EQ102 inhibits IL-15 and IL-21, but not IL-2, IL-4, IL-7, and IL-9 EQ101 & EQ102 Product Development EQ101 EQ101 is a synthetic peptide covalently conjugated to a polyethylene glycol, or PEG, molecule in a site-specific manner.
The high degree of selectivity for IL-15 and IL-21 inhibition aligns well with the demonstrated key involvement of these two cytokines that work synergistically in driving the pathology in celiac disease and other inflammatory gut and hepatic disorders. 10 Figure 3: EQ302 inhibits IL-15 and IL-21, but not IL-2, IL-4, IL-7 or IL-9 EQ101 & EQ302 Product Development EQ101 EQ101 is a synthetic peptide covalently conjugated to a polyethylene glycol, or PEG, molecule in a site-specific manner.
There are currently two approved therapies for the treatment of LN. One is GlaxoSmithKline’s Benlysta, approved in 2020, and the other is Lupkynis (voclosporin), which was approved in January 2021 and is marketed by Aurinia Pharmaceuticals Inc.
There are currently two approved therapies for the treatment of LN. One is GlaxoSmithKline’s Benlysta (belimumab), approved in 2020, and the other is Lupkynis (voclosporin), which was approved in January 2021 and is marketed by Aurinia Pharmaceuticals Inc.
The PCT system delays expenses, allows a limited evaluation of the chances of success for national/regional patent applications and enables substantial savings where applications are abandoned within the first 2 1/2 years of filing.
The PCT system delays expenses, allows a limited evaluation of the chances of success for national/regional patent applications and enables substantial savings where applications are abandoned within the first 2½ years of filing.
In some instances, such a PTA may result in a U.S. patent 25 term extending beyond 20 years from the earliest date of filing a non-provisional patent application related to the U.S. patent.
In some instances, such a PTA may result in a U.S. patent term extending beyond 20 years from the earliest date of filing a non-provisional patent application related to the U.S. patent.
Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical studies and other activities, and/or register their sales and medical representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit 34 certain other sales and marketing practices.
Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical studies and other activities, and/or register their sales and medical representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit 33 certain other sales and marketing practices.
Patents that may issue from our pending in-licensed patent applications are expected to expire between 2028 and 2041, absent any patent term adjustments or extensions. Additionally, we own one patent application family related to methods of using itolizumab to treat severe asthma, which is pending in the United States, Australia, Canada, and New Zealand.
Patents that may issue from our pending in-licensed patent applications are expected to expire between 2028 and 2042, absent any patent term adjustments or extensions. Additionally, we own one patent application family related to methods of using itolizumab to treat severe asthma, which is pending in the United States, Australia, Canada, and New Zealand.
Rationale for EQ102 for the Treatment of Celiac Disease IL-15 has been identified as a key driver of celiac disease pathogenesis. IL-15 is chronically upregulated in the lamina propria and epithelium of the intestine and directly correlates with the severity of mucosal damage. This proinflammatory cytokine acts on distinct cell types resulting in malfunction of multiple immune mechanisms.
Rationale for EQ302 for the Treatment of Celiac Disease IL-15 has been identified as a key driver of celiac disease pathogenesis. IL-15 is chronically upregulated in the lamina propria and epithelium of the intestine and directly correlates with the severity of mucosal damage. This proinflammatory cytokine acts on distinct cell types resulting in malfunction of multiple immune mechanisms.
Figure 10: Overview of the EQUATOR clinical study design Lupus Market Overview SLE is a heterogeneous, multisystem, autoimmune disease characterized by the presence of multiple autoantibodies and deposition of immune complexes in various tissues. Based on publicly available sources, we estimate that SLE impacts between 250,000 and 322,000 people in the United States.
Figure 8: Overview of the EQUATOR clinical study design Lupus Market Overview SLE is a heterogeneous, multisystem, autoimmune disease characterized by the presence of multiple autoantibodies and deposition of immune complexes in various tissues. Based on publicly available sources, we estimate that SLE impacts between 250,000 and 322,000 people in the United States.
If granted, any patents in this patent family are expected to expire in 2032, absent any patent term adjustments or extensions. The second patent family in our composite peptide portfolio includes claims currently directed to other multi-cytokine family peptide antagonists, as well as their methods of production. This family includes two issued U.S. patents and a pending U.S. application.
If granted, any patents in this patent family are expected to expire in 2032, absent any patent term adjustments or extensions. The second patent application family in our composite peptide portfolio includes claims currently directed to other multi-cytokine family peptide antagonists, as well as their methods of production. This family includes three issued U.S. patents and a pending U.S. application.
We will also leverage the collective talent within our organization to opportunistically discover, acquire or in-license other high-value therapeutic programs that may complement our core strategy or have the potential for synergistic therapeutic benefit in combination with EQ101, EQ102 or itolizumab (EQ001). • Build a commercial infrastructure.
We will also leverage the collective talent within our organization to opportunistically discover, acquire or in-license other high-value therapeutic programs that may complement our core strategy or have the potential for synergistic therapeutic benefit in combination with EQ101, EQ302 or itolizumab (EQ001). • Build a commercial infrastructure.
ALCAM is also expressed on non-hematopoietic tissues such as the vascular endothelium, blood-brain barrier, skin, lung, kidney and gut, where it selectively facilitates the trafficking of T cells expressing CD6. Figure 5: CD6 co-stimulation drives pathogenic T cell development and activity .
See Figure 5. 12 ALCAM is also expressed on non-hematopoietic tissues such as the vascular endothelium, blood-brain barrier, skin, lung, kidney and gut, where it selectively facilitates the trafficking of T cells expressing CD6. Figure 5: CD6 co-stimulation drives pathogenic T cell development and activity .
Like the federal Anti-Kickback Statute, the Affordable Care Act amended the intent standard for certain 33 healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Like the federal Anti-Kickback Statute, the Affordable Care Act amended the intent standard for certain 32 healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
The reduction of inducible T regs to dietary antigens elevates the potential for an intestinal inflammatory immune response to gluten intake.
The reduction of inducible T regs to dietary antigens elevates the potential 16 for an intestinal inflammatory immune response to gluten intake.
Of these six composite peptide families, the first family includes claims currently directed to composite peptides covering EQ101, methods of designing such peptides, and methods of using such peptides to treat various T cell mediated diseases and disorders (including but not limited to RA, immune-mediated hair loss, and myositis).
Of these six composite peptide patent application families, the first family includes claims currently directed to composite peptides covering EQ101, methods of designing such peptides, and methods of using such peptides to treat various T cell mediated diseases and disorders (including but not limited to RA, immune-mediated hair loss, and myositis).
Research conducted at the University of Houston, supported by a Target Identification in Lupus Grant from the Lupus Research Alliance, has shown that patients with active LN have substantial elevations in urinary ALCAM and that ALCAM levels in the urine track with disease activity. See Figure 11 .
Research conducted at the University of Houston, supported by a Target Identification in Lupus Grant from the Lupus Research Alliance, has shown that patients with active LN have substantial elevations in urinary ALCAM and that ALCAM levels in the urine track with disease activity. See Figure 9 .
EQ102 specifically inhibits the activity of IL-15 and IL-21, but not the remaining γc cytokines in the family (IL-2, -4, -7, or -9), thus targeting the key pathogenic cytokines in celiac disease while preserving the functional immune system through other uninterrupted γc cytokines.
EQ302 specifically inhibits the activity of IL-15 and IL-21, but not the remaining γc cytokines in the family (IL-2, -4, -7, or -9), thus targeting the key pathogenic cytokines in celiac disease while preserving the functional immune system through other uninterrupted γc cytokines.
Additionally, we or our collaborators may develop companion diagnostic tests for use with our 35 product candidates. Companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical products, will apply to companion diagnostics.
Additionally, we or our collaborators may develop companion diagnostic tests for use with our 34 product candidates. Companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical products, will apply to companion diagnostics.
This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect beginning on April 1, 2013 and will stay in effect through 2031 unless additional Congressional action is taken.
This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect beginning on April 1, 2013 and will stay in effect through 2032 unless additional Congressional action is taken.
Figure 12: Overview of the EQUALISE clinical study design In March 2021, we reported favorable topline data from the Type A group of the EQUALISE study in patients with SLE where the data showed itolizumab (EQ001) was well tolerated.
Figure 10: Overview of the EQUALISE clinical study design In March 2021, we reported favorable topline data from the Type A group of the EQUALISE study in patients with SLE where the data showed itolizumab (EQ001) was well tolerated.
Manufacturing We do not own or operate manufacturing facilities for the production of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We rely on CMOs to manufacture EQ101 and EQ102.
Manufacturing We do not own or operate manufacturing facilities for the production of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We rely on CMOs to manufacture EQ101 and EQ302.
Notably the increased number of circulating T h 17 cells was accompanied by a decrease in T reg cells, suggesting a loss of T eff cell regulation. Such regulatory mechanisms are crucial for eliminating alloreactive T cell activity, thus preventing sustained autoimmune responses and tissue destruction in GVHD.
Notably the increased number of circulating Th17 cells was accompanied by a decrease in T reg cells, suggesting a loss of T eff cell regulation. Such regulatory mechanisms are crucial for eliminating alloreactive T cell activity, thus preventing sustained autoimmune responses and tissue destruction in GVHD.
We believe the unique mechanism of action of itolizumab (EQ001) can selectively target elements of the underlying pathogenesis of LN by: a) inhibiting multiple pathogenic T eff cells and cytokine secretion; b) inhibiting trafficking of T eff cells into kidney tissues; and c) reducing the T h 17:T reg ratio associated with LN.
We believe the unique mechanism of action of itolizumab (EQ001) can selectively target elements of the underlying pathogenesis of LN by: a) inhibiting multiple pathogenic T eff cells and cytokine secretion; b) inhibiting trafficking of T eff cells into kidney tissues; and c) reducing the Th17:T reg ratio associated with LN.
In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state.
In order to distribute products commercially, we will need to comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state.
Despite the results of those clinical studies and the approval of baricitinib, the efficacy of JAK inhibitors may be limited by their PK properties which can result in inadequate blockade of JAK signaling between doses and by the additional signaling pathways (PI3K, AKT, mTOR and MAPK/ERK) associated with the c cytokines that are not inhibited by the JAK inhibitors, which can lead to an incomplete blockade of pathologic cytokine signaling.
Despite the results of those clinical studies and the approvals of baricitinib and ritlecitinib, the efficacy of JAK inhibitors may be limited by their PK properties which can result in inadequate blockade of JAK signaling between doses and by the additional signaling pathways (PI3K, AKT, mTOR and MAPK/ERK) associated with the g c cytokines that are not inhibited by the JAK inhibitors, which can lead to an incomplete blockade of pathologic cytokine signaling.
Our Initial Clinical Indications Alopecia Areata Market Overview AA is an inflammatory, non-scarring autoimmune-mediated condition resulting in hair loss that has limited treatment options for those with severe disease. The condition occurs when the immune system attacks hair follicles on any hair-bearing area of the body, most frequently on the head and face.
Our Current Target Indications Alopecia Areata Market Overview AA is an inflammatory, non-scarring autoimmune-mediated condition resulting in hair loss that has limited treatment options for those with severe disease. The condition occurs when the immune system attacks hair follicles on any hair-bearing area of the body, most frequently on the head and face.
An independent data monitoring committee will regularly review safety data, and an interim analysis is planned after approximately 100 subjects have completed Day 29 assessments to evaluate the safety and efficacy of treatment. We anticipate that interim review occurring in 2024. An overview of the design of the EQUATOR study is depicted in Figure 10 .
An independent data monitoring committee will regularly review safety data, and an interim analysis is planned after approximately 100 subjects have completed Day 29 assessments to evaluate the safety and efficacy of treatment. We anticipate that interim review occurring in the third quarter of 2024. An overview of the design of the EQUATOR study is depicted in Figure 8 .
We may incur significant costs to comply with such laws and regulations now or in the future. Employees As of December 31, 2022, we employed 36 employees, all of whom were full-time and engaged in research and development activities, operations, finance, business development or administration. We also engage temporary employees and consultants as needed.
We may incur significant costs to comply with such laws and regulations now or in the future. Employees As of December 31, 2023, we employed 44 employees, all of whom were full-time and engaged in research and development activities, operations, finance, business development or administration. We also engage temporary employees and consultants as needed.
Elevated levels of T h 17 cells are accompanied by a decrease of T reg cells, suggesting that loss of this functional immune balance may be involved in the pathogenesis of renal damage in SLE patients.
Elevated levels of Th17 cells are accompanied by a decrease of T reg cells, suggesting that loss of this functional immune balance may be involved in the pathogenesis of renal damage in SLE patients.
If granted, any patents that issue from this patent family are expected to expire in 2040, absent any patent term adjustments or extensions. As of March 3, 2023, through our acquisition of Bioniz, we wholly own a patent portfolio directed to composite peptide antagonists.
If granted, any patents that issue from this patent family are expected to expire in 2040, absent any patent term adjustments or extensions. As of March 15, 2024, through our acquisition of Bioniz, we wholly own a patent portfolio directed to composite peptide antagonists.
These data further highlight the potentially important pathogenic role of the CD6-ALCAM pathway in patients with LN. 21 Figure 11: ALCAM is a predictive biomarker in patients with active LN . The graph depicts levels of ALCAM in the urine of active LN, active (non-renal) SLE, inactive SLE and healthy controls by ELISA.
These data further highlight the potentially important pathogenic role of the CD6-ALCAM pathway in patients with LN. 20 Figure 9: ALCAM is a predictive biomarker in patients with active LN . The graph depicts levels of ALCAM in the urine of active LN, active (non-renal) SLE, inactive SLE and healthy controls by ELISA.
This family currently includes seven issued U.S patents, three issued Australian patents, one issued Canadian patent, one issued Brazilian patent, one issued Chinese patent, 38 patents in European states, and two issued Japanese patents. Also pending are applications in the United States, Brazil, Canada, China, Europe, Hong Kong, and Japan.
This family currently includes nine issued U.S patents, three issued Australian patents, one issued Canadian patent, one issued Brazilian patent, one issued Chinese patent, 38 patents in European states, and two issued Japanese patents. Also pending are applications in the United States, China, Europe, Hong Kong, and Japan.
Details for each program are outlined in ‘Our Initial Clinical Indications’ section below. 6 Strategy Our goal is to become a leading, fully-integrated biotechnology company focused on therapies for severe immuno-inflammatory disorders. To achieve our goal, we intend to: • Develop EQ101 for the treatment of Alopecia Areata.
Details for each of our current clinical programs are outlined in ‘Our Current Target Indications’ section below. 6 Strategy Our goal is to become a leading, fully-integrated biotechnology company focused on therapies for severe immuno-inflammatory disorders. To achieve our goal, we intend to: • Develop EQ101 for the treatment of alopecia areata.
Binding of ALCAM to domain-3 of CD6 leads to the downstream activation of several mitogen activated protein kinase pathways related to T cell activation, proliferation, differentiation and survival. See Figure 5.
Binding of ALCAM to domain-3 of CD6 leads to the downstream activation of several mitogen activated protein kinase pathways related to T cell activation, proliferation, differentiation and survival.
For example, the Affordable Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers.
The Affordable Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers.
As of March 3, 2023, our patent portfolio related to itolizumab included issued patents and pending patent applications exclusively licensed from Biocon in the United States, Australia, Canada, and New Zealand, pending international and 23 national stage patent applications filed under the Patent Cooperation Treaty, or PCT, that we own.
As of March 15, 2024, our patent portfolio related to itolizumab included issued patents and pending patent applications exclusively licensed from Biocon in the United States, Australia, Canada, and New Zealand, and pending international and national stage patent applications filed under the Patent Cooperation Treaty, or PCT, that we own.
In addition to the same objectives as were in the Type A portion of the study, the Type B portion will also assess potential clinical activity of itolizumab (EQ001) in LN patients based on proteinuria levels and SLEDAI-2K scores. An overview of the design of the EQUALISE study is depicted in Figure 12 .
In addition to the same objectives as were in the Type A portion of the study, the Type B portion also assessed potential clinical activity of itolizumab (EQ001) in LN patients based on proteinuria levels and SLEDAI-2K scores. An overview of the design of the EQUALISE study is depicted in Figure 10 .
The prognosis for patients with proliferative LN remains poor and up to 40% of patients will progress to end-stage renal disease, or ESRD, requiring dialysis or kidney transplant. Overall, the available options are quite limited for LN patients, particularly those that are refractory to, or relapse from standard induction therapy. Recently, two new therapies have been 20 approved for LN.
The prognosis for patients with proliferative LN remains poor and up to 40% of patients will progress to end-stage renal disease, or ESRD, requiring dialysis or kidney transplant. Overall, the available options are quite limited for LN patients, particularly those that are refractory to, or relapse from standard induction therapy. Two therapies are currently approved for LN.
If granted, any patents in this patent family are expected to expire in 2034, absent any patent term adjustments or extensions. The third patent application family includes claims currently directed to composite peptides covering EQ102 and its methods of use to treat various T cell mediated diseases and disorders (including but not limited to celiac disease and inflammatory bowel disease).
If granted, any patents in this patent family are expected to expire in 2036, absent any patent term adjustments or extensions. The fourth patent application family includes claims currently directed to composite peptides covering EQ302 and methods of use to treat various T cell mediated diseases and disorders (including but not limited to celiac disease and inflammatory bowel disease).
Acquisition We acquired the exclusive worldwide rights to EQ101 and EQ102 through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022. Through the acquisition, we expanded our immunology pipeline with first-in-class immuno-inflammatory product candidates across a range of development stages and obtained a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates.
Acquisition 7 We acquired the exclusive worldwide rights to EQ101 and a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates such as EQ302 through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022. That acquisition expanded our immunology pipeline with first-in-class immuno-inflammatory product candidates across a range of development stages.
Our strategy is focused on advancing the clinical development of our product candidates, including potentially pursuing additional indications and acquiring new product candidates and platforms to expand our pipeline. We intend to commercialize our product candidates either independently or through partnerships or otherwise monetize our pipeline through strategic transactions.
Our strategy is focused on advancing the clinical development of our product candidates, including potentially pursuing additional indications and acquiring new product candidates and platforms to expand our pipeline. We intend to commercialize our product candidates either independently or through partnerships or otherwise monetize our pipeline through strategic transactions. Our current clinical-stage product candidates consist of EQ101 and itolizumab (EQ001).
Despite those recent approvals, there remains a significant need for new therapies that are more effective, can maintain a durable response, and carry a better safety profile.
Despite those approved products, there remains a significant need for new therapies that are more effective, can maintain a durable response, and carry a better safety profile.
Initially, investigator-initiated studies using tofacitinib and ruxolitinib produced moderate response rates in small numbers of subjects that had been otherwise refractory to standard of care treatments. More recently, several industry-sponsored studies observed efficacy of 15 JAK inhibitors in the treatment of AA using baricitinib, ritlecitinib and deuruxolitinib. Baricitinib was granted FDA approval for the treatment of AA in June 2022.
Initially, investigator-initiated studies using tofacitinib and ruxolitinib produced moderate response rates in small numbers of subjects that had been otherwise refractory to standard of care treatments. More recently, several industry-sponsored studies observed efficacy of JAK inhibitors in the treatment of AA using baricitinib, ritlecitinib and deuruxolitinib.
Furthermore, ALZUMAb had been well tolerated with demonstrated safety and clinical activity in three clinical studies in India in patients with rheumatoid arthritis and chronic plaque psoriasis, with a total of 333 patients exposed to ALZUMAb to date in clinical studies at doses ranging from 0.2 mg/kg to 1.6 mg/kg over a period of four years.
Furthermore, ALZUMAb had 14 been well-tolerated with demonstrated clinical activity in completed clinical studies in India in patients with rheumatoid arthritis and chronic plaque psoriasis, at doses ranging from 0.2 mg/kg to 1.6 mg/kg over a period of four years.
This wing of our portfolio includes six additional patent families, including those related to the IL-2, IL-9, IL-15 peptide antagonist EQ101 (formerly known as BNZ-1), the IL-15 and IL-21 peptide antagonist EQ102 (formerly known as BNZ-2), other peptide sequences, and other related technologies for peptide modulation of multi-cytokine signaling largely in the γc-cytokine family space.
This wing of our portfolio includes six additional patent application families, including those related to the IL-2, IL-9, IL-15 peptide antagonist EQ101, the IL-15 and IL-21 peptide antagonist EQ302, other peptide sequences, and other related technologies for peptide modulation of multi-cytokine signaling largely in the γc-cytokine family space.
In addition, we are aware of a number of companies with development programs in first-line and steroid refractory aGVHD, including AltruBio, Inc., ASC Therapeutics, CSL Behring LLC, Cynata Therapeutics Limited, ElsaLys Biotech, Humanigen, Inc., Maat Pharma SA, Medac GmbH, Mesoblast Limited, Shenzhen Xbiome Biotech, Co., Ltd., VectivBio Holding AG, and Zelgen Biopharmaceuticals Co., Ltd.
In addition, we are aware of a number of companies with development programs in first-line and steroid refractory aGVHD, including AltruBio, Inc., ASC Therapeutics, CSL Behring LLC, Cynata Therapeutics Limited, ElsaLys Biotech, Evive Biotech (subsidiary of Yifan Pharmaceutical Co., Ltd.), Humanigen, Inc., Maat Pharma SA, Medac GmbH, Mesoblast Limited, Shenzhen Xbiome Biotech, Co., Ltd., TR1X Bio, VectivBio Holding AG (acquired by Ironwood Pharmaceuticals, Inc.), ViGenCell Inc., and Zelgen Biopharmaceuticals Co., Ltd.
ALZUMAb is produced in an NS0 cell line and is currently available only in an IV formulation. Itolizumab (EQ001) contains the identical monoclonal antibody sequence produced in a Chinese hamster ovary, or CHO, cell line and may be administered by IV or SC. CHO cell lines are the industry-standard antibody therapeutic production system.
Itolizumab (EQ001) contains the identical monoclonal antibody sequence produced in a Chinese hamster ovary, or CHO, cell line and may be administered by IV or SC. CHO cell lines are the industry-standard antibody therapeutic production system.
We are aware of a number of companies with development programs targeting LN including Amgen Inc., AstraZeneca plc, Boehringer Ingelheim GmbH, Bristol-Myers Squibb Company, Corestem Co., Ltd., CSL Behring LLC, Genentech Inc., Jansen Pharmaceutical Companies of Johnson & Johnson, Kezar Life Sciences, Inc., Novartis AG, Omeros Corporation and Vera Therapeutics, Inc.
We are aware of a number of companies with development programs targeting LN including AstraZeneca plc, Corestem Co., Ltd., CSL Behring LLC, Genentech Inc., Jansen Pharmaceutical Companies of Johnson & Johnson, Kezar Life Sciences, Inc., Nkarta, Inc., Novartis AG, Omeros Corporation and Vera Therapeutics, Inc.
An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. 29 A Complete Response letter will describe all of the deficiencies that the FDA has identified in the BLA or NDA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling.
A Complete Response letter will describe all of the deficiencies that the FDA has identified in the BLA or NDA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling.
Specifically, there have been several recent U.S. Congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
Congressional inquiries and federal legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.
In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions take effect progressively starting in fiscal year 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe commencement and completion of clinical studies can be delayed for a number of reasons, including delays related to: • impacts and risks associated with global health epidemics or outbreaks such as those related to COVID-19; • the FDA or other applicable regulatory authorities disagreeing as to the design or implementation of our clinical studies; • obtaining FDA or other applicable regulatory authorizations to commence a study or reaching a consensus with the applicable FDA regulators on study design; • any failure or delay in reaching an agreement with CROs and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites; • obtaining approval from one or more IRBs; • additional nonclinical pharmacology and toxicology studies to support Phase 2 and 3 clinical studies; • IRBs refusing to approve, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the study; • changes to clinical study protocol; • clinical sites deviating from study protocol or dropping out of a study; • manufacturing sufficient quantities of product candidate or obtaining sufficient quantities of combination therapies for use in clinical studies; • subjects failing to enroll or remain in our study at the rate we expect, or failing to return for post-treatment follow-up; • subjects choosing an alternative treatment, or participating in competing clinical studies; 50 • lack of adequate funding to continue the clinical study; • subjects experiencing severe or unexpected drug-related adverse effects; • occurrence of serious adverse events in studies of the same class of agents conducted by other companies; • selection of clinical end points that require prolonged periods of clinical observation or analysis of the resulting data; • a facility manufacturing our product candidates or any of their components being ordered by the FDA (or its own regulatory authorities if such facility is located outside the United States) to temporarily or permanently shut down or cease export of such materials due to violations of cGMP regulations or other applicable requirements, changes in export restrictions and controls, or infections or cross-contaminations during the manufacturing process; • any changes to our manufacturing process that may be necessary or desired; • third-party clinical investigators losing the licenses or permits necessary to perform our clinical studies, not performing our clinical studies on our anticipated schedule or consistent with the clinical study protocol, GCP, or other regulatory requirements; • us, or our contractors not performing data collection or analysis in a timely or accurate manner or improperly disclosing data prematurely or otherwise in violation of a clinical study protocol; or • our contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications.
Biggest changeThe commencement and completion of clinical studies can be delayed for a number of reasons, including delays related to: • the FDA or other applicable regulatory authorities disagreeing as to the design or implementation of our clinical studies; 48 • obtaining FDA or other applicable regulatory authorizations to commence a study or reaching a consensus with the applicable FDA regulators on study design; • any failure or delay in reaching an agreement with CROs and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites; • obtaining approval from one or more Institutional Review Boards, or IRBs; • additional nonclinical pharmacology and toxicology studies to support Phase 2 and 3 clinical studies; • IRBs refusing to approve, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the study; • changes to clinical study protocol; • clinical sites deviating from study protocol or dropping out of a study; • manufacturing sufficient quantities of product candidate or obtaining sufficient quantities of combination therapies for use in clinical studies; • subjects failing to enroll or remain in our study at the rate we expect, or failing to return for post-treatment follow-up; • subjects choosing an alternative treatment, or participating in competing clinical studies; • lack of adequate funding to continue the clinical study; • cost of preclinical research and testing being greater than anticipated or greater than our available financial resources; • subjects experiencing severe or unexpected drug-related adverse effects; • occurrence of serious adverse events in studies of the same class of agents conducted by other companies; • selection of clinical end points that require prolonged periods of clinical observation or analysis of the resulting data; • a facility manufacturing our product candidates or any of their components being ordered by the FDA (or its own regulatory authorities if such facility is located outside the United States) to temporarily or permanently shut down or cease export of such materials due to violations of current good manufacturing practice, or cGMP, regulations or other applicable requirements, changes in export restrictions and controls, or infections or cross-contaminations during the manufacturing process; • any changes to our manufacturing process that may be necessary or desired; • impacts and risks associated with global health epidemics or outbreaks; • third-party clinical investigators losing the licenses or permits necessary to perform our clinical studies, not performing our clinical studies on our anticipated schedule or consistent with the clinical study protocol, Good Clinical Practices, or GCP, or other regulatory requirements; • data collection or analysis in an untimely or inaccurate manner or improper disclosure of data prematurely or otherwise in violation of a clinical study protocol by us or our contractors; or • our contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications.
In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur increased sales and marketing expenses, with certain of such investments potentially being made in advance of an approval. As a result, we expect to continue to incur significant operating losses and negative cash flows for the foreseeable future.
In addition, if we obtain regulatory approval of any of our product candidates, we expect to incur increased sales and marketing expenses, with certain of such investments potentially being made in advance of an approval. As a result, we expect to continue to incur significant operating losses and negative cash flows for the foreseeable future.
We are also aware that ALZUMAb and ALZUMAb-L have been and may continue to be used in India on a compassionate use basis, off label, and/or in investigator-initiated studies. We are unaware of any currently active and ongoing clinical studies of itolizumab in Cuba.
We are also aware that ALZUMAb and ALZUMAb-L have been and ALZUMAb-L may continue to be used in India on a compassionate use basis, off label, and/or in investigator-initiated studies. We are unaware of any currently active and ongoing clinical studies of itolizumab in Cuba.
We are also obligated to use commercially reasonable efforts to develop and seek regulatory approval for, and if regulatory approval is obtained, to commercialize, itolizumab in the Equillium Territory and to secure funding for the development of itolizumab in two or more indications.
We are also obligated to use commercially reasonable efforts to develop and seek regulatory approval of, and if regulatory approval is obtained, to commercialize, itolizumab in the Equillium Territory and to secure funding for the development of itolizumab in two or more indications.
Ono would be responsible for filing future applications with the FDA or other regulatory authorities for approval of itolizumab (EQ001) and will be the owner of any marketing approvals issued by the FDA or other regulatory authorities for itolizumab (EQ001).
Ono would be responsible for filing future applications with the FDA or other regulatory authorities for approval of itolizumab (EQ001) and will be the owner of any marketing approvals of itolizumab (EQ001) issued by the FDA or other regulatory authorities.
Biocon may also continue to support the use of ALZUMAb or ALZUMAb-L in their own sponsored clinical studies, off-label use, investigator-initiated studies, or third party-sponsored studies over which we have no control. For example, Biocon is studying itolizumab in ulcerative colitis as part of a Phase 2 clinical study being conducted in India, which Equillium is collaborating and co-funding.
Biocon may also continue to support the use of ALZUMAb-L in their own sponsored clinical studies, off-label use, investigator-initiated studies, or third party-sponsored studies over which we have no control. For example, Biocon is studying itolizumab in ulcerative colitis as part of a Phase 2 clinical study being conducted in India, which Equillium is collaborating and co-funding.
Obtaining coverage and adequate reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our approved products to the payor.
Obtaining coverage and adequate reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our approved products to the payor.
Even if we obtain regulatory approval for our product candidates or any future product candidates, there is no assurance that our CMOs will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand.
Even if we obtain regulatory approval of our product candidates or any future product candidates, there is no assurance that our CMOs will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand.
In November 2019, OFAC notified us that after careful consideration, which included consultation with the FDA, OFAC determined that itolizumab (EQ001) falls within the definition of “Cuban-origin pharmaceutical” and, as such, the general licenses at section 515.547(b) and (c) of the CACR authorize the conduct of clinical studies for itolizumab (EQ001) for the purpose of seeking approval for the drug from the FDA.
In November 2019, OFAC notified us that after careful consideration, which included consultation with the FDA, OFAC determined that itolizumab (EQ001) falls within the definition of “Cuban-origin pharmaceutical” and, as such, the general licenses at section 515.547(b) and (c) of the CACR authorize the conduct of clinical studies for itolizumab (EQ001) for the purpose of seeking approval of the drug from the FDA.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration and license agreements, such as our Asset Purchase Agreement with Ono.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements, such as our Asset Purchase Agreement with Ono.
If the export restrictions are expanded to include itolizumab (EQ001), our supply of itolizumab (EQ001) may be disrupted, delayed or stopped indefinitely and our ability to continue development of itolizumab (EQ001), including our ongoing clinical studies, may be significantly impacted and may result in higher costs of drug product and adversely harm our business.
If the export restrictions are expanded to include itolizumab (EQ001), our supply of itolizumab (EQ001) may be disrupted, delayed or stopped indefinitely and our ability to continue development of itolizumab (EQ001), including our ongoing clinical studies, may be significantly impacted and may result in higher costs of drug product and adversely harm our business.
HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; • the U.S. federal Food, Drug and Cosmetic Act, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; • the Public Health Service Act, which prohibits, among other things, the introduction of a biological product into interstate commerce without an approved BLA; • federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the federal transparency requirements under the Physician Payments Sunshine Act, created under the Affordable Care Act, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program to annually report to the Centers for Medicare & Medicaid Services information related to payments and other transfers of value provided to physicians, as defined by such law, other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members; • state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; and • state and foreign laws that require pharmaceutical companies to implement compliance programs and comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; track and report gifts, compensation and other remuneration provided to physicians, other health care providers, and certain health care entities; report information related to drug pricing; and/or ensure the registration and compliance of sales personnel.
HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; • the U.S. federal Food, Drug and Cosmetic Act, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; • the Public Health Service Act, which prohibits, among other things, the introduction of a biological product into interstate commerce without an approved BLA; 81 • federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the federal transparency requirements under the Physician Payments Sunshine Act, created under the Affordable Care Act, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children’s Health Insurance Program to annually report to the Centers for Medicare & Medicaid Services information related to payments and other transfers of value provided to physicians, as defined by such law, other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals and physician ownership and investment interests, including such ownership and investment interests held by a physician’s immediate family members; • state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by any non-governmental third-party payors, including private insurers; and • state and foreign laws that require pharmaceutical companies to implement compliance programs and comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; track and report gifts, compensation and other remuneration provided to physicians, other health care providers, and certain health care entities; report information related to drug pricing; and/or ensure the registration and compliance of sales personnel.
Collaborations are subject to numerous risks, which may include that: • collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; • collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on study or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates; • a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; • we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; • disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; 67 • collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; • collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and • a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Collaborations are subject to numerous risks, which may include that: • collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; • collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on study or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates; • a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; • we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; • disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; • collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and • a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
The FDA and other applicable regulatory authorities could delay, limit or deny approval of a product candidate for many reasons, including because they: • may not deem our product candidate to be adequately safe and effective; • may not agree that the data collected from clinical studies are acceptable or sufficient to support the submission of a BLA, NDA or other submission or to obtain regulatory approval, and may impose requirements for additional preclinical studies or clinical studies; • may determine that adverse events experienced by participants in our clinical studies represents an unacceptable level of risk; • may determine that population studied in the clinical study may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; • may not accept clinical data from studies, which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States; • may disagree regarding the formulation, labeling and/or the specifications; • may not approve the manufacturing processes or facilities associated with our product candidate; • may change approval policies or adopt new regulations; or • may not accept a submission due to, among other reasons, the content or formatting of the submission.
The FDA and other applicable regulatory authorities could delay, limit or deny approval of a product candidate for many reasons, including because they: • may not deem our product candidate to be adequately safe and effective; 47 • may not agree that the data collected from clinical studies are acceptable or sufficient to support the submission of a BLA, NDA or other submission or to obtain regulatory approval, and may impose requirements for additional preclinical studies or clinical studies; • may determine that adverse events experienced by participants in our clinical studies represents an unacceptable level of risk; • may determine that population studied in the clinical study may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; • may not accept clinical data from studies, which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States; • may disagree regarding the formulation, labeling and/or the specifications; • may not approve the manufacturing processes or facilities associated with our product candidate; • may change approval policies or adopt new regulations; or • may not accept a submission due to, among other reasons, the content or formatting of the submission.
Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product, providing consulting fees and other benefits to physicians to induce them to prescribe products, engaging in promotion for “off-label” uses, and submitting inflated best price information to the Medicaid Rebate Program; • HIPAA, among other things, imposes criminal and civil liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare 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, fictitious or fraudulent statement or representation, in connection with the delivery of or 82 payment for healthcare benefits, items or services.
Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product, providing consulting fees and other benefits to physicians to induce them to prescribe products, engaging in promotion for “off-label” uses, and submitting inflated best price information to the Medicaid Rebate Program; • HIPAA, among other things, imposes criminal and civil liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare 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, fictitious or fraudulent statement or representation, in connection with the delivery of or payment for healthcare benefits, items or services.
For example: • others may be able to make product candidates that are similar to ours but that are not covered by the claims of the patents that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; 73 • issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; and • the patents of others may have an adverse effect on our business.
For example: • others may be able to make product candidates that are similar to ours but that are not covered by the claims of the patents that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; • issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; and • the patents of others may have an adverse effect on our business.
The degree of future protection for our proprietary rights is uncertain, and we cannot predict: • if and when patents may issue based on our patent applications; • the scope of protection of any patent issuing based on our patent applications; • whether the claims of any patent issuing based on our patent applications will provide protection against competitors; • whether any of the patents we own or license will be found to ultimately be valid and enforceable; • whether or not third parties will find ways to invalidate or circumvent our patent rights; 65 • whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; • whether the patents of others will not have an adverse effect on our business; • whether we will develop additional proprietary technologies or products that are separately patentable; • whether we will need to initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose; and/or • whether the patent applications that we own or in-license will result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries.
The degree of future protection for our proprietary rights is uncertain, and we cannot predict: • if and when patents may issue based on our patent applications; • the scope of protection of any patent issuing based on our patent applications; • whether the claims of any patent issuing based on our patent applications will provide protection against competitors; • whether any of the patents we own or license will be found to ultimately be valid and enforceable; • whether or not third parties will find ways to invalidate or circumvent our patent rights; • whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; • whether the patents of others will not have an adverse effect on our business; • whether we will develop additional proprietary technologies or products that are separately patentable; • whether we will need to initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose; and/or • whether the patent applications that we own or in-license will result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries.
Also, there has been heightened governmental scrutiny recently over the manner in which pharmaceutical companies set prices for their marketed products, which have resulted in several Congressional inquiries and proposed federal legislation, as well as state efforts, designed to, among other things, bring more transparency to product pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
Also, there has been heightened governmental scrutiny recently over the manner in which pharmaceutical companies set prices for their marketed products, which have resulted in several Congressional inquiries and proposed and enacted federal legislation, as well as state efforts, designed to, among other things, bring more transparency to product pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
We have adopted a code of conduct applicable to all of our employees, as well as a disclosure program and other applicable policies and procedures, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or 75 regulations.
We have adopted a code of conduct applicable to all of our employees, as well as a disclosure program and other applicable policies and procedures, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, or collectively Trade Laws, prohibit, among other things, companies and their employees, agents, CROs, legal counsel, accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector.
U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, or collectively Trade Laws, prohibit, among other things, companies and their employees, agents, CROs, legal counsel, 82 accountants, consultants, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector.
If we receive regulatory approval for itolizumab (EQ001) and a new and serious safety issue is identified in connection with the commercial use of ALZUMAb or ALZUMAb-L or in clinical studies, exploratory studies, or other clinical uses of itolizumab conducted or supported by Biocon or third parties, regulatory authorities may withdraw their approval of the product or otherwise restrict our ability to market and sell itolizumab.
If we receive regulatory approval of itolizumab (EQ001) and a new and serious safety issue is identified in connection with the commercial use of ALZUMAb-L or in clinical studies, exploratory studies, or other clinical uses of itolizumab conducted or supported by Biocon or third parties, regulatory authorities may withdraw their approval of the product or otherwise restrict our ability to market and sell itolizumab.
We face substantial competition, which may result in others discovering, developing or commercializing products more quickly or marketing them more successfully than us. If their product candidates are shown to be safer or more effective than ours, then our commercial opportunity will be reduced or eliminated. The development and commercialization of new products is highly competitive.
We face substantial competition, which may result in others discovering, developing or commercializing products more quickly or marketing them more successfully than us. If their product candidates are shown to be safer or more effective than ours, then our commercial opportunity will be reduced or eliminated. 55 The development and commercialization of new products is highly competitive.
We are aware of a number of judicial decisions and legislative proposals that could bring about major changes in the way workers are classified, including the California legislature’s recent passage of California Assembly Bill 5, which California Governor Gavin Newsom signed into law in September 2019, or AB 5, and Assembly Bill 2257, or AB 2257, which went into effect in September 2020 and amended certain portions of AB 5.
We are aware of a number of judicial decisions and legislative proposals that could bring about major changes in the way workers are classified, including the California legislature’s passage of California Assembly Bill 5, which California Governor Gavin Newsom signed into law in September 2019, or AB 5, and Assembly Bill 2257, or AB 2257, which went into effect in September 2020 and amended certain portions of AB 5.
Any such delay or rejection could prevent us from commercializing EQ101, EQ102, itolizumab (EQ001) or any future product candidates. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors for whom they may also be conducting clinical studies or other biopharmaceutical product development activities that could harm our competitive position.
Any such delay or rejection could prevent us from commercializing EQ101, itolizumab (EQ001) or any future product candidates. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors for whom they may also be conducting clinical studies or other biopharmaceutical product development activities that could harm our competitive position.
Generally, public concern regarding the safety of biopharmaceutical products could delay or limit our ability to obtain regulatory approval, result in the inclusion of unfavorable information in our labeling, or require us to undertake other activities that may entail additional costs. We have not obtained approval from the FDA or any other applicable regulatory authority for any product.
Generally, public concern regarding the safety of biopharmaceutical products could delay or limit our ability to obtain regulatory approval, result in the inclusion of unfavorable information in our labeling, or require us to undertake other activities that may entail additional costs. We have not obtained approval of any product from the FDA or any other applicable regulatory authority.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain 54 regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
Additionally, a third-party payor’s 60 decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy.
Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy.
Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s independent discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business. 63 Agreements with our advisors, employees, contractors and consultants may contain certain limited publication rights.
Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s independent discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business. Agreements with our advisors, employees, contractors and consultants may contain certain limited publication rights.
Furthermore, we have no assurance that the results of any clinical studies that we conduct for our product candidates in Australia and New Zealand will be accepted by the FDA or other foreign regulatory authorities for development and commercialization approvals. In addition, current Australian tax regulations provide for a refundable research and development tax credit.
Furthermore, we have no assurance that the results of any clinical studies that we conduct for our product 77 candidates in Australia and New Zealand will be accepted by the FDA or other foreign regulatory authorities for development and commercialization approvals. In addition, current Australian tax regulations provide for a refundable research and development tax credit.
For example, on December 22, 2017, U.S. federal income tax legislation was signed into law (H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”), informally titled the Tax Cuts and Jobs Act, that 89 significantly revised the IRC.
For example, on December 22, 2017, U.S. federal income tax legislation was signed into law (H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”), informally titled the Tax Cuts and Jobs Act, that significantly revised the IRC.
We may not be successful in our efforts to establish other strategic partnerships or alternative arrangements for any product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and potential parties may not view such product candidates as having the requisite potential to demonstrate safety and efficacy.
We may not be successful in our efforts to establish other 42 strategic partnerships or alternative arrangements for any product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and potential parties may not view such product candidates as having the requisite potential to demonstrate safety and efficacy.
Biocon, its Cuban partner, CIMAB, S.A., and their licensees, over which we have no control, have the rights to develop itolizumab worldwide and commercialize itolizumab in geographies outside of the Equillium Territory (as defined below). Itolizumab is approved in India for the treatment of moderate to severe plaque psoriasis, and is marketed by Biocon as ALZUMAb.
Biocon, its Cuban partner, CIMAB, S.A., and their licensees, over which we have no control, have the rights to develop itolizumab worldwide and commercialize itolizumab in geographies outside of the Equillium Territory (as defined below). Itolizumab is approved in India for the treatment of moderate to severe plaque psoriasis and was marketed by Biocon as ALZUMAb.
If we are unable to identify, select and acquire suitable product candidates from third parties or acquire businesses at valuations and on other terms acceptable to us, or if we are unable to raise capital required to acquire businesses or new product candidates, our business and prospects will be limited and may require us to divest one or more of our product candidates to enable us to acquire businesses or new product candidates or progress the development of our other product candidates.
If we are unable to identify, select and acquire suitable product candidates from third parties or acquire businesses at valuations and on other terms acceptable to us, or if we are unable to raise capital required to acquire businesses or new product candidates, our business and prospects will be limited 45 and may require us to divest one or more of our product candidates to enable us to acquire businesses or new product candidates or progress the development of our other product candidates.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected. We currently have two U.S. trademark registrations for EQUILLIUM respectively covering Classes 5 and 42, and one Canadian trademark registration for EQUILLIUM covering both Classes 5 and 42.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected. 70 We currently have two U.S. trademark registrations for EQUILLIUM respectively covering Classes 5 and 42, and one Canadian trademark registration for EQUILLIUM covering both Classes 5 and 42.
Responding to investigations can be time and 83 resource-consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly.
Responding to investigations can be time and resource-consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly.
Moreover, any such litigation or the threat thereof may adversely affect our reputation, our ability to form strategic alliances 70 or sublicense our rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would have an adverse effect on our business, results of operations and financial condition.
Moreover, any such litigation or the threat thereof may adversely affect our reputation, our ability to form strategic alliances or sublicense our rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would have an adverse effect on our business, results of operations and financial condition.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer 80 price, for single source and innovator multiple source drugs, beginning January 1, 2024.
Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications, our ability to obtain future patents, and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. The U.S.
However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications, our ability to obtain future 88 patents, and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. The U.S.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. 90 In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline. 90 Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline. Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are and may become further dependent on Ono for funding the clinical development and commercialization of itolizumab (EQ001). If Ono terminates our Asset Purchase Agreement, does not exercise its option, or does not achieve the milestones specified in the Asset Purchase Agreement, our business and financial condition would be adversely impacted.
We are and may become further dependent on Ono for funding the clinical development and commercialization of itolizumab (EQ001). If Ono terminates our Asset Purchase Agreement, does not exercise its option, or does not achieve 46 the milestones specified in the Asset Purchase Agreement, our business and financial condition would be adversely impacted.
We could also encounter delays if a clinical study is suspended or terminated by us, by the IRBs of the institutions in which such studies are being conducted, by a Data Safety Monitoring Board for such study or by the FDA or by other regulatory agencies or health authorities that have jurisdiction in countries in which the study is being conducted.
We could also encounter delays if a clinical study is modified, suspended or terminated by us, by the IRBs of the institutions in which such studies are being conducted, by a Data Safety Monitoring Board for such study or by the FDA or by other regulatory agencies or health authorities that have jurisdiction in countries in which the study is being conducted.
If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise performs in a substandard manner, or terminates its engagement with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated.
If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise performs in a substandard manner, or terminates its engagement with us, the timelines for our development programs may be extended or 60 delayed or our development activities may be suspended or terminated.
Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.
Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third 63 parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time consuming and, even if resolved in our favor, is likely to divert significant resources from 68 our core business, including distracting our technical and management personnel from their normal responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time consuming and, even if resolved in our favor, is likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities.
There is also a risk that, even if the validity of such patents is upheld, the court will construe the 69 patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention.
There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not 68 issuing and could provoke third parties to assert claims against us.
For example, although itolizumab (EQ001) and ALZUMAb share the same primary monoclonal antibody sequence, they are manufactured in different cell lines and thus could be considered different biopharmaceutical products. Therefore, results seen in clinical studies of ALZUMAb conducted by Biocon may not be predictive of the results of our clinical studies of itolizumab (EQ001).
For example, although itolizumab 43 (EQ001) and ALZUMAb share the same primary monoclonal antibody sequence, they are manufactured in different cell lines and thus could be considered different biopharmaceutical products. Therefore, results seen in clinical studies of ALZUMAb conducted by Biocon may not be predictive of the results of our clinical studies of itolizumab (EQ001).
Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that 58 we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If our current or future licensors, licensees or partners fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated.
Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If our current or future licensors, licensees or partners fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or 61 eliminated.
Unless the United States Department of the Treasury issues regulations that narrow the application of this provision to a smaller subset of our research and development expenses or the provision is deferred, modified, or repealed by Congress, it could harm our future operating results by effectively increasing our future tax obligations.
Unless the United States Department of the Treasury issues regulations that narrow the application of this provision to a smaller subset of our research and development expenses or the provision is deferred, modified, or repealed by Congress, it could 89 harm our future operating results by effectively increasing our future tax obligations.
Many of our competitors, such as large pharmaceutical and biotechnology companies like Pfizer Inc. and Eli Lilly and Company, have significantly greater financial resources and expertise in research and development, manufacturing, 58 preclinical studies, conducting clinical studies, obtaining regulatory approvals and marketing approved products than we have.
Many of our competitors, such as large pharmaceutical and biotechnology companies like Pfizer Inc. and Eli Lilly and Company, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical studies, conducting clinical studies, obtaining regulatory approvals and marketing approved products than we have.
As a result, our ability to use our pre-ownership change NOL carryforwards to offset U.S. federal taxable income (if we earned net taxable income) and any other pre-ownership change tax attributes may be subject to limitations, which could potentially result in increased future tax liability to us.
As a result, our ability to use our pre-ownership change NOL carryforwards to offset U.S. federal taxable income in the future (if we earned net taxable income) and any other pre-ownership change tax attributes may be subject to limitations, which could potentially result in increased future tax liability to us.
Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law on September 16, 2011, could increase those 88 uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
Potential natural disasters, some possibly related to the increasing effects of climate change, could damage or destroy clinical study sites, our office spaces, laboratories, and/or warehouses, which could have a significant negative impact on our operations. We are vulnerable to the increasing impact of climate change and other natural disasters.
Potential natural disasters, some possibly related to the increasing effects of climate change, could damage, destroy or disrupt clinical study sites, our office spaces, laboratories, and/or warehouses, which could have a significant negative impact on our operations. We are vulnerable to the increasing impact of climate change and other natural disasters.
From time to time, we may publicly disclose preliminary or topline data from our clinical studies, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study.
From time to time, we may publicly disclose preliminary or topline data from our preclinical and clinical studies, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study.
Elements of our product candidates, including processes for their preparation and manufacture, may involve proprietary know-how, information, or technology that is not covered by patents, 71 and thus for these aspects we may consider trade secrets and know-how to be our primary intellectual property.
Elements of our product candidates, including processes for their preparation and manufacture, may involve proprietary know-how, information, or technology that is not covered by patents, and thus for these aspects we may consider trade secrets and know-how to be our primary intellectual property.
In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical study protocols to comply with these changes. Amendments may require us to resubmit our clinical study protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical study.
In addition, 49 changes in regulatory requirements and policies may occur, and we may need to amend clinical study protocols to comply with these changes. Amendments may require us to resubmit our clinical study protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical study.
We are generally also subject to all of the same risks with respect to protection of intellectual property 66 that we license as we are for intellectual property that we own, which are described below. If we or our licensor fail to adequately protect this intellectual property, our ability to commercialize products could suffer.
We are generally also subject to all of the same risks with respect to protection of intellectual property that we license as we are for intellectual property that we own, which are described below. If we or our licensor fail to adequately protect this intellectual property, our ability to commercialize products could suffer.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biopharmaceutical companies have experienced significant 91 stock price volatility in recent years.
Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring itolizumab (EQ001) to market could decrease our ability to generate sufficient revenue to maintain our business. Additionally, companion diagnostic tests may be developed for use with itolizumab (EQ001).
Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring itolizumab (EQ001) to market could decrease our ability to generate sufficient revenue to maintain our business. 44 Additionally, companion diagnostic tests may be developed for use with itolizumab (EQ001).
Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business.
Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or 80 other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business.
Sales of our common stock by current stockholders may make it more difficult for us to sell equity or equity-related securities 85 in the future at a time and price that we deem reasonable or appropriate, and make it more difficult for other stockholders to sell shares of our common stock.
Sales of our common stock by current stockholders may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, and make it more difficult for other stockholders to sell shares of our common stock.
This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical studies of our product candidates, obtaining marketing approvals for our product candidates, manufacturing, marketing and selling our product candidates if we obtain marketing approval, and satisfying post-marketing requirements, if any.
This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical studies of our product candidates, obtaining marketing approvals of our product candidates, manufacturing, marketing and selling our product candidates if we obtain marketing approval, and satisfying post-marketing requirements, if any.
We have no experience in biologic manufacturing and do not own or operate, and we do not expect to own or operate, facilities for product manufacturing, storage and distribution, or testing. We are completely dependent on third-party CMOs 61 to fulfill our clinical and commercial supply of our product candidates.
We have no experience in biologic manufacturing and do not own or operate, and we do not expect to own or operate, facilities for product manufacturing, storage and distribution, or testing. We are completely dependent on third-party CMOs to fulfill our clinical and commercial supply of our product candidates.
Alternatively, or additionally, we may enter into agreements to clarify the scope of our rights in such intellectual property. If we fail in defending any such claims, in addition to paying monetary 72 damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
Alternatively, or additionally, we may enter into agreements to clarify the scope of our rights in such intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. 91 We could be subject to securities class action litigation.
Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. We could be subject to securities class action litigation.
We face an inherent risk of product liability exposure related to the testing of EQ101, EQ102, itolizumab (EQ001) and any future product candidates in human clinical studies and will face an even greater risk if we commercially sell any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of EQ101, itolizumab (EQ001) and any future product candidates in human clinical studies and will face an even greater risk if we commercially sell any products that we may develop.
If our manufacturers are unable to produce sufficient quantities for clinical studies or for commercialization, commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects.
If our manufacturers are unable to 59 produce sufficient quantities for clinical studies or for commercialization, commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects.
Though our agreements with third parties typically restrict the ability of our advisors, employees, collaborators, licensors, suppliers, third-party contractors and consultants to publish data potentially relating to our trade secrets, our agreements may contain certain limited publication rights.
Though 69 our agreements with third parties typically restrict the ability of our advisors, employees, collaborators, licensors, suppliers, third-party contractors and consultants to publish data potentially relating to our trade secrets, our agreements may contain certain limited publication rights.
As a result, the topline results that we report may differ from future results of the same clinical studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.
As a result, the topline results that we report may differ from future results of the same preclinical and clinical studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.
In addition, if the facilities of our manufacturer are located outside of the United States, as is the case currently for itolizumab (EQ001) and EQ102, the production, distribution and delivery of pharmaceutical products are also subject to the laws and regulations of the country.
In addition, if the facilities of our manufacturer are located outside of the United States, as is the case currently for itolizumab (EQ001), the production, distribution and delivery of pharmaceutical products are also subject to the laws and regulations of the country.
Additionally, any of our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
Additionally, any of our 53 product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.
We cannot provide any assurances that third party patents do not exist which might be enforced against our current technology, including our research programs, product candidates, which include EQ101, EQ102, itolizumab (EQ001) and others, their respective methods of use, manufacture and formulations thereof, and could result in either an injunction prohibiting our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.
We cannot provide any assurances that third party patents do not exist which might be enforced against our current technology, including our research programs, product candidates, which include EQ101, EQ302, itolizumab (EQ001) and others, their respective methods of use, manufacture and formulations thereof, and could result in either an injunction prohibiting our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.
Security incidents and attendant consequences that we or our third party providers could experience may cause customers to stop using our products and services, deter new customers from using our products and services, and negatively impact our ability to grow and operate our business.
Security incidents and attendant consequences that we or our third party providers could experience may prevent or cause customers to stop using our products and services, deter new customers from using our products and services, and negatively impact our ability to grow and operate our business.
Ensuring that we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely basis remains a costly and time-consuming effort that needs to be re-evaluated frequently.
Ensuring that we have adequate internal financial and 87 accounting controls and procedures in place to produce accurate financial statements on a timely basis remains a costly and time-consuming effort that needs to be re-evaluated frequently.
If orphan drug exclusivity is lost and we were unable to successfully enforce any remaining patents covering our eligible product candidates, we could be subject to biosimilar competition earlier than we anticipate.
If orphan drug exclusivity is lost and we were unable to successfully 57 enforce any remaining patents covering our eligible product candidates, we could be subject to biosimilar competition earlier than we anticipate.
Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical study in accordance with regulatory requirements or our clinical protocols, inspection of the clinical study operations or study site by the FDA or other regulatory agencies resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a pharmaceutical, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical study.
Such authorities may impose such a suspension or termination, or a modification to our study protocol, due to a number of factors, including failure to conduct the clinical study in accordance with regulatory requirements or our clinical protocols, inspection of the clinical study operations or study site by the FDA or other regulatory agencies resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a pharmaceutical, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical study.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third party patent and pending application in the United States and abroad that is relevant to our therapeutic research programs or necessary for the commercialization of our product candidates such as EQ101, EQ102, itolizumab (EQ001) and/or others in any jurisdiction.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third party patent and pending application in the United States and abroad that is relevant to our therapeutic research programs or necessary for the commercialization of our product candidates such as EQ101, EQ302, itolizumab (EQ001) and/or others in any jurisdiction.
Even if we receive regulatory approval for any of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense.
Even if we receive regulatory approval of any of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We lease approximately 1,750 square feet of space for our current headquarters in La Jolla, California under a lease that expires in February 2027. We also lease additional office and laboratory spaces in La Jolla, California, under leases with various expiration dates, with the latest extending through February 2027.
Biggest changeItem 2. Properties. We lease approximately 1,750 square feet of space for our current headquarters in La Jolla, California under a lease that expires in February 2027. We also lease additional office and laboratory spaces in La Jolla, California, under leases with various expiration dates, with the first expiring in February 2025 and the latest extending through February 2027.
Mine Saf ety Disclosures. Not applicable. 92 PART II
Mine Saf ety Disclosures. Not applicable. 93 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Record As of March 16, 2023, there were approximately 46 stockholders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Biggest changeThe actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust or by other entities.
Securities Authorized for Issuance Under Our Equity Compensation Plans Information about our equity compensation plans will be included in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference. Recent Sales of Unregistered Securities None.
Securities Authorized for Issuance Under Our Equity Compensation Plans Information about our equity compensation plans will be included in our definitive proxy statement to be filed with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference. 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 Information Our common stock began trading on the Nasdaq Global Market under the symbol “EQ” on October 12, 2018. Prior to that date, there was no public trading market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock began trading on the Nasdaq Global Market under the symbol “EQ” on October 12, 2018, and was transferred to the Nasdaq Capital Market under the same symbol on September 15, 2023.
We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future, including due to limitations that are currently imposed by our Loan Agreement.
Dividend Policy We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future.
Removed
This number of holders of record also does not include stockholders whose shares may be held in trust or by other entities. Dividend Policy We have never declared or paid cash dividends on our capital stock.
Added
Prior to October 12, 2018, there was no public trading market for our common stock. Holders of Record As of March 20, 2024, there were approximately 50 stockholders of record of our common stock.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [ R eserved] 93
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In July 2023, our board of directors authorized a stock repurchase program, or Stock Repurchase Program, pursuant to which we may repurchase up to $7.5 million of shares of our common stock through December 31, 2024.
Added
As of December 31, 2023, approximately $7.2 million remained available under our Stock Repurchase Program for future repurchases. Item 6. [ R eserved] 94

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe increase in research and development expense primarily includes the following changes: • $7.3 million increase in clinical development expenses, primarily driven by start-up expenses related to our EQUATOR clinical study and to a lesser extent start-up expenses for our EQ102 and EQ101 clinical studies including costs associated with the purchase of drug substance and drug product for these studies, partially offset by lower costs for our other itolizumab (EQ001) clinical studies; • $2.7 million increase in non-clinical research expenses; • $1.3 million increase in employee compensation and benefits; • $0.4 million of transaction costs associated with the Bioniz asset acquisition, primarily legal expenses; • $0.4 million increase in consulting expenses to support our research and development activities; and • $0.9 million decrease in research and development expenses associated with the recording of a Tax Incentive benefit from the Australian Tax Office, or ATO, as a reduction to research and development expenses associated with our EQ101 and EQ102 clinical studies being conducted in Australia.
Biggest changeThe decrease in research and development expense primarily includes the following changes: • $1.7 million decrease in non-clinical research expenses; • $1.4 million decrease in employee compensation and benefits; • $1.1 million increase in the estimated Tax Incentive benefit from the Australian Taxation Office, or ATO, offsetting our research and development expenses associated with our EQ101 and EQ102 clinical studies in Australia; • $0.4 million decrease in transaction costs associated with the Bioniz asset acquisition, primarily legal expenses; offset by • $3.7 million increase in clinical development expenses, primarily driven by EQUATOR, EQ101 and EQ102 clinical studies, partially offset by lower costs for our other itolizumab (EQ001) clinical studies; and • $0.4 million increase in consulting expenses.
The cost of clinical studies may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others: • per patient clinical study costs; • the number of clinical studies required for approval; • the number of sites and the number of countries included in our clinical studies; • the length of time required to enroll suitable patients; • the inefficiencies and additional costs related to any delays and potential restarts of clinical studies; 97 • the number of doses that patients receive; • the number of patients that participate in our clinical studies; • the drop-out or discontinuation rates of patients in our clinical studies; • the duration of patient follow-up; • potential additional safety monitoring or other studies requested by regulatory agencies; • the number and complexity of procedures, analyses and tests performed during our clinical studies; • the costs of procuring drug product for our clinical studies; • the phase of development of the product candidate; and • the efficacy and safety profile of the product candidate.
The cost of clinical studies may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others: • per patient clinical study costs; • the number of clinical studies required for approval; • the number of sites and the number of countries included in our clinical studies; • the length of time required to enroll suitable patients; • the inefficiencies and additional costs related to any delays and potential restarts of clinical studies; • the number of doses that patients receive; • the number of patients that participate in our clinical studies; • the drop-out or discontinuation rates of patients in our clinical studies; • the duration of patient follow-up; • potential additional safety monitoring or other studies requested by regulatory agencies; • the number and complexity of procedures, analyses and tests performed during our clinical studies; • the costs of procuring drug product for our clinical studies; • the phase of development of the product candidate; and • the efficacy and safety profile of the product candidate.
If a significant financing component exists, the transaction price is adjusted for the time value of money. If an element of variability exists, we must estimate the consideration we expect to receive and use that amount as the basis for recognizing revenue as the product or the service is transferred to the customer.
If a significant financing component exists, the transaction price is adjusted for the time value of money. If an element of variability exists, we must estimate the consideration we expect to receive and use that amount as the basis for recognizing 105 revenue as the product or the service is transferred to the customer.
Clinical development timelines, the probability of success, and development costs can differ materially from expectations. Completion of clinical studies may take several years or more, and the length of time generally varies according to the type, complexity, novelty, and intended use of a product candidate.
Clinical development timelines, the probability of success, and development costs can differ materially from expectations. 98 Completion of clinical studies may take several years or more, and the length of time generally varies according to the type, complexity, novelty, and intended use of a product candidate.
In 2022, we generated revenue from the Asset Purchase Agreement related to the one-time, upfront payment from Ono in exchange for the Option as well as from the itolizumab (EQ001) development funding from Ono. We have not generated any revenue from product sales, milestone payments or royalties.
We have generated revenue from the Asset Purchase Agreement related to the one-time, upfront payment from Ono in exchange for the Option as well as from the itolizumab (EQ001) development funding from Ono. We have not generated any revenue from product sales, milestone payments or royalties.
If a contract has multiple performance obligations, we allocate the transaction price to each distinct performance obligation in an amount that reflects the consideration we are entitled to receive in exchange for satisfying each distinct performance 104 obligation.
If a contract has multiple performance obligations, we allocate the transaction price to each distinct performance obligation in an amount that reflects the consideration we are entitled to receive in exchange for satisfying each distinct performance obligation.
We will recognize interest and penalties in income tax expense if and when incurred. Recent Accounting Pronouncements See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information concerning recent accounting pronouncements. Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Not required for smaller reporting companies. 105
We will recognize interest and penalties in income tax expense if and when incurred. 106 Recent Accounting Pronouncements See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information concerning recent accounting pronouncements. Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Not required for smaller reporting companies.
As a result of the conflict between Russia and Ukraine, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability.
As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability.
If we fail to complete the development of EQ101, EQ102, itolizumab (EQ001) or any future product candidates in a timely manner, or to obtain regulatory approval for our product candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected. Asset Purchase Agreement with Ono Pharmaceutical Co., Ltd.
If we fail to complete the development of EQ101, EQ302, itolizumab (EQ001) or any future product candidates in a timely manner, or to obtain regulatory approval for our product candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected. Asset Purchase Agreement with Ono Pharmaceutical Co., Ltd.
Furthermore, in connection with the acquisition of Bioniz, we expanded our pipeline from one product candidate to three product candidates, all at various stages of development. This expansion may accelerate the rate at which our operating losses increase as we incur costs to further the development and seek regulatory approval for these product candidates.
Furthermore, in connection with the acquisition of Bioniz, we expanded our pipeline from one product candidate to multiple product candidates, all at various stages of development. This expansion may accelerate the rate at which our operating losses increase as we incur costs to further the development and seek regulatory approval for these product candidates.
We plan to substantially increase our research and development expenses for the foreseeable future as we advance the development of EQ101, EQ102, and itolizumab (EQ001) if Ono does not exercise its option, potentially expand the number of indications for which we are developing those product candidates, and potentially acquire or develop new product candidates.
We plan to substantially increase our research and development expenses for the foreseeable future as we advance the development of EQ101, EQ302, and itolizumab (EQ001) if Ono does not exercise its option, potentially expand the number of indications for which we are developing those product candidates, and potentially acquire or develop new product candidates.
We expect operating losses and negative cash flows to continue for at least the next several years as we incur costs related to the development of EQ101, EQ102, and itolizumab (EQ001) if Ono does not exercise its option, and any our other product candidates.
We expect operating losses and negative cash flows to continue for at least the next several years as we incur costs related to the development of EQ101, EQ302 and itolizumab (EQ001) if Ono does not exercise its option, and any of our other product candidates.
Financial Overview Revenue To date, we have not generated any revenues from therapeutic product sales, developmental milestones or royalties. In 2022, our revenues were derived from an upfront payment under the Asset Purchase Agreement as well as from development funding from Ono.
Financial Overview Revenue To date, we have not generated any revenues from therapeutic product sales, developmental milestones or royalties. In 2022 and 2023, our revenues were derived from an upfront payment under the Asset Purchase Agreement as well as from development funding from Ono.
The study, which is being conducted by Biocon in India and commenced in November 2022, is a randomized, double-blinded, placebo-controlled clinical study in up to 30 subjects to evaluate the safety and efficacy of itolizumab in patients with moderate to severe ulcerative colitis.
The study, which is being conducted by Biocon in India and commenced in November 2022, is a randomized, double-blinded, placebo-controlled clinical study in up to 90 subjects, to evaluate the safety and efficacy of itolizumab in patients with moderate to severe ulcerative colitis.
Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EQ101, EQ102 and itolizumab (EQ001) or any of our other product candidates or whether, or when, we may achieve profitability.
Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EQ101, EQ302 and itolizumab (EQ001) or any of our other product candidates or whether, or when, we may achieve profitability.
As a result of the conflict between Russia and Ukraine, bank failures, inflationary pressures on the economy and monetary policy responses by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability.
As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, bank failures, inflationary pressures on the economy and monetary policy responses by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including from bank failures, diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability.
Our ability to generate product revenues will depend on the successful development and eventual commercialization of EQ101, EQ102, itolizumab (EQ001) if Ono does not exercise its option, and any future product candidates.
Our ability to generate product revenues will depend on the successful development and eventual commercialization of EQ101, EQ302, itolizumab (EQ001) if Ono does not exercise its option, and any future product candidates.
Interest Expense Interest expense consists of interest and amortization of discounts on our outstanding term loans payable. Interest Income Interest income consists primarily of interest income earned on cash, cash equivalents and short-term investments, and is recognized when earned.
Interest Expense Interest expense consists of interest and amortization of discounts on our prior term loans payable. Interest Income Interest income consists primarily of interest income earned on cash, cash equivalents and short-term investments, and is recognized when earned.
As of December 31, 2022, we have not received the option exercise payment or any milestone payments. We are responsible for conducting all research and development of itolizumab, which will be funded by Ono on a quarterly basis from July 1, 2022, through the option period.
As of December 31, 2023, we have not received the option exercise payment or any milestone payments. We are responsible for conducting all research and development of itolizumab, which is being funded by Ono on a quarterly basis from July 1, 2022 through the option period.
We are responsible for conducting all research and development of itolizumab, which will be funded by Ono on a quarterly basis from July 1, 2022, through the option period.
We are responsible for conducting all research and development of itolizumab, which is being funded by Ono on a quarterly basis from July 1, 2022, through the option period.
If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $37.2 million based on the currency exchange rate quoted by MUFG Bank, Ltd on March 16, 2023. We are also eligible to receive up to $101.4 million upon the achievement of certain development and commercialization milestones.
If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $33.1 million based on the currency exchange rate quoted by MUFG Bank Ltd. on March 21, 2024. We are also eligible to receive up to $101.4 million upon the achievement of certain development and commercialization milestones.
Since our inception, substantially all of our efforts have been focused on organizing and staffing our company, business planning, raising capital, in-licensing rights to itolizumab (EQ001), conducting non-clinical research, filing three INDs, conducting clinical development of our product candidates, conducting business development activities such as the acquisition of Bioniz, the Asset Purchase Agreement with Ono and other transactions not completed, and the general and administrative activities associated with operating a public company.
Since our inception, substantially all of our efforts have been focused on organizing and staffing our company, business planning, raising capital, in-licensing rights to itolizumab (EQ001), conducting non-clinical research, filing three Investigational New Drug applications, or INDs, conducting clinical development of our product candidates, conducting business development activities such as the acquisition of Bioniz, the Asset Purchase Agreement with Ono and other transactions not completed, initiating a stock repurchase program, and the general and administrative activities associated with operating a public company.
Our strategy is focused on advancing the clinical development of our product candidates, including potentially pursuing additional indications and acquiring new product candidates and platforms to expand our pipeline. We intend to commercialize our product candidates either independently or through partnerships or otherwise monetize our pipeline through strategic transactions.
Our strategy is focused on advancing the clinical development of our product candidates, including potentially pursuing additional indications and acquiring new product candidates and platforms to expand our pipeline. We intend to commercialize our product candidates either independently or through partnerships or otherwise monetize our pipeline through strategic transactions. Our current clinical-stage product candidates consist of EQ101 and itolizumab (EQ001).
The option period will expire three months following the delivery of topline data from the EQUALISE study in LN and interim data from the EQUATOR Phase 3 clinical study in aGVHD.
Unless terminated early, the option period will expire three months 97 following the delivery of topline data from the EQUALISE clinical study in LN and interim data from the EQUATOR Phase 3 clinical study in aGVHD.
The successful development of EQ101, EQ102 and itolizumab (EQ001) is highly uncertain.
The successful development of EQ101, EQ302 and itolizumab (EQ001) is highly uncertain.
We have experienced net losses and negative cash flows from operating activities since our inception and expect to continue to incur net losses into the foreseeable future. We had an accumulated deficit of $172.4 million as of December 31, 2022.
We have experienced net losses and negative cash flows from operating activities since our inception and expect to continue to incur net losses into the foreseeable future. We had an accumulated deficit of $185.7 million as of December 31, 2023.
If Ono exercises the Option, we will receive JPY 5.0 billion, or approximately $37.2 million based on the currency exchange rate quoted by MUFG Bank, Ltd. on March 16, 2023. We are also eligible to receive up to $101.4 million upon achievement of certain development and commercialization milestones.
If Ono exercises the Option, we will receive JPY 5.0 billion, or approximately $33.1 million based on the currency exchange rate quoted by MUFG Bank, Ltd. on March 21, 2024. We are also eligible to receive up to $101.4 million upon achievement of certain development and commercialization milestones.
Investing Activities Net cash provided by investing activities was $18.7 million during the year ended December 31, 2022. We purchased $14.9 million of short-term investments and $33.2 million of our short-term investments matured during the period. Purchases of property and equipment for the year ended December 31, 2022 totaled $0.3 million.
Net cash provided by investing activities was $18.7 million during the year ended December 31, 2022. Maturities of our short-term investments totaled $33.2 million, which was offset by purchases of short-term investments totaling $14.9 million. Purchases of property and equipment for the year ended December 31, 2022 totaled $0.3 million.
Our future capital requirements will depend on many factors, including: • whether Ono exercises its option and the extent to which milestones payments, if any, are received: • the initiation, progress, timing, costs and results of our ongoing and future clinical studies of EQ101, EQ102, itolizumab (EQ001) and other product candidates, including as such activities may be adversely impacted by the COVID-19 pandemic and the evolving conflict between Russia and Ukraine and recent bank failures; • the number and scope of indications we decide to pursue for the development of our product candidates; 101 • the cost, timing and outcome of regulatory review of any BLA we may submit for our product candidates; • the costs and timing of manufacturing EQ101, EQ102, itolizumab (EQ001) and other product candidates; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates; • the costs associated with being a public company; • our ability to enter into partnerships or otherwise monetize our pipeline through strategic transactions on a timely basis, on terms that are favorable to us, or at all; • the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; • the extent to which we acquire or in-license other product candidates and technologies; • the legal and other transactional costs associated with our business development activities; and • the cost associated with commercializing EQ101, EQ102 and itolizumab (EQ001) or any of our other product candidates, if approved for commercial sale.
Our future capital requirements will depend on many factors, including: • whether Ono exercises its option and the extent to which milestones payments, if any, are received: • the initiation, progress, timing, costs and results of our ongoing and future clinical studies of EQ101 and itolizumab (EQ001) and other product candidates, including as such activities may be adversely impacted by public health 102 epidemics or outbreaks, the evolving conflict between Russia and Ukraine, the conflict in the Middle East and bank failures; • the potential advancement and cost of preclinical research of EQ302 and other novel preclinical drug candidates identified by our multi-cytokine targeting drug discovery platform; • the number and scope of indications we decide to pursue for the development of our product candidates; • the cost, timing and outcome of regulatory review of any Biologics License Application, or BLA, or New Drug Application, or NDA, we may submit for our product candidates; • the costs and timing of manufacturing EQ101 and itolizumab (EQ001) and other product candidates; • the costs of drug formulation research and device development; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates; • the costs associated with being a public company; • our ability to enter into partnerships or otherwise monetize our pipeline through strategic transactions on a timely basis, on terms that are favorable to us, or at all; • the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; • the extent to which we acquire or in-license other product candidates and technologies or engage in in-house discovery and preclinical research of new product candidates, for example EQ302; • the legal and other transactional costs associated with our business development activities; and • the cost associated with commercializing EQ101 and itolizumab (EQ001) or any of our other product candidates, if approved for commercial sale.
Interest Expense Interest expense was $1.1 million for the years ended December 31, 2022 and 2021. Interest expense consists of interest on our term notes payable. Interest Income Interest income was $0.4 million for the year ended December 31, 2022, compared to $0.1 million for the year ended December 31, 2021.
Interest Expense Interest expense was $0.5 million for the year ended December 31, 2023, compared to $1.1 million for the year ended 2022. Interest expense consists of interest on our prior term notes payable. Interest Income Interest income was $2.3 million for the year ended December 31, 2023, compared to $0.4 million for the year ended December 31, 2022.
We anticipate our expenses will increase substantially as we advance our research and development activities, including the ongoing and future clinical development of EQ101, EQ102 and itolizumab (EQ001), potentially expand the indications in which we conduct clinical development of our product candidates, potentially acquire additional products and/or product candidates, seek regulatory approval for and potentially commercialize any approved product candidates, hire additional personnel, protect our intellectual property, incur increasing expenses associated with our outstanding debt, and incur general corporate costs.
We anticipate our expenses will increase substantially as we advance our research and development activities, including the ongoing and future clinical development of EQ101, EQ302 and itolizumab (EQ001), potentially expand the indications in which we conduct clinical development of our product candidates, potentially acquire or develop new product candidates, including preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform, seek regulatory approval for and potentially commercialize any approved product candidates, hire additional personnel, protect our intellectual property, and incur general corporate costs.
The increase in interest income was primarily due to higher interest rates on our short-term investments during 2022 compared to 2021. Other Income (Expense), Net Other income, net was $0.3 million for the year ended December 31, 2022, compared to other expense, net of $0.3 million for the year ended December 31, 2021.
The increase in interest income was primarily due to higher average interest rates in 2023 compared to 2022. Other (Expense) Income, Net Other expense, net was $0.1 million for the year ended December 31, 2023, compared to other income, net of $0.3 million for the year ended December 31, 2022.
Funding Requirements We expect our expenses to increase substantially in connection with our ongoing and future activities, particularly as we advance and expand our clinical development of EQ101, EQ102, and itolizumab (EQ001) if Ono does not exercise its option, including potential new indications.
Funding Requirements We expect our expenses to increase substantially in connection with our ongoing and future activities, particularly as we advance and expand our clinical development of EQ101 and itolizumab (EQ001) if Ono does not exercise its option, including potential new indications, and potentially advance preclinical research of EQ302 and other novel preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform.
The change during 2022 compared to 2021 was primarily driven by a realized foreign currency gain of $0.6 million on the Ono upfront payment of JPY 3.5 billion due to the strengthening of the Japanese Yen between the time of invoicing and cash receipt, partially offset by increases in net unrealized foreign currency transaction losses related to our Australian subsidiary.
For the year ended December 31, 2022, other income, net consisted of a realized foreign currency gain of $0.6 million on the Ono upfront payment of JPY 3.5 billion due to the strengthening of the Japanese Yen between the time of invoicing and cash receipt, partially offset by net unrealized foreign currency transaction losses related to the Australian subsidiary.
Pursuant to the Asset Purchase Agreement, we are responsible for conducting all research and development of itolizumab (EQ001), which will be funded by Ono on a quarterly basis from July 1, 2022 through the option period.
We are also eligible to receive up to $101.4 million upon the achievement of certain development and commercialization milestones. Pursuant to the Asset Purchase Agreement, we are responsible for conducting all research and development of itolizumab (EQ001), which is being funded by Ono on a quarterly basis from July 1, 2022 through the option period.
Purchases of property and equipment for the year ended December 31, 2021 totaled $0.1 million. Financing Activities Net cash used in financing activities totaled $1.2 million during the year ended December 31, 2022. We began making principal payments on our outstanding notes payable starting in October 2022 which totaled $1.4 million.
As of December 31, 2023, we had no further obligations under the Loan Agreement. 104 Net cash used in financing activities totaled $1.2 million during the year ended December 31, 2022. We began making principal payments on our outstanding notes payable starting in October 2022 which totaled $1.4 million.
We expect that our existing cash, cash equivalents and short-term investments as of December 31, 2022 will enable us to fund our operations into 2025. 95 We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for EQ101, EQ102, or any future product candidate, which is unlikely to happen within the next 12 months, if ever.
We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for EQ101, EQ302, or any future product candidate, which is unlikely to happen within the next 12 months, if ever.
Amortization of the upfront payment represented $4.0 million, and development funding from July 1, 2022 through December 31, 2022 represented $11.8 million. There was no revenue recognized in the year ended December 31, 2021.
Amortization of the upfront payment represented $4.0 million, and development funding from July 1, 2022 through December 31, 2022, represented $11.8 million. Research and Development Expenses Research and development expenses were $37.0 million for the year ended December 31, 2023, compared to $37.5 million for the year ended December 31, 2022.
As of December 31, 2022, we had $59.1 million in cash and cash equivalents and $11.9 million in short-term investments.
As of December 31, 2023, we had $23.2 million in cash and cash equivalents and $17.7 million in short-term investments.
We have a proprietary product discovery platform that we can leverage to design novel peptides to target and inhibit multiple cytokines that are involved in validated biological and disease pathways.
We have a proprietary product discovery platform that we can leverage to design novel peptides to target and inhibit multiple cytokines that are involved in validated biological and disease pathways. For example, we recently highlighted preclinical data from EQ302, a second generation orally deliverable multi-cytokine inhibitor in development to target IL-15 and IL-21.
Sources of Liquidity Asset Purchase Agreement with Ono On December 5, 2022, we entered into the Asset Purchase Agreement with Ono, pursuant to which the Company granted Ono the exclusive right, but not the obligation, to acquire our rights to itolizumab.
As of the filing of this Annual Report on Form 10-K, we have not sold any shares under the 2023 ATM Facility. 101 Asset Purchase Agreement with Ono On December 5, 2022, we entered into the Asset Purchase Agreement with Ono, pursuant to which we granted Ono the exclusive right, but not the obligation, to acquire our rights to itolizumab.
There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive.
If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive.
If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $37.2 million based on the currency exchange rate quoted by MUFG Bank Ltd. on March 16, 2023. We are also eligible to receive up to $101.4 million upon the achievement of certain development and commercialization milestones.
If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $33.1 million based on the currency exchange rate quoted by MUFG Bank, Ltd on March 21, 2024. We expect Ono to make its option exercise decision in the second half of 2024.
However, based on our current operating plans and our assessment of the probability and potential timing of such payments, we believe those payments, if any, are remote and highly unlikely to come due within the next 12 months. 103 Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.
However, based on our current operating plans and our assessment of the probability and potential timing of such payments, we believe those payments, if any, are remote and highly unlikely to come due within the next 12 months.
For further details on the potential contingent payments related to our acquisition of Bioniz and related to the Biocon License, see Notes 6 and 9 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. 102 Cash Flows The following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands): Year Ended December 31, 2022 2021 Net cash provided by (used in): Operating activities $ (8,733 ) $ (32,081 ) Investing activities 18,684 27,406 Financing activities (1,215 ) 31,061 Effect of exchange rate changes on cash 5 (2 ) Net increase in cash and cash equivalents $ 8,741 $ 26,384 Operating Activities Net cash used in operating activities was $8.7 million during the year ended December 31, 2022.
Cash Flows The following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands): Year Ended December 31, 2023 2022 Net cash (used in) provided by: Operating activities $ (21,783 ) $ (8,733 ) Investing activities (4,762 ) 18,684 Financing activities (9,228 ) (1,215 ) Effect of exchange rate changes on cash (118 ) 5 Net (decrease) increase in cash and cash equivalents $ (35,891 ) $ 8,741 Operating Activities During the year ended December 31, 2023, net cash used in operating activities was $21.8 million compared to $8.7 million during the year ended December 31, 2022.
Our novel and differentiated pipeline of first-in-class immunology assets has the potential to address unmet medical needs in numerous areas, including dermatology, gastroenterology, transplant science, hematology, rheumatology, oncology and pulmonology. We acquired the exclusive worldwide rights to EQ101 and EQ102 through the acquisition of Bioniz in February 2022.
Our novel and differentiated pipeline of first-in-class immunology assets has the potential to address unmet medical needs in numerous areas, including dermatology, gastroenterology, rheumatology, hematology, transplant science, oncology and pulmonology. We are focused on developing EQ101, EQ302 and itolizumab (EQ001) as potential best-in-class, disease modifying treatments for multiple severe immuno-inflammatory disorders.
Unless terminated early, the option period will expire three months following the delivery of topline data from the EQUALISE clinical study in LN and interim data from the EQUATOR Phase 3 clinical study in aGVHD. During the year ended December 31, 2022, we recognized $15.8 million of revenue under the Asset Purchase Agreement.
The option period will expire three months following the delivery of topline data from the EQUALISE study in LN and interim data from the EQUATOR Phase 3 clinical study in aGVHD. As of December 31, 2023, we have received $38.0 million in development funding payments from Ono.
Our current clinical-stage product candidates consist of EQ101, EQ102 and itolizumab (EQ001). EQ101 and EQ102 are synthetic peptides engineered to specifically inhibit key disease-driving, clinically validated cytokine targets aimed at addressing unmet needs across a range of immuno-inflammatory indications.
EQ101 is a first-in-class, selective, tri-specific synthetic peptide engineered to specifically inhibit IL-2, IL-9 and IL-15, key disease-driving, clinically validated cytokine targets aimed at addressing unmet needs across a range of immuno-inflammatory indications.
Acquired In-Process Research and Development Expenses There were $23.0 million of acquired in-process research and development expenses for the year ended December 31, 2022 resulting from accounting for the Bioniz acquisition as an asset acquisition where the product candidates acquired were determined to have no alternative future use. The consideration in excess of the tangible net liabilities acquired was expensed.
The acquired in-process research and development expenses in the year ended December 31, 2022 resulted from accounting for the Bioniz acquisition as an asset acquisition based on a determination that the product candidates acquired had no alternative future use.
Other Income (Expense), Net Other income (expense), net consists primarily of a foreign currency transaction gain related to the Ono upfront payment which was denominated in JPY and net foreign currency gains and losses related to our Australian subsidiary. 98 Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table sets forth our results of operations for the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 Change Revenue $ 15,759 $ - $ 15,759 Research and development 37,547 26,379 11,168 Acquired in-process research and development 23,049 - 23,049 General and administrative 17,239 11,407 5,832 Interest expense (1,053 ) (1,073 ) 20 Interest income 420 57 363 Other income (expense), net 281 (250 ) 531 Revenue During the year ended December 31, 2022, we recognized revenue of $15.8 million under our Asset Purchase Agreement with Ono.
Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table sets forth our results of operations for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Change Revenue $ 36,084 $ 15,759 $ 20,325 Research and development 37,039 37,547 (508 ) Acquired in-process research and development - 23,049 (23,049 ) General and administrative 13,567 17,239 (3,672 ) Interest expense (491 ) (1,053 ) 562 Interest income 2,334 420 1,914 Other (expense) income, net (76 ) 281 (357 ) Income tax expense 580 - 580 Revenue During the year ended December 31, 2023, we recognized revenue of $36.1 million under our Asset Purchase Agreement with Ono.
Substantially all of our operating losses resulted from expenses incurred in connection with our research and development activities, non-clinical and clinical activities and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing losses into the foreseeable future.
As of December 31, 2023, we had an accumulated deficit of $185.7 million. 96 Substantially all of our operating losses resulted from expenses incurred in connection with our research and development activities, non-clinical and clinical activities, acquired in-process research and development, and general and administrative costs associated with our operations.
General and Administrative Expenses General and administrative expenses were $17.2 million for the year ended December 31, 2022, compared to $11.4 million for the year ended December 31, 2021.
The consideration in excess of the tangible net liabilities acquired was expensed. 100 General and Administrative Expenses General and administrative expenses were $13.6 million for the year ended December 31, 2023, compared to $17.2 million for the year ended December 31, 2022.
The Type A portion of the study has been completed, and was a MAD study involving 35 SLE patients to evaluate the safety, tolerability, PK/PD and clinical activity of itolizumab (EQ001) administered SC. We are also collaborating with Biocon and co-funding a Phase 2 clinical study of itolizumab in subjects with ulcerative colitis.
We are also collaborating with Biocon and co-funding a Phase 2 clinical study of itolizumab in subjects with ulcerative colitis.
These payments were offset by proceeds from issuance of shares under our employee stock purchase plan totaling $0.2 million. Net cash provided by financing activities totaled $31.1 million during the year ended December 31, 2021.
Financing Activities Net cash used in financing activities totaled $9.2 million during the year ended December 31, 2023, driven by payments totaling $9.1 million related to our former loan and security agreement with Oxford Finance LLC and SVB, or Loan Agreement, and $0.3 million in stock repurchases, offset by $0.2 million of cash received from employee stock purchases related to our Employee Stock Purchase Plan.
Liquidity and Capital Resources We have incurred losses and negative cash flows from operations since inception. As of December 31, 2022, we had an accumulated deficit of $172.4 million and anticipate that we will continue to incur net losses for the foreseeable future.
In addition, we have generated proceeds from our Asset Purchase Agreement with Ono as described in more detail in the Sources of Liquidity section below. As of December 31, 2023, we had an accumulated deficit of $185.7 million and anticipate that we will continue to incur net losses for the foreseeable future.
As of December 31, 2022, aggregate deferred revenue related to the Asset Purchase Agreement was $25.1 million. 96 Research and Development Expenses Research and development expenses primarily consist of costs associated with our non-clinical research and clinical development of our product candidates.
Research and Development Expenses Research and development expenses primarily consist of costs associated with our non-clinical research and clinical development of our product candidates.
The decision to initiate the EQUATOR study was based on findings from our completed Phase 1b clinical study in aGVHD, called EQUATE, and feedback from both the FDA and leading physicians in the field of hematopoietic stem cell transplantation.
In March 2022, we initiated EQUATOR, a global Phase 3 pivotal clinical study of itolizumab (EQ001) in 200 patients with acute graft-versus-host disease, or aGVHD. The decision to initiate the EQUATOR study was based on findings from our completed Phase 1b clinical study in aGVHD, called EQUATE, and feedback from both the U.S.
For additional information relating to our term loans or leases, see Notes 7, 10 and 12 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis.
Material Cash Requirements 103 Our expected material cash requirements are comprised of contractually obligated expenditures, including amounts due under our operating leases. For additional information relating to our leases, see Notes 7 and 12 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
We have incurred losses since our inception. For the years ended December 31, 2022 and 2021, our net losses were $62.4 million and $39.1 million, respectively. As of December 31, 2022, we had an accumulated deficit of $172.4 million.
Since inception, we have primarily financed our operations through debt and equity financings and revenue generated from the Asset Purchase Agreement. We have incurred losses since our inception. For the years ended December 31, 2023 and 2022, our net losses were $13.3 million and $62.4 million, respectively.
As a result of the Bioniz acquisition, we acquired cash totaling $0.7 million. Net cash provided by investing activities was $27.4 million during the year ended December 31, 2021. We purchased $33.0 million of short-term investments and $60.5 million of our short-term investments matured during the period.
Investing Activities Net cash used in investing activities was $4.8 million during the year ended December 31, 2023. Purchases of our short-term investments totaled $54.7 million, which was offset by maturities of short-term investments totaling $50.0 million during the period. Purchases of property and equipment for the year ended December 31, 2023 totaled $0.1 million.
Net cash used in operating activities during 2022 primarily related to our net loss of $62.4 million, adjusted for non-cash expense of $23.0 million related to the acquired in-process research and development charge attributed to the Bioniz acquisition, non-cash stock-based compensation expense of $4.8 million and net cash inflows from a change in deferred revenue of $25.1 million associated with the one-time receipt of our upfront payment from Ono received in connection with entering into the Asset Purchase Agreement in December 2022.
The primary drivers of the change in net cash used in operating activities pertained to a decrease of $26.4 million related to the one-time receipt of the upfront payment from Ono received in connection with entering into the Asset Purchase Agreement in December 2022 partially offset by an increase of $13.7 million in development funding from Ono.
We expect that our primary uses of capital will be for clinical development services, non-clinical research, manufacturing, legal and other regulatory compliance expenses, compensation and related expenses, risk management, and general overhead costs. We expect that our existing cash, cash equivalents and short-term investments as of December 31, 2022 will enable us to fund our currently planned operations into 2025.
We expect that our primary uses of capital will be for clinical development services, non-clinical research, manufacturing and product supply, potential acquisition of new products, potential repurchases of shares of our common stock under our stock repurchase program, legal and other regulatory compliance expenses, employee compensation and related expenses, insurance premiums, working capital and other general overhead costs.
Research and Development Expenses Research and development expenses were $37.5 million for the year ended December 31, 2022, compared to $26.4 million for the year ended December 31, 2021.
Acquired In-Process Research and Development Expenses There were no acquired in-process research and development expenses in the year ended December 31, 2023, whereas there was $23.0 million of such expenses for the year ended December 31, 2022.
Through the acquisition we expanded our immunology pipeline with first-in-class immuno-inflammatory product candidates across a range of development stages and obtained a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates.
We acquired the exclusive worldwide rights to EQ101 and a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates such as EQ302 through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022.
We have not sold any shares of our common stock to Lincoln Park under the Purchase Agreement through the date of the filing of this Annual Report on Form 10-K.
As of December 31, 2023, we repurchased 298,385 shares of our common stock under the stock repurchase program for a total of $0.3 million. There have been no repurchases of our common stock under the stock repurchase program since December 31, 2023 and through the date of the filing of this Annual Report on Form 10-K.
In November 2022, we initiated a Phase 2 proof-of-concept clinical study of EQ101 that is expected to enroll approximately 30 subjects with alopecia areata in Australia. We are conducting the Type B portion of EQUALISE, a Phase 1b proof-of-concept clinical study of itolizumab (EQ001) in patients with lupus/LN.
We recently completed EQUALISE, a Phase 1b proof-of-concept clinical study of itolizumab (EQ001) in patients with systemic lupus erythematosus, or SLE, and lupus nephritis, or LN. In November 2023, we announced data from the Type B LN portion of the study presented at the annual meetings of the American College of Rheumatology and the American Society of Nephrology.
Removed
EQ101 is a first-in class, selective, tri-specific inhibitor of IL-2, IL-9 and IL-15, and EQ102 is a first-in class, selective, bi-specific inhibitor of IL-15 and IL-21.
Added
We are also engaged in the discovery and optimization of additional peptide-based product candidates that selectively target multiple cytokines and are currently advancing the preclinical development of EQ302, a first-in-class, orally delivered, bi-specific inhibitor of IL-15 and IL-21.
Removed
We are focused on developing EQ101, EQ102 and itolizumab (EQ001) as potential best-in-class, disease modifying treatments for multiple severe immuno-inflammatory disorders and currently have active clinical development programs with all three assets. 94 In March 2022, we initiated EQUATOR, a global Phase 3 pivotal clinical study of itolizumab (EQ001) in 200 patients with aGVHD.
Added
EQ101 and EQ302 are synthetic peptides engineered to specifically inhibit key disease-driving, clinically validated cytokine targets aimed at addressing unmet needs in a number of immuno-inflammatory indications. In November 2022, we initiated a Phase 2 proof-of-concept clinical study of EQ101 administered intravenously, or IV, in subjects with moderate to severe alopecia areata, or AA, in Australia and New Zealand.
Removed
In September 2022, we initiated a Phase 1 first-in-human clinical study of EQ102 administered SC in up to 64 healthy volunteers in Australia. We are planning an additional part to the study which will evaluate the biological activity of EQ102 in subjects with celiac disease.
Added
Enrollment in that study has been completed, and we expect to announce topline data in the second quarter of 2024. We are currently conducting preclinical development of EQ302, including in vivo pharmacology and formulation development, to further characterize and optimize the product candidate.
Removed
The ongoing Type B portion of the study will evaluate up to 20 newly diagnosed or refractory LN patients who will be treated with itolizumab (EQ001) for up to 24 weeks.
Added
Pending positive findings, we expect to advance EQ302 into additional preclinical development to include GMP-manufacturing and toxicology studies capable of supporting a potential IND filing and advancement into a first-in-human clinical study. We recently completed a Phase 1 first-in-human clinical study of another multi-cytokine targeting peptide, EQ102, in healthy volunteers in Australia.
Removed
Since inception, we have primarily financed our operations through our initial public offering, or IPO, a follow-on public offering, a registered direct offering, private placements of convertible promissory notes, term loans and sales of our common stock through “at-the-market” sales agreements, or ATM offerings, with Jefferies LLC, or Jefferies, and revenue generated from the Asset Purchase Agreement.
Added
EQ102 is a bi-specific inhibitor of IL-15 and IL-21, which was also acquired as part of the Bioniz acquisition. In that Phase 1 study, EQ102 was generally well tolerated and demonstrated pharmacodynamic activity, but the bioavailability of the initial formulation was lower than expected.
Removed
In addition, subject to limited exceptions, our loan and security agreement with Oxford Finance LLC and SVB also prohibits us from incurring indebtedness without the prior written consent of the lenders, which consent may be withheld at their sole and absolute discretion. On March 10, 2023, the FDIC took control and was appointed receiver of SVB.
Added
Preclinical and translational data have demonstrated that EQ302 has increased potency compared to EQ102, is both stable and permeable in the gut, and can be further modified for optimal systemic or gut-restricted activity.
Removed
At the time the FDIC took control, we held assets valued at approximately $8.2 million in a sweep account with SVB. We received full access to those funds on March 13, 2023.
Added
In December 2023, we announced that given our recent progress with EQ302 and its superior product profile relative to EQ102, we have transitioned away from further developing EQ102 and are instead advancing EQ302 towards the clinic for the potential treatment of patients with gastrointestinal and skin diseases.

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Other EQ 10-K year-over-year comparisons