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

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Paragraph-level year-over-year comparison of Ernexa Therapeutics 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.

+440 added−437 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-20)

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

440 paragraphs added · 437 removed · 201 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

158 edited+174 added−190 removed154 unchanged
Biggest changePatent protection for the mRNA technology platform includes: Family Number and Title United States or Foreign Jurisdiction Earliest Effective Date of Patent Application FAB-001: “Methods and Products for Transfecting Cells” Granted : US (Nos. 9,422,577, 9,605,277, 9,605,278, 10,472,611, 10,662,410, 10,829,738, 10,982,229, and 11,466,293), EP (CH, DE, FR, GB, IE), EP (BE, CH, DE, DK, FR, GB, IE, NL), AU (6X), CA (Allowed), CN (4X), HK (5X), JP (2X), KR (2X), MX, MX (Allowed), RU (2X) Published : US (3X), EP, BR (2X), CA, CN, HK (2X), KR, RU Pending : US (4X), AU, CA, MX (3X) 12/05/2011 FAB-003: “Methods and Products for Transfection” Granted : US (Nos. 8,497,124, 9,127,248, 9,399,761, 9,562,218, 9,695,401, 9,879,228, 9,969,983, 10,131,882, 10,301,599, 10,443,045, 11,492,600) Pending : US 12/05/2011 6 Table of Contents FAB-005: “Methods and Products for Expressing Proteins in Cells” Granted : US (Nos. 9,376,669, 9,447,395, 9,464,285, 9,487,768, 9,657,282, 9,758,797, 10,415,060, 10,590,437, 10,724,053, 10,752,917, 10,752,918, 10,752,919, 10,767,195, 11,332,758, 11,332,759, 11,339,409, and 11,339,410), EP (CH, DE, FR, GB, IE), AU (2X), BR (3X Allowed), CA (Allowed), HK, JP (3X), KR (2X), MX, RU Published : US (2X), EP, BR, CA, CN, HK, JP, KR, MX Pending : AU 11/01/2012 FAB-008: “Methods and Products for Nucleic Acid Production and Delivery” Granted : US (Nos. 9,770,489 and 10,124,042), EP (CH, DE, ES, FR, IE), EP (BE, CH, DE, DK, ES, FI, FR, GB, IE, NL, NO, SE), AU, CA (Allowed), HK, JP (Allowed), KR, MX Published : US (2X), AU, BR (2X), CA, CN, JP, KR, MX Pending : AU, EP 08/18/2014 FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” Granted : US (No. 11,241,505), AU, JP Published : US, EP, CA, CN, HK (2X), JP, NZ Pending : AU 02/13/2015 FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” Granted : US (Nos. 10,137,206, 10,350,304, 10,363,321, 10,369,233, 10,576,167, 10,888,627, and 10,894,092), CN (Allowed) Published : US (3X), EP, AU, CA, CN, HK, JP, IL, IN, NZ Pending : CN, JP (2X), NZ 08/17/2016 7 Table of Contents FAB-011: “Nucleic Acid-Based Therapeutics” Published : US, EP, AU, CA, HK 03/27/2018 FAB-012: “Cationic Lipids and Transfection Methods” Granted : US (Nos. 10,501,404, 10,556,855, 10,611,722, 10,752,576, and 11,242,311) Published : US (2X), AU, CA, CN, EP, HK, JP, KR, MX Pending : AU, NZ US: 07/30/2019 Foreign: 07/03/2019 FAB-013: “Engineered Gene-Editing Proteins” Pending : US, EP 05/12/2020 FAB-016: “Mesenchymal Stem Cell Therapies” Published : CN, EP Pending : US, AU, JP 04/28/2020 FAB-017: “Engineered Immune Cell Therapies” Published : PCT 03/05/2021 FAB-018: “Circular RNA” Published : PCT 04/27/2021 US – United States of America EP – European Patent Convention PCT – Patent Cooperation Treaty AU – Australia BE – Belgium BR – Brazil CA – Canada CH – Switzerland CN – Peoples’ Republic of China DE – Germany DK – Denmark ES – Spain FI – Finland GB – Great Britain HK – Hong Kong IE – Ireland IL – Israel IN – India JP – Japan KR – Republic of Korea (South Korea) MX – Mexico NL – Netherlands NO – Norway NZ – New Zealand SE – Sweden 8 Table of Contents Patent Families Descriptions of our patent families are as follows: • FAB-001: “Methods and Products for Transfecting Cells” - The present invention relates in part to nucleic acids encoding proteins, nucleic acids containing non-canonical nucleotides, therapeutics comprising nucleic acids, methods, kits, and devices for inducing cells to express proteins, methods, kits, and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, and therapeutics produced using these methods, kits, and devices.
Biggest changePatent protection for the mRNA technology platform includes: Family Number and Title United States or Foreign Jurisdiction Earliest Effective Date of Patent Application FAB-001: “Methods and Products for Transfecting Cells” Granted : US (Nos. 9,422,577, 9,605,277, 9,605,278, 10,472,611, 10,662,410, 10,829,738, 10,982,229, ,11,466,293, 11,692,203 and 11,708,586), EP (CH, DE, FR, GB, IE), EP (BE, CH, DE, DK, FR, GB, IE, NL), AU (6X), CA, CN (4X), HK (5X), JP (2X), KR (2X), MX(2X), RU Nationalized PCT : (1X) Pending : US (4X), AU, BR (4X), CA, CN, EP, HK (2X), KR, MX (3X), RU 12/05/2011 FAB-003: “Methods and Products for Transfection” Granted : US (Nos. 8,497,124, 9,127,248, 9,399,761, 9,562,218, 9,695,401, 9,879,228, 9,969,983, 10,131,882, 10,301,599, 10,443,045, 11,492,600) Pending : US 5/07/2012 FAB-005: “Methods and Products for Expressing Proteins in Cells” Granted : US (Nos. 9,447,395, 9,376,669, 9,464,285, 9,487,768, 9,657,282, 9,758,797, 10,415,060, 10,590,437, 11,339,409, 10,752,917, 11,339,410 ,10,724,053, 11,332,758, 10,767,195, 11,332,759, 10,752,918 and 10,752,919 ), EP (CH, DE, FR, GB, IE), AU (2X), BR (3X), CA, HK, JP (3X), KR (3X), MX, RU Nationalized PCT : (1X) Allowed: BR, JP, MX and US Pending : AU, CA, CN, EU, HK, KR and US 11/01/2012 3 Table of Contents FAB-008: “Methods and Products for Nucleic Acid Production and Delivery” Granted : US (Nos. 9,770,489 and 10,124,042), EP (DE, FR, GB, CH, ES, IE), EP (BE; DK; FI; FR; DE; IE; NL; NO; ES; SE; CH; GB), AU, HK, JP, KR, MX, RU Nationalized PCT : (1X) Pending : AU, BR, CA, CN, EP, JP, KR, MX and US (2X) 08/18/2014 FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” Granted : US (No. 11,241,505), AU, JP Nationalized PCT : (1X) Pending : AU, CA, CN, EP, HK (2X), JP, NZ and US 02/16/2016 FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” Granted : US (Nos. 10,576,167, 10,137,206, 10,350,304, 10,363,321, 10,369,233, 10,888,627, and 10,894,092), AU, CN Nationalized PCT : (1X) Issue Fees Paid: US Pending : US (3X), AU, CN, EP, HK, IL (2X), JP (2X), NZ (2X) 08/17/2017 FAB-011: “Nucleic Acid-Based Therapeutics” Nationalized PCT: (1X) Pending: US, AU, CA, EP and HK 03/27/2019 FAB-012: “Cationic Lipids and Transfection Methods” Granted : US (Nos. 10,501,404, 10,556,855, 10,611,722, 10,752,576, 11,242,311 and 11,814,333) Nationalized PCT: (1X) Pending : US (2X), AU, CA, CN, EP, HK, JP, KR, MX, NZ US: 07/30/2019 Foreign: 07/03/2019 4 Table of Contents FAB-013: “Engineered Gene-Editing Proteins” Pending : US, EP Nationalized PCT: (1X) 05/12/2021 FAB-016: “Mesenchymal Stem Cell Therapies” Nationalized PCT: (1X) Pending : US, AU, CN, EP, HK and JP 04/28/2021 FAB-017: “Engineered Immune Cell Therapies” Nationalized PCT: (1X) Pending: US, AU, CA, CN, EP and JP 03/04/2022 FAB-018: “Circular RNA” Nationalized PCT: (1X) Pending: US, AU, CA, CN, EP and JP 04/27/2022 FAB-019: “Methods for reprogramming and gene editing cells” Pre-nationalization PCT: (1X) 01/05/2022 US – United States of America EP – European Patent Convention PCT – Patent Cooperation Treaty AU – Australia BE – Belgium BR – Brazil CA – Canada CH – Switzerland CN – Peoples’ Republic of China DE – Germany DK – Denmark ES – Spain FI – Finland FR – France GB – Great Britain HK – Hong Kong IE – Ireland IL – Israel IN – India JP – Japan KR – Republic of Korea (South Korea) MX – Mexico NL – Netherlands NO – Norway NZ – New Zealand RU – Russian Federation SE – Sweden 5 Table of Contents Patent Families Descriptions of our patent families are as follows: • FAB-001: “Methods and Products for Transfecting Cells” - The present invention relates in part to nucleic acids encoding proteins, nucleic acids containing non-canonical nucleotides, therapeutics comprising nucleic acids, methods, kits, and devices for inducing cells to express proteins, methods, kits, and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, and therapeutics produced using these methods, kits, and devices.
As a result of these factors, it is more difficult to predict the time and cost of such product candidate development, and we cannot predict whether the application of gene editing technology, or other similar or competitive gene editing technologies, will result in the identification, development and regulatory approval of any products.
As a result of these factors, it is more difficult to predict the time and cost of such product candidate development, and we cannot predict whether the application of gene editing technology, or other similar or competitive gene editing technologies, will result in the identification, development or regulatory approval of any products.
Therapeutics comprising nucleic acids encoding gene-editing proteins are also described. • FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-011: “Nucleic Acid-Based Therapeutics” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. 9 Table of Contents • FAB-012: “Cationic Lipids and Transfection Methods” - The present invention relates in part to novel cationic lipids and their use, e.g., in delivering nucleic acids to cells. • FAB-013: “Engineered Gene-Editing Proteins” - The present invention relates in part to nucleic acids encoding gene editing proteins, including novel engineered variants. • FAB-016: “Mesenchymal Stem Cell Therapies” - Cell-based therapies based on mesenchymal stem cells (MSCs) are described. • FAB-017: “Engineered Immune Cell Therapies” - The present disclosure relates in part to engineered immune cells that are, inter alia, silenced from a host immune response. • FAB-018: “Circular RNA” - Nucleic acid structures that promote formation of circular RNAs (circRNAs), which may comprise hybridization of substantially complimentary regions within the nucleic acid and contact with an RNA ligase.
Therapeutics comprising nucleic acids encoding gene-editing proteins are also described. • FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-011: “Nucleic Acid-Based Therapeutics” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-012: “Cationic Lipids and Transfection Methods” - The present invention relates in part to novel cationic lipids and their use, e.g., in delivering nucleic acids to cells. • FAB-013: “Engineered Gene-Editing Proteins” - The present invention relates in part to nucleic acids encoding gene editing proteins, including novel engineered variants. 6 Table of Contents • FAB-016: “Mesenchymal Stem Cell Therapies” - Cell-based therapies based on mesenchymal stem cells (MSCs) are described. • FAB-017: “Engineered Immune Cell Therapies” - The present disclosure relates in part to engineered immune cells that are, inter alia, silenced from a host immune response. • FAB-018: “Circular RNA” - Nucleic acid structures that promote formation of circular RNAs (circRNAs), which may comprise hybridization of substantially complimentary regions within the nucleic acid and contact with an RNA ligase.
As a result of the material weaknesses, restating our previously issued financial statements, and other matters that may in the future be raised by the SEC, we may face the potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weakness in our internal control over financial reporting and the preparation of our financial statements.
As a result of the material weakness, restating our previously issued financial statements, and other matters that may in the future be raised by the SEC, we may face the potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weakness in our internal control over financial reporting and the preparation of our financial statements.
In the future, if we obtain an issued patent covering one of future products and product candidates that we or our strategic partners or collaborators may develop, depending upon the timing, duration and specifics of any FDA marketing approval of such product candidates, such patent may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments.
In the future, if we obtain an issued patent covering one of the product candidates that we or our strategic partners or collaborators may develop, depending upon the timing, duration and specifics of any FDA marketing approval of such product candidates, such patent may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are approved and commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Even if we or our strategic partners are able to obtain regulatory approval for a particular product, the approval may limit the indicated medical uses for the product, may otherwise limit our ability to promote, sell, and distribute the product, may require costly post-marketing surveillance, and/or may require ongoing post-marketing studies.
Even if we or our strategic partners are able to obtain regulatory approval for a particular product candidate, the approval may limit the indicated medical uses for the product, may otherwise limit the ability to promote, sell, and distribute the product, may require costly post-marketing surveillance, and/or may require ongoing post-marketing studies.
To the extent that we raise additional capital by issuing equity securities, existing stockholder ownership may experience substantial dilution, and the securities may include preferred shares with liquidation or other preferences that could harm the rights of a common stockholder.
To the extent that we raise additional capital by issuing equity or equity-linked securities, existing stockholder ownership may experience substantial dilution, and the securities may include preferred shares with liquidation or other preferences that could harm the rights of a common stockholder.
We filed an amendment to our Annual Report on Form 10-K/A for the years ended December 31, 2021 and 2020 on June 30, 2022 to correct the errors in our financial statements for the years ended December 31, 2021 and 2020 and for the quarters ended June 30, 2020, September 30, 2020, March 31, 2021, June 30, 2021 and September 30, 2021.
On June 30, 2022, we filed an amendment to our Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 to correct the errors in our financial statements for the years ended December 31, 2021 and 2020 and for the quarters ended June 30, 2020, September 30, 2020, March 31, 2021, June 30, 2021 and September 30, 2021.
We and our strategic partners thus face uncertainties associated with the preclinical and clinical development, manufacture, and regulatory compliance for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of product candidates.
We and our strategic partners thus face uncertainties associated with the preclinical and clinical development, manufacture, and regulatory compliance for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of future product candidates.
For some products for severe or life-threatening diseases, especially if the product may be too toxic to administer to healthy humans, the initial clinical trials may be conducted in individuals having a specific disease for which use the tested product is indicated. ● Phase 2 clinical trials usually involve studies in a limited patient population to evaluate the safety and efficacy of the drug or biologic for specific, targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse effects and safety risks 15 Table of Contents ● In Phase 3, if a compound is found to be potentially effective and to have an acceptable safety profile in Phase 2 (or occasionally Phase 1) studies, the Phase 3 studies will be conducted to further confirm clinical efficacy, optimal dosage and safety within an expanded population which may involve geographically diverse clinical trial sites.
For some products for severe or life-threatening diseases, especially if the product may be too toxic to administer to healthy humans, the initial clinical trials may be conducted in individuals having a specific disease for which use the tested product is indicated. ● Phase 2 clinical trials usually involve studies in a limited patient population to evaluate the safety and efficacy of the drug or biologic for specific, targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse effects and safety risks. ● In Phase 3, if a compound is found to be potentially effective and to have an acceptable safety profile in Phase 2 (or occasionally Phase 1) studies, the Phase 3 studies will be conducted to further confirm clinical efficacy, optimal dosage and safety within an expanded population which may involve geographically diverse clinical trial sites.
We had previously provided IRX-2 as a study drug and financial support to conduct those investigator sponsored trials, but are no longer providing either.
We previously provided IRX-2 as a study drug and financial support to conduct those investigator sponsored trials, but are no longer providing either.
Other companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do, and such companies also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what Eterna has to offer.
Other companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do, and such companies also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer.
Before approving an MA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s identity, potency, quality, purity and stability. 16 Table of Contents If the FDA’s evaluation of the marketing submission or manufacturing facilities is not favorable, the FDA will issue a complete response letter.
Before approving an MA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s identity, potency, quality, purity and stability. 10 Table of Contents If the FDA’s evaluation of the marketing submission or manufacturing facilities is not favorable, the FDA will issue a complete response letter.
Further, if the Exclusive Factor License Agreement is terminated, there is no guarantee that we will be able to enter into a new license agreement that aligns with our business strategy on the same or similar terms, if at all, and our competitors could in-license the technology, which would result in a significant market disadvantage to us.
Further, if the A&R Factor License Agreement is terminated, there is no guarantee that we will be able to enter into a new license agreement that aligns with our business strategy on the same or similar terms, if at all, and our competitors could in-license the technology, which would result in a significant market disadvantage to us.
In addition, a MA must also demonstrate purity, specifically in terms of showing that the final product does not contain extraneous material. The FDA has 60 days from its receipt of the MA to review the application to ensure that it is sufficiently complete for substantive review before accepting it for filing.
In addition, an MA must also demonstrate purity, specifically in terms of showing that the final product does not contain extraneous material. The FDA has 60 days from its receipt of the MA to review the application to ensure that it is sufficiently complete for substantive review before accepting it for filing.
Prior to beginning human clinical trials, a sponsor must submit an IND to the FDA, which includes the results of the pre-clinical tests, together with manufacturing information and analytical data. Some pre-clinical or non-clinical testing may continue even after the IND is submitted.
Prior to beginning human clinical trials, a sponsor must submit an IND to the FDA, which includes the results of the preclinical tests, together with manufacturing information and analytical data. Some preclinical or non-clinical testing may continue even after the IND is submitted.
In addition to including the results of the pre-clinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, if the trial lends itself to an efficacy evaluation.
In addition to including the results of the preclinical studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, if the trial lends itself to an efficacy evaluation.
FDA approval of a marketing application is required before marketing of the product may begin in the United States. The MA must include the results of product development, pre-clinical studies and clinical studies, together with other detailed information, including information on the chemistry, manufacture and controls utilized in manufacture of the product.
FDA approval of a marketing application is required before marketing of the product may begin in the United States. The MA must include the results of product development, preclinical studies and clinical studies, together with other detailed information, including information on the chemistry, manufacture and controls utilized in manufacture of the product.
Even if patents covering future products and product candidates that we or our strategic partners or collaborators may develop are obtained, once the patent life has expired for a product candidate, we or our strategic partners or collaborators may be open to competition from competitive products.
Even if patents covering future products and product candidates that we or our strategic partners or collaborators may develop are obtained, once the patent life has expired for a particular product, we or our strategic partners or collaborators may be open to competition from competitive products.
The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
The legal systems of certain countries, particularly certain developing countries including India and China, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
Our employees are also eligible for the grant of equity awards under our long-term incentive program that are designed to align interests of our employees with that of our stockholders. All employees also participate in a regular performance measurement process through which staff receive performance and development feedback, which is taken into account in determining annual compensation.
Our employees are also eligible to receive equity awards under our long-term incentive program that are designed to align their interests with the interests of our stockholders. All employees also participate in a regular performance measurement process through which staff receive performance and development feedback, which is taken into account in determining annual compensation.
As a condition of MA approval, the FDA may also require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug or biologic outweigh the potential risks. REMS can include medication guides, communication plans for the healthcare professionals, and other Elements to Assure Safe Use, or ETASU.
As a condition of MA approval, the FDA may also require a risk evaluation and mitigation strategy (“REMS”) to help ensure that the benefits of the drug or biologic outweigh the potential risks. REMS can include medication guides, communication plans for the healthcare professionals, and other Elements to Assure Safe Use (“ETASU”).
Some of the Company’s patents and patent applications have effective dates later than March 16, 2013 and thus will be subject to the provisions of the Leahy-Smith Act. In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent rulings from the U.S.
Some of the Company’s patents and patent applications have effective dates later than March 16, 2013 and thus will be subject to the provisions of the Leahy-Smith Act. 32 Table of Contents In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent rulings from the U.S.
Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks.
Our current or future trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks.
Factor Limited has customary termination rights under the Exclusive Factor License Agreement, including in connection with certain uncured material breaches of the Exclusive Factor License Agreement and specified bankruptcy events. Any termination of our existing or future licenses could result in the loss of significant rights and would harm our business significantly.
Factor Limited has customary termination rights under the A&R Factor License Agreement, including in connection with certain uncured material breaches of the A&R Factor License Agreement and specified bankruptcy events. Any termination of our existing or future licenses could result in the loss of significant rights and would harm our business significantly.
In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Furthermore, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
In addition, federal, state and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes. 17 Table of Contents Post-approval requirements and consideration Once an MA is approved, a product will be subject to certain post-approval requirements.
In addition, federal, state and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes. Post-approval requirements and consideration Once an MA is approved, a product will be subject to certain post-approval requirements.
If disputes over intellectual property that we have licensed, or license in the future, prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully enter into strategic partnerships or develop therapeutic products.
If disputes over intellectual property that we have licensed, or license in the future, prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully enter into strategic partnerships.
These regulatory review agencies and committees and the new requirements or guidelines they promulgate may lengthen the regulatory review process, which may reduce the anticipated benefits of our strategic partnerships or adversely affect the commercialization of any future therapeutic products that we may develop.
These regulatory agencies and committees and any new regulations, requirements or guidelines they promulgate may lengthen the regulatory review process, which may reduce the anticipated benefits of our strategic partnerships or adversely affect the commercialization of any future therapeutic products they may develop.
With limited exceptions, the FDA may withhold approval of a MA regardless of prior advice it may have provided or commitments it may have made to the sponsor.
With limited exceptions, the FDA may withhold approval of an MA regardless of prior advice it may have provided or commitments it may have made to the sponsor.
For example, we are obligated to pay the expenses incurred by Factor Limited in preparing, filing, prosecuting and maintaining the Factor Patents and agreed to bear all costs and expenses associated with enforcing and defending the Factor Patents in any action or proceeding arising from pursuit of sublicensing opportunities under the license granted under the Exclusive Factor License Agreement.
For example, we are obligated to pay the expenses incurred by Factor Limited in preparing, filing, prosecuting and maintaining the Factor Patents and have agreed to bear all costs and expenses associated with enforcing and defending the Factor Patents in any action or proceeding arising from pursuit of sublicensing opportunities under the license granted under the A&R Factor License Agreement.
Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
Moreover, there has been heightened governmental scrutiny over the manner in which prescription drug and biological product manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
Such a loss of patent protection could have a material adverse impact on our business. 35 Table of Contents In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
Such a loss of patent protection could have a material adverse impact on our business. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
Our business is dependent upon the mRNA technology platform licensed from Factor Limited. Pursuant to the Exclusive Factor License Agreement, Factor Limited has customary termination rights, including in connection with certain uncured material breaches of the Exclusive Factor License Agreement, failure to make payments and specified bankruptcy events.
Our business is substantially dependent upon the mRNA technology platform licensed from Factor Limited. Pursuant to the A&R Factor License Agreement, Factor Limited has customary termination rights, including in connection with certain uncured material breaches of the A&R Factor License Agreement, failure to make payments and specified bankruptcy events.
Our computer systems, as well as those of various third parties on which it relies, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures.
Our computer systems, as well as those of various third parties on which we rely, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures.
As such, it is difficult to accurately predict the developmental challenges we may incur pursuing our business strategy. There may be long-term effects from treatment with any such product candidates that we or our strategic partners may develop that we cannot predict at this time.
It is therefore difficult to accurately predict the developmental challenges we may incur pursuing our business strategy. There may be long-term effects from treatment with any product candidates that our strategic partners may develop that we cannot predict at this time.
There are two centers within the FDA that are responsible for the review and approval of drug and biologic marketing applications and general regulatory oversight: the Center for Drug Evaluation and Research, or CDER, and the Center for Biologics Evaluation and Research (“CBER”).
There are two centers within the FDA that are responsible for the review and approval of drug and biologic marketing applications and general regulatory oversight: the Center for Drug Evaluation and Research (“CDER”) and the Center for Biologics Evaluation and Research (“CBER”).
We may also provide our employees with opportunities to earn cash and equity incentive compensation to reward the achievement of company-wide goals that are established annually and designed to drive aspects of our strategic priorities that support and advance our strategy across our company.
We may also provide our employees with opportunities to earn performance-based cash and equity compensation to reward the achievement of company-wide goals established annually and designed to drive aspects of our strategic priorities that support and advance our strategy across our company.
Management concluded that the errors were the result of accounting personnel’s lack of technical proficiency in complex matters. This material weakness remained unremediated as of December 31, 2022.
Management concluded that the errors were the result of accounting personnel’s lack of technical proficiency in the accounting for complex matters. This material weakness remained unremediated as of December 31, 2023.
Any such product candidates may interact with genetic material (RNA/DNA) and because animal genetic materials differ from human genetic material, past testing of any such product candidates in animal models may not be predictive of results in human clinical trials for safety or efficacy.
Any such product candidates may interact with genetic material (RNA/DNA) and because animal genetic materials differ from human genetic material, past testing of any such product candidates in animal models may not be predictive of results in human clinical trials designed to demonstrate safety or efficacy.
Once an MA is approved, changes to the conditions of approval, including additional indications, are made by the submission of a supplement to the MA The supplemental NDA, or sNDA, or the supplemental BLA, or sBLA must contain all of the information necessary to support the change.
Once an MA is approved, changes to the conditions of approval, including additional indications, are made by the submission of a supplement to the MA The supplemental NDA (“sNDA”) or the supplemental BLA (“sBLA”) must contain all of the information necessary to support the change.
The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process.
The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process for drugs and biologics.
Third party payors are increasingly challenging the prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic or other studies in order to further demonstrate the value of our products.
Third party payors are increasingly challenging the prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy. Companies may need to conduct expensive pharmacoeconomic or other studies to further demonstrate the value of its products.
The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, we will only be permitted to commercialize our products if the appropriate regulatory agency is satisfied that we have presented adequate evidence of safety, quality and efficacy.
The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, a company will only be permitted to commercialize its products if the appropriate regulatory agency is satisfied that the company presented adequate evidence of safety, quality and efficacy.
Similarly, the EMA governs the development of gene therapies in the EU and may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines.
Similarly, the EMA oversees the development of cellular and gene therapies in the EU and may issue new guidelines concerning the development and marketing authorization for cellular or gene therapy products and require that we comply with these new guidelines.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe intellectual property of the licensor that is not subject to the licensing agreement; • our right to sublicense patents and other intellectual property to third parties under the license agreement; and • the ownership of inventions and know-how resulting from any joint creation or use of intellectual property by our licensors and us or our partners.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • whether and the extent to which our technology and processes infringe intellectual property of the licensor that is not subject to the licensing agreement; • our right to sublicense patents and other intellectual property to third parties under the license agreement; • our diligence obligations under the agreement and what activities satisfy those diligence obligations; • the priority of invention of patented technology; and • the ownership of inventions and know-how resulting from any joint creation or use of intellectual property by our licensors and us or our partners.
We are substantially dependent on intellectual property we in-licensed from Factor Limited, and if we lose the license to such intellectual property or the Exclusive Factor License Agreement is terminated for any reason, our ability to enter into strategic partnerships or develop therapeutics products would be harmed, and our business, financial condition and results of operations would be materially and adversely affected.
We are substantially dependent on intellectual property we have in-licensed from Factor Limited, and if we lose the license to such intellectual property or the A&R Factor License Agreement is terminated for any reason, our ability to enter into strategic partnerships would be harmed, and our business, financial condition and results of operations would be materially and adversely affected.
Management plans to implement measures designed to ensure that the deficiencies contributing to the ineffectiveness of our internal control over financial reporting are promptly remediated, such that the internal controls are designed, implemented and operating effectively.
Management has implemented measures designed to ensure that the deficiencies contributing to the ineffectiveness of our internal control over financial reporting are remediated, such that the internal controls are designed, implemented and operating effectively.
We were unable to timely file our Q1 2022 10Q with the SEC due to identifying errors in our financial statements reported in the Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 during our preparation of the financial statements for the quarter ended March 31, 2022.
We were unable to timely file our Quarterly Report on Form 10-Q for the three months ended March 31, 2022 with the SEC due to identifying errors in our financial statements reported in the Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 during our preparation of the financial statements for the quarter ended March 31, 2022.
Such licenses impose obligations on our business, and if we fail to comply with those obligations, we could lose license rights, which would substantially harm our business. We are dependent on patents, know-how and proprietary technology licensed from Factor Limited under the Exclusive Factor License Agreement.
Such licenses impose obligations on our business, and if we fail to comply with those obligations, we could lose license rights, which would substantially harm our business. We rely on patents, know-how and proprietary technology licensed from Factor Limited under the A&R Factor License Agreement.
Product candidates employing medical technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the United States Department of Health and Human Services, the United States Department of Justice, state and local governments, and their respective foreign equivalents.
Product candidates employing medical technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA, other divisions of the United States Department of Health and Human Services, the United States Department of Justice, state and local governments, and their respective foreign equivalents.
As disclosed in Part II, Item 9A to this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were not effective and did not provide reasonable assurance of achieving the desired control objectives.
As disclosed in Part II, Item 9A to this Annual Report on Form 10-K, our Chief Executive Officer and Senior Vice President of Finance concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective and did not provide reasonable assurance of achieving the desired control objectives.
Competition for skilled personnel in our industry is intense and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our management, scientific and medical teams may terminate their employment with us on short notice.
Competition for skilled personnel in our industry is intense and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, our employees may terminate their employment with us on short notice.
Foreign regulatory requirements In addition to regulation by the FDA and certain state regulatory agencies, we are also subject to a variety of foreign regulations governing clinical trials and the marketing of other products. Outside of the United States, our ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory agencies.
Foreign regulatory requirements In addition to regulation by the FDA and certain state regulatory agencies, there are a variety of foreign regulations governing clinical trials and the marketing of products. Outside of the United States, the ability of a company to market a product depends upon receiving a marketing authorization from the appropriate regulatory agencies.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: ● completion of pre-clinical laboratory tests, animal studies and formulation studies according to the FDA’s good laboratory practice, or GLP, regulations; ● submission of an investigational new drug application, or IND, which must become effective before human clinical trials may begin and which must include approval by an institutional review board, or IRB, at each clinical site before the trials are initiated; ● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use conducted in compliance with federal regulations and good clinical practice, or GCP, an international standard meant to protect the rights and health of human clinical trial subjects and to define the roles of clinical trial sponsors, administrators, and monitors; 14 Table of Contents ● submission to, and acceptance by, the FDA of a MA; ● satisfactory completion of an FDA inspection of our manufacturing facility or other facilities at which the drug or biologic is produced to assess compliance with current good manufacturing practice, or cGMP, regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; ● potential FDA audit of the non-clinical and clinical trial sites that generated the data in support of the MA: and ● FDA review and approval of the MA.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: ● completion of preclinical laboratory tests, animal studies and formulation studies according to the FDA’s good laboratory practice, or GLP, regulations; ● submission of an investigational new drug application (“IND”), which must become effective before human clinical trials may begin and which must include approval by an institutional review board (“IRB”) at each clinical site before the trials are initiated; ● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use conducted in compliance with federal regulations and good clinical practice (“GCP”), an international standard meant to protect the rights and health of human clinical trial subjects and to define the roles of clinical trial sponsors, administrators, and monitors; ● submission to, and acceptance by, the FDA of a MA; ● satisfactory completion of an FDA inspection of our manufacturing facility or other facilities at which the drug or biologic is produced to assess compliance with current good manufacturing practice (“cGMP”), regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; ● potential FDA audit of the non-clinical and clinical trial sites that generated the data in support of the MA: and ● FDA review and approval of the MA. 8 Table of Contents The testing and approval process require substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain.
The nature of marketing claims that the FDA will permit us to make in the labeling and advertising of our products will generally be limited to those specified in FDA approved labeling, and the advertising of our products will be subject to comprehensive monitoring and regulation by the FDA.
The nature of marketing claims that the FDA permits in the labeling and advertising of products will generally be limited to those specified in FDA approved labeling, and the advertising of products will be subject to comprehensive monitoring and regulation by the FDA.
Our ability to enter into strategic partnerships or develop therapeutics products using the Factor Patents depends entirely on the effectiveness and continuation of the Exclusive Factor License Agreement. If we lose the right to license any of the mRNA technology platform, our ability to enter into strategic partnerships or develop therapeutic products in the foreseeable future would be harmed.
Our ability to enter into strategic partnerships or develop therapeutics products using the Factor Patents depends entirely on the effectiveness and continuation of the A&R Factor License Agreement. If we lose the right to license any of the mRNA technology platform, our ability to enter into strategic would be harmed.
If we do not obtain patent term extension and data exclusivity for future products and product candidates that we or our strategic partners or collaborators may develop, our business may be materially harmed. Patents have a limited lifespan.
If we do not obtain patent term extension for future products that we or our strategic partners or collaborators may successfully develop, our business may be materially harmed. Patents have a limited lifespan.
In order to induce valuable employees to remain with us, we intend to provide employees with stock options that vest over time.
In order to induce valuable employees to remain with us, we intend to provide employees with stock options and/or restricted stock units that vest over time.
We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business.
Our patents and patent applications may be subject to procedural or legal challenges by others. We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business.
We or our licensors may be subject to claims that former employees, collaborators or other third parties have an ownership interest in the patents and intellectual property that we in-license or that we may own or in-license in the future.
We or our licensors may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property that we own or license now or in the future. 17 Table of Contents We or our licensors may be subject to claims that former employees, collaborators or other third parties have an ownership interest in the patents and intellectual property that we in-license or that we may own or in-license in the future.
Any products that we manufacture or distribute pursuant to FDA approvals are subject to continuing monitoring and regulation by the FDA, including compliance with cGMP and the reporting of adverse experiences with the drugs.
Any products manufactured or distributed pursuant to FDA approvals are subject to continuing monitoring and regulation by the FDA, including compliance with cGMP and the reporting of adverse experiences with the drugs.
The submission of an MA is also subject to the payment of a substantial application fee (for FDA fiscal year 2023 this fee may exceed 3 million dollars, although a waiver of such fee may be obtained under certain limited circumstances, including when the drug that is subject of the application has received Orphan Drug Designation for the indication sought).
The submission of an MA is also subject to the payment of a substantial application fee (although a waiver of such fee may be obtained under certain limited circumstances, including when the drug that is subject of the application has received Orphan Drug Designation for the indication sought).
Adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other oversight bodies to change the requirements for approval of any of our or our strategic partners’ product candidates.
In addition, adverse developments in clinical trials of cellular gene therapy products conducted by others, or in treated patients after such products are commercialized, may cause the FDA or other oversight bodies to change the requirements for approval of any of our strategic partners’ product candidates.
These and other provisions in the IRA could have a material adverse effect on our business prospects. We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business.
We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business.
We anticipate that in the United States, Congress, state legislatures, and private sector entities will continue to consider and may adopt healthcare policies intended to curb rising healthcare costs.
In the United States, Congress, state legislatures, and private sector entities are expected to continue to consider and may adopt healthcare policies intended to curb rising healthcare costs.
We have identified material weaknesses in our internal control over financial reporting.
We have identified a material weakness in our internal control over financial reporting.
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue our business activities, or potentially discontinue operations altogether.
We cannot be certain that additional capital will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue our business activities, or potentially discontinue operations altogether.
The INSPIRE trial was the only Company-sponsored study of IRX-2. IRX-2 has been studied externally in other clinical settings outside of head and neck cancer in the form of investigator sponsored trials, all of which have either ended or are not currently active.
There were no new safety signals observed with IRX-2. The INSPIRE trial was our only sponsored study of IRX-2. IRX-2 has been studied externally in other clinical settings outside of head and neck cancer in the form of investigator sponsored trials, all of which have either ended or are not currently active.
Drugs and biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new MA supplement before the change can be implemented.
Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new MA supplement before the change can be implemented.
As a result, we or our strategic partners may be required to change regulatory strategies or to modify applications for regulatory approval, which could delay and impair our ability to complete the pre-clinical and clinical development and manufacture of, and obtain regulatory approval for, our product candidates.
Accordingly, our strategic partners may be required to change regulatory strategies or to modify applications for clinical investigations or regulatory approval, which could delay and impair their ability to complete the preclinical and clinical development and manufacture of, and obtain regulatory approval for, their product candidates.
Our nucleic-acid delivery technology is also designed for ex vivo delivery of mRNA encoding gene-editing proteins and reprogramming factors, including to primary cells, insertion of exogenous sequences into genomic safe-harbor loci, and in vivo delivery of mRNA to the brain, eye, skin, and lung, which may be useful for the development of mRNA-based therapeutic. mRNA Gene Editing Our mRNA gene-editing technology is designed to delete, insert, and repair DNA sequences in living cells, which may be useful for correcting disease-causing mutations, making cells resistant to infection and degenerative disease, modulating the expression of immunoregulatory proteins to enable the generation of durable allogeneic cell therapies, and engineering immune cells to more effectively fight cancer.
Our nucleic-acid delivery technology is also designed for ex vivo delivery of mRNA encoding gene-editing proteins and reprogramming factors, including to primary cells, insertion of exogenous sequences into genomic safe-harbor loci, and in vivo delivery of mRNA to the brain, eye, skin, and lung, which may be useful for the development of mRNA-based therapeutic. mRNA Gene Editing Our mRNA gene-editing technology is designed to delete, insert, and repair DNA sequences in living cells, which may be useful for correcting disease-causing mutations, making cells resistant to infection and degenerative disease, modulating the expression of immunoregulatory proteins to enable the generation of durable allogeneic cell therapies, and engineering immune cells to more effectively fight cancer. 1 Table of Contents Conventional gene-editing technologies typically employ plasmids or viruses to express gene-editing proteins, which can result in low-efficiency editing and unwanted mutagenesis when an exogenous nucleic acid fragment is inserted at random locations in the genome.
ITEM 1. Business About Eterna We are a preclinical-stage biopharmaceutical company committed to realizing the potential of mRNA cell engineering to provide patients with transformational new medicines.
ITEM 1. Business Overview We are a life science company committed to realizing the potential of mRNA cell engineering to provide patients with transformational new medicines.
Drugs and biologics must be approved by the FDA through the New Drug Application, (“NDA”) process or the Biologic License Application (“BLA”) process before they may be legally marketed in the United States. Henceforth, we will use the term “marketing application,” or MA, to apply to both.
Government regulation and product approval Drugs and biologics must be approved by the FDA through the New Drug Application (“NDA”) process or the Biologic License Application (“BLA”) process before they may be legally marketed in the United States. We use the terms “marketing application” or “MA” to apply to both.
If we, or our contract manufacturers, fail to comply or cannot remedy regulator identified deficiencies, then we may be prohibited from marketing product. If the FDA grants approval, the approval will be limited to those conditions and patient populations for which the product is safe and effective, as demonstrated through clinical studies.
If a manufacturer fails to comply or cannot remedy regulator identified deficiencies, then the FDA may prohibit the product from being marketed. If the FDA grants approval, the approval will be limited to those conditions and patient populations for which the product is safe and effective, as demonstrated through clinical studies.
Risks Related to Ownership of our Common Stock We have a limited operating history and have never generated any product revenue. We were formed in September 2018, for the purpose of consummating a business combination with IRX Therapeutics, Inc., which business combination was consummated in November 2018. Since inception, we have incurred significant net losses.
We have a limited operating history upon which to evaluate our business and prospects. We were formed in September 2018, for the purpose of consummating a business combination with IRX Therapeutics, Inc., which business combination was consummated in November 2018. Since inception, we have incurred significant net losses.
ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug or biologic.
ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries.
For more information, see Item 1A “Risk Factors-Risks Related to Our Intellectual Property” contained in this Annual Report on Form 10-K. 13 Table of Contents Supply and Manufacturing We currently do not have any agreements for the supply or manufacturing of cell lines.
For more information, see Item 1A “Risk Factors-Risks Related to Our Intellectual Property” contained in this Annual Report on Form 10-K. Supply and Manufacturing We currently do not have any agreements for the supply or manufacturing of cell lines. However, together with our licensor, Factor Limited, we believe that we have considerable experience in developing engineered cell lines.
Our Code of Conduct and Ethics emphasizes the importance of integrity, honesty, forthrightness, respect and fairness. Our Code of Conduct and Ethics applies to all our employees, including those who are integrated into the Company through acquisitions. Health, Safety and Well-Being We actively promote the safety, health and well-being of our employees.
Our Code of Conduct and Ethics, which applies to all our employees, emphasizes the importance of integrity, honesty, forthrightness, respect and fairness. Health, Safety and Well-Being We actively promote the safety, health and well-being of our employees.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. Properties We currently lease approximately 49,000 square feet of office and laboratory space in New York and Massachusetts, of which, approximately 45,000 square feet is attributable to a new sublease of office and laboratory space in Somerville, Massachusetts that we entered into in October 2022.
Biggest changeITEM 2. Properties We currently lease approximately 49,000 square feet of office and laboratory space in the aggregate in New York and Massachusetts, of which, approximately 45,000 square feet is new office and laboratory space in Somerville, Massachusetts that we subleased in October 2022. The terms of our leases expire from December 2026 through approximately November 2033.
Removed
We intend to begin building out the Somerville leased space in the second quarter of 2023, which we expect to be substantially complete during the fourth quarter of 2023. The terms of our leases expire from December 2026 through approximately December 2032. We believe that our leased property meets our current needs.
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We believe that our leased properties are generally well maintained, in good operating condition and meet our current business needs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on The Nasdaq Capital Market under the symbol “ERNA.” As of March 20, 2023, there were approximately 145 stockholders of record based on the actual number of holders registered on our books at such date.
Biggest changeITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on The Nasdaq Capital Market under the symbol “ERNA.” Holders of Common Stock As of March 12, 2024, there were approximately 155 stockholders of record.
We have 156,112 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or in shares of our common stock.
Preferred Stock We have 156,112 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or in shares of our common stock.
In 2022, we paid approximately $16,000 in cash dividends to the holders of our Series A Preferred Stock. We expect to pay the dividends on our Series A Preferred Stock in accordance with its terms, though we may elect to pay the dividend in shares of our common stock in the future.
In 2023, we paid approximately $16,000 in cash dividends to the holders of our Series A Preferred Stock. We expect to pay the dividends on our Series A Preferred Stock in accordance with its terms. Dividend Policy We have not declared or paid any cash dividends on our common stock.
Removed
We have not declared or paid any cash dividends on our common stock. No cash dividends have been previously paid on our common stock and none are anticipated in 2023. For information regarding securities authorized for issuance under our equity compensation plans, see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Added
The number of stockholders of record is based upon the actual number of holders registered on our books at such date. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.
Added
We currently do not anticipate paying any cash dividends in the foreseeable future.
Added
Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and contractual limitations, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Added
Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this report.
Added
Recent Sales of Unregistered Securities We did not sell any unregistered securities during the period covered by this report that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K. Issuer Purchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

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

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Biggest changeGeneral and Administrative Expenses Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs. 42 Table of Contents Comparison of the Years Ended December 31, 2022 and 2021 Years ended December 31, 2022 2021 Change (in thousands) Operating expenses: Research and development $ 10,392 $ 12,705 $ (2,313 ) Impairment of in-process research and development 5,990 - 5,990 In-process research and development - 80,538 (80,538 ) General and administrative 16,835 14,724 2,111 Transaction costs - 5,765 (5,765 ) Total operating expenses 33,217 113,732 (80,515 ) Loss from operations (33,217 ) (113,732 ) 80,515 Other income (expense), net: Loss on sale of NTN assets - (9,648 ) 9,648 Change in fair value of warrant liabilities 10,795 - 10,795 Loss on non-controlling investment (941 ) - (941 ) Other (expense) income, net (1,171 ) 899 (2,070 ) Total other income (expense), net 8,683 (8,749 ) 17,432 Loss before income taxes (24,534 ) (122,481 ) 97,947 Provision for income taxes (45 ) (64 ) 19 Net loss $ (24,579 ) $ (122,545 ) $ 97,966 Research and Development Expenses Years ended December 31, 2022 2021 Change (in thousands) License and MSA expense $ 4,761 $ 6,500 $ (1,739 ) Payroll-related 2,426 2,342 84 Stock-based compensation 1,249 1,597 (348 ) Clinical 1,047 1,292 (245 ) Other expenses, net 909 974 (65 ) Total research and development expenses $ 10,392 $ 12,705 $ (2,313 ) For the year ended December 31, 2022, our research and development expenses decreased primarily due to a reduction in license expenses under the Original Factor License Agreement, less stock-based compensation expense due to forfeitures of stock options and restricted stock units, and lower clinical trial expense.
Biggest changeGeneral and Administrative Expenses Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs. 40 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Years ended December 31, (in thousands) 2023 2022 Change Revenue $ 68 $ - $ 68 Cost of revenues 236 - 236 Gross loss (168 ) - (168 ) Operating expenses: Research and development 5,920 10,392 (4,472 ) General and administrative 14,587 16,835 (2,248 ) Acquisition of Exacis IPR&D 460 - 460 Impairment of IRX-2 IPR&D - 5,990 (5,990 ) Total operating expenses 20,967 33,217 (12,250 ) Loss from operations (21,135 ) (33,217 ) 12,082 Other expense, net: Change in fair value of warrant liabilities 215 10,795 (10,580 ) Change in fair value of contingent consideration 118 - 118 Loss on non-controlling investment (59 ) (941 ) 882 Interest income 138 - 138 Interest expense (614 ) (30 ) (584 ) Other expense, net (334 ) (1,141 ) 807 Total other (expense) income, net (536 ) 8,683 (9,219 ) Loss before income taxes (21,671 ) (24,534 ) 2,863 Benefit (provision) for income taxes 3 (45 ) 48 Net loss $ (21,668 ) $ (24,579 ) $ 2,911 Revenue During the year ended December 31, 2023, we recognized revenue related to the cell line customization activities we performed for a third party.
As part of the Sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million, which will be reduced on an incremental basis throughout the term of the lease.
As part of the sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million, which will be reduced on an incremental basis throughout the term of the sublease.
Upfront payments and milestone payments for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.
Upfront payments and milestone payments we make for the in-licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.
Research and Development Expenses We expense our research and development costs as incurred. Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research.
Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research.
The major components of research and development costs have included preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product development efforts.
The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, supplies and materials, preclinical study costs, expensed licensed technology, consulting, scientific advisors and other third-party costs, and allocations of various overhead costs related to our product development efforts.
The amount of required restricted cash collateral will decline in parallel with the reduction in the amount of the letter of credit over the term of the sublease. The amount of restricted cash reduces by an equal amount our available working capital.
The amount of required restricted cash collateral will decline in parallel with the reduction in the amount of the letter of credit over the term of the sublease.
Goodwill is not amortized but is tested for impairment annually, or if events occur or circumstances change that would reduce the fair value of a reporting unit below its carrying value.
Goodwill is not amortized but is tested for impairment annually or more frequently if events occur or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value.
Accounting Standard to be Adopted In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).
Recent Accounting Pronouncements In June 2022, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).
We have also established a full valuation allowance for all deferred tax assets, including the NOL carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.
Provision for Income Taxes During 2023, we expect to incur state income tax liabilities related to our operations. We have established a full valuation allowance for all deferred tax assets, including our net operating loss carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.
If the actual timing of the performance of the services or the level of effort varies from the estimate, the accrual is adjusted accordingly. The expenses for some third-party services may be recognized on a straight-line basis if the expected costs are expected to be incurred ratably during the period.
The expenses for some third-party services may be recognized on a straight-line basis if the expected costs are expected to be incurred ratably during the period.
There was no similar transaction for the year ended December 31, 2022.
There were no comparable expenses for the year ended December 31, 2022.
We have in-licensed a portfolio of over 100 patents covering key mRNA cell engineering technologies, including technologies for mRNA cell reprogramming, mRNA gene editing, the NoveSlice TM and UltraSlice TM gene-editing proteins, and the ToRNAdo TM mRNA delivery system, which we collectively refer to as our “mRNA technology platform.” We plan to develop and advance a pipeline of therapeutic products, both internally and through strategic partnerships, with the near-term focus on deploying our mRNA technology platform through strategic partnerships.
We have in-licensed a portfolio of over 100 patents covering key mRNA cell engineering technologies, including technologies for mRNA cell reprogramming, mRNA gene editing, the NoveSlice TM and UltraSlice TM gene-editing proteins, and the ToRNAdo TM mRNA delivery system, which we collectively refer to as our “mRNA technology platform.” We refer to aspects of our mRNA technology platform as “mRNA delivery,” “mRNA gene editing” and “mRNA cell reprogramming.” We license our mRNA technology platform from Factor Bioscience Limited (“Factor Limited”) under an exclusive license agreement. 38 Table of Contents Our near-term focus is on entering into strategic partnerships to deploy our mRNA technology platform.
Goodwill Impairment Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc. in November 2018 (the “IRX Acquisition”), which was accounted for as a business combination.
We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. 45 Table of Contents Goodwill Impairment Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc. in November 2018, which was accounted for as a business combination.
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Cash Flows Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows: For the years ended December 31, (in thousands) 2022 2021 Change Cash (used in) provided by: Operating activities $ (20,976 ) $ (23,488 ) $ 2,512 Investing activities (47 ) (22,742 ) 22,695 Financing activities 19,579 61,585 (42,006 ) Net (decrease) increase in cash and cash equivalents $ (1,444 ) $ 15,355 $ (16,799 ) 47 Table of Contents Net Cash Used in Operating Activities The decrease in cash used in operating activities was due to a decrease in net loss of $3.5 million, after giving effect to adjustments made for non-cash transactions, offset by an increase in cash provided by operating assets and liabilities of $6.0 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Cash Flows Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows: For the years ended December 31, (in thousands) 2023 2022 Change Cash (used in) provided by: Operating activities $ (20,408 ) $ (20,976 ) $ 568 Investing activities (19 ) (47 ) 28 Financing activities 16,556 19,579 (3,023 ) Net decrease in cash and cash equivalents $ (3,871 ) $ (1,444 ) $ (2,427 ) Net Cash Used in Operating Activities There was an increase of approximately $0.6 million in cash used in operating activities for the year ended December, 2023, as compared to year ended December 31, 2022.
The term of the Sublease is approximately 10 years, and we will pay approximately $63.0 million in base rental payments over the 10-year term, plus our share of the Sublessor’s parking spaces and operating expenses.
The term of the sublease is approximately 10 years, and our base rent obligations over the term is estimated to be approximately $63.0 million, plus our share of the sublessor’s parking spaces and operating expenses. Acquisition of Exacis In-Process Research and Development We acquired from Exacis Biotherapeutics Inc.
As such, we determined that the carrying value of the IPR&D asset was impaired and recognized a non-cash impairment charge of approximately $6.0 million for the year ended December 31, 2022.
Accordingly, we recognized a non-cash impairment charge of approximately $6.0 million during the year ended December 31, 2022, which reduced the value of this asset to zero.
Despite outcomes that favored IRX-2 in certain predefined subgroups, the INSPIRE trial did not meet the primary endpoint of Event-Free Survival (EFS) at two years of follow up.
Despite outcomes that favored IRX-2 in certain predefined subgroups, the trial did not meet its primary endpoint of event-free survival at two years of follow up. Based on the totality of available information, following receipt of the results described above we determined we would not further develop IRX-2 and that the carrying value of the IPR&D asset was impaired.
We plan to raise additional funds to support our product development activities and working capital requirements through public or private equity offerings, debt financings, strategic partnerships, out-license collaborations or other means. Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders.
We will continue to evaluate and plan to raise additional funds to support our working capital needs through public or private equity offerings, debt financings, strategic partnerships, out-licensing our intellectual property or other means.
Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in “Item 1A — Risk Factors” of this Annual Report on Form 10-K. We do not undertake any obligation to update forward-looking statements except as required by applicable law.
Forward-looking statements are not guarantees of future activities or results. Many factors could cause our actual activities or results to differ materially from those anticipated in forward-looking statements, including those discussed in “Item 1A. Risk Factors” of Part I of this report.
These increases in expense to the year ended December 31, 2022 were offset by income from the sale of certain fixed assets and a decrease in interest expense when compared to the year ended December 31, 2021.
Purchases of property and equipment decreased by $0.3 million for the year ended December 31, 2023 compared to 2022, which was offset by a decrease in proceeds received from the sale of fixed assets of $0.3 million for the year ended December 31, 2022 compared to 2022.
Since management evaluates Eterna as a single reporting unit, goodwill is tested for impairment at the entity level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the entity is less than its carrying value.
Goodwill is tested for impairment as of December 31 st of each year, or more frequently as warranted by events or changes in circumstances mentioned above. Accounting guidance also permits an optional qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value.
Additionally, we recorded a loss related to the liquidated damages we incurred under our registration rights agreement with the Q1-22 PIPE Investor (as defined below) as a result of not timely filing with the SEC our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.
During the year ended December 31, 2022, we expensed fees associated with a private placement we completed in the first quarter of 2022, as all of the fees incurred were allocated to the warrants issued in connection with such transaction, and we incurred a loss for liquidated damages under a registration rights agreement we entered into with investors in the private placement resulting from not timely filing our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.
We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements reflect our views only as of the date they are made. Overview We are a preclinical-stage biopharmaceutical company committed to realizing the potential of mRNA cell engineering to provide patients with transformational new medicines.
Overview We are a life science company committed to realizing the potential of mRNA cell engineering to provide patients with transformational new medicines.
We have contracted with third parties to perform various clinical study and trial activities in the development and testing of potential products. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. We accrue for third party expenses based on estimates of the services received and efforts expended during the reporting period.
Research and development costs for the year ended December 31, 2022 also included expenses related to our former IRX-2 clinical trials as well as insurance coverage for the clinical trials. We have contracted with third parties to perform various studies. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows.
Developing product candidates, conducting clinical trials and commercializing products are expensive, and we would need to raise substantial additional funds if we were to pursue the development of one or more product candidates Based on our current financial condition and forecasts of available cash, we believe we do not have sufficient funds to fund our operations for the next twelve months from the filing of the financial statements contained in this Annual Report on Form 10-K for the year ended December 31, 2022.
In addition, while we are not presently pursuing product development, we may do so in the future. Developing product candidates, conducting clinical trials and commercializing products requires substantial capital, and we would need to raise substantial additional funds if we were to pursue the development of one or more product candidates.
Actual sales of shares of common stock to the Investment Group under the Second Purchase Agreement depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the common stock and determinations by us as to the appropriate sources of funding for us and our operations.
Our ability to raise capital through sales of our common stock will depend on a variety of factors including, among others, market conditions, the trading price and volume of our common stock, and investor sentiment.
Of the $0.9 million loss for the year ended December 31, 2022, $0.5 million related to NoveCite’s results of operations for the year ended December 31, 2021. We have not guaranteed obligation of NoveCite nor are we otherwise committed to provide any financial support for NoveCite. Therefore, we will record losses only up to our investment carrying amount.
Therefore, we only record 25% of NoveCite’s losses up to our investment carrying amount of $1.0 million. For the years ended December 31, 2023 and 2022, we recognized losses of approximately $0.1 million and $0.9 million, and as of December 31, 2023, the carrying value of our initial investment is zero.
There can be no assurance that any such required additional funding will be available to us at all or available on terms acceptable to us. Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us.
If we raise capital through collaborative arrangements, we may be required to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. We prepared the accompanying consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business.
We are evaluating when to adopt the amendments in ASU 2022-02. We do not expect a material impact as a result of adopting this amendment.
We do not expect a material impact on our consolidated financial statements as a result of adopting this ASU. In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements – Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative.
Liquidity and Capital Resources At December 31, 2022, we had cash and cash equivalents of approximately $15.5 million, of which approximately $4.1 million was restricted cash, as discussed below.
The effective tax rate differs from the statutory tax rate due primarily to our full valuation allowance. Liquidity and Capital Resources At December 31, 2023, we had cash and cash equivalents of approximately $11.7 million, of which approximately $4.1 million was restricted cash (see —Material Cash Requirements—Somerville Sublease, below) and an accumulated deficit of approximately $187.0 million.
Change in Fair Value of Warrant Liabilities For the year ended December 31, 2022, we recognized a credit of $11.4 million for the change in the fair value of warrant liabilities, which was offset by $0.6 million in expense related to the excess fair value of the Q1-22 Common Warrants and Q1-22 Pre-Funded Warrant (as defined below) issued in connection with the Q1-22 PIPE Transaction (as defined below) over the $12.0 million gross proceeds received.
Change in Fair Value of Warrant Liabilities For the year ended December 31, 2023 and 2022, we recognized credits to expense related to the change in the fair value of warrant liabilities due to a decrease in the market price of our common stock.
There was no similar impairment charge for the year ended December 31, 2021. 43 Table of Contents In-Process Research and Development During the year ended December 31, 2021, we expensed the $80.5 million fair value of IPR&D acquired in the Novellus Acquisition because there was no future alternative use for the IPR&D other than for its intended purpose.
The Purchased License was determined to be an IPR&D asset that has no alternative future use and no separate economic value from its original intended purpose, which is expensed in the period the cost is incurred. As a result, we expensed the fair value of the Purchased License of approximately $0.5 million during the year ended December 31, 2023.
There were no comparable credits or expenses for the year ended December 31, 2021. Loss on Non-Controlling Investment We account for our investment in NoveCite under the equity method. During the year ended December 31, 2022, we recognized approximately $0.9 million of loss on our 25% non-controlling investment in NoveCite.
There were no contingent consideration liabilities during the same period in 2022. 42 Table of Contents Loss on Non-Controlling Investment We account for our 25% non-controlling investment in NoveCite, Inc. (“NoveCite”) under the equity method. We have not guaranteed any obligations of NoveCite, nor are we otherwise committed to providing further financial support for NoveCite.
Net Cash Provided by Financing Activities The decrease in net cash provided by financing activities was primarily the result of a decrease in net proceeds from capital raising transactions of approximately $42.9 million, net, offset by a decrease in principal payments made for long-term debt arrangements of $0.9 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Net cash provided by financing activities for the year ended December 31, 2022 includes approximately $19.6 million in net proceeds received from capital raising transactions. Material Cash Requirements Somerville Sublease In October 2022, we entered into a sublease for approximately 45,500 square feet of office and laboratory space in Somerville, Massachusetts.
Net Cash Used in Investing Activities The decrease in net cash used in investing activities was primarily due to $22.9 million of cash used to purchase Novellus during the year ended December 31, 2021, which was offset by proceeds of approximately $0.3 million from the Merger and the Disposition.
Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 includes approximately $16.3 million in net proceeds received from convertible note financings and approximately $0.3 million in net proceeds received under the SEPA.
There was no comparable loss for the year ended December 31, 2021. 44 Table of Contents Other (Expense) Income, Net Years ended December 31, 2022 2021 Change (in thousands) Q1-22 PIPE transaction fees $ (1,007 ) $ - $ (1,007 ) Liquidated damages (240 ) - (240 ) Interest expense, net (30 ) (74 ) 44 PPP Loan forgiveness and ERC refunds - 974 (974 ) Other income, net 106 (1 ) 107 Total other (expense), income net $ (1,171 ) $ 899 $ (2,070 ) For the year ended December 31, 2022, the increase in other expense, net was primarily due to fees related to the Q1-22 PIPE Transaction (as defined below), which were allocated to the warrants issued in connection with the transaction.
Other (Expense) Income, Net Years ended December 31, 2023 2022 Change (in thousands) SEPA fees $ (280 ) $ - $ (280 ) Q1-22 PIPE transaction fees - (1,007 ) 1,007 Liquidated damages - (240 ) 240 Other (expense) income, net (54 ) 106 (160 ) Total other expense, net $ (334 ) $ (1,141 ) $ 807 For the year ended December 31, 2023, we recognized (a) commitment fees and other fees related to the SEPA we entered into with Lincoln Park in April 2023 and (b) other miscellaneous expense.
We have to date incurred operating losses, and we expect these losses to continue in the future as we further develop our product development programs and operate as a publicly traded company.
We have to date incurred operating losses, and we expect these losses to continue in the future. For the year ended December 31, 2023, we incurred a net loss of $21.7 million, and we used $20.4 million in operating activities.
Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. If the entity does not pass the qualitative assessment, then the entity’s carrying value is compared to its fair value. Goodwill is considered impaired if the carrying value of the entity exceeds its fair value.
Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. Management evaluates our company as a single reporting unit, therefore, our goodwill is tested for impairment at the entity level.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Exchange Act, about our expectations, beliefs, or intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects.
Added
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in Part II, Item 8 of this report. The following discussion contains forward-looking statements. See “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS” in Part I of this report.
Removed
You can identify forward-looking statements by the fact that these statements do not relate to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made.
Added
We expect that potential strategic partners will use our mRNA technology platform for preclinical and eventual clinical development of product candidates for a variety of clinical indications. Following receipt of the results from the INSPIRE phase 2 trial of IRX-2, our only product candidate, in June 2022, we determined to cease the development of IRX-2.
Removed
Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements.
Added
We do not currently plan to develop any product candidates. In the future we may develop and advance product candidates, either internally and/or through strategic partnerships.
Removed
We license our mRNA technology platform from Factor Limited under an exclusive license agreement. 41 Table of Contents Basis of Presentation Revenues We are a pre-clinical stage company and have had no revenues from product sales to date.
Added
Recent Financings In July 2023, we received $8.7 million from a private placement in which we issued $8.7 million in aggregate principal amount of convertible notes (the “July 2023 convertible notes”) and warrants to purchase an aggregate of approximately 6.1 million shares of our common stock (the “July 2023 warrants”).
Removed
We will not have revenues from product sales until such time as we receive regulatory approval of our product candidates, successfully commercialize our products or enter into a licensing agreement with respect to our intellectual property, which may include up-front licensing fees, of which there can be no assurance.
Added
On December 8, 2023, we received $1.5 million in exchange for a 6% promissory note with an aggregate principal amount of $1.5 million we issued to Charles Cherington. The promissory note was to mature on January 8, 2024, and interest accrued at a rate of 6.0% per annum, payable at maturity.
Removed
In-process research and development (“IPR&D”) that we acquire and which has no alternative future uses and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.
Added
On December 14, 2023, we repaid the $1.5 million of principal and $1,500 of accrued interest due under the promissory note. There are no further obligations under the promissory note.
Removed
Preclinical and clinical study and trial associated activities such as production and testing of clinical material require significant up-front expenditures.
Added
On December 14, 2023, we entered into a purchase agreement with certain purchasers for the private placement of $9.2 million of convertible notes (the “December 2023 convertible notes” and together with the July 2023 convertible notes, the “convertible notes”) and warrants to purchase an aggregate of approximately 9.6 million shares of our common stock (the “December 2023 warrants” and together with the July 2023 warrants, the “note warrants”).
Removed
These reductions were offset by expenses incurred related to the MSA, which was not in place in the prior year, and other miscellaneous expense during 2022 when compared to the year ended December 31, 2021.
Added
There were two closings under this purchase agreement: on December 15, 2023, we received $7.8 million and issued $7.8 million in December 2023 convertible notes and December 2023 warrants to purchase approximately 8.1 million shares of our common stock, and on January 11, 2024, we received the remaining $1.4 million and issued an aggregate of $1.4 million in December 2023 convertible notes and December 2023 warrants to purchase approximately 1.5 million shares of our common stock.
Removed
Impairment of In-Process Research and Development As discussed in Part I, Item 1 of this Annual Report on Form 10-K, in June 2022, we received the results from the INSPIRE phase 2 trial of IRX-2. The IRX-2 multi-cytokine biologic immunotherapy represents substantially all the fair value assigned to the technologies of IRX that we acquired in 2018.
Added
The July 2023 convertible notes bear interest at 6% per annum, and the December 2023 convertible notes bear interest at 12% per annum, both of which are payable quarterly in arrears. At our election, we may pay interest either in cash or in-kind by increasing the outstanding principal amount of the applicable notes.
Removed
Significant additional clinical development work would be required to advance IRX-2 in the form of additional Phase 2 and 3 studies to further evaluate the treatment effect of IRX-2 in patient subgroups and in combination with checkpoint inhibitor therapies. The INSPIRE trial is the only Company-sponsored study of IRX-2.
Added
The July 2023 convertible notes mature on July 14, 2028, and the December 2023 convertible notes mature on December 15, 2028 and January 11, 2029, depending on the issuance date of such notes, unless earlier converted or repurchased. We may not redeem any of the convertible notes prior to maturity.
Removed
IRX-2 has been studied externally in other clinical settings outside of head and neck cancer in the form of investigator sponsored trials, which have either ended or are not currently active. Based on the totality of available information, we currently do not have plans to further develop the IRX-2 product candidate.
Added
At the option of the holder, the July 2023 convertible notes and the December 2023 convertible notes may be converted from time-to-time in whole or in part into shares of our common stock at a conversion rate of $2.86 per share and $1.9194 per share, respectively, subject to customary adjustments for stock splits, stock dividends, recapitalization and the like.
Removed
General and Administrative Expenses Years ended December 31, 2022 2021 Change (in thousands) Professional fees $ 8,499 $ 7,351 $ 1,148 Payroll-related 2,942 1,299 1,643 Insurance 1,951 1,134 817 Stock-based compensation 1,686 3,638 (1,952 ) Loss on disposal or sale of fixed assets 280 - 280 Other expenses, net 1,477 1,302 175 Total general and administrative expenses $ 16,835 $ 14,724 $ 2,111 The increase in general and administrative expense for the year ended December 31, 2022 primarily related to increased legal fees, settlements related to certain legal matters and increased headcount, as well as severance expense for certain employees, including our former Chief Executive Officer, who resigned effective May 26, 2022.
Added
The convertible notes contain conversion limitations such that no conversion may be made if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99%, 9.99% or 19.99% immediately after conversion thereof, subject to certain increases not in excess of either 9.99% or 19.99% at the option of the holder.
Removed
Other increases included premiums for public company insurance policies and losses on the disposal or sale of fixed assets, as compared to the same period in 2021. These increases were offset by decreased stock-based compensation expense due primarily to forfeitures of stock options and restricted stock units as compared to the year ended December 31, 2021.
Added
The convertible notes provide for customary events of default (subject in certain cases to customary grace and cure periods), which include, among others: nonpayment of principal or interest; breach of covenants or other agreements in the convertible notes; the occurrence of a material adverse effect event and certain events of bankruptcy.
Removed
Transaction Costs For the year ended December 31, 2021, we incurred approximately $5.8 million in transaction costs related to the issuance of common stock to Eterna LLC’s financial advisor upon consummation of the Merger, and there were no comparable transaction costs for the year ended December 31, 2022.
Added
Generally, if an event of default occurs and is continuing under the convertible notes, the holder thereof may require us to repurchase some or all of their convertible notes at a repurchase price equal to 100% of the principal amount of the convertible notes being repurchased, plus accrued and unpaid interest thereon.
Removed
Loss on Sales of NTN Assets We incurred a $9.6 million loss on the sale of NTN assets for year ended December 31, 2021 in connection with the Disposition, and there were no comparable transaction costs for the year ended December 31, 2022.
Added
In connection with the issuance of the December 2023 convertible notes, we agreed to reduce the exercise price of the warrants we issued in a private placement in December 2022 to purchase an aggregate of approximately 4.4 million shares of our common stock from $3.28 to $1.43 per share and of the July 2023 warrants from $2.61 to $1.43 per share. 39 Table of Contents Basis of Presentation Revenue Our near-term focus is on deploying our mRNA technology platform through strategic partnerships.
Removed
During the year ended December 31, 2021, we recognized income from the forgiveness of our Paycheck Protection Program loan and for payroll tax refunds under the Employee Retention Credit program, both of which were under the Coronavirus Aid, Relief, and Economic Security Act administered by the U.S. Small Business Administration (the “CARES Act”).
Added
We are not currently developing any product candidates. Our future revenue, if any, is primarily expected to come from out-licensing our mRNA technology platform and/or aspects thereof.
Removed
We did not receive any such income for the year ended December 31, 2022. Provision for Income Taxes We recognized a provision for income taxes of approximately $45,000 and $64,000 for the years ended December 31, 2022 and 2021, respectively. Our income tax provision is primarily for U.S. state income tax.
Added
In February 2023, we entered into an exclusive option and license agreement with a third party, under which we granted such third party an option to obtain an exclusive sublicense to certain of our technology for preclinical, clinical and commercial purposes in exchange for a non-refundable up-front payment to us of $0.3 million.
Removed
At December 31, 2022 and 2021, we had available net operating loss (“NOL”) carryforwards of approximately $35.6 million and $20.7 million for federal income tax purposes, respectively, of which $35.6 million can be carried forward indefinitely.
Added
In August 2023, that third party requested that we begin developing certain induced pluripotent stem cell lines in exchange for a cell line customization fee. The third party paid us $0.4 million towards the customization fee, which we are recognizing ratably over the customization period, which is expected to be approximately 20 to 25 months.
Removed
We have available $28.8 million and $20.7 million of state NOLs for the years ended December 31, 2022 and 2021, respectively, which begin to expire in 2041. We also have foreign NOL carryforwards of $6.3 million and $4.8 million for the years ended December 31, 2022 and 2021, respectively, which carry forward indefinitely.
Added
We will only earn the remaining amount of the customization fee if we make certain progress towards delivery of the customized cell line. We estimate the amount of consideration we expect to recognize as revenue that is not probable of having a significant reversal of such recognized revenue, and we place a constraint on the remaining contractual consideration.
Removed
Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control to offset future taxable income. Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards.
Added
As it becomes evident that the constrained amounts are no longer at risk of a significant reversal of revenue, we will remove the constraint from the related revenue and recognize a cumulative catch-up adjustment to revenue in the period in which the constraint was removed.
Removed
We continue to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified.

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Other ERNA 10-K year-over-year comparisons