CERO THERAPEUTICS HOLDINGS INC

Overview

We are an innovative immunotherapy company advancing the development of next-generation engineered T cell therapeutics for the treatment of cancer. Our proprietary approach to T cell engineering, which enables us to integrate certain desirable characteristics of both innate and adaptive immunity into a single therapeutic construct, is designed to engage the body’s full immune repertoire to achieve optimized cancer therapy. Our novel cellular immunotherapy platform is designed to redirect patient-derived T cells to eliminate tumors by building in engulfment pathways that employ phagocytic mechanisms to destroy cancer cells, creating what we refer to as CER-T cells. We believe the differentiated activity of CER-T cells will afford them greater therapeutic application than currently approved chimeric antigen receptor T (“CAR-T”) cell therapies, for use spanning both hematological malignancies and solid tumors. We are nearing completion of extensive preclinical testing and studies which are needed to obtain regulatory clearance to initiate human clinical trials with CER-1236, and have engaged in a pre-IND meeting with the Federal Drug Administration (the “FDA”). We anticipate filing an investigational new drug (“IND”) application and, if allowed to proceed, initiating clinical trials for our lead drug candidate, CER-1236, in 2024. However, manufacturing delays or other delays with IND-enabling studies, among other factors, may impact the timing and approval of such trials.

The ability to enhance the activity of T cells against human cancers through genetic engineering has been among the most significant advances in cancer therapy in the last decade. One of the more promising therapeutic uses of T cells to emerge has been CAR-T cell technology. Yet as remarkable a development as CAR-T cell therapy has been, its use has been largely limited to the treatment of certain hematological cancers due to CAR-T cells’ limited ability to proliferate, traffic, and circulate in solid tumors. Curative cell therapies for solid tumors currently do not exist, and the significance of this limitation is underscored by the prevalence of solid tumor malignancies. The American Cancer Society estimates that solid tumor cancers accounted for more than 1.7 million of the 1.9 million people newly diagnosed with cancer in 2022. Even in hematological malignancies with approved CAR-T cell therapies, cure rates do not exceed 60%. Nevertheless, despite such limitations, sales of CAR-T cell therapies are anticipated to grow rapidly over the next several years and are expected to exceed $10 billion globally by 2030.

We believe that the preferential attributes engineered into our CER-T cell therapy enables us to overcome many of the limitations which hinder the wider application of CAR-T technology. Our CER-T cells employ a novel targeting mechanism that enables the use of phagocytic pathways. Specifically, they target phosphatidylserine (“PS”), a critical component of the cell’s plasma membrane that has a key role in cell cycle regulation. Exposure of PS on the outer surface of the plasma membrane acts as an “eat-me” signal and marks abnormal, stressed and dying or dead cells for phagocytosis. The pro-phagocytic activities of CER-T cells are designed to integrate innate immune effector functions into cytotoxic killer T cells, creating within a single T cell the ability to directly mediate cytotoxic effects and indirectly prime other immune cells. As externally oriented PS is ubiquitously expressed by numerous cancer cell types, we believe a single CER-T construct may have broad clinical utility in treating an array of cancers. Moreover, in preclinical studies, we have observed CER-T cells to exhibit superior cross-presentation abilities compared to conventional T cells, potentially triggering a broad complement of immune effector cells against tumors. In consequence, we envision CER-T therapeutics as potentially having differentiated therapeutic utility with application across a wide array of cancer types.

We have patterned the design of our CER-T constructs based upon many of the components found in existing conventional CAR-T cell therapies, which we believe could shorten development timelines and enhance commercial application. The processes and protocols used to genetically modify a patient’s T cells to produce CAR-T cells are already well recognized, as is the use of lentivirus in the manufacture of these therapies. Accordingly, we have developed CER-T cell manufacturing processes that closely resemble those used to produce existing engineered CAR-T cells. We also expect to benefit from the well-defined and recognized regulatory guidelines established by both U.S. and European regulatory authorities related to CAR-T therapy and its use. In contrast to these attributes, we believe that other emerging CAR-based drug candidates which involve immune effector cells other than T cells, such as CAR-NK and CAR-M therapies, that are in the earlier stages of clinical development are unlikely to enjoy similar benefits.

In preclinical studies, we have observed CER-1236 to display attractive functional attributes, among which are:

Based on the preclinical data regarding the use of CER-1236 T cells to combat hematologic malignancies, we currently intend to file an IND application to begin clinical trials in 2024. We anticipate that our initial targets will be relapsed, remitting acute myeloid leukemia (“AML”) patients as well as aggressive, difficult-to-treat B cell malignancies, including aggressive mantle cell lymphoma (“MCL”) and refractory chronic lymphocytic leukemia (“CLL”). AML is a heterogenous and aggressive hematopoietic malignancy characterized by the rapid buildup of immature myeloid cells in the bone marrow and blood. This process results in the inhibition of normal hematopoiesis, manifesting as neutropenia, anemia, thrombocytopenia, and the clinical features of bone marrow failure. AML accounts for 90% of all acute leukemias in adults, with an estimated 20,240 new cases and 11,400 deaths expected in the United States in 2023. The disease often presents with signs and symptoms related to infiltration of leukemic blasts into the bone marrow resulting in infections and disruption of normal hematopiesis and is associated with a variety of laboratory derangements in addition to abnormal blood counts. The current treatment has remained largely unchanged over several decades with combination chemotherapy with cytarabine for 7 days and an anthracycline for 3 days (“7+3”). Newer, targeted approaches that include multi-kinase domain inhibitors and antibody-drug conjugates are now available during induction chemotherapy for certain patients. For patients that are sufficiently healthy and at unfavorable risk, allogeneic Hematopoietic Stem Cell Transplants (“HSCTs”) are commonly performed. Despite these interventions, there is significant unmet medical need for novel therapies, including cell therapeutic approaches. In the difficult-to-treat B-cell malignancies, durable responses with CAR-T cell therapy are often evasive and the high frequency of acute multi-organ complications often limits its use, particularly among chronically ill or elderly patients. Existing FDA-approved CD19-targeted CAR-T cell therapies produce an overall response rate of between 50% and 80%. Our Phase 1 clinical trial of around 25 patients, is intended to evaluate the safety, potential therapeutic utility and applicable dose of CER-1236. Following a trial in these hematological malignancies, we intend to expand the clinical development of CER-1236 to include solid tumors such as non-small cell lung cancer (“NSCLC”) and ovarian cancer. We believe that CER-1236 has the potential to be a therapy for the unmet needs of targeted indications, if approved, and differentiated by its safety, tolerability, efficacy and clinical benefit over current therapeutic alternatives, which have been observed in preclinical studies. None of the abovementioned statements regarding any of our products in development are intended to be a prediction or conclusion of efficacy. No clinical trials on our product candidates have commenced so no conclusions relating to such attributes can be made.

Our Strategy

Our intent is to become a leading biopharmaceutical company focused on the capital-efficient advancement of innovative anti-cancer product candidates targeting the unmet medical need associated with aggressive and difficult-to-treat hematological malignancies and solid tumors. To accomplish this objective, the key elements of our strategy include:

The Immune System and its Function

The immune system is a host defense system comprising multiple structures and processes within an organism that protects against disease. As with other mammalian species, the human immune system is segregated into two separate yet interconnected components, the innate immune system and the adaptive immune system. The innate immune system is responsible for an immediate, non-specific response to infected or diseased cells. Triggering its activation are pathogen-associated and damage-associated molecular patterns recognized by preconfigured pattern recognition receptors which reside on the surface of various types of leukocytes, or white blood cells, that make up the innate immune system, including macrophages, dendritic cells, eosinophils and natural killer (“NK”) cells. In addition to its direct participation in eliminating damaged or diseased cells, certain components of the innate immune system function significantly as antigen-presenting cells (“APCs”) promoting the activity of the adaptive immune system.

The adaptive immune system is composed of special types of leukoctyes known as T and B lymphocytes, also known as T and B cells, respectively. T cells participate primarily in the cell-mediated immune response while B cells are involved in the humoral immune response. T cells are an essential component of the adaptive immune system, targeting specific antigens and either destroying targeted cells directly or participating in their destruction by activating other immune cells. T cells use T cell specific receptors to recognize antigens presented via major histocompatibility complex (“MHC”) molecules on APCs. Through this mechanism, T cells have the ability to target tumor-transformed or virus infected cells, as well as help coordinate the activity of other immune cells.

T cells are differentiated by the expression of protein markers on their surface. The two most prominent types of T cells are those that express CD8 molecules and are known as CD8 T cells, and those that express CD4 molecules and are known as CD4 T cells. CD8 T cells, also referred to as cytotoxic lymphocytes (“CTLs”), eliminate cells which they encounter that are recognized as being infected with viruses or other pathogens or are otherwise damaged or dysfunctional through a process referred to as cell lysis, which involves the release by these killer T cells of perforins and granzymes to compromise the integrity of the target cell’s membrane. Endogenous pathogens are broken down by mechanisms present in virtually all cells into smaller fragments and presented to CD8 T cells in combination with an MHC class I molecule. CD4 T cells, also referred to as T helper cells, have limited cytotoxic activity and typically do not kill infected or dysfunctional cells or eliminate pathogens directly. Instead, they participate in the immune response by providing signals which activate and orchestrate other types of immune cells to perform these tasks. Professional APCs, such as dendritic cells and macrophages, process exogenous pathogens and then present small fragments of the degraded pathogen to CD4 T cells in combination with an MHC class II molecule, through a phenomenon known as cross-presentation, antigens of exogenous origin are coupled with an MHC Class I molecule to amplify CD8 T cell activity. Antigen cross presentation is of particular importance in the immune system’s response to cancer.

Genetically Engineered T Cells

The ability to enhance the activity of T cells against human cancers through genetic engineering has been among the most significant advances in cancer therapy in the last decade. Advances in understanding T cells and their role in immunology, and an appreciation of their potential use to treat cancer, has increased interest in the clinical application of T cells in recent years, with the field of adoptive immunotherapy attaining increased prominence as a means of enhancing immune control over tumors. Modern molecular biological techniques allow scientists to introduce genes into human T cells that enhance T cell activity, expand their numbers and infuse them back into the patient from whom they were originally harvested. We have developed a novel approach to T cell engineering which has enabled us to integrate certain desirable characteristics of both the innate immune system and the adaptive immune system into a single therapeutic construct intended to optimize cancer therapy. This novel cellular immunotherapy platform is designed to redirect T cells to eliminate tumors by building in engulfment pathways that employ phagocytic programs, creating our CER-T cell therapy.

Phagocytosis is a vital cellular process by which a phagocytic cell engulfs and internalizes a target for elimination and is a major mechanism for the removal of pathogens and unwanted cells to maintain tissue homeostasis. The human body removes billions of cells daily through phagocytic processes. Phagocytic removal employs specific cell clearance programs and machinery to eliminate target cells. The process is a crucial part of the innate immune system and is distinct from the adaptive immune response which involves the generation of cytotoxic T cells to elicit antigen-specific, cytolytic target elimination. To optimize anti-tumor function, we developed CER-T cell therapy to collaboratively mediate both cytotoxic and phagocytic mechanisms. By leveraging the strength of both immune responses, engulfment has the potential for more silent and nontoxic cell removal compared to current CAR-T cell therapies. By leveraging both immune responses, we believe CER-T cell therapy has the potential to eliminate cancer cells more effectively and with fewer side effects than traditional CAR-T cell therapies.

The recognition of phagocytosis as a therapeutic modality to directly clear cancer cells and initiate anti-tumor T cell immune responses has fueled interest in effectively engaging phagocytes for use in cancer therapy. Macrophage cell engineering and macrophage-targeting approaches that enhance cytotoxic, phagocytic and cytokine-mediated anti-tumor function are in development. Early clinical trial data from therapeutic candidates targeting myeloid inhibitor function has demonstrated the potential to elicit clinical responses. However, the diverse pro-tumor functions of myelo-monocytic cells may offset these efforts by supporting cancer cell survival, proliferation and the release of factors that may impede anti-tumor immune responses. Limited in vivo proliferation and manufacturing challenges have also been hurdles in the development of mononuclear phagocyte-based cellular therapy.

Experimental evidence demonstrates the ability of CER-T cells to engulf targeted cells, employ cytolytic and non-cytolytic killing mechanisms, and exhibit pro-inflammatory and antigen processing capabilities that augment the current capabilities of T cell immunotherapy. To that end, we believe CER-T cell therapy, if approved, may become a component of standard of care treatment regimens, used in combination with both small molecule therapeutics and biologics including monoclonal antibodies, and CAR-T and high affinity T cell receptor (“TCR”) T cell therapies to direct robust tumor elimination.

The Increasing Prominence of CAR-T Technology

Immunotherapy is a treatment that harnesses the components and mechanics of the immune system to address diseases and disorders. Cellular immunotherapy is a form of immunotherapy that focuses on modulating or enhancing the activity of different immune cells. One of the more prominent and promising therapeutic uses of T-cells to emerge has been CAR-T cell technology.

CAR-T therapy recognizes specific antigens that are present on the surface of tumor cells and destroys them. The concept of CAR-T builds upon the normal biology of CTLs, whereby naturally occurring receptors serve to activate these cells when a foreign pathogen or cancerous cell is detected. Conventional CAR-T cell therapy involves the genetic manipulation of a patient’s T cells to enable the expression by those modified cells of a receptor designed to bind to a specific surface antigen. After the removal of the T cells from the patient’s blood, a viral vector containing the genetic instructions for the CAR is employed to insert those genes into the genome of the T cell through a process known as transduction. Aggregated in a single viral vector are the genes encoding for each component of the CAR. Typical of the prevailing generation of CAR architecture is the inclusion of these components:

The assembly of these core CAR components is depicted in the schematic presented below to which certain non-coding regulatory sequences may be used to augment viral gene expression.

Delivery of conventional CAR-T cell therapies involves a single viral vector.

Conventional CAR-T cell therapies often utilize a lentiviral vector for the delivery of CAR specific genes. Lentiviral particles offer a well-characterized transduction mechanism and are recognized as efficient and convenient vehicles for gene transfer as they demonstrate broad tropism, or activity, in a wide array of cell types, and can be used to target quiescent, or non-dividing, cells. In addition, they do not integrate close to the promoter regions of genes with the frequency of other gene delivery alternatives and lack the immunogenicity of DNA-based vectors, characteristics which provide for enhanced safety. The use of a lentiviral vector to facilitate ex vivo clinical gene transfer has been demonstrated to be safe in humans for two decades with no genotoxicity observed in hundreds of patients following gene transfer into T cells or hematopoietic progenitor cells.

Currently, six CAR-T cell therapies have been approved by the FDA for the treatment of certain types of hematological cancers. The first two, approved in 2017, are axicabtagene ciloleucel, sold by Gilead Sciences under the brand name Yescarta, and tisagenlecleucel, sold by Novartis under the brand name Kymriah. A third CAR-T cell therapy, brexucabtagene autoleucel, which is comparable to Yescarta and sold by Gilead under the tradename Tecartus, was approved in 2020. Lisocabtagene matraleucel, sold by Bristol Myers Squibb under the brand name Breyanzi, received FDA approval in February 2021 with Bristol Myers Squibb also receiving approval for idecabtagene vicleucel, sold under the tradename Abecma, in March of that year. Most recently, Janssen Biotech received FDA approval for ciltacabtagene autoleucel, brand name Carvykti, to treat adult patients with relapsed or refractory multiple myeloma and which targets the BMCA protein expressed on cancer cells rather than CD19, the target of the other approved CAR-T cell therapies. Each of these therapies is an autologous therapy and is made from T cells first collected from the patient, which are then genetically modified and administered back to the same patient. Sales of CAR-T cell therapies are anticipated to grow rapidly over the next several years and are expected to exceed $10 billion by 2030. CAR-constructs incorporating alternate immune effector cell types, including NK cells and macrophages, are in earlier stages of clinical development and have only recently entered clinical trials. To date, no CAR-based therapies that employ NK cells or macrophages have received FDA approval. There are at present no FDA approved CAR T cell products for AML.

The Limitations of Current CAR-T Technology

Much of the excitement of cellular therapy surrounds the curative potential of adoptive transfer of genetically engineered T cells. Adoptively transferred T cells proliferate upon their engagement with target antigens and represent a form of therapy that can be appropriately characterized as living and expanding. Efficient targeted killing and tumor elimination may be achieved in a short period of time. However, multiple barriers limit the efficacy of conventional CAR-T cell therapy. A high rate of side effects often accompany treatment with currently approved products, especially in those patients with high tumor burdens. In addition, partial responses occur, often associated with immune escape of the tumor from the TCR or the display by the T cells of an exhaustion phenotype. Moreover, while engineered CAR-T cells have shown remarkable potential in the treatment of hematological cancers, they have not demonstrated equivalent efficacy in the treatment of solid tumors. Curative cell therapies for solid tumors currently do not exist and the importance of this limitation is underscored by the prevalence of solid tumor malignances. The American Cancer Society estimates that solid tumor cancers accounted for more than 1.7 million of the 1.9 million people newly diagnosed with cancer in 2021. Even in hematological malignancies with approved CAR-T cell therapies, less toxic orthogonal treatment approaches are needed as cure rates for CD19-targeted CAR-T cell therapies do not exceed 60%.

Challenges to the use of cellular therapy to address solid tumors often relate to difficulty in developing receptors directed towards targets expressed in high frequency on cancer cells as well as overcoming the immunosuppressive microenvironments that contribute to ineffective immune responses. The tumor stroma, made up of a dense fibrotic matrix, often surrounds solid tumors and acts as a physical barrier, which restricts CAR-T cell access to the tumor. CAR-T cell activity may be further hindered by the tumor microenvironment (“TME”). In the TME, multiple cell types which drive immunosuppression infiltrate solid tumors, including myeloid-derived suppressor cells, tumor-associated macrophages, and regulatory T cells. The interaction of these cells and the tumor cells increases the expression of signaling molecules that enable tumor cell proliferation while dampening the generation of co-stimulatory signals necessary for T cell expansion and persistence. In addition, TME-associated immune dysfunction may result in a down regulation of MHC class I molecules, limiting proper antigen presentation and T cell proliferation. Collectively, these attributes of solid tumors enable them to avoid normal immune surveillance. Increased engagement of the endogenous host response is also an important, if not critical, component of CAR-T cell therapy clinical success as the recruitment into the tumor of bystander lymphocytes has been observed in tumor biopsies from patients with curative CAR-T cell therapy. Enhancing the host’s own response to tumor cells offers an important opportunity to improve current CAR T cell responses.

CAR-T recipients may also incur serious adverse events (“SAEs”), perhaps the most prominent of which is cytokine release syndrome (“CRS”). Believed to be related to the rapid proliferation and activation of T cells upon detection of a target antigen, severe or life-threatening CRS was noted in a significant number of patients who participated in the registrational trials of FDA-approved CAR-T therapies. These SAEs can result in patients who receive conventional CAR-T therapy requiring longer hospitalizations and more intensive medical care. The frequency and severity of observed SAEs was one of the primary reasons that administration of currently approved CAR-T therapy is restricted to a select number of treatment centers. Moreover, aside from the low-level expression of certain cancer specific neoantigens, most tumor associated antigens are also found on normal cells which may lead to serious, if not life threatening, “on-target, off-tumor” toxicities.

We believe that the preferential attributes engineered into our CER-T cell therapies have the potential to represent a next-generation adoptive cellular immunotherapy approach and enable us to overcome many of the limitations which hinder the wider application of current CAR-T technology. The prophagocytic and immunomodulatory properties of CER-T cells are designed to overcome some of the immunosuppressive elements in many solid tumors. In addition, their anticipated superior antigen presentation properties may enhance a patient’s ongoing immune response against tumor antigens. In consequence, we envision CER-T therapeutics as having a differentiated mechanism for tumor clearance that enables the potential for enhanced activity across a broad array of hematological malignancies and solid tumors.

CER-T Cell Therapy Technology

Distinguishing our CER-T cell therapy candidate is the integration into a single therapeutic construct of many of the anti-tumor capabilities resident in both the innate and the adaptive immune systems. We believe the coupling of these functions better emulates normal immune system activity which may promote enhanced T cell activation, proliferation and durability for more robust elimination of cancerous cells and reduction in tumor burden.

We have designed our CER-T constructs to embrace many of the components found in conventional CAR-T cell therapies. The processes and protocols used to genetically modify a patient’s T cells to produce CAR-T cells are well recognized, as is the use of lentivirus in the manufacture of these therapies. Accordingly, we have constructed CER-T cell manufacturing processes to be similar to those of CAR-T cells. We expect to benefit from the well-defined regulatory guidelines established by both U.S. and European regulatory authorities related to CAR-T cell therapy and its use.

The biological foundations for CER-T cell therapy

PS is a component of a cell’s plasma membrane and has a key role in cell removal. Under normal physiological conditions, PS is restricted to the inner leaflet of the phospholipid bilayer which makes up the plasma membrane of a cell. However, cellular stresses cause the externalization of PS to the cell surface. Exposure of PS on the outer surface acts as an “eat-me” signal and marks abnormal, stressed and dying or dead cells for phagocytic clearance. A variety of tumors have been shown to have increased surface PS as a result of altered plasma membrane regulation. Among hematologic tumors, loss-of-function mutations in the flippase chaperone transmembrane protein 30A (“TMEM30A”), have been identified in approximately 5% to 11% of patients with diffuse large B cell lymphoma (“DLBCL”) and among a cohort of newly diagnosed patients, this mutation was correlated with improved response to the standard therapeutic regimen suggesting the host’s immune elimination of PS positive tumor cells enhances tumor clearance. We are seeking to exploit the presence of PS expressed on the outer cell surface of both hematological malignancies and solid tumors to create our next generation anti-cancer agents.

CER-1236: Our Lead Development Candidate

As externally oriented PS is present on many cancerous cells regardless of tumor type, we believe a single CER construct may demonstrate clinical utility in treating an array of cancers. To that end, we have focused our development activities on optimizing the cancer killing capabilities of a specific CER-T therapeutic design. These efforts have resulted in our lead clinical candidate, CER-1236. In preclinical studies, we have observed CER-1236 to display attractive functional capabilities and product characteristics, among which are:

We have designed CER-1236 to align with components included in the current generation of conventional CAR-T configurations by fusing the external domain of TIM-4, a phagocytic receptor, with intracellular signaling domains from T cells and innate immune cells. TIM-4 harbors endogenous phagocytic capacity through its binding to the pro-phagocytic “eat-me” signal PS. CER-1236’s intracellular signaling domains, including TLR2/TIR, CD28 and CD3ξ motifs, are designed to augment both TIM-4 mediated phagocytosis and cytotoxic T cell function. Another similarity between conventional CAR-T therapeutic formats and our CER-T design is the delivery vehicle used in transduction. As is found in many approved CAR-T therapies, our CER-T technology also employs a lentiviral vector to facilitate gene delivery to patient-derived T cells. A schematic of the structural elements of CER-1236 is presented below.

Schematic of CER-1236

Abbreviations: TIM-4 = ectodomain of the T cell immunoglobulin mucin domain protein 4; TLR2 = toll-like receptor 2; TIR = toll/interleukin-1 receptor.

CER-1236 employs an innovative mechanism of action

CER-1236 is an autologous T cell therapy candidate designed to target PS through the external domain of the prophagocytic receptor TIM-4 protein. This therapeutic construct was developed to combine adaptive T cell killing activity with phagocytic clearance and antigen presentation activity to create T cells with enhanced cancer immunotherapy capabilities. The approach builds on the early success of adoptive T cell transfer, which has demonstrated the ability of T cells to proliferate, traffic, and circulate within both primary and metastatic tumors.

By enhancing phagocytic clearance and antigen presentation activity and integrating them into T cells, we believe CER-T cells offer the potential for more effective elimination of cancer cells. The industry’s decades-long experience with engineered T cell use provides a solid foundation for the development of CER-1236.

As the target ligand of our initial CER-T cell is not an antigen restricted to only certain tumors, CER-1236 T cells may provide clinical benefit across multiple tumor types. The functional interaction of CER-1236 T cells is depicted in the illustration presented below.

CER-1236 T cells are designed to harness the power of both the innate and adaptive immune systems

CER-1236 expresses the external domain of the prophagocytic receptor TIM-4 which is linked to T cell and innate immune cell intracellular signaling domains. TIM-4 is normally expressed on subsets of macrophages and dendritic cells and harbors endogenous phagocytic capacity through its binding to and recognition of PS. The intracellular signaling domains in CER-1236 are designed to trigger T cell cytotoxic function and enhance TIM-4 mediated phagocytosis. CD3ξ is the signaling component of the TCR and CD28 is a co-stimulatory domain needed for optimal activation. The TLR2/TIR domain is involved in both innate and adaptive immune responses and activation of TIR further enhances signaling through both NFξB and the mitogen-activated protein (“MAP”) kinase family, promoting T cell activity and phagocytic uptake. Both CD28 and CD3ξ signaling domains are incorporated into approved CAR-T cell products. A third generation anti-CD19 CAR-T cell that incorporates a TLR2/TIR is currently in clinical development.

By virtue of the TIM-4 engulfment receptor and the intracellular signaling domains, CER-1236 combines attributes of both T cells and phagocytic cells. In phagocytic cells, such as macrophages and dendritic cells, recognition of the TIM-4 ligand, PS, on the surface of apoptotic cells by native TIM-4 leads internalization by utilizing integrin coreceptors to activate phagocytic signaling. TIM-4-mediated phagocytosis depends on activation of the RAC1 GTPase which is similarly targeted by TLR signaling, especially TLR9 and TLR2. However, it has been shown that deletion of the intracellular portion of TIM-4 is not required for phagocytosis, and therefore the extracellular domain (“ECD”) of TIM-4 appears to function as a tether during phagocytosis to allow intracellular signaling by other transmembrane phagocytic molecules with which it associates, such as the integrins which are expressed ubiquitously on T cells. Since CER-1236 contains only the ECD of TIM-4, binding to PS on tumor cells recruits the cell-surface phagocytosis machinery, and simultaneously directly activates CER-1236 T cells through the intracellular CD3ξ and CD28 costimulatory domains. Phagocytosis and cytokine secretion are further enhanced by the TLR2/TIR intracellular signaling domain.

In preclinical studies, CER-1236 empowers T cells with phagocytic and cytotoxic potency

In anin vitroevaluation of the phagocytic potential of CER-1236, CER-transduced T cells demonstrated robust phagocytosis of PS. CER-1236 T cells were produced by transducing donor T cells using a lentiviral vector encoding for the chimeric receptor CER-1236, yielding a high percentage of T cells expressing the TIM-4 receptor, in similar CD4:CD8 ratios to untransduced cells. CER-1251 T cells, which express matching intracellular signaling domains but are unable to bind to PS due to a mutation in the gene encoding for the TIM-4 binding site, were also produced as a negative control.

PS-coated agarose beads were prelabeled with pHrodo red, a pH-sensitive dye which displays limited fluorescence at neutral pH but generates significant fluorescence in acidic pH. The post-phagocytic fusion of phagosomes and lysosomes leads to a drop in pH which can be detected by pH-sensitive dyes. As is illustrated in the graphic below, CER-1236 T cells co-cultured with PS-coated beads displayed significant phagocytic activity with up to 60% of CER-T cells acquiring a pHrodo red signal, indicative of bead capture and internalization. By contrast, untransduced T cells and CER-1251 T cells, with a mutation in the TIM-4 binding site, demonstrated minimal pHrodo red binding.

CER-1236 displays robust, target-specific phagocytic activity

Gene expression patterns demonstrate the combined cytotoxic and phagocytic functions which reside in the CER-1236 T cell. RNA-sequencing enabled the interrogation of the transcriptional profile of CER-1236 T cells after stimulation, with defined separation between the CER-1236 activated cells and the untransduced and CER-1251 control T cells. As is presented in the gene expression profile below, over 1,700 genes were noted to be differentially expressed in CER-1236 stimulated T cells in comparison to CER-1251 stimulated T cells. Among these genes were those related to pathways with well-known involvement in regulating phagocytosis, genes involved in nucleation of the ARP-WASP complex, Rho family GTPases, RAC signaling and phagosome formation. Of note, the RhoG subfamily of GTPase has been previously implicated in TCR-driven phagocytic processes. This aggregate of transcriptional signatures is indicative of the multi-modal immune response elicited by CER-1236 T cells.

Phagocytic and cytotoxic transcriptional signatures demonstrate the plasticity of CER-1236 T cells

CER-1236 T cells were also observed to generate potent anti-cancer responses in cell lines derived from specific hematological malignancies and solid tumors. Using an MCL cell line that has been modified to constitutively express externalized cell surface PS, MCL cells were co-cultured with either CER-1236 T cells or untransduced T cells. Notably, CER-1236 T cells eliminated 87% of the MCL cells while the untransduced cells demonstrated minimal cytotoxic ability. In addition, CER-1236 T cells secreted multiple cytokines, including IFNξ, granzyme B and TNFξ, all indicative of robust and sustained T cell cytotoxicity. Cytokine secretion was determined to be dependent of binding to PS, as CER-1251 T cells did not secrete cytokines despite exposure to cell surface PS. Further visual evidence of the cancer-killing capacity of CER-1236 T cells is illustrated in the staining assays depicted in the graphs presented below. In the assays with no CER-1236 T cells, a significant proliferation of cancer cells was observed, as evidenced by the increase in red staining, while the growth of cancer cells when exposed to CER-1236 T cells was limited. These results are presented in the graph to the left below.

CER-1236 T cells demonstrates potent cytotoxic responses to cancer cells in vitro

Significant cytotoxic activity of CER-1236 was also noted in an advanced NSCLC cell line which had a mutation in its epidermal growth factor receptor (“EGFR”) gene, a cancer type accounting for between 10% and 15% of all lung adenocarcinoma cases in persons of European descent and higher among the Asian population. As is depicted in the above, right graph, while the addition of CER-1236 alone to a NSCLC cell line which harbors L858R double mutations, demonstrated moderate cancer cell killing activity, the addition of osimertinib, the preferred tyrosine kinase inhibitor option for first-line treatment of EGFR-mutation positive advanced NSCLC, substantially enhanced CER-1236 T cell killing in a tyrosine kinase inhibitor-concentration dependent manner. In contrast, HCC827 cells co-cultured with untransduced T cells displayed minimal changes in cell number as compared to cells incubated in the absence of T cells, at all drug concentrations tested. Conditional cytokine proliferation was also observed with CER-1236 T cell treatment, with IFNξ levels over 400-fold higher in cancer cell cultures which used CER-1236 T cells, in contrast to co-cultures which used untransduced T cells. The addition of osimertinib to co-cultures further increased IFNξ levels by more than two-fold, compared with CER-1236 treatment alone. Similar trends were observed with TNFξ and Granzyme B levels and increases in osimertinib concentrations led to dose-dependent CER-1236 T cell proliferation. These results demonstrated that CER-1236 T cell activity could be significantly enhanced by upregulating target expression through concomitant dosing of standard of care medication.

PS, a lipid moiety recognized by phagocytic cells as an “eat me” signal, has previously been shown to be aberrantly upregulated on acute promyelocytic (“APL”) blasts, a subset of AML. To further interrogate phosphatidylserine across other AML subtypes, we evaluated a panel of primary bone marrow samples and peripheral blood from AML patients. We screened a preliminary panel of primary, treatment-naïve or on-therapy AML bone marrow and PBMC samples by flow cytometry: (n=5 adverse, n=5 intermediate, n=1 APL, n=1 familial, n=5 N/A) (Table 1). We observed both high percent (35.5 % ± 21.6) and gMFI of cell surface PS on a range of AML bone marrow samples. The median MFI of tertiles 1-3 was: T1 n=7, gMFI = 5033; T2 n=8, gMFI = 1873; T3 n=8, gMFI = 611. Of note, the two on-therapy samples showed high percent and gMFI of cell surface PS, with a patient receiving 5-azacytidine showing 1.8 fold PS gMFI over median. The second patient receiving TKI therapy showed 3.3 fold PS gMFI over median. Healthy donor samples had much lower cell surface PS, with a mean gMFI of 582. Circulating AML leukemic blasts were also evaluated for cell surface PS and showed high concordance with BM blasts, with high levels of cell surface PS compared to healthy donor peripheral blood mononuclear cells (“PBMCs”).

Table 1. AML patient characteristics

AML from bone marrow or PBMC have elevated cell surface “Eat Me” signal

CER-1236 T cells were also observed to generate potent anti-cancer responses against myeloid malignancies. AML is a heterogenous, and aggressive hematopoietic malignancy characterized by the rapid buildup of immature myeloid cells in the bone marrow and blood. We used AML cell lines depicted in the graph below, Kasumi-1 and MV4-11 to demonstrate cytotoxic anti-AML responses in co-culture studies with CER-1236. Similar to in vitro cytotoxicity results observed with B cell malignancy and NSCLC cell lines we show the addition of CER-1236 alone to AML cell lines demonstrates potent cell killing activity. Kasumi-1 harbors a p53 mutation, marking a subset of unfavorable disease risk AML patients, while MV4-11 cells carry a FLT-3 mutation, a proliferative AML leukemia subset. Both cell lines co-cultured with untransduced T cells displayed minimal changes in cell number as compared to cells incubated in the absence of T cells. CER-1236 T cells secreted multiple cytokines in co-cultures with AML cell lines, including IFNξ, granzyme B and TNFξ, all indicative of robust and sustained T cell cytotoxicity.

CER-1236 T cells demonstrate robust in vivo elimination of MCL xenografts

The cancer killing capacity of CER-1236 that was demonstrated in studies involving MCL cell lines was also noted in a mouse xenograft model. Immune deficient NOD scid gamma (“NSG”) mice were xenografted with the human REC-1 cell line at Day -2 and then treated with 8 mg/kg ibrutinib or vehicle and administered CER-1236 T cells daily from Day -1 to study completion. Administration of 7.5e6 CER-1236 T cells in the presence of ibrutinib resulted in the elimination of REC-1 tumor burden in all 11 of the mice in this treatment cohort. The administration of CER-1236 T cells in the absence of ibrutinib eliminated the tumors in all nine animals treated with CER-1236 T cells alone. No tumor growth inhibition was observed in either the vehicle-treated or ibrutinib-treated control groups. Median survival for mice receiving CER-1236 T cells with or without co-administration of ibrutinib was not reached during the study period. The results of this study are presented in the charts below.

A single infusion of CER-1236 T cells eliminates tumors and improves survival

The level of CER-1236 T cells in peripheral blood displayed robust expansion at Day 7, with or without the concomitant administration of ibrutinib. Animals that received CER-1236 T cells demonstrated an expansion of over 400-fold as compared to Day 2 levels both in the absence and presence of ibrutinib. High levels of CER-1236 T cells did not persist in the periphery and animals that received CER-1236 T cells showed a greater than 95% contraction in cell count from peak numbers by Day 14 with subsequent CER-T cell expansion likely prompted by residual tumor cell encounters. CER-1236 T cells also maintained robust proliferative capacity despite repeated antigen challenges with no evidence of T cell exhaustion noted. These findings are illustrated in the following charts.

A single infusion of CER-1236 T cells generated rapid cell expansion across repeated challenges.

CER-1236 demonstrates in vivo tumor clearance in NSCLC adenocarcinoma xenograft.

We envisioned that the simultaneous exposure to both osimertinib and CER-1236 would lead to synergistic in vivo anti-tumor responses. HCC827 NSCLC cells were inoculated into the flanks of NSG mice. Once established, the mice were dosed with a short course of the EGFR inhibitor osimeretinib to prime PS antigen on tumors and administered 2.5e6 CER-1236 T cells. Treatment groups that received the EGFR inhibitor alone, after initial tumor regression, developed progressive disease. In contrast, animals infused with CER-1236 T cells demonstrated potent anti-tumor responses in the presence of osimertinib. CER-1236 T cells expanded rapidly in the blood, with the highest expansion observed in the osimertinib-treated cohorts. Importantly, no evidence of organ toxicity or weight loss was observed with increases in body weight recorded in all groups over the course of the study. Analysis of the tumors post-infusion indicated extensive infiltration of T cells compared to untransduced controls.

CER-1236 T cells infused to Osimertinib dosed animals showed higher levels of T cell expansion

We believe that the preclinical models of AML, MCL, ovarian cancer and EGFR-mutation positive NSCLC demonstrate the ability of CER-1236 T cells to induce collaborative innate-adaptive anti-tumor immune responses in both in vitro and in vivo studies. Moreover, concurrent treatment with standard-of-care therapeutics for each of these indications increases target ligand, conditionally bolstering CER-1236 T cell function to augment anti-tumor activity. Additionally, in antigen presentation assays, activated CER-1236 T cells exhibited superior cross-presentation ability relative to conventional T cells, triggering specific TCR-T cell responses in an MHC class I and TLR-2 dependent manner, overcoming the limited antigen presentation capabilities of conventional T cells. These results indicate that CER-1236 T cells have the potential to achieve optimal tumor control by eliciting both cytotoxic effects and mediated cross-priming.

CER-1236 T cells did not elicit safety signals in preclinical studies

Importantly, no evidence of toxicity was observed after the single administration of 7.5e6 CER-1236 T cells. No incidence of anemia, thrombocytopenia, neutropenia or coagulation abnormalities were recorded. Complete blood count, prothrombin time, and partial thromboplastin time were measured in blood taken at the peak of T cell expansion and after T cell contraction. Hematologic indices, including hemoglobin/hematocrit, platelets and neutrophils remained stable throughout the study. Prothrombin and partial thromboplastin time were unaffected at the peak of T cell expansion and after contraction. None of the animals experienced weight loss, morbidity or unexpected mortality. CER-1236 T cells showed a restricted pattern of tissue distribution similar to other T cell products and did not result in tissue damage with no histological abnormalities observed in any organ evaluated, including heart, lung, liver, kidney and brain.

CER-1236 Clinical Development Strategy

Based on the extensive preclinical data that we have assembled regarding the use of CER-1236 T cells to combat cancer, we currently anticipate filing an initial IND in 2024 to commence clinical trials with our initial treatment target being patients suffering from relapsed, or refractory AML as well as certain B cell lymphomas with unmet medical need. We subsequently intend to expand the clinical development of CER-1236 to include solid tumors such as NSCLC and ovarian cancer. We expect these clinical trials to evaluate the safety, the potential therapeutic utility and applicable dose of CER-1236. In addition, we anticipate that these clinical trials may provide insight into the possible use of CER-1236 to treat an array of hematologic and solid tumors. We believe this drug candidate has the potential to be a therapy for the unmet needs of targeted indications, if approved, and by leveraging the innate immune system’s phagocytic capabilities, could be differentiated by its safety, tolerability, efficacy and clinical benefit over current therapeutic approaches, which have been observed in preclinical studies. None of the abovementioned statements regarding any of our products in development are intended to be a prediction or conclusion of efficacy. No clinical trials on our product candidates have commenced so no conclusions relating to such attributes can be made.

Disease background

Acute Myeloid Leukemia

Approximately, 20,000 patients in the U.S. are diagnosed with AML annually. In adults, AML, characterized by the rapid buildup of abnormal myeloid cells in the bone marrow and blood, is the most common acute leukemia worldwide. In children and young adults under 20 years old AML comprises 74% of acute leukemia cases. Despite the many available treatments for AML, prognosis for patients remains poor. There are several molecular alterations of AML that make it difficult to treat with individual therapies. The process of categorizing the disease state as well a patient’s degree of “fitness” for toxic chemotherapeutic regimens is the subject of ongoing debate and discussion. Moreover, the development of engineered T cell therapies for AML has proven difficult in part due to the identification of suitable target antigens.

B cell lymphoma

B cell lymphomas include patients diagnosed with Hodgkin’s disease and those diagnosed with non-Hodgkin’s lymphoma (“NHL”). In the U.S., the American Cancer Society estimates that in 2023, approximately 8,800 cases of Hodgkin’s lymphoma and 81,000 cases of NHL will be diagnosed, with the number of new diagnoses expected to increase annually. Aggressive B cell lymphomas are a heterogenous group of cancers that arise from B lymphocytes in various stages of development that make up part of the immune system. Included in this group is DLBCL and its variants, MCL, Burkitt lymphoma and B cell lymphoblastic lymphoma. There are an estimated 15,000 patients receiving second or third-line therapies for refractory or recurrent NHL.

We intend to focus the initial development of CER-1236 on the lymphoid malignancies MCL and CLL, a malignancy of mature B cells. MCL is a rare and difficult-to-treat B cell lymphoma with a relapsing and remitting clinical course. Most cases of MCL are diagnosed with advanced-stage disease. Extranodal involvement is common, including involvement of the bone marrow, the gastrointestinal tract and peripheral blood which can result in significant morbidity. MCL accounts for approximately 6% of all cases of NHL diagnosed annually. CLL tends to progress slowly, with a benign phase followed by a terminal phase marked by progressive disease resistant to treatment. The course of CLL is complicated by immune dysfunction, which leads to an increased risk of infection, autoimmune complications and other cancers. An estimated 19,000 new cases of CLL are diagnosed annually in the U.S. and CLL is the cause of approximately 4,300 deaths per year.

Current therapies and their limitations

Until recent years, AML has been treated with decades-old combination chemotherapy regimens, including cytarabine and anthracycline. This regimen has about a 70-80% complete response (“CR”) rates of adults younger than 60 years and 40-60% of fit adults older than 60 years old. For those eligible for the chemotherapy regimen and experiencing a CR, many patients with adverse features (70%) undergo allogeneic HSCT which, in some patients are “curative.” Unfortunately, a significant proportion (up to 50%) of AML patients are over the age of 65 and are “unfit” for intensive chemotherapy, requiring different treatment approaches for medically unfit patients. The treatment landscape for older unfit adults with AML fundamentally changed with the recent availability of new drugs, in particular the oral B-cell lymphoma 2 inhibitor venetoclax. Venetoclax is used in conjunction with azacytidine to treat these patients, with a complete response rate ~65%. However the majority of adult patients with AML experience relapse despite initially attaining CR; a venetoclax-based doublet therapy for medically less-fit adults carries a median survival of ~14.7 months and 4-year survival of less than 20%. The prognosis for patients who are refractory to or relapse after frontline azacitidine venetoclax is dismal with median overall survival of 2.4 months, making this an area of high unmet need. Such patients who do not respond to frontline therapy with azacitidine or venetoclax, and the subset who do not respond to targeted therapies, e.g., IDH1/2 inhibitors, are candidates for investigational trials. To date, there are no approved cell therapeutic approaches to treat AML.

Treatment of NHL is dependent on disease designation. Indolent disease may be treated with localized radiation or simply monitored for disease progression, at which time the disease is often treated with rituximab, with or without chemotherapy. Aggressive disease is treated with chemotherapy if diagnosed in the earlier stages of disease progression or with a combination of rituximab and chemotherapy if diagnosed in the more advanced stages. Targeted therapeutics, including the Bruton Tyrosine Kinase (“BTK”) inhibitors, may be used as first line therapy or as treatment for refractory or relapsed disease. These neoplasms are typically characterized by rapid progressive disease and, although often potentially curable, are associated with relatively short survival of the patient in the absence of successful therapy.

While novel agents, including chemoimmunotherapy, targeted agents and cellular therapy, have transformed the care of patients with MCL, therapeutic resistance remains a challenge in relapsed or refractory MCL, particularly among patients whose disease characteristics designate them as high risk. Several approaches may be employed as second-line therapy for patients who relapse or progress on first-line therapy, including induction with alternate chemotherapies, and targeted therapeutics such as bortezomib, lenalidomide in combination with the monoclonal antibody rituximab, and BTK inhibitors. The use of a BTK inhibitor is generally the preferred second-line therapy and may also be used as third-line therapy in patients who have not been previously administered a BTK inhibitor. CD19 directed CAR-T cell therapy is the recommended third-line treatment for patients who relapse or progress after the administration of chemoimmunotherapy and a BTK inhibitor. Autologous or allogeneic stem cell transplant is another treatment option for patients who relapse.

The management of CLL has evolved rapidly over the past decade with newer, targeted therapeutics becoming the standard of care for a significant majority of previously untreated patients. Options for therapy at relapse include the BTK inhibitors, BCL-2 inhibitors, P13Kδ inhibitors.

Existing FDA-approved CD19-targeted CAR-T cell therapies produce overall response rates between 50% and 80%. Dosing with brexucabtagene autoleucel resulted in progression free survival of 25.8 months and overall survival of 46.6 months in patients with MCL and the National Cancer Care Network has made the treatment its recommended salvage therapy for eligible patients. CAR-T cell therapy has also demonstrated efficacy in treating aggressive and indolent lymphoma subpopulations and is currently being evaluated as a treatment for CLL. Yet while these treatments have transformed care, durable responses are often elusive. Moreover, they have a high frequency of acute multi-organ complications, limiting their use in chronically ill and elderly patients. As such, a significant medical need still exists in refractory or relapsed patients, particularly in patients whose disease is characterized by high-risk features.

Our therapeutic approach and development program

We anticipate the design of the clinical development program for CER-1236 to enable our evaluation of its therapeutic utility in treating both hematologic and solid tumors, as the capacity of a single therapeutic construct to provide clinical benefit across this diversity of tumor types would represent a significant advance in cancer immunotherapy. Due to the therapy’s novel mechanism of action, engaging both the innate and the adaptive immune response, and the broad expression profile of PS on a variety of hematologic and solid tumors, we intend to employ an adaptive Phase 1 trial design to evaluate patient response to CER-1236. As such, the dosing protocol will emphasize a gradual increase in the delivered dose with the objective of achieving a clinical signal, while ensuring patient safety. We also intend our Phase 1 trial design to enable an evaluation of appropriate dosing strategies to optimize CER-T engagement and proliferation.

To enhance patient recruitment opportunities, we intend to enroll AML patients who are relapsed and refractory to chemotherapy and eligible for HSCT. While we expect the majority of our initial enrollments to be with AML patients, we also intend to make all B cell lymphoma patients eligible to enroll as initial participants in our Phase 1 trial. With safe dosage established in these first patients, our intent is to subsequently evaluate the use of CER-1236 as monotherapy in AML, MCL and CLL, and in combination with a BTK inhibitor in select patients. We envision each of the AML, MCL and CLL treatment cohorts to involve an additional three to five patients. Our objective with these cohorts is to assess safety and CER-T cell proliferation post infusion.

We believe, subject to discussions with the FDA and other regulatory authorities, that there may be a full development path to registration and use in the larger AML or relapsed, refractory B cell lymphoma patient populations on achieving positive safety data along with indications of therapeutic benefit in these initial trial cohorts. We believe CER-1236 may provide significant treatment advantages over currently available therapeutics, including CAR-T therapy as a result of its potential to enhance objective response rates and the duration of response related to the comprehensive, coordinated engagement of the innate and adaptive immune systems and a sustained signaling environment. We believe this novel mechanism of action will enable our advance of a single therapeutic construct to address the substantial unmet need for a safe and effective cell therapy offering an improved therapeutic profile, despite significant competition. We subsequently anticipate initiating clinical trials for additional indications, including the possible application of CER-1236 in the treatment of certain solid tumors such as EGFR mutation positive NSCLC and ovarian cancer.

Manufacturing Strategy

The manufacture of product candidates derived from our autologous CER-1236 T cells involves the same type of equipment, materials and protocols already used in the manufacture of currently FDA-approved CAR-T cell therapies, which we believe will provide us numerous benefits. We are planning for CER-1236 cell product to be manufactured using an automated closed process, with product manufacture continuous from bulk harvested cells through to cryopreserved drug product bags. There are multiple factors involved in the manufacturing process needed to ensure proper CER-T cell cryopreservation both preceding and following freezing, including the thawing process and post-thaw handling prior to patient administration. These factors are well understood and procedures have been identified to optimize yield, activity, stability and consistency. In addition, we may be able to take advantage of the increasing regulatory familiarity with these established protocols. Our expected manufacturing process embraces a fully automated, closed-system design intended to minimize exposure to potential contaminants and ensure consistent successful manufacture of the product. The product will be manufactured in a contract manufacturing facility which maintains a quality system compliant with current Good Manufacturing Practice (“cGMP”) requirements.

Lentivirus containing CER-1236 will be produced following a cGMP process using cGMP plasmids.

We have entered into a contract manufacturing agreement related to the production of drug product for our clinical trials, and we anticipate entering into similar arrangements regarding plasmid, viral vector and final drug product manufacture for drug product to be used in subsequent clinical trial phases in the future. We intend to advance related process development work both internally and with our contract manufacturing organization (“CMO”) partners. In the event a product candidate receives regulatory approval, we anticipate entering into contract manufacturing agreements with one or more CMOs to support product launch and commercial manufacture.

Intellectual Property

Intellectual property is of vital importance in our field and in biotechnology generally. Our commercial success will depend in part on obtaining and maintaining patent protection for our current and future product candidates. We seek to protect and enhance proprietary technology, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining, and defending our patent rights. When available to expand market exclusivity, our strategy is to obtain or license additional intellectual property related to current or contemplated development platforms, core elements of technology, and/or clinical candidates. We will also seek to rely on regulatory protection afforded through inclusion in expedited development and review, data exclusivity, market exclusivity, and patent term extensions, where available. In addition to patent protection, we also may rely on trademark registration, trade secrets, know-how, other proprietary information, and continuing technological innovation to develop and maintain our competitive position. We seek to protect and maintain the confidentiality of proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, including the United States, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office (“USPTO”) in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier filed patent. In the United States, the patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to an approved drug may be extended, and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our product candidates receive FDA approval, we expect to apply for patent term extensions on patents covering those product candidates. We plan to seek patent term extensions to any issued patents we may obtain in any jurisdiction where such patent term extensions are available.

In some instances, we submit patent applications directly with the USPTO as provisional patent applications. Corresponding non-provisional patent applications must be filed not later than 12 months after the provisional application filing date. While we intend to timely file non-provisional patent applications relating to our provisional patent applications, we cannot predict whether any such patent applications will result in the issuance of patents that provide us with any competitive advantage.

We will file U.S. non-provisional applications and Patent Cooperation Treaty (“PCT”) applications that claim the benefit of the priority date of earlier filed provisional applications, when applicable. The PCT system allows a single application to be filed within 12 months of the original priority date of the patent application, and to designate all of the PCT member states in which national patent applications can later be pursued based on the international patent application filed under the PCT. The PCT searching authority performs a patentability search and issues a non-binding patentability opinion which can be used to evaluate the chances of success for the national applications in foreign countries prior to having to incur the filing fees. Although a PCT application does not issue as a patent, it allows the applicant to seek protection in any of the member states through national-phase applications. At the end of the period of two and a half years from the first priority date of the patent application, separate patent applications can be pursued in any of the PCT member states either by direct national filing, or in some cases, by filing through a regional patent organization, such as the European Patent Office. The PCT system delays expenses, allows a limited evaluation of the chances of success for national/regional patent applications, and enables substantial savings where applications are abandoned within the first two and a half years of filing.

For all patent applications, we determine claiming strategy on a case-by-case basis. Advice of counsel and our business model and needs are always considered. We continuously reassess the number and type of patent applications, as well as the scope of our patent claims to pursue coverage and value for our processes and compositions, given existing patent office rules and regulations. Further, claims may be modified during patent prosecution to meet our intellectual property and business needs.

We have sought patent protection in the United States related to the CER-1236 T cell technology platform and its constructs, as well as their use as individual cellular compositions and product candidates targeting specific diseases. We also intend to seek patent protection related to the processes and materials used in CER-1236 T cell expression as well as its use in combination therapies. As of the date of this Annual Report, our patent portfolio consists of two issued U.S. patents, one of which relates to CER-1236, 11 pending U.S. applications, seven granted foreign applications (in Europe, Germany, Spain, France, UK, Italy, and Mexico) and 29 pending foreign applications (in China, Japan, Canada, Hong Kong, and Israel). U.S. Patent Application Number 17/400,082 was allowed and later issued on May 23, 2023 as U.S. Patent Number 11,655,282. This patent provides coverage over our CER-1236 product candidate and includes claims directed to a CER comprising, at least in part, Tim-4, a phosphatidylserine binding domain, its sequence, and various Tim-4 proteins. These patents and applications, if and when issued, are projected to expire from 2037 to 2042, prior to consideration of any additional patent term. We intend to pursue, when possible, further composition, method of use, dosing, formulation, and other patent protection directed to our current and new product candidates. We may also pursue patent protection with respect to manufacturing and drug development processes and technology.

The following issued patents are directed at a composition of matter and provide coverage over our CER-1236 T cell candidate:

U.S. Patent No. 11,655,282, having an anticipated expiration date of September 26, 2037; and

EP Patent No. 3,519,441 (validated in the United Kingdom, France, Spain, Germany, and Italy), having an anticipated expiration date of September 26, 2037.

Competition

The biotechnology and pharmaceutical industries have made substantial investments in recent years into the rapid development of novel immunotherapies for the treatment of a range of pathologies, including cancers, making this a highly competitive market.

We face substantial competition from multiple sources, including large and specialty pharmaceutical, biopharmaceutical and biotechnology companies, academic research institutions and governmental agencies, and public and private research institutions. Our competitors compete with us based on the specific technologies employed, and on the stage of product candidate development. In addition, many small biotechnology companies have formed collaborations with large, established companies to (i) obtain support for their research, development, and commercialization of products, or (ii) combine several treatment approaches to develop longer lasting or more efficacious treatments that may potentially directly compete with our current or future product candidates.

In addition to the current standard of care treatments for patients with cancer, numerous commercial and academic preclinical studies and clinical trials are being undertaken by a large number of parties to assess novel technologies and product candidates in the field of immunotherapy. Results from these studies and trials have fueled increasing levels of interest in the field of immunotherapy. Accordingly, we face competition from numerous pharmaceutical and biotechnology entities related to the development of cellular-based therapies to treat cancer. We expect to face competition from other companies developing TCR T therapies, such as Adaptimmune Therapeutics, plc GlaxoSmithKline plc, MediGene AG, TCR2 Therapeutics Inc., TScan Therapeutics Inc. and Ziopharm Oncology, Inc. We also may compete with other T cell therapy companies with target discovery platforms, such as Adaptive Therapeutics, Inc., Immatics, N.V., 3T Biosciences, Inc., and Sana Biotechnology, Inc., among others. We may also compete against a significant number of companies engaged in the development of autologous and allogeneic CAR-T, CAR-NK, TIL and T cell engager technologies including larger companies such as Gilead Sciences, Inc., Bristol-Myers Squibb Company and Amgen, Inc. as well as smaller companies such as Nkarta Inc., Allogene Therapeutics Inc., Century Therapeutics Inc., and Fate Therapeutics Inc., among others.

Many of our competitors, either alone or in combination with their respective strategic partners, have significantly greater financial resources and expertise in R&D, manufacturing, the regulatory approval process, and marketing than we do. Mergers and acquisitions activity in the pharmaceutical, biopharmaceutical, and biotechnology sector is likely to result in greater resource concentration among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through sizeable collaborative arrangements with established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, and acquiring technologies complementary to, or necessary for, our programs.

Our commercial opportunity could be reduced or eliminated if one or more of our competitors develop and commercialize products that are safer, more effective, better tolerated, or of greater convenience or economic benefit than our proposed product offering. Our competitors also may be in a position to obtain FDA or other regulatory approval for their products more rapidly, resulting in a stronger or dominant market position before we are able to enter the market. The key competitive factors affecting the success of all of our programs are likely to be product safety, efficacy, convenience, and treatment cost.

In the event we receive regulatory approval for any of our product candidates, we will likely compete with other cost-effective and reimbursable treatments used to treat cancer. The most common treatment modalities for patients with cancer are surgery, radiation, and drug therapy, including chemotherapy, hormone therapy, biologic therapy, such as monoclonal and bispecific antibodies, immunotherapy, and cell-based therapy, used alone or in combination to enhance efficacy. Our CER-T cell therapy candidates, if any are approved, may not be competitive with them. Some of these drugs are branded and subject to patent protection, and others are available on a generic basis. Insurers and other third-party payors may also encourage the use of generic products or specific branded products. As a result, obtaining market acceptance of any of our CER-T cell therapies that we successfully introduce to the market may pose challenges.

Government Regulation

In the United States, biological products are licensed by the FDA for marketing under the Public Health Service Act (“PHS Act”) and regulated under the Federal Food, Drug, and Cosmetic Act (“FDCA”). Both the FDCA and the PHS Act and their corresponding regulations govern, among other things, the testing, manufacturing, safety, purity, potency, efficacy, labeling, packaging, storage, recordkeeping, distribution, marketing, sales, import, export, reporting, advertising, and other promotional practices involving biological products. FDA clearance of an IND application must be obtained before commencing clinical testing of biological products. FDA licensure also must be obtained before marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.

U.S. Development Process

The process required by the FDA before a biological product may be marketed in the United States generally involves the following:

Before testing any biological product candidate in humans, the product candidate enters the preclinical testing stage. Nonclinical tests include laboratory evaluations of product chemistry, pharmacology, toxicity, and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the nonclinical tests must comply with federal regulations and requirements including GLPs.

The clinical study sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data or literature, and a proposed clinical protocol, to the FDA as part of the IND. Some nonclinical testing typically continues after the IND is submitted. An IND is an exemption that allows an unapproved product to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer an investigational product to humans. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA requests certain changes to a protocol before the trial can begin, or the FDA places the clinical trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA.

Clinical trials may involve the administration of the biological product candidate to healthy volunteers or subjects under the supervision of qualified investigators. Clinical trials involving some products for certain diseases, including some rare diseases may begin with testing in patients with the disease. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection, and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects or his or her legal representative provide informed consent. Further, each clinical trial must be reviewed and approved by an independent IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.

During all phases of clinical development, the FDA requires extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of serious suspected adverse reactions over those listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for such reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within 7 calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2, and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biologic has been associated with unexpected serious harm to patients.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics of the biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biologics, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency, and purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.

There are also various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with the research. In each of these areas, the FDA and other regulatory authorities have broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals.

Information about certain clinical trials must be submitted within specific timeframes for public dissemination on the clinicaltrials.gov website. Sponsors or distributors of investigational products for the diagnosis, monitoring, or treatment of one or more serious diseases or conditions must also have a publicly available policy on evaluating and responding to requests for expanded access requests.

U.S. Review and Approval Processes

After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the product begins. The BLA must include results of product development, laboratory, and animal studies, human studies, information on the manufacture and composition of the product, proposed labeling, and other relevant information. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.

Under the Prescription Drug User Fee Act, as amended (“PDUFA”), each BLA may be accompanied by a significant user fee. Under federal law, the submission of most applications is subject to an application user fee. The sponsor of an approved application is also subject to an annual program fee. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for product candidates designated as orphan drugs, unless the product candidate also includes a non-orphan indication.

Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. The application also needs to be published and submitted in an electronic format that can be processed through the FDA’s electronic systems. If the electronic submission is not compatible with the FDA’s systems, the BLA can be refused for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and effective, for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMPs to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a REMS is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.

Before approving a BLA, the FDA may inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical trial sites to assure that the clinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money, and effort in the areas of training, record keeping, production and quality control.

Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than the sponsor interprets the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, such as requiring labeling changes, or major, such as requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings, or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post-marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized. As a condition for approval, the FDA may also require additional nonclinical testing as a Phase 4 commitment.

One of the performance goals agreed to by the FDA under the PDUFA is to review standard BLAs in ten months from filing and priority BLAs in six months from filing, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.

Post-Approval Requirements

Maintaining substantial compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to cGMP. We will rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we may commercialize. Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including quality control and quality assurance and maintenance of records and documentation.

Following approval, the manufacturing facilities are subject to inspections by the FDA, and such inspections may result in an issuance of FDA Form 483 deficiency observations, untitled letter, or a warning letter, which can lead to plant shutdown and other more serious penalties and fines. Prior to the institution of any manufacturing changes, a determination needs to be made regarding whether FDA approval is required in advance. If not done in accordance with FDA expectations, the FDA may restrict supply and may take further action. Product reports are required to be submitted annually. Other post-approval requirements applicable to biological products include reporting of cGMP deviations that may affect the identity, potency, purity, and overall safety of a distributed product, recordkeeping requirements, reporting of adverse events, reporting updated safety and efficacy information, and complying with electronic record and signature requirements.

After a BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA may conduct laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products. Systems need to be put in place to record and evaluate adverse events reported by health care providers and patients and to assess product complaints. An increase in severity or new adverse events can result in labeling changes or product recall. Defects in manufacturing of commercial products can result in product recalls.

We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or inpatient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process, or after approval may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval or license revocation, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect.

Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to register their establishments with the FDA and certain state agencies, and they are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain cGMP compliance. Manufacturers and other parties involved in the drug supply chain for prescription drug products must also comply with product tracking and tracing requirements and for notifying the FDA of counterfeit, diverted, stolen and intentionally adulterated products or products that are otherwise unfit for distribution in the United States. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented, and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation (“ODD”), to a biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a biological product available in the United States for this type of disease or condition will be recovered from sales of the product. ODD must be requested before submitting a BLA. After the FDA grants ODD, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. ODD does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has ODD receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same biological product for the same indication for seven years, except in limited circumstances, such as not being able to supply the product for patients or showing clinical superiority to the product with orphan exclusivity.

Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. If a biological product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity.

Expedited Review and Approval Programs

The FDA has various programs, including fast track designation, priority review, accelerated approval, and breakthrough therapy designation, that are intended to expedite or simplify the process for the development and FDA review of biological products that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new biological products to patients earlier than under standard FDA review procedures. To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that a biological product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a fast track BLA before the application is complete, a process known as rolling review.

The FDA may give a priority review designation, such as a rare pediatric disease designation, to biological products that treat a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. Most products that are eligible for fast track designation may also be considered appropriate to receive a priority review. In addition, biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the biological product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a biological product receiving accelerated approval to perform adequate and well-controlled post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint. Under the Food and Drug Omnibus Reform Act of 2022 (“FDORA”), the FDA may require, as appropriate, that such trials be underway prior to approval or within a specific time period after the date of approval for a product granted accelerated approval.

Under FDORA, the FDA has increased authority for expedited procedures to withdraw approval of a drug or indication approved under accelerated approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit of the product. In addition, for products being considered for accelerated approval, the FDA generally requires, unless otherwise informed by the agency, that all advertising and promotional materials intended for dissemination or publication within 120 days of marketing approval be submitted to the agency for review during the pre-approval review period.

Moreover, a sponsor can request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug or biological product that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or biological product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drug and biological products designated as breakthrough therapies are also eligible for accelerated approval. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decides that the time period for FDA review or approval will not be shortened. Furthermore, fast-track designation, priority review, accelerated approval, and breakthrough therapy designation do not change the standards for approval and may not ultimately expedite the development or approval process.

Biologics Price Competition and Innovation Act

The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which was enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), created an abbreviated approval pathway for biological products that are demonstrated to be “biosimilar” or “interchangeable” with an FDA-licensed reference biological product via an approved BLA. Biosimilarity to an approved reference product requires that there be no differences in conditions of use, route of administration, dosage form, and strength, and no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity is demonstrated in steps beginning with rigorous analytical studies or “fingerprinting”, in vitro studies, in vivo animal studies, and generally at least one clinical study. If at any point in the stepwise biosimilarity process a significant difference is observed, then the products are not biosimilar, and the development of a standalone BLA is necessary. In order to meet the higher hurdle of interchangeability, a sponsor must demonstrate that the biosimilar product can be expected to produce the same clinical result as the reference product, and for a product that is administered more than once, that the risk of switching between the reference product and biosimilar product is not greater than the risk of maintaining the patient on the reference product. Complexities associated with the larger, and often more complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being evaluated by the FDA. Under the BPCIA, a reference biologic is granted 12 years of exclusivity from the time of first licensure of the reference product.

Regulation Outside of the United States

In addition to regulations in the United States, we are subject to a variety of regulations in other jurisdictions governing clinical studies, commercial sales, and distribution of our products. Most countries outside of the United States require that clinical trial applications be submitted to and approved by the local regulatory authority for each clinical study. In the European Union (the “European Union”), for example, an application must be submitted to the national competent authority and an independent ethics committee in each country in which we intend to conduct clinical trials, much like the FDA and IRB, respectively. Under the Clinical Trials Regulation (EU) No 536/2014, which replaced the Clinical Trials Directive 2001/20/EC on January 31, 2022, a single application is now made through the Clinical Trials Information System (“CTIS”) for clinical trial authorization in up to 30 EU/EEA countries at the same time and with a single set of documentation.

The assessment of applications for clinical trials is divided into two parts (Part I contains scientific and medicinal product documentation and Part II contains the national and patient-level documentation). Part I is assessed by a coordinated review by the competent authorities of all European Union member states (the “ Member States”) in which an application for authorization of a clinical trial has been submitted (Member States concerned) of a draft report prepared by a reference Member State. Part II is assessed separately by each Member State concerned. The role of the relevant ethics committees in the assessment procedure continues to be governed by the national law of the Member State concerned, however overall related timelines are defined by the Clinical Trials Regulation. The Clinical Trials Regulation also provides for simplified reporting procedures for clinical trial sponsors.

In addition, whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of countries outside the United States before we can commence marketing of the product in those countries. The approval process and requirements vary from country to country, so the number and type of nonclinical, clinical, and manufacturing studies needed may differ, and the time may be longer or shorter than that required for FDA approval.

To obtain regulatory approval of our medicinal products under the European Union regulatory system, we are required to submit a marketing authorization application (“MAA”), to be assessed in the centralized procedure. The centralized procedure allows applicants to obtain a marketing authorization (“MA”) that is valid throughout the European Union, and the additional Member States of the European Economic Area (Iceland, Liechtenstein and Norway) (“EEA”). It is compulsory for medicinal products manufactured using biotechnological processes, orphan medicinal products, advanced therapy medicinal products (gene-therapy, somatic cell-therapy or tissue-engineered medicines) and medicinal products containing a new active substance which is not authorized in the European Union and which is intended for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, auto-immune and other immune dysfunctions, viral diseases or diabetes. The centralized procedure is optional for any other products containing new active substances not authorized in the European Union or for products which constitute a significant therapeutic, scientific, or technical innovation or for which a centralized authorization is in the interests of patients at European Union level. When a company wishes to place on the market a medicinal product that is eligible for the centralized procedure, it sends an application directly to the EMA, to be assessed by the Committee for Medicinal Products for Human Use (“CHMP”). The CHMP is responsible for conducting the assessment of whether a medicine meets the required quality, safety, and efficacy requirements, and whether the product has a positive risk/benefit profile. The procedure results in a European Commission decision, which is valid in all European Union Member States. The centralized procedure is as follows: full copies of the MAA are sent to a rapporteur and a co-rapporteur designated by the competent European Medicines Agency (“EMA”) scientific committee. They coordinate the EMA’s scientific assessment of the medicinal product and prepare draft reports. Once the draft reports are prepared (other experts might be called upon for this purpose), they are sent to the CHMP, whose comments or objections are communicated to the applicant. The rapporteur is therefore the privileged interlocutor of the applicant and continues to play this role, even after the MA has been granted.

The rapporteur and co-rapporteur then assess the applicant’s replies, submit them for discussion to the CHMP, and taking into account the conclusions of this debate, prepare a final assessment report. Once the evaluation is completed, the CHMP gives a favorable or unfavorable opinion as to whether to grant the authorization. When the opinion is favorable, it shall include the draft summary of product characteristics (“SmPC”), the package leaflet, and the texts proposed for the various packaging materials. The time limit for the evaluation procedure is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP). The EMA then has fifteen days to forward its opinion to the European Commission, which will make a binding decision on the grant of an MA within 67 days of the receipt of the CHMP opinion.

National marketing authorizations, which are issued by the competent authorities of the Member States of the European Union and only cover their respective territory, are available for products not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized for marketing in a Member State of the European Union, this national authorization can be recognized in other Member States through the mutual recognition procedure. If the product has not received a national authorization in any Member State at the time of application, it can be approved simultaneously in various Member States through the decentralized procedure.

In the European Union, new chemical entities (including both small molecules and biological medicinal products) approved on the basis of a complete and independent data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. Data exclusivity, if granted, prevents generic or biosimilar applicants from referencing the innovator’s pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA, for a period of eight years from the date on which the reference product was first authorized in the European Union. During the additional two-year period of market exclusivity, a generic or biosimilar MAA can be submitted, and the innovator’s data may be referenced, but no medicinal product can be marketed until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to authorization, is held to bring a significant clinical benefit in comparison with currently approved therapies. There is no guarantee that a product will be considered by the EMA to be a new chemical entity, and products may not qualify for data exclusivity. Even if a product is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company could nevertheless also market another version of the product if such company obtained an MA based on an MAA with a complete and independent data package of pharmaceutical tests, preclinical tests and clinical trials.

The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as an orphan medicinal product if it is intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition that affects no more than five in 10,000 persons in the European Union when the application is made. In addition, orphan designation can be granted if the product is intended for a life threatening, seriously debilitating, or serious and chronic condition in the European Union and, without incentives, it is unlikely that sales of the product in the European Union would be sufficient to justify the necessary investment in its development. Orphan designation is only available if there is no other satisfactory method approved in the European Union of diagnosing, preventing, or treating the applicable orphan condition, or if such a method exists, the proposed orphan medicinal product will be of significant benefit to patients affected by such condition, as defined in Regulation (EC) 847/2000.

Orphan designation provides opportunities for fee reductions, protocol assistance, and access to the centralized procedure. Fee reductions are limited to the first year after an MA, except for small and medium enterprises. In addition, if a product which has an orphan designation subsequently receives a centralized MA for the indication for which it has such designation, the product is entitled to orphan market exclusivity, which means the EMA may not approve any other application to market a similar medicinal product for the same indication for a period of ten years. A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The exclusivity period may be reduced to six years if, at the end of the fifth year, it is shown that the designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, an MA may be granted to a similar medicinal product for the same indication as an authorized orphan product at any time if:

A pediatric investigation plan (“PIP”) in the European Union is aimed at ensuring that the necessary data are obtained to support the authorization of a medicine for children, through studies in children. All applications for MAs for new medicines have to include the results of studies as described in an agreed PIP, unless the medicine is exempt because of a deferral or waiver. This requirement also applies when an MA holder wants to add a new indication, pharmaceutical form, or route of administration for a medicine that is already authorized and covered by intellectual property rights. Several rewards and incentives for the development of pediatric medicines for children are available in the European Union. Medicines authorized across the European Union with the results of studies from a PIP included in the product information are eligible for an extension of their supplementary protection certificate (“SPC”) by six months (provided an application for such extension is made at the same time as filing the SPC application for the product, or at any point up to two years before the SPC expires). This is the case even when the studies’ results are negative. For orphan medicinal products, the incentive is an additional two years of market exclusivity. Scientific advice and protocol assistance at the EMA are free of charge for questions relating to the development of pediatric medicines. Medicines developed specifically for children that are already authorized but are not protected by a patent or supplementary protection certificate are eligible for a pediatric-use MA (“PUMA”). If a PUMA is granted, the product will benefit from ten years of market protection as an incentive.

In March 2016, the EMA launched an initiative, the PRIority Medicines (“PRIME”) scheme, to facilitate development of product candidates in indications, often rare, for which few or no therapies currently exist. The PRIME scheme is intended to encourage development of products in areas of unmet medical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized procedure. Products from small- and medium-sized enterprises may qualify for earlier entry into the PRIME scheme than larger companies on the basis of compelling non-clinical data and tolerability data from initial clinical trials. Many benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and potentially accelerated MAA assessment once a dossier has been submitted. Importantly, once a candidate medicine has been selected for the PRIME scheme, a dedicated contact and rapporteur from the CHMP or from the Committee for Advanced Therapies (“CAT”) are appointed early in the PRIME scheme facilitating increased understanding of the product at EMA’s committee level. An initial meeting with the CHMP/CAT rapporteur initiates these relationships and includes a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies. PRIME eligibility does not change the standards for product approval, and there is no assurance that any such designation or eligibility will result in expedited review or approval.

The aforementioned European Union rules are generally applicable in the EEA.

The European Commission introduced legislative proposals in April 2023 that, if implemented, will replace the current regulatory framework in the European Union for all medicines (including those for rare diseases and for children). The European Commission has provided the legislative proposals to the European Parliament and the European Council for their review and approval. In October 2023, the European Parliament published draft reports proposing amendments to the legislative proposals, which will be debated by the European Parliament. Once the European Commission’s legislative proposals are approved (with or without amendment), they will be adopted into European Union law.

The United Kingdom left the European Union on January 31, 2020, and the United Kingdom and the European Union have concluded a trade and cooperation agreement (“TCA”) which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021.

The TCA includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued, but does not provide for wholesale mutual recognition of United Kingdom and European Union pharmaceutical regulations. At present, Great Britain has implemented European Union legislation on the marketing, promotion and sale of medicinal products through the Human Medicines Regulations 2012 (as amended). Except in respect of the European Union Clinical Trials Regulation, the regulatory regime in Great Britain therefore largely aligns with current European Union medicines regulations, however it is possible that these regimes will diverge more significantly in future now that Great Britain’s regulatory system is independent from the European Union and the TCA does not provide for mutual recognition of United Kingdom and European Union pharmaceutical legislation. However, notwithstanding that there is no wholesale recognition of European Union pharmaceutical legislation under the TCA, under a new framework mentioned below which was put in place by the Medicines and Healthcare products Regulatory Agency (“MHRA”), the United Kingdom’s medicines regulator, on January 1, 2024, the MHRA may take into account decisions on the approval of MAs from the EMA (and certain other regulators) when considering an application for a Great Britain MA.

On February 27, 2023, the United Kingdom government and the European Commission announced a political agreement in principle to replace the Northern Ireland Protocol (the “Northern Ireland Protocol”) with a new set of arrangements, known as the “Windsor Framework”. This new framework fundamentally changes the existing system under the Northern Ireland Protocol, including with respect to the regulation of medicinal products in the United Kingdom. In particular, the MHRA will be responsible for approving all medicinal products destined for the United Kingdom market (i.e., Great Britain and Northern Ireland), and the EMA will no longer have any role in approving medicinal products destined for Northern Ireland. A single United Kingdom-wide MA will be granted by the MHRA for all medicinal products to be sold in the United Kingdom, enabling products to be sold in a single pack and under a single authorization throughout the United Kingdom. The Windsor Framework was approved by the European Union-United Kingdom Joint Committee on March 24, 2023, so the United Kingdom government and the European Union will enact legislative measures to bring it into law. On June 9, 2023, the MHRA announced that the medicines aspects of the Windsor Framework will apply from January 1, 2025.

The MHRA has introduced changes to national licensing procedures, including procedures to prioritize access to new medicines that will benefit patients, an accelerated assessment procedure and new routes of evaluation for novel products and biotechnological products. On January 1, 2024, the MHRA put in place a new international recognition framework under which the MHRA may have regard to decisions on the approval of MAs made by the EMA and certain other regulators when determining an application for a new Great Britain MA.

There is now no pre-MA orphan designation in Great Britain. Instead, the MHRA reviews applications for orphan designation in parallel to the corresponding MAA. The criteria are essentially the same, but have been tailored for the Great Britain market, i.e., the prevalence of the condition in Great Britain (rather than the European Union) must not be more than five in 10,000. Should an orphan designation be granted, the period or market exclusivity will be set from the date of first approval of the product in Great Britain or the European Union, wherever is earliest.

Healthcare Laws and Regulations

Sales of our product candidate, if approved, or any other future product candidate, will be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we might conduct our business. The healthcare laws and regulations that may affect our ability to operate include the following:

Many states have similar laws and regulations, such as anti-kickback and false claims laws, that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, state laws that require drug and biologics manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, as well as state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA. Additionally, to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.

Pharmaceutical Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such drug products. In the United States, third-party payors include federal and state healthcare programs, government authorities, private managed care providers, private health insurers and other organizations.

Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical drug products and medical services, in addition to questioning their safety and efficacy. Such payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Nonetheless, our product candidates may not be considered medically necessary or cost-effective. Moreover, the process for determining whether a third-party payor will provide coverage for a drug product may be separate from the process for setting the price of a drug product or for establishing the reimbursement rate that such a payor will pay for the drug product. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and could increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare Reform

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system. The United States government, state legislatures and foreign governments also have shown significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement, and requirements for substitution of generic products for branded prescription drugs and biologics. In recent years, Congress has considered reductions in Medicare reimbursement levels for drugs and biologics administered by physicians. CMS, the agency that administers the Medicare and Medicaid programs, also has authority to revise reimbursement rates and to implement coverage restrictions for some drugs and biologics. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products. While Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from federal legislation or regulation may result in a similar reduction in payments from private payors.

The Affordable Care Act substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The Affordable Care Act is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms. Among other things, the Affordable Care Act expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum Medicaid rebate for both branded and generic drugs and biologics, expanded the 340B program, and revised the definition of average manufacturer price (“AMP”), which could increase the amount of Medicaid drug rebates manufacturers are required to pay to states. The legislation also extended Medicaid drug rebates, previously due only on fee-for-service Medicaid utilization, to include the utilization of Medicaid managed care organizations as well and created an alternative rebate formula for certain new formulations of certain existing products that is intended to increase the amount of rebates due on those drugs.

Other legislative changes have been proposed and adopted since passage of the Affordable Care Act. The Budget Control Act of 2011, among other things, included automatic reductions to several government programs, including aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, which went into effect in April 2013 and will remain in effect through 2031. The American Taxpayer Relief Act was signed into law, which, among other things, reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There have been executive, judicial and congressional challenges to the Affordable Care Act. We cannot predict what additional challenges to the Affordable Care Act may arise in the future, the outcome thereof, or the impact any such actions may have on our business. Additionally, the Biden administration has introduced various measures in recent years, focusing on healthcare and medical-product pricing, in particular. It remains to be seen how these measures will affect our business and there is uncertainty as to what other healthcare programs and regulations may be implemented or changed at the federal and/or state level in the U.S., but it is possible that such initiatives could have an adverse effect on our ability to obtain FDA approval or clearance and/or successfully commercialize products in the U.S. in the future. For example, any changes that reduce, or impede the ability of healthcare providers to obtain reimbursement for medical procedures in which the products we currently, or intend to, commercialize are used, or that reduce medical procedure volumes, could adversely affect our operations and/or future business plans. The financial impact of U.S. healthcare reform legislation over the next few years will depend on a number of factors, including the policies reflected in implementing regulations and guidance and changes in sales volumes for medical devices affected by the legislation. From time to time, legislation is drafted, introduced, and passed that could significantly change the statutory provisions governing coverage, reimbursement, pricing, and marketing of medical device products. In addition, third-party payor coverage and reimbursement policies are often revised or interpreted in ways that may significantly affect our business and our products.

Further legislative and regulatory changes under the Affordable Care Act remain possible, and it is unknown what form any such changes or any law would take, and how or whether it may affect our business in the future. We expect that changes or additions to the Affordable Care Act, the Medicare and Medicaid programs, changes allowing the federal government to directly negotiate drug prices, and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry.

The Affordable Care Act requires pharmaceutical manufacturers of branded prescription drugs and biologics to pay a branded prescription drug fee to the federal government. Each individual pharmaceutical manufacturer pays a prorated share of the branded prescription drug fee, based on the dollar value of its branded prescription drug sales to certain federal programs identified in the law. Furthermore, the law requires manufacturers to provide a 50% discount (increased by subsequent legislation to a 70% discount) off the negotiated price of prescriptions filled by beneficiaries in the Medicare Part D coverage gap, referred to as the “donut hole.” The Inflation Reduction Act of 2022 (“IR Act”) includes several provisions that may impact our business to varying degrees. The IR Act also includes provisions that reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the donut hole. Pharmaceutical manufacturers will be required to provide a 10% discount of all biosimilar and brand name prescription drugs covered under the Medicare Part D plan benefit during the initial coverage period before the beneficiary reaches the $2,000 out-of-pocket spending cap. Once the patient reaches the out-of-pocket spending cap, they enter catastrophic coverage and drug manufacture liability for biosimilar and brand name drugs increases to 20%. Furthermore, the IR Act allows the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; requires companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delays until January 1, 2032 the implementation U.S. Department of Health and Human Service (“HHS”) rebate rule that would have limited the fees that pharmacy benefit managers can charge.

The Affordable Care Act also expanded the Public Health Service’s 340B drug pricing program, which requires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. The Affordable Care Act expanded the 340B program to include additional types of covered entities: certain freestanding cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals, each as defined by the Affordable Care Act. Because the 340B ceiling price is determined based on AMP and Medicaid drug rebate data, revisions to the Medicaid rebate formula and AMP definition could cause the required 340B discounts to increase.

The American Rescue Plan Act of 2021 eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug’s AMP, for single source and innovator multiple source drugs, beginning January 1, 2024. Payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives as well. For example, CMS may develop new payment and delivery models, such as bundled payment models.

Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for pharmaceutical products.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that additional federal, state, and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.

Employees and Human Capital Resources

As of April 1, 2024, we had eight full-time employees and one part-time employee. Of the nine total employees, two are focused on general and administrative functions and seven are conducting R&D. Our employees are not represented by labor unions or covered by collective bargaining agreements and we consider our relationship with our employees to be good.

Compensation and Benefits

Our employee-related objectives include, as applicable, identifying, recruiting, retaining, and incentivizing our management team and our clinical, scientific and other employees and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and motivate personnel through the granting of stock-based and cash-based compensation awards, in order to align our interests and the interests of our stockholders with those of our employees and consultants. In addition, all of our employees are eligible for health insurance, paid and unpaid leaves including paid parental leave, a retirement plan, life and disability/accident coverage, and parking or commuter assistance and an employee assistance.

Corporate Information

We were incorporated under the laws of the state of Delaware on October 2, 2020 under the name Phoenix Biotech Acquisition Corporation, CERo was incorporated under the laws of the state of Delaware on September 23, 2016. On February 14, 2024, we consummated a merger with Legacy CERo and subsequently changed our name to “CERo Therapeutics Holdings, Inc.” Our corporate headquarters are currently located at 210 Haskins Way, Suite 230, South San Francisco, California 94080, and our telephone number is (215) 731-9450. Our website iswww.cero.bio. The information on our website is not incorporated by reference in this Annual Report or in any other filings we make with the U.S. Securities and Exchange Commission (“SEC”).

Available Information

Our internet address is www.cero.bio. Our investor relations website is located atwww.cero.bio/investors. We make available free of charge on our investor relations website under “SEC Filings” our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our directors’ and officers’ Section 16 reports and any amendments to those reports as soon as reasonably practicable after filing or furnishing such materials to the SEC. They are also available for free on the SEC’s website atwww.sec.gov.

We use our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Investors should monitor such website, in addition to following our press releases, SEC filings and public conference calls and webcasts. Information relating to our corporate governance is also included on our investor relations website. The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing.