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| PART I | |
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| Item 1. Business | 6 |
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| Item 1A. Risk Factors | 60 |
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| Item 1B. Unresolved Staff Comments | 117 |
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| Item 1C. Cyber Security | 117 |
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| Item 2. Properties | 118 |
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| Item 3. Legal Proceedings | 118 |
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| Item 4. Mine Safety Disclosures | 118 |
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| PART II | |
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| Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 119 |
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| Item 6. Reserved | 119 |
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| Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 120 |
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| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 133 |
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| Item 8. Financial Statements and Supplementary Data | 134 |
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| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 169 |
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| Item 9A. Controls and Procedures | 169 |
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| Item 9B. Other Information | 169 |
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| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 169 |
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| PART III | |
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| Item 10. Directors, Executive Officers and Corporate Governance | 170 |
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| Item 11. Executive Compensation | 170 |
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| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 170 |
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| Item 13. Certain Relationships and Related Transactions, and Director Independence | 170 |
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| Item 14. Principal Accounting Fees and Services | 170 |
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| PART IV | |
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| Item 15. Exhibits and Financial Statement Schedules | 170 |
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| Signatures | 175 |
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| Index to Consolidated Financial Statements | 134 |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report are forward-looking statements. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements concerning:
| ● | the commercial opportunities stemming from the development of obexelimab for multiple immunology and inflammation (“I&I”) diseases; |
| ● | our ability to develop and, if approved, ultimately commercialize obexelimab and, with partners, our other programs; |
| ● | our ability to obtain or maintain orphan drug designation for certain of our product candidates; |
| ● | the initiation, timing, progress, results, and cost of our development programs, and our current and future preclinical and clinical studies, including statements regarding the timing of initiation and completion of our clinical trials, and the period during which the results of the trials will become available; |
| ● | the success, cost and timing of our clinical development of our product candidates; |
| ● | our ability to establish clinical differentiation of our product candidates; |
| ● | our ability to develop product candidates that have broad therapeutic potential; |
| ● | our ability to utilize our business development strategy and expertise to build a balanced portfolio; |
| ● | our ability to identify collaborations and strategic partnerships to maximize the value of our portfolio; |
| ● | our ability to build our operational and commercial capabilities for supplying and marketing our products, if approved, in key markets; |
| ● | market conditions in the biopharmaceutical sector and issuance of securities analysts’ reports or recommendations; |
| ● | the trading volume of our common stock; |
| ● | an inability to obtain additional funding; |
| ● | our ability to initiate, recruit and enroll patients in and conduct our clinical trials at the pace that we project; |
| ● | our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved; |
| ● | our reliance on third parties to manufacture drug substance and drug product for use in our clinical trials; |
| ● | our ability to retain and recruit key personnel; |
| ● | our ability to obtain and maintain adequate intellectual property rights; |
| ● | our expectations regarding government and third-party payor coverage and reimbursement; |
| ● | our estimates of our expenses, ongoing losses, capital requirements and our needs for or ability to obtain additional financing; |
| ● | our existing cash and the sufficiency of our existing cash and proceeds from future capital-raising efforts, if any, to fund our future operating expenses and capital expenditure requirements; |
| ● | the potential benefits of strategic collaboration agreements; |
| ● | our ability to enter into strategic collaborations or arrangements, including potential business development opportunities and potential licensing partnerships, and our ability to attract collaborators with development, regulatory and commercialization expertise; |
| ● | sales of our stock by us, our insiders or our stockholders, as well as expected lock-up releases or expiration of market stand-off or lock-up agreements; |
| ● | our expectations regarding the time during which we will be an emerging growth company and smaller reporting company under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”); |
| ● | general economic, industry, geopolitical and market conditions, such as military conflict or war, inflation and financial institution instability, or pandemic or epidemic disease outbreaks, many of which are beyond our control; |
| ● | additions or departures of senior management, directors or key personnel; |
| ● | our financial performance; |
| ● | developments and projections relating to our competitors or our industry; and |
| ● | other risks and uncertainties, including those included in the section titled “Risk Factors.” |
The forward-looking statements in this Annual Report may prove incorrect. These forward-looking statements speak only as of the date of this Annual Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and should not be unduly relied upon. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, these forward-looking statements should not be relied upon as guarantees of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual future results, levels of activity, performance and events and circumstances could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risks and uncertainties may emerge from time to time, and management cannot predict all risks and uncertainties. Except as required by applicable law, we do not undertake to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
SUMMARY RISK FACTORS
Our business is subject to a number of risks of which investors should be aware before making an investment decision. These risks are discussed more fully in Part I, Item 1A. “Risk Factors” in this Annual Report. These risks include the following:
| ● | We are a clinical stage biopharma company with a limited operating history and no products approved for commercial sale; we have incurred substantial losses since our inception, and we anticipate incurring substantial and increasing losses for the foreseeable future; |
| ● | We will require substantial additional financing to achieve our goals, and failure to obtain additional capital when needed, or on acceptable terms, would cause us to delay, limit, reduce or terminate our product development efforts; |
| ● | Raising additional capital may cause dilution to our stockholders, imposing restrictions on our operations or require us to relinquish rights to our product candidates; |
| ● | Clinical development is lengthy and expensive, characterized by uncertain outcomes, with results of earlier studies and trials often failing to predict future trial results or results in other indications of a product candidate. We may incur additional costs or experience delays in completing, or fail to complete, the development and commercialization of our current product candidates or any future product candidates; |
| ● | Delays or difficulties in the enrollment and dosing of patients in clinical trials, delay or prevent receipt of necessary regulatory approvals; |
| ● | Any significant adverse events or undesirable side effects caused by our product candidates may delay or prevent regulatory approval or market acceptance of our product candidates, or result in significant negative consequences following marketing approval, if any; |
| ● | We face potential competition from different sources that have made substantial investments into the rapid development of novel treatments for immunological indications, including large and specialty pharmaceutical and biotechnology companies, many of which already have approved therapies in our current indications; |
| ● | We may not realize the benefits of our current or future collaborations or licensing arrangements and may be unsuccessful in consummating future partnerships; |
| ● | Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize any product candidate in the U.S. or any other jurisdiction, and any such approval may be for a more narrow indication than we seek; |
| ● | We are dependent on the services of our senior management and other clinical and scientific personnel, and if we are not able to retain these individuals or recruit additional management or clinical and scientific personnel, our business will suffer; |
| ● | We will need to grow our organization, and we may experience difficulties in managing our growth and expanding our operations, which could adversely affect our business; |
| ● | The manufacturing of our product candidates is complex, and our third-party manufacturers may encounter difficulties in production. If our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials, our ability to obtain marketing approval, or provide commercial supply of our products, if approved, could be delayed or halted; |
| ● | If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates or any future product candidates we may develop, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize products similar or identical to ours, and our ability to successfully develop and commercialize our product candidates may be adversely impacted; |
| ● | We have relied and expect to continue to rely on third parties to conduct our preclinical studies and clinical trials. If those third parties do not perform as contractually required, fail to satisfy legal or regulatory requirements, miss deadlines or terminate the relationship, our development programs could be delayed, more costly or unsuccessful, and we may never be able to seek or obtain regulatory approval for or commercialize our product candidates; |
| ● | Our rights to develop and commercialize our product candidates are subject, in large part, to the terms and conditions of licenses granted to us by others, such as Xencor, Inc. (“Xencor”). If we fail to comply with our obligations in the agreements under which we in-license or acquire development or commercialization rights to product candidates, or data from third parties, we could lose such rights that are important to our business; |
| ● | The operations of our suppliers, many of which are located outside of the U.S., including our current sole contract manufacturing organization (“CMO”) for drug substance and drug product, WuXi Biologics (Hong Kong) Limited (“WuXi Biologics”), which is located in China, are subject to additional risks that are beyond our control and that could harm our business, financial condition, results of operations and prospects; |
| ● | An active and liquid trading market for our common stock may not be sustained; and |
| ● | The market price of our common stock may be volatile, which could result in substantial losses for investors. |
If we are unable to adequately address these and other risks we face, our business, results of operations, financial condition and prospects may be harmed.
NOTE REGARDING TRADEMARKS
The Zenas BioPharma word mark, logo mark, and the “lightning bolt” design are trademarks of Zenas BioPharma, Inc. or its affiliated companies.
We have, in certain cases, omitted the ® and ™ designations for these trademarks used in this Annual Report. Nevertheless, all rights to such trademarks are owned by Zenas BioPharma, Inc. Other trademarks referenced in this Annual Report are the property of their respective owners.
