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As filed with the Securities and Exchange Commission on November 17, 2020.

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

4D Molecular Therapeutics, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware		2836		47-3506994
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

5858 Horton Street #455

Emeryville, California 94608

(510) 505-2680

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

David Kirn, M.D.

Chief Executive Officer

5858 Horton Street #455

Emeryville, California 94608

(510) 505-2680

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Alan C. Mendelson Benjamin A. Potter Phillip S. Stoup Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 Telephone: (650) 328-4600		August J. Moretti Chief Financial Officer 4D Molecular Therapeutics, Inc. 5858 Horton Street #455 Emeryville, California 94608 Telephone: (510) 505-2680		Dave Peinsipp Charles S. Kim Kristin VanderPas Will H. Cai Cooley LLP 101 California Street, 5th Floor San Francisco, California 94111 Telephone: (415) 693-2000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐				Accelerated filer		☐
Non-accelerated filer		☒				Smaller reporting company		☐
						Emerging growth company		☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  ☐

CALCULATION OF REGISTRATION FEE

 

Title of each class of securities to be registered		Proposed maximum aggregate offering price(1)		Amount of registration fee(2)
Common Stock, $0.0001 par value per share		$75,000,000		$8,183

 

(1)	Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes shares that the underwriters have the option to purchase additional shares.

(2)	Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

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The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, Dated November     , 2020

                        Shares

 

Common Stock

 

 

This is the initial public offering of shares of common stock of 4D Molecular Therapeutics, Inc. We are offering                 shares of our common stock.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price will be between $                and $                per share.

We have applied to list our common stock on the Nasdaq Global Market under the symbol “FDMT.”

We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements in this prospectus and may elect to do so in future filings.

 

 

See the section titled “Risk Factors” beginning on page 14 to read about factors you should consider before deciding to invest in shares of our common stock.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

		Per Share				Total
Initial public offering price		$				$
Underwriting discounts and commissions(1)		$				$
Proceeds, before expenses, to 4D Molecular Therapeutics, Inc.		$				$

 

(1)	See the section titled “Underwriting” for a description of the compensation payable to the underwriters.

To the extent that the underwriters sell more than                 shares of common stock, the underwriters have an option to purchase up to an additional                 shares from us at the initial public offering price, less the underwriting discounts and commissions.

The underwriters expect to deliver the shares against payment in New York, New York on                 , 2020.

 

 

 

Goldman Sachs & Co. LLC		BofA Securities		Evercore ISI

Prospectus dated                 , 2020

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TABLE OF CONTENTS

 

		Page
Prospectus Summary			1
Risk Factors			14
Special Note Regarding Forward-Looking Statements			84
Industry and Market Data			86
Use of Proceeds			87
Dividend Policy			89
Capitalization			90
Dilution			92
Selected Financial Data			95
Management’s Discussion and Analysis of Results of Operation and Financial Condition			97
Business			117
Management			192
Executive Compensation			204
Certain Relationships and Related Party Transactions			219
Principal Stockholders			222
Description of Capital Stock			226
Shares Eligible for Future Sale			232
Material U.S. Federal Income Tax Consequences to Non-U.S. Holders			235
Underwriting			239
Legal Matters			245
Experts			245
Where You Can Find More Information			245
Index to Financial Statements			F-1

 

 

We and the underwriters have not authorized anyone to provide you any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover page of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside of the United States: we have not and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.

4D Molecular Therapeutics^™, Therapeutic Vector Evolution^™, and our logo are some of our trademarks and tradenames used in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this prospectus may appear without the ^® and ^™ symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. If any of the following risks actually occurs, our business, reputation, financial condition, results of operations, revenue and future prospects could be seriously harmed. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. Unless otherwise indicated, references to our business being seriously harmed in these risk factors and elsewhere will include harm to our business, reputation, financial condition, results of operations, future prospects and stock price. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements

We are in the early stages of drug development and have a very limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

We are a clinical-stage gene therapy company pioneering the development of product candidates using our targeted and evolved AAV vectors. We commenced operations in September 2013, have no products approved for commercial sale and have not generated any product revenue. Drug development is a highly uncertain undertaking and involves a substantial degree of risk. If our product candidates are not successfully developed and approved, we may never generate any revenue. To date, we have not completed any clinical trials (including any pivotal clinical trial), obtained marketing approval for any product candidates, manufactured commercial scale quantities of any of our product candidates or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Our limited operating history as a company and early stage of drug development make any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties. If we do not address these risks and difficulties successfully, our business will be seriously harmed.

We have had recurring net losses, and we expect to continue to incur significant net losses for the foreseeable future.

We have incurred recurring net losses, including net losses of $9.6 million and $49.3 million for the years ended December 31, 2018 and 2019, respectively, and $33.2 million and $36.1 for the nine months ended September 30, 2019 and September 30, 2020, respectively. As of September 30, 2020, we had an accumulated deficit of $115.1 million.

We have devoted substantially all of our financial resources and efforts on research and development activities, including for our product candidates and our Therapeutic Vector Evolution platform. We do not expect to generate revenue from product sales for several years, if at all. We continue to incur significant research and development and other expenses related to our ongoing operations. The amount of our future net losses will depend, in part, on the level of our future expenditures and our ability to generate revenue. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

 

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We expect to continue to incur significant and increasingly higher expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

 

•

progress our current and any future product candidates through preclinical and clinical development;

 

•

experience delays in our preclinical studies and clinical trials, whether current or planned, due to the novel coronavirus (COVID-19) pandemic, or other factors;

 

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expand our manufacturing facilities and work with our contract manufacturers to scale up the manufacturing processes for our product candidates;

 

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continue our research and discovery activities;

 

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continue the development of our Therapeutic Vector Evolution platform;

 

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initiate and conduct additional preclinical, clinical or other studies for our product candidates;

 

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change or add additional contract manufacturers or suppliers;

 

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seek regulatory approvals and marketing authorizations for our product candidates;

 

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establish sales, marketing and distribution infrastructure to commercialize any products for which we obtain approval;

 

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acquire or in-license product candidates, intellectual property and technologies;

 

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make milestone, royalty or other payments due under any current or future collaboration or license agreements;

 

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obtain, maintain, expand, protect and enforce our intellectual property portfolio;

 

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attract, hire and retain qualified personnel;

 

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experience any delays or encounter other issues related to our operations;

 

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meet the requirements and demands of being a public company;

 

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defend against any product liability claims or other lawsuits related to our products; and

 

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the impact of the COVID-19 pandemic, which may exacerbate the magnitude of the factors discussed above.

Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ deficit and working capital. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

Even if this offering is successful, we will require substantial additional capital to finance our operations. If we fail or are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs, future commercialization efforts or other operations.

Developing biopharmaceutical products, including conducting preclinical studies and clinical trials, is a very time consuming, expensive and uncertain process that takes years to complete. Our operations have required substantial amounts of cash since inception. To date, we have financed our operations primarily through the sale of equity securities, and to a lesser extent from cash received pursuant to our collaboration and license agreements. We have initiated clinical trials, which are ongoing, and have several other product candidates in preclinical development that may enter clinical development shortly thereafter. Developing our product candidates is expensive, and we expect to

 

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continue to spend substantial amounts as we fund our early stage research projects, continue preclinical and clinical development of our product candidates and, in particular, advance our product candidates through clinical trials. Even if we are successful in developing our product candidates, obtaining regulatory approvals and launching and commercializing any product candidate will require substantial additional funding beyond the net proceeds of this offering.

As of September 30, 2020, we had $88.8 million in cash and cash equivalents. Based on our current operating plan, we estimate that our existing cash and cash equivalents, together with the anticipated net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next                  months. Our estimate as to how long we expect our existing cash and cash equivalents to be available to fund our operations is based on assumptions that may prove inaccurate, and we could use our available capital resources sooner than we currently expect. In addition, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We may need to raise additional funds sooner than we anticipate if we choose to expand more rapidly than we presently anticipate.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If adequate funds are not available to us on a timely basis, we may be required to:

 

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delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities or eliminate one or more of our development programs altogether; or

 

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delay, limit, reduce or terminate our efforts to establish manufacturing and sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates, or reduce our flexibility in developing or maintaining our sales and marketing strategy.

We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to, or jointly own some aspects of, our product candidates or technologies that we would otherwise pursue on our own. We do not expect to realize revenue from sales of products or royalties from licensed products in the foreseeable future, if at all, and unless and until a product candidate is clinically tested, approved for commercialization and successfully marketed.

We will be required to seek additional funding in the future and currently intend to do so through collaborations, public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these funding sources. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. Additional funds may not be available to us on acceptable terms or at all. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives. Any of the above events could seriously harm our business and cause the price of our common stock to decline.

 

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Due to the significant resources required for the development of our product candidates, and depending on our ability to access capital, we must prioritize development of certain product candidates. Moreover, we may expend our limited resources on product candidates that do not yield a successful product and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Due to the significant resources required for the development of our product candidates, in particular our product candidates in IND-enabling studies and those in clinical trials, we must decide which product candidates and indications to pursue and advance and the amount of resources to allocate to each. Our decisions concerning the allocation of research, development, collaboration, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial product and may divert resources away from better opportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties in respect of certain product candidates may subsequently also prove to be less than optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the viability or market potential of any of our product candidates or misread trends in the biopharmaceutical industry, in particular for ophthalmology, cardiology and pulmonology diseases, our business could be seriously harmed. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights.

The amount of our future losses is uncertain and our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.

Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control and may be difficult to predict, including:

 

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the timing and success or failure of preclinical studies and clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or collaboration partners;

 

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the timing and cost of, and level of investment in research, development and commercialization activities, which may change from time to time;

 

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the timing of receipt of approvals from regulatory authorities in the United States and internationally;

 

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the timing and status of enrollment and safety and efficacy readouts for our clinical trials;

 

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the cost of manufacturing, as well as building out our supply chain, which may vary depending on the quantity of production, the cost of continuing to establish and scale up our internal manufacturing capabilities, and the terms of any agreements we enter into with third-party suppliers;

 

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timing and amount of any option, milestone, royalty or other payments due under any current or future collaboration or license agreement;

 

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coverage and reimbursement policies with respect to our gene therapy product candidates and potential future drugs that compete with our products, if approved;

 

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expenditures that we may incur to acquire, develop or commercialize additional products and technologies;

 

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the level of demand for our gene therapy products, if approved, which may vary significantly over time; and

 

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future accounting pronouncements or changes in our accounting policies.

For example, we expect that most of our license revenue for the year ended December 31, 2020 will be from Roche. The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.

This variability and unpredictability could also result in our failing to meet the expectations of financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.

We concluded that there is substantial doubt relating to our ability to continue as a going concern for at least one year from the date that our financial statements for the year ended December 31, 2019 were available for reissuance, and our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our financial statements included in this prospectus.

Our report from our independent registered public accounting firm for the year ended December 31, 2019 includes an explanatory paragraph stating that our recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors would lose part or all of their investment. Future reports from our independent registered public accounting firm may also contain statements expressing substantial doubt about our ability to continue as a going concern. If there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, or at all, and our business may be harmed.

Risks Related to the Research, Discovery, Development and Commercialization of Our Product Candidates

All of our product candidates are based on a novel AAV gene therapy technology with which there is limited regulatory and clinical experience to date, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. Further, the regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied therapeutic modalities.

All of our product candidates are based on gene therapy technology and our future success depends on the successful development of this novel therapeutic approach. We cannot assure you that any development problems we or other gene therapy companies experience in the future related to gene therapy technology will not cause significant delays or unanticipated costs in the development of our product candidates, or that such development problems can be solved. In addition, the clinical study requirements of the U.S. Food and Drug Administration (FDA) and other regulatory agencies and

 

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the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied therapeutic modalities. Further, as we are developing novel treatments for diseases in which there is limited clinical experience with new endpoints and methodologies, there is heightened risk that the FDA, European Medicines Agency (EMA) or comparable foreign regulatory bodies may not consider the clinical trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficult to analyze. To date, few gene therapy products have been approved by the FDA or comparable foreign regulatory authorities, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States, the European Union or other jurisdictions. Further, approvals by one regulatory agency may not be indicative of what other regulatory agencies may require for approval.

Regulatory requirements governing gene therapy products have evolved and may continue to change in the future. For example, the FDA established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research (CBER) to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. These and other regulatory review agencies, committees and advisory groups and the requirements and guidelines they promulgate may lengthen the regulatory review process, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions.

Under the National Institutes of Health (NIH) Guidelines for Research Involving Recombinant DNA Molecules (NIH Guidelines), supervision of human gene transfer trials, including evaluation and assessment by an Institutional Biosafety Committee (IBC) a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution, is required. The IBC assesses the safety of the research and identifies any potential risk to the public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.

We are subject to significant regulatory oversight by the FDA, and in addition to the government regulators, the applicable IBC and Institutional Review Board (IRB), of each institution at which we or our collaborators conduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review and approve the proposed clinical trial.

Similarly, the EMA governs the development of gene therapies in the European Union and may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines.

Changes in applicable regulatory guidelines may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions.

As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay

 

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or discontinue development of such product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of our product candidates can be costly and could negatively impact our ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all.

Adverse public perception or regulatory scrutiny of gene therapy technology may negatively impact the developmental progress or commercial success of product candidates that we develop alone or with collaborators.

The developmental and commercial success of our current product candidates, or any that we develop alone or with collaborators in the future, will depend in part on public acceptance of the use of gene therapy technology, including the use of AAVs, for the prevention or treatment of human diseases. Adverse public perception of gene therapies may negatively impact our ability to raise capital or enter into strategic agreements for the development of product candidates.

Gene therapy remains a novel technology. The commercial success of our gene therapy products, if successfully developed and approved, may be adversely affected by claims that gene therapy is unsafe, unethical or immoral. This may lead to unfavorable public perception and the inability of any of our product candidates to gain the acceptance of the public or the medical community. Unfavorable public perceptions may also adversely impact our or our collaborators’ ability to enroll clinical trials for our product candidates. Moreover, success in commercializing any product candidates that receive regulatory approval will depend upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of such product candidates in lieu of, or in addition to, existing treatments with which they are already familiar and for which greater clinical data may be available.

Publicity of any adverse events in, or unfavorable results of, preclinical studies or clinical trials for any current or future product candidates, or with respect to the studies or trials of our competitors or of academic researchers utilizing similar technologies, even if not ultimately attributable to our technology or product candidates, could negatively influence public opinion. Negative public perception about the use of AAV technology in human therapeutics, whether related to our technology or a competitor’s technology, could result in increased governmental regulation, delays in the development and commercialization of product candidates or decreased demand for the resulting products, any of which may seriously harm our business.

Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.

Adverse events or other undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities.

During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries, and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. It is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in previous trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. Many times, side effects are only detectable

 

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after investigational products are tested in large-scale, Phase 3 clinical trials or, in some cases, after they are made available to patients on a commercial scale after approval.

If any serious adverse events occur, clinical trials or commercial distribution of any product candidates or products we develop alone or with collaborators could be suspended or terminated, and our business could be seriously harmed. Treatment-related side effects could also affect patient recruitment and the ability of enrolled patients to complete the trial or result in potential liability claims. Regulatory authorities could order us or our collaborators to cease further development of, deny approval of, or require us to cease selling any product candidates or products for any or all targeted indications. If we or our collaborators elect, or are required, to delay, suspend or terminate any clinical trial or commercialization efforts, the commercial prospects of such product candidates or products may be harmed, and our ability to generate product revenues from them or other product candidates that we develop may be delayed or eliminated. Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

 

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regulatory authorities may suspend, limit or withdraw approvals of such product, or seek an injunction against its manufacture or distribution;

 

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regulatory authorities may require additional warnings on the label including “boxed” warnings, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

 

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we may be required to change the way the product is administered or conduct additional clinical trials or post-approval studies;

 

•

we may be required to create a Risk Evaluation and Mitigation Strategy (REMS), which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other elements to assure safe use;

 

•

the product may become less competitive;

 

•

we may be subject to fines, injunctions or the imposition of criminal penalties;

 

•

we could be sued and held liable for harm caused to patients; and

 

•

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could seriously harm our business.

Drug development is a highly uncertain undertaking and involves a substantial degree of risk. We have no products approved for commercial sale, and we have never generated any revenue from product sales, and we may never generate revenue or be profitable.

We have no products approved for commercial sale and have not generated any revenue from product sales. We do not anticipate generating any revenue from product sales until after we have successfully completed clinical development and received regulatory approval for the commercial sale of a product candidate, which will not occur for several years if ever.

Our ability to generate revenue and achieve profitability depends significantly on many factors, including:

 

•

successfully completing research and preclinical and clinical development of our product candidates;

 

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•

the COVID-19 pandemic, which may result in clinical site closures, delays to patient enrollment, patients discontinuing their treatment or follow up visits or changes to trial protocols;

 

•

obtaining regulatory approvals and marketing authorizations for product candidates for which we successfully complete clinical development and clinical trials;

 

•

developing a sustainable and scalable manufacturing process for our product candidates, as well as establishing and maintaining commercially viable supply relationships with third parties that can provide adequate products and services to support clinical activities and any commercial demand for our product candidates;

 

•

identifying, assessing, acquiring and/or developing new product candidates;

 

•

negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;

 

•

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future approved products, if any;

 

•

patients’ willingness to enroll or continue to participate in a clinical trial during the COVID-19 pandemic;

 

•

launching and successfully commercializing product candidates for which we obtain marketing approval, either by collaborating with a partner or, if launched independently, by establishing a sales, marketing and distribution infrastructure;

 

•

obtaining and maintaining an adequate price for our product candidates, both in the United States and in foreign countries where our products are commercialized;

 

•

obtaining adequate reimbursement for our product candidates or procedures using our product candidates from payors;

 

•

the convenience and durability of our treatment or dosing regimen;

 

•

acceptance by physicians, payors and patients of the benefits, safety and efficacy of our product candidate, or any future product candidates, if approved, including relative to alternative and competing treatments;

 

•

patient demand for any of our product candidates that may be approved;

 

•

addressing any competing technological and market developments;

 

•

maintaining, protecting, expanding and enforcing our portfolio of intellectual property rights, including patents, trade secrets and know-how; and

 

•

attracting, hiring and retaining qualified personnel.

Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of our expenses, or when we will be able to generate any meaningful revenue or achieve or maintain profitability, if ever. In addition, our expenses could increase beyond our current expectations if we are required by the FDA or foreign regulatory agencies, to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our or our collaborators’ clinical trials or the development of any of our product candidates. Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate and ongoing compliance efforts.

Even if we are able to generate revenue from the sale of any approved products, we may not become profitable, and we will need to obtain additional funding through one or more equity or debt

 

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financings in order to continue operations. Revenue from the sale of any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price and whether we own the commercial rights for that territory. If the number of addressable patients is not as significant as we anticipate, the indication approved by regulatory authorities is narrower than we expect, the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines or the price and available third-party reimbursement are lower than anticipated, we may not generate significant revenue from sales of such products, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates or continue our operations and cause a decline in the value of our common stock, all or any of which may seriously harm our business.

Public health crises such as pandemics or similar outbreaks have affected and could continue to seriously and adversely affect our preclinical and clinical trials, business, financial condition and results of operations.

In March 2020, the World Health Organization declared COVID-19 a global pandemic, and the United States declared a national emergency with respect to COVID-19. In response to the COVID-19 pandemic, “shelter in place” orders and other public health guidance measures have been implemented across much of the United States and Europe, including in the locations of our offices, clinical trial sites, key vendors and partners. We expect that our clinical development program timelines will be negatively affected by COVID-19, which could harm our business. Further, due to “shelter in place” orders and other public health guidance measures, we have implemented a work-from-home policy for all staff members excluding those necessary to maintain minimum basic operations. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise seriously harm our business. For example, with our personnel working from home, some of our research activities that require our personnel to be in our laboratories will be delayed.

As a result of the COVID-19 pandemic, or similar pandemics, and related “shelter in place” orders and other public health guidance measures, we have, and may in the future, experience disruptions that could seriously harm our business. Potential disruptions include but are not limited to:

 

•

delays or difficulties in enrolling patients in our clinical trials;

 

•

delays or difficulties in initiating or expanding clinical trials, including delays or difficulties with clinical site initiation and recruiting clinical site investigators and clinical site staff;

 

•

increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health conditions or being forced to quarantine;

 

•

interruption of key clinical trial activities, such as clinical trial site data monitoring and efficacy, safety and translational data collection, processing and analyses, due to limitations on travel imposed;

 

•

recommendations by federal, state or local governments, employers and others or interruptions of clinical trial subject visits, which may impact the collection and integrity of subject data and clinical trial endpoints;

 

•

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

 

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•

delays or disruptions in preclinical experiments and IND-enabling studies due to restrictions of on-site staff and unforeseen circumstances at CROs and vendors;

 

•

interruption or delays in the operations of the FDA and comparable foreign regulatory agencies;

 

•

interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, raw materials shortages, production slowdowns or stoppages and disruptions in delivery systems;

 

•

delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

 

•

limitations on employee or other resources that would otherwise be focused on the conduct of our clinical trials and preclinical work, including because of sickness of employees or their families, the desire of employees to avoid travel or contact with large groups of people, an increased reliance on working from home, school closures or mass transit disruptions;

 

•

changes in regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

 

•

delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel; and

 

•

refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.

These and other factors arising from the COVID-19 pandemic could worsen in countries that are already afflicted with COVID-19, could continue to spread to additional countries or could return to countries where the pandemic has been partially contained, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could seriously harm our business.

The COVID-19 pandemic continues to rapidly evolve. The extent to which the COVID-19 pandemic may affect our clinical trials, business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. Future developments in these and other areas present material uncertainty and risk with respect to our clinical trials, business, financial condition and results of operations.

We may encounter substantial delays in our clinical trials or may not be able to conduct or complete our clinical trials on the timelines we expect, if at all.

Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any clinical trials will be initiated or conducted as planned or completed on schedule, if at all. For example, in the first half of 2019 a manufacturing batch of our product candidate 4D-110 produced at a CMO failed to meet the specifications required for use in our planned clinical trial due to an issue identified with one of the plasmids used in the manufacturing process. As a result, we delayed the initiation of our planned first-in-human trial of 4D-110 until July 2020, so that we could produce the clinical-grade material required for the trial using our in-house manufacturing facility. We also cannot be sure that submission of an IND or a clinical trial application (CTA) will result in the FDA or other

 

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regulatory authority, as applicable, allowing clinical trials to begin in a timely manner, if at all. Moreover, even if these trials begin, issues may arise that could suspend or terminate such clinical trials. A failure of one or more clinical trials can occur at any stage of testing, and our future clinical trials may not be successful. Events that may prevent successful or timely initiation or completion of clinical trials include:

 

•

inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;

 

•

delays in reaching a consensus with regulatory agencies on study design or implementation of the clinical trials;

 

•

adverse impacts from the COVID-19 pandemic as further described elsewhere in these risk factors;

 

•

delays or failure in obtaining regulatory authorization to commence a trial;

 

•

delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;

 

•

delays in identifying, recruiting and training suitable clinical investigators;

 

•

delays in obtaining required IRB approval at each clinical trial site;

 

•

delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing;

 

•

insufficient or inadequate supply or quality of product candidates or other materials necessary for use in clinical trials, or delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials;

 

•

imposition of a temporary or permanent clinical hold by regulatory agencies for a number of reasons, including after review of an IND or amendment, CTA or amendment, or equivalent foreign application or amendment; as a result of a new safety finding that presents unreasonable risk to clinical trial participants; or a negative finding from an inspection of our clinical trial operations or study sites;

 

•

developments on trials conducted by competitors for related technology that raise FDA or foreign regulatory authority concerns about risk to patients of the technology broadly; or if the FDA or a foreign regulatory authority finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;

 

•

delays caused by patients withdrawing from clinical trials or failing to return for post-treatment follow-up;

 

•

difficulty collaborating with patient groups and investigators;

 

•

failure by our CROs, other third parties, or us to adhere to clinical trial protocols;

 

•

failure to perform in accordance with the FDA’s or any other regulatory authority’s good clinical practice requirements (GCPs) or applicable regulatory guidelines in other countries;

 

•

occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

 

•

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

 

•

changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

 

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•

the cost of clinical trials of our product candidates being greater than we anticipate;

 

•

clinical trials of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon development of such product candidates;

 

•

transfer of manufacturing processes to larger-scale facilities operated by a contract manufacturing organization (CMO) or by us, and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process; and

 

•

third parties being unwilling or unable to satisfy their contractual obligations to us.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the severity and difficulty of diagnosing the disease under investigation, size of the patient population and process for identifying subjects, eligibility and exclusion criteria for the trial in question, design of the trial protocol, availability and efficacy of approved therapies or other clinical trials for the disease or condition under investigation, perceived risks and benefits of the product candidate under trial or testing, availability of genetic testing for potential patients, efforts to facilitate timely enrollment in clinical trials, patient referral practices of physicians, ability to obtain and maintain subject consent, the risk that enrolled subjects will drop out before completion of the trial, the ability to monitor patients adequately during and after treatment, and the proximity and availability of clinical trial sites for prospective patients. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and while we have agreements governing their committed activities, we have limited influence over their actual performance.

Any inability to successfully initiate or complete clinical trials could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to, or we may elect to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may seriously harm our business.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the data safety monitoring board for such trial or by the FDA or any other regulatory authority, or if the IRBs of the institutions in which such trials are being conducted suspend or terminate the participation of their clinical investigators and sites subject to their review. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate revenue. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

 

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The limited number of patients who have the diseases for which our product candidates are being studied may make it more difficult for us to enroll or complete clinical trials or may result in findings in our clinical trials that do not reach levels of statistical significance sufficient for marketing approval.

Most of the conditions for which we plan to evaluate our current product candidates in clinical trials are rare genetic diseases. Accordingly, there are limited patient pools from which to draw for clinical trials. In addition to the rarity of these diseases, the eligibility criteria of our clinical trials will further limit the pool of available study participants as we will require that patients have specific characteristics that we can measure to assure their disease is either severe enough or not too advanced to include them in a trial. We or our collaborators may not be able to initiate or continue clinical trials on a timely basis or at all for any of our product candidates if we or our collaborators are unable to locate and enroll a sufficient number of eligible patients to participate in the trials as required by applicable regulations or as needed to provide appropriate statistical power for a given trial. Similarly, because most of the conditions we intend to treat are rare in nature, we plan to design and conduct clinical trials utilizing a small number of patients in order to evaluate the safety and therapeutic activity of our product candidates. Conducting trials in smaller subject populations increases the risk that any safety or efficacy issues observed in only a few patients could prevent such trials from reaching statistical significance or otherwise meeting their specified endpoints, which could require us to conduct additional clinical trials, or delay or prevent our product candidates from receiving regulatory approval, which would seriously harm our business.

Research and development of biopharmaceutical products is inherently risky. We cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be commercialized or if they will ever be successfully commercialized.

We are at an early stage of development of our product candidates. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the following:

 

•

our product candidates may not successfully complete preclinical studies or clinical trials;

 

•

delays in our clinical development plans due to the COVID-19 pandemic;

 

•

a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it does not meet applicable regulatory criteria;

 

•

our competitors may develop therapeutics that render our product candidates obsolete or less attractive;

 

•

our competitors may develop platform technologies that render our Therapeutic Vector Evolution platform technology obsolete or less attractive;

 

•

the product candidates and Therapeutic Vector Evolution platform technology that we develop may not be sufficiently covered by intellectual property for which we hold exclusive rights or may be covered by third-party patents or other intellectual property or exclusive rights;

 

•

the market for a product candidate may change so that the continued development of that product candidate is no longer reasonable or commercially attractive;

 

•

a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;

 

•

if a product candidate obtains regulatory approval, we may be unable to establish sales and marketing capabilities, or successfully market such approved product candidate; and

 

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•

a product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors.

If any of these events occur, we or our collaborators may be forced to abandon our development efforts for a product candidate or candidates, which would seriously harm our business. Failure of a product candidate may occur at any stage of preclinical or clinical development, and, because our product candidates and our Therapeutic Vector Evolution platform technology are in an early stage of development, there is a relatively higher risk of failure and we may never succeed in developing marketable products or generating product revenue.

We may not be successful in our efforts to further develop our Therapeutic Vector Evolution platform technology and current product candidates. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. Each of our product candidates is in the early stages of development and will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we generate any revenue from product sales, if at all. Any clinical trials that we may conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates. If the results of our ongoing or future clinical trials are inconclusive with respect to the efficacy of our product candidates or if we do not meet the clinical endpoints with statistical significance or if there are safety concerns or adverse events associated with our product candidates, we may be prevented or delayed in obtaining marketing approval for our product candidates.

If any of our product candidates successfully completes clinical trials, we generally plan to seek regulatory approval to market our product candidates in the United States, the European Union, and in additional foreign countries where we believe there is a viable commercial opportunity. We have never commenced, compiled or submitted an application seeking regulatory approval to market any product candidate. We may never receive regulatory approval to market any product candidates even if such product candidates successfully complete clinical trials, which would seriously harm our business. To obtain regulatory approval in countries outside the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, purity, potency, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing and distribution of our product candidates. We may also rely on our collaborators or collaboration partners to conduct the required activities to support an application for regulatory approval, and to seek approval, for one or more of our product candidates. We cannot be sure that our collaborators or collaboration partners will conduct these activities successfully or do so within the timeframe we desire. Even if we (or our collaborators or collaboration partners) are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. Failure to obtain approval for our product candidates in multiple jurisdictions, will seriously harm our business.

Even if we receive regulatory approval to market any of our product candidates, we cannot assure you that any such product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives. Any approval we may obtain could be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We may also be required to perform additional or unanticipated clinical trials to obtain approval or be subject to additional post-marketing testing requirements to maintain approval. In addition, regulatory authorities may withdraw their approval of a product or impose restrictions on its distribution, such as in the form of a REMS. The failure to obtain timely regulatory approval of product candidates, any product marketing limitations or a product withdrawal would seriously harm our business.

 

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Investment in biopharmaceutical product development involves significant risk that any product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide any assurance that we will be able to successfully advance any of our product candidates through the development process or, if approved, successfully commercialize any of our product candidates.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could seriously harm our business.

The ability of the FDA to review and/or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most foreign inspections of manufacturing facilities, and subsequently, on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could seriously harm our business.

Our clinical trials may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates, which would prevent, delay or limit the scope of regulatory approval and commercialization.

Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we or our collaborators must demonstrate through lengthy, complex and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each target indication. Further, because our product candidates are subject to regulation as biological drug products, we will need to demonstrate that they are safe, pure, and potent for use in their target indications. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical

 

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studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical trials, and results of early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. The results of clinical trials in one set of patients or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier trials. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.

We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. We cannot be certain that our planned clinical trials or any other future clinical trials will be successful. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications, which could seriously harm our business.

In addition, even if such clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates. Even if regulatory approval is secured for any of our product candidates, the terms of such approval may limit the scope and use of our product candidate, which may also limit its commercial potential.

Interim “top-line” and preliminary data from studies or trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim “top-line” or preliminary data from preclinical studies or clinical trials. Interim data are subject to the risk that one or more of the outcomes may materially change as more data become available. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Additionally, interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could seriously harm our business.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In

 

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addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure. Any information we determine not to disclose may ultimately be deemed significant by you or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If the top-line data that we report differ from final results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, product candidates may be harmed, which could seriously harm our business.

We may not be successful in our efforts to continue to create a pipeline of product candidates or to develop commercially successful products. If we fail to successfully identify and develop additional product candidates, our commercial opportunity may be limited.

One of our strategies is to identify and pursue preclinical and clinical development and commercialization of additional product candidates through our Therapeutic Vector Evolution platform technology. Our Therapeutic Vector Evolution platform technology may not produce a pipeline of viable product candidates, or our competitors may develop platform technologies that render our Therapeutic Vector Evolution platform technology obsolete or less attractive. Our research methodology may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make them unmarketable or unlikely to receive marketing approval. Identifying, developing and obtaining regulatory approval and commercializing additional product candidates will require substantial additional funding beyond the net proceeds of this offering and is prone to the risks of failure inherent in drug development. If we are unable to successfully identify, acquire, develop and commercialize additional product candidates, our commercial opportunity may be limited.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We may face competition with respect to any product candidates that we seek to develop or commercialize in the future from major pharmaceutical companies and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

There are a number of large pharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of the indications for which we have product candidates, including XLRP, choroideremia, Fabry disease, wet AMD, and cystic fibrosis lung disease. Certain of our competitors have commercially approved products for the treatment of the diseases that we are pursuing or may pursue in the future, including Biogen, Roche, Sanofi, Takeda and Vertex. These drugs are well established therapies and are widely accepted by physicians, patients and third-party payors, which may make it difficult to convince these parties to switch to our product candidates. Companies that we are aware are developing therapeutics in the ophthalmology, cardiology and pulmonology disease areas include large companies with significant financial resources, such as Allergan, Biogen, Novartis, Pfizer, Regeneron, Roche, Sanofi, Takeda and Vertex, and biopharmaceutical companies such as Abeona, Adverum, AGTC, Amicus, Avrobio, Freeline, Kodiak Sciences, Krystal, MeiraGTx, RegenxBio, Sangamo, and Spirovant. In addition to competition from other companies targeting ophthalmology, cardiology and pulmonology, any products we may develop may also face competition from other types of therapies, such as gene-editing therapies and drug delivery devices.

Many of our current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing,

 

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preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our product candidates. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered to have application for treatment of ophthalmology, cardiology and pulmonology indications, which could give such products significant regulatory and market timing advantages over any of our product candidates. Our competitors also may obtain FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.

If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any product candidates we may develop, we may not be successful in commercializing those product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any approved product for which we retain sales and marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to third parties. In the future, we may choose to build a focused sales, marketing and commercial support infrastructure to sell, or participate in sales activities with our collaborators for, some of our product candidates if and when they are approved.

There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and other commercialization capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our commercialization personnel.

Factors that may inhibit our efforts to commercialize any approved product on our own include:

 

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our inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, compliance, customer service, medical affairs and other support personnel;

 

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our inability to recruit and build a commercial infrastructure due to the impacts of COVID-19;

 

•

the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future approved products;

 

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the inability of reimbursement professionals to negotiate arrangements for formulary access, reimbursement, and other acceptance by payors;

 

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the inability to price our products at a sufficient price point to ensure an adequate and attractive level of profitability;

 

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•

restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population;

 

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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

 

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unforeseen costs and expenses associated with creating an independent commercialization organization.

If we enter into arrangements with third parties to perform sales, marketing, commercial support and distribution services, our product revenue or the profitability of product revenue may be lower than if we were to market and sell any products we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish commercialization capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates if approved and our business would be seriously harmed.

Even if any product candidates we develop receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

The commercial success of any of our product candidates will depend upon its degree of market acceptance by physicians, patients, third-party payors and others in the medical community. Even if any product candidates we may develop receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. The degree of market acceptance of any product candidates we may develop, if approved for commercial sale, will depend on a number of factors, including:

 

•

the efficacy and safety of such product candidates as demonstrated in pivotal clinical trials and published in peer-reviewed journals;

 

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the potential and perceived advantages compared to alternative treatments;

 

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the ability to offer our products for sale at competitive prices;

 

•

the ability to offer appropriate patient access programs, such as co-pay assistance;

 

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sufficient third-party coverage or reimbursement;

 

•

the extent to which physicians recommend our products to their patients;

 

•

convenience and ease of dosing and administration compared to alternative treatments;

 

•

the clinical indications for which the product candidate is approved by FDA, EMA or other regulatory agencies;

 

•

product labeling or product insert requirements of the FDA, EMA or other comparable foreign regulatory authorities, including any limitations, contraindications or warnings contained in a product’s approved labeling;

 

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restrictions on how the product is distributed;

 

•

the timing of market introduction of competitive products;

 

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publicity concerning our products or competing products and treatments;

 

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the strength of marketing and distribution support; and

 

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the prevalence and severity of any side effects.

 

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If any product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenue, and we may not become profitable.

Risks Related to Manufacturing

Gene therapies are novel, complex and difficult to manufacture. We could experience production problems that result in delays in our development or commercialization programs, limit the supply of our products or otherwise seriously harm our business.

We currently have a development, manufacturing and testing agreement and cooperation agreement with Catalent to manufacture supplies of our product candidates in the future. Our product candidates require processing steps that are more complex than those required for most chemical and protein pharmaceuticals. Moreover, unlike chemical pharmaceuticals, the physical and chemical properties of a biologic such as ours generally cannot be fully characterized. As a result, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner. Accordingly, we employ multiple steps to control our manufacturing process to assure that the process works and the product candidate is made strictly and consistently in compliance with the process. Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory, which could delay or prevent the initiation of clinical trials or receipt of regulatory approvals. We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA, or other comparable applicable foreign standards or specifications with consistent and acceptable production yields and costs. For example, in the first half of 2019, a manufacturing batch of our product candidate 4D-110 produced at a CMO failed to meet the specifications required for use in our planned clinical trial due to an issue identified with one of the plasmids used in the manufacturing process. As a result, we delayed the initiation of our planned first-in-human trial of 4D-110 until July 2020, so that we could produce the clinical-grade material required for the trial using our in-house manufacturing facility.

In addition, FDA and other comparable foreign regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA or other comparable foreign regulatory authorities may require that we not distribute a lot until the agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. Lot failures or product recalls could cause us to delay clinical trials or product launches which could be costly to us and otherwise seriously harm our business.

We also may encounter problems hiring and retaining the experienced scientific, quality control and manufacturing personnel needed to operate our manufacturing process which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

Any problems in our manufacturing process or the facilities with which we contract could make us a less attractive collaborator for potential partners, including larger pharmaceutical companies, which could limit our access to additional attractive development programs. Problems in third-party manufacturing process or facilities also could restrict our ability to meet market demand for our products. Additionally, should our agreement with Catalent or agreements with other parties with whom we have manufacturing agreements be terminated for any reason, there are a limited number of manufacturers who would be suitable replacements, and it would take a significant amount of time to transition the manufacturing to a replacement.

 

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Delays in obtaining regulatory approval of our manufacturing process or disruptions in our manufacturing process may delay or disrupt our commercialization efforts.

Before we can begin to commercially manufacture our product candidates in third-party or our own facilities, we must obtain regulatory approval from the FDA to market our product using the manufacturing process and facility we proposed in our marketing application. In addition, we must pass a pre-approval inspection of our manufacturing facility by the FDA before any of our product candidates can obtain marketing approval, if ever. In order to obtain approval of a BLA for our product candidates, we will need to ensure that all of our manufacturing processes, methods and equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. If any of our vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors. The cGMP requirements govern quality control of the manufacturing process and documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may not be permitted to sell any products that we may develop.

Delays in developing our manufacturing capabilities or failure to achieve operating efficiencies from it may require us to devote additional resources and management time to manufacturing operations and may delay our product development timelines.

We have a small operational manufacturing facility that we are using to manufacture clinical trial material. In addition, we have leased approximately 17,000 square feet of space primarily for our second manufacturing facility in Emeryville, California, most of which we plan to devote to manufacturing activities for our clinical trials. We may face delays in the production of clinical supply at our manufacturing facility and cannot guarantee when our facility will be able to produce sufficient quantities of product candidates needed to support our planned clinical trials. Any delays in developing our internal manufacturing capabilities may disrupt or delay the supply of our product candidates if we have not maintained a sufficient back-up supply of such product candidates through third-party manufacturers. Moreover, changing manufacturing facilities during the clinical development process may also require that we or our collaborators conduct additional studies, make notifications to regulatory authorities, make additional filings to regulatory authorities, and obtain regulatory authority approval for the new facilities, which may be delayed or which we may never receive. We will further need to comply with the FDA’s and applicable foreign regulatory authorities’ cGMP requirements for the production of product candidates for clinical trials and, if approved, commercial supply, and will be subject to FDA and comparable foreign regulatory authority inspection. These requirements include the qualification and validation of our manufacturing equipment and processes. We may not be able to develop or acquire the internal expertise and resources necessary for compliance with these requirements.

In order to develop internal manufacturing expertise, we may be forced to devote greater resources and management time than anticipated, particularly in areas relating to operations, quality, regulatory, facilities and information technology. We also may encounter problems hiring and retaining the experienced scientific, quality control and manufacturing personnel needed to operate our manufacturing processes. If we experience unanticipated employee shortage or turnover in any of these areas, we may not be able to effectively manage our ongoing manufacturing operations and we may not achieve the operating efficiencies that we anticipate from developing these capabilities, which may negatively affect our product development timeline or result in difficulties in maintaining compliance with applicable regulatory requirements. Any such problems could result in the delay, prevention or impairment of clinical development and commercialization of our product candidates and would seriously harm our business.

 

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We currently rely and expect to continue to rely on third parties to conduct product manufacturing for certain of our product candidates, and these third parties may not perform satisfactorily.

Although we are in process of expanding internal manufacturing capabilities, we currently rely, and expect to continue to rely, on third parties for the production of some of our preclinical study and planned clinical trial materials and, therefore, we can control only certain aspects of their activities. The facilities used by us and our contract manufacturers to manufacture certain of our product candidates must be reviewed by the FDA pursuant to inspections that will be conducted after we submit our BLA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the cGMPs for manufacture of our products. If we or our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, we will not be able to obtain and/or maintain regulatory approval for our products as manufactured at their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

In addition, we rely on additional third parties to manufacture plasmids used in the manufacture of our product candidates and to perform quality testing, and reliance on these third parties entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

 

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reduced control for certain aspects of manufacturing activities;

 

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termination or nonrenewal of manufacturing and service agreements with third parties in a manner or at a time that is costly or damaging to us; and

 

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disruptions to the operations of our third-party manufacturers and service providers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or service provider.

Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize future product candidates. Some of these events could be the basis for FDA or European Union Member State regulatory authority action, including injunction, recall, seizure or total or partial suspension of product manufacture.

Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver necessary components could result in delays in our research studies, preclinical, clinical development or marketing schedules.

Given the nature of biologics manufacturing, there is a risk of contamination during manufacturing. Any contamination could materially harm our ability to produce product candidates on schedule and could harm our results of operations and cause reputational damage.

Some of the raw materials required in our manufacturing process, such as plasmids, are derived from biologic sources. Such raw materials are difficult to procure and may be subject to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical material, which could seriously harm our business.

 

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We depend on third-party suppliers for key raw materials used in our manufacturing processes, and the loss of these third-party suppliers or their inability to supply us with adequate raw materials could seriously harm our business.

We rely on third-party suppliers for the raw materials required for the production of our product candidates. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of raw materials involve several risks, including limited control over pricing, availability, quality and delivery schedules. As a small company, our negotiation leverage is limited and we are likely to get lower priority than our competitors who are larger than we are. We cannot be certain that our suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements. Any interruption in supply of raw materials could materially harm our ability to manufacture our product candidates until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supplier in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would seriously harm our business.

Risks Related to Regulatory Approval and Other Legal Compliance Matters

The regulatory approval processes of the FDA, EMA and comparable foreign regulatory authorities are lengthy, expensive, time consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be seriously harmed.

We and any collaborators are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Foreign regulatory authorities impose similar requirements. The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. We have not submitted for or obtained regulatory approval for any product candidate. We and any collaborators must complete additional preclinical or nonclinical studies and clinical trials to demonstrate the safety and efficacy of our product candidates in humans to the satisfaction of the regulatory authorities before we will be able to obtain these approvals, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:

 

•

the FDA or comparable foreign regulatory authorities may disagree with the design, implementation or results of our or our collaborators’ clinical trials;

 

•

the FDA or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use of our products;

 

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the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval;

 

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•

we or our collaborators may be unable to demonstrate to the FDA, or comparable foreign regulatory authorities that a product candidate’s clinical and other benefits outweigh its safety risks;

 

•

the FDA or comparable foreign regulatory authorities may disagree with our or our collaborators’ interpretation of data from preclinical studies or clinical trials;

 

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the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA or other submission or to obtain regulatory approval in the United States or elsewhere;

 

•

the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

 

•

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our or our collaborators’ clinical data insufficient for approval.

This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would seriously harm our business.

In addition, even if we or our collaborators were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may impose significant limitations in the form of narrow indications, warnings, or a REMS. Regulatory authorities may not approve the price we or our collaborators intend to charge for products we may develop, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could seriously harm our business.

We may attempt to secure approval from the FDA or comparable foreign regulatory authorities through the use of accelerated approval pathways. If we are unable to obtain such approval, we may be required to conduct additional clinical trials beyond those that we contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals. Even if we receive accelerated approval from the FDA, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw accelerated approval.

We may in the future seek an accelerated approval for one or more of our product candidates. Under the accelerated approval program, the FDA may grant accelerated approval to a product candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public

 

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health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post- approval confirmatory studies to verify and describe the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical benefit, the FDA may withdraw its approval of the drug.

Prior to seeking accelerated approval for any of our product candidates, we intend to seek feedback from the FDA and will otherwise evaluate our ability to seek and receive accelerated approval. There can be no assurance that after our evaluation of the feedback and other factors we will decide to pursue or submit a BLA for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance that after subsequent FDA feedback we will continue to pursue or apply for accelerated approval or any other form of expedited development, review or approval, even if we initially decide to do so. Furthermore, if we decide to submit an application for accelerated approval or receive an expedited regulatory designation (e.g., breakthrough therapy designation) for our product candidates, there can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. The FDA or other comparable foreign regulatory authorities could also require us to conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for our product candidate would result in a longer time period to commercialization of such product candidate, if any, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.

Even if we or our collaborators obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.

If one of our product candidates is approved, it will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post- market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any approved marketing application. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs and biologics are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products “off-label” for indications or uses for which they do not have approval, though we may share truthful and not misleading information that is otherwise consistent with our product’s FDA approved labeling. The holder of an approved application must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of our products in general or in specific patient subsets. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval or label restrictions.

 

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If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

 

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issue warning letters;

 

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impose civil or criminal penalties;

 

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suspend or withdraw regulatory approval;

 

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suspend any of our clinical trials;

 

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refuse to approve pending applications or supplements to approved applications submitted by us;

 

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impose restrictions on our operations, including closing our contract manufacturers’ facilities; or

 

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seize or detain products, or require a product recall.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, our business will be seriously harmed.

Moreover, the policies of the FDA and of other regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

We have received Fast Track designation for 4D-310 for the treatment of Fabry disease to improve pain, disability and organ dysfunction, and we may seek Fast Track designation for certain future product candidates, but we may not be able to obtain such designations, and there is no guarantee that 4D-310 will experience a faster regulatory review or obtain regulatory approval.

If a product is intended for the treatment of a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address an unmet medical need for this disease condition, the product sponsor may apply for Fast Track designation. The sponsor of a Fast Track product has opportunities for more frequent interactions with the applicable FDA review team during product development and, once a BLA is submitted, the product candidate may be eligible for priority review. A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA. The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. We have received Fast Track designation for 4D-310 for the treatment of Fabry disease to improve pain, disability and organ

 

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dysfunction, and we may receive Fast Track designation for other product candidates in the future; however, we may not experience a faster development, review or approval process, and receipt of the designation does not increase the likelihood that the FDA will approve 4D-310 for any indication. In addition, the FDA may rescind the Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.

We have received orphan drug designation for 4D-110 for the treatment of choroideremia and for 4D-310 for the treatment of Fabry disease, and we may seek orphan drug designation for certain future product candidates, but we may be unable to obtain such designations or to maintain the benefits associated with orphan drug designation, including market exclusivity, which may cause our revenue, if any, to be reduced.

We have received orphan drug designation in the United States for 4D-110 for the treatment of choroideremia and for 4D-310 for the treatment of Fabry disease. Although we may seek orphan product designation for some or all of our other product candidates, we may never receive such designations. Under the Orphan Drug Act, the FDA may designate a drug or biologic product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. Orphan drug designation must be requested before submitting a BLA. In the European Union, the EMA’s Committee for Orphan Medicinal Products (COMP), grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and application fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA.

In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity for the orphan patient population. Exclusive marketing rights in the United States may also be unavailable if we or our collaborators seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective. In the European Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following drug or biological product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.

Even if we obtain orphan drug designation, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if we obtain orphan drug exclusivity for a product candidate, that exclusivity

 

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may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior in that it is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug or biologic nor gives the drug or biologic any advantage in the regulatory review or approval process.

If the product candidates that we or our collaborators may develop receive regulatory approval in the United States or another jurisdiction, they may never receive approval in other jurisdictions, which would limit market opportunities for such product candidate and seriously harm our business.

Approval of a product candidate in the United States by the FDA or by the requisite regulatory agencies in any other jurisdiction does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions. The approval process varies among countries and may limit our or our collaborators’ ability to develop, manufacture, promote and sell product candidates internationally. Failure to obtain marketing approval in international jurisdictions would prevent the product candidates from being marketed outside of the jurisdictions in which regulatory approvals have been received. In order to market and sell product candidates in the European Union and many other jurisdictions, we and our collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and may involve additional preclinical studies or clinical trials both before and after approval. In many countries, any product candidate for human use must be approved for reimbursement before it can be approved for sale in that country. In some cases, the intended price for such product is also subject to approval. Further, while regulatory approval of a product candidate in one country does not ensure approval in any other country, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. If we or our collaborators fail to comply with the regulatory requirements in international markets or to obtain all required marketing approvals, the target market for a particular potential product will be reduced, which would limit our ability to realize the full market potential for the product and seriously harm our business.

Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.

In the United States, the European Union and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively the ACA) was enacted, which substantially changed the way healthcare is financed by both governmental and private payors. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

 

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an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;

 

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new requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting “transfers of value” made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediate family members;

 

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an increase to the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and an extension the rebate program to individuals enrolled in Medicaid managed care organizations;

 

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a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

 

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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

 

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a licensure framework for follow-on biologic products;

 

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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and

 

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establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services (CMS) to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial, U.S. Congressional and executive branch challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, the Tax Cuts and Jobs Act of 2017 was enacted, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas (Texas District Court Judge) ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case, although it is unclear when a decision will be made or how the Supreme Court will rule. It is also unclear how other efforts to challenge, repeal or replace the ACA will impact the ACA or our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, led to aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through December 31, 2020, unless additional action is taken by Congress. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further 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. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our customers and accordingly, seriously harm our business.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in

 

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several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government payor programs, and review the relationship between pricing and manufacturer patient programs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Additionally, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Further, on July 24, 2020, the Trump administration announced four executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals, including a policy that would tie Medicare Part B drug prices to international drug prices; one that directs HHS to finalize the Canadian drug importation proposed rule previously issued by HHS and makes other changes allowing for personal importation of drugs from Canada; one that directs HHS to finalize the rulemaking process on modifying the federal Anti-Kickback Statute safe harbors for discounts for plans, pharmacies, and pharmaceutical benefit managers; and one that reduces costs of insulin and epipens to patients of federally qualified health centers. Although a number of these will require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures and could seriously harm our business.

Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological 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. Legally mandated price controls on payment amounts by third-party payors or other restrictions could seriously harm our business. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates or put pressure on our product pricing. Furthermore, there has been increased interest by third-party payors and governmental authorities in reference pricing systems and publication of discounts and list prices. Prescription drugs and biological products that are in violation of these requirements will be included on a public list. These reforms could reduce the ultimate demand for our product candidates or put pressure on our product pricing and could seriously harm our business.

In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and market products,

 

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this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize our product candidates, if approved. In markets outside of the United States and European Union, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or judicial action in the United States, the European Union or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Even if we are able to commercialize any product candidates, due to unfavorable pricing regulations and/or third-party coverage and reimbursement policies, we may not be able to offer such products at competitive prices which would seriously harm our business.

The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if any product candidates we may develop obtain marketing approval.

Our ability to successfully commercialize any products that we may develop also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Government authorities currently impose mandatory discounts for certain patient groups, such as Medicare, Medicaid and Veterans Affairs (VA) hospitals, and may seek to increase such discounts at any time. Future regulation may negatively impact the price of our products, if approved. Increasingly, other third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. For gene therapy and other products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. We cannot be sure that reimbursement will be available for any product candidate that we commercialize and, if reimbursement is available, that the level of reimbursement will be sufficient.

Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. In order to get reimbursement, physicians may need to show that patients have superior treatment outcomes with our products compared to standard of care drugs, including lower-priced generic versions of standard of care drugs. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. In the United States, no uniform policy of coverage

 

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and reimbursement for products exists among third-party payors and coverage and reimbursement levels for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time consuming and costly process that may require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the medicine is approved by the FDA, EMA or other comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale, and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products we may develop could seriously harm our business.

Even if we obtain FDA approval of any of our product candidates, we may never obtain approval or commercialize such products outside of the United States, which would limit our ability to realize their full market potential.

In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our ability to realize the full market potential of our products will be harmed.

We currently have no sales organization. If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell any products effectively, if approved, or generate product revenue.

We currently do not have a marketing or sales organization. In order to commercialize any product, if approved, in the United States and foreign jurisdictions, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. In advance of any of our product candidates receiving regulatory approval, we expect to establish a sales organization with technical

 

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expertise and supporting distribution capabilities to commercialize each such product candidate, which will be expensive and time-consuming. We have no prior experience in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. We may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize our product candidates. If we are not successful in commercializing products, either on our own or through arrangements with one or more third parties, we may not be able to generate any future product revenue and we would incur significant additional losses and our business would be seriously harmed.

Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties and seriously harm our business.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved. Such laws include:

 

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the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

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the U.S. federal civil and criminal false claims and civil monetary penalties laws, including the civil federal False Claims Act, which can be enforced through civil whistleblower or qui tam actions, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. Pharmaceutical manufacturers can cause false claims to be presented to the U.S. federal government by engaging in impermissible marketing practices, such as the off-label promotion of a product for an indication for which it has not received FDA approval. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;

 

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the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and

 

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willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation;

 

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the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

 

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the U.S. Public Health Service Act, which prohibits, among other things, the introduction into interstate commerce of a biological product unless a biologics license is in effect for that product;

 

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the U.S. Physician Payments Sunshine Act and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to certain payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and transfers of value provided during the previous year to certain other healthcare providers, including physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse midwives;

 

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analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; and state and local laws requiring the registration of pharmaceutical sales representatives; and

 

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similar healthcare laws in the European Union and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers.

We may also be subject to additional federal laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office, and foreign political parties or officials thereof, and federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices, including certain of our advisory board arrangements with physicians, some of whom are compensated in the form of stock or stock options, do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and

 

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regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

We use and generate materials that may expose us to material liability.

Our research programs involve the use of hazardous materials and chemicals. We are subject to foreign, federal, state and local environmental and health and safety laws and regulations governing, among other matters, the use, manufacture, handling, storage and disposal of hazardous materials and waste products such as human tissue samples that may have the potential to transmit diseases. We may incur significant costs to comply with these current or future environmental and health and safety laws and regulations. In addition, we cannot completely eliminate the risk of contamination or injury from hazardous materials and may incur material liability as a result of such contamination or injury. In the event of an accident, an injured party may seek to hold us liable for any damages that result. Any liability could exceed the limits or fall outside the coverage of our workers’ compensation, property and business interruption insurance and we may not be able to maintain insurance on acceptable terms, if at all. We currently carry no insurance specifically covering environmental claims.

Compliance with governmental regulations regarding the treatment of animals used in research could increase our operating costs, which would adversely affect the commercialization of our products.

The Animal Welfare Act (AWA) is the federal law that covers the treatment of certain animals used in research. Currently, the AWA imposes a wide variety of specific regulations that govern the humane handling, care, treatment and transportation of certain animals by producers and users of research animals, most notably relating to personnel, facilities, sanitation, cage size, and feeding, watering and shipping conditions. Third parties with whom we contract are subject to registration, inspections and reporting requirements under the AWA. Furthermore, some states have their own regulations, including general anti-cruelty legislation, which establish certain standards in handling animals. Comparable rules, regulations, and or obligations exist in many foreign jurisdictions. If we or our contractors fail to comply with regulations concerning the treatment of animals used in research, we may be subject to fines and penalties and adverse publicity, and our operations could be adversely affected.

Risks Related to Our Reliance on Third Parties

We expect to rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.

We currently rely and expect to continue to rely on third parties, such as CROs, clinical data management organizations, clinical data assessments and analysis organizations, medical institutions

 

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and clinical investigators, to conduct some aspects of our research, preclinical testing and clinical trials. Any of these third parties may terminate their engagements with us or be unable to fulfill their contractual obligations. If we need to enter into alternative arrangements, it would delay our product development activities.

Our reliance on these third parties for research and development activities reduces our control over these activities, but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with GCP for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible, reproducible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We are also required to register ongoing clinical trials and to post the results of completed clinical trials on a government-sponsored database within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any product candidates we may develop and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.

We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of any product candidates we may develop or commercialization of our product candidates, producing additional losses and depriving us of potential product revenue.

We may depend on collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

We have sought, and may in the future seek third-party collaborators for the research, development and commercialization of certain of the product candidates we may develop. Our likely collaborators for any other collaboration arrangements include large and mid-size pharmaceutical companies, regional, national and international pharmaceutical companies, biotechnology companies and academic institutions. If we enter into any such arrangements with any third parties, we will likely have shared or limited control over the amount and timing of resources that our collaborators dedicate to the development or potential commercialization of any product candidates we may seek to develop with them. Our ability to generate revenue from these arrangements with commercial entities will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.

Collaborations involving our product candidates we may develop, pose the following risks to us:

 

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collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations;

 

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collaborators may not properly obtain, maintain, enforce or defend intellectual property or proprietary rights relating to our product candidates or may use our proprietary information in such a way as to expose us to potential litigation or other intellectual property related proceedings, including proceedings challenging the scope, ownership, validity and enforceability of our intellectual property;

 

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•

collaborators may own or co-own intellectual property covering our product candidates that result from our collaboration with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property or such product candidates;

 

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disputes may arise with respect to the ownership of intellectual property developed pursuant to collaborations;

 

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we may need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us;

 

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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

 

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disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources;

 

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collaborators may decide not to pursue development and commercialization of any product candidates we develop or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;

 

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collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;

 

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collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

 

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collaborators with marketing and distribution rights to one or more product candidates may not commit sufficient resources to the marketing and distribution of such product candidates;

 

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we may lose certain valuable rights under circumstances identified in our collaborations, including if we undergo a change of control;

 

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collaborators may undergo a change of control and the new owners may decide to take the collaboration in a direction which is not in our best interest;

 

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collaborators may become party to a business combination transaction and the continued pursuit and emphasis on our development or commercialization program by the resulting entity under our existing collaboration could be delayed, diminished or terminated;

 

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collaborators may become bankrupt, which may significantly delay our research or development programs, or may cause us to lose access to valuable technology, devices, materials, know-how or intellectual property of the collaborator relating to our products and product candidates;

 

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key personnel at our collaborators may leave, which could negatively impact our ability to productively work with our collaborators;

 

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collaborations may require us to incur short and long-term expenditures, issue securities that dilute our stockholders, or disrupt our management and business;

 

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collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates or our Therapeutic Vector Evolution platform technology; and

 

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•

collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.

We may face significant competition in seeking appropriate collaborations. Recent business combinations among biotechnology and pharmaceutical companies have resulted in a reduced number of potential collaborators. In addition, the negotiation process is time-consuming and complex, and we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate or delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or bring them to market and generate product revenue which could seriously harm our business.

If we enter into collaborations to develop and potentially commercialize any product candidates, we may not be able to realize the benefit of such transactions if we or our collaborator elect not to exercise the rights granted under the agreement or if we or our collaborator are unable to successfully integrate a product candidate into existing operations and company culture. In addition, if our agreement with any of our collaborators terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidates utilizing the collaborator’s technology or intellectual property or require us to stop development of those product candidates completely. We may also find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected. Any collaborator may also be subject to many of the risks relating to product development, regulatory approval, and commercialization described in this “Risk Factors” section, and any negative impact on our collaborators may adversely affect us.

Risks Related to Our Intellectual Property

Our success depends on our ability to protect our intellectual property and our proprietary technologies.

Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for our product candidates, proprietary technologies and their uses as well as our ability to operate without infringing upon the proprietary rights of others. We generally seek to protect our proprietary position by filing patent applications in the United States and abroad related to our product candidates, proprietary technologies and their uses that are important to our business. Our patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover the technology. There can be no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around or invalidated by third parties. Even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. Further, we have one pending patent application (patent no. 14/774,972), that was made with government support, that may be subject, under certain circumstances, to march-in-rights under 35 U.S.C. 203, which is a right that allows the government, in certain limited circumstances, to force a party with a license to intellectual property funded, at least in part, by the government, to grant a license to such property to another entity. This patent was made with the support of U.C. Berkeley and relates to our A101 vector. The degree of future protection for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our

 

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product candidates and proprietary technologies and erode or negate any competitive advantage we may have, which could seriously harm our business.

We and our licensors have applied, and we intend to continue applying, for patents covering aspects of our product candidates, proprietary technologies and their uses that we deem appropriate. However, we may not be able to apply for patents on certain aspects of our current or future product candidates, proprietary technologies and their uses in a timely fashion, at a reasonable cost, in all jurisdictions, or at all, and any potential patent coverage we obtain may not be sufficient to prevent substantial competition.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our actual or potential future collaborators or licensors will be successful in protecting our product candidates, proprietary technologies and their uses by obtaining and defending patents. These risks and uncertainties include the following:

 

•

the U.S. Patent and Trademark Office (USPTO) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the noncompliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction;

 

•

patent applications may not result in any patents being issued;

 

•

patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage;

 

•

our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or eliminate our ability to make, use and sell our potential product candidates;

 

•

other parties may have designed around our claims or developed technologies that may be related or competitive to our platform, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position;

 

•

any successful opposition to any patents owned by or licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of any products or product candidates that we may develop;

 

•

because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we or our licensors were the first to file any patent application related to our product candidates, proprietary technologies and their uses;

 

•

an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications for any application with an effective filing date before March 16, 2013;

 

•

there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and

 

•

countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates.

 

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The patent prosecution process is also expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

The patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. Moreover, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents, if issued, patents obtained by our collaborators or the patent rights that we license from others, may be challenged in the courts or patent offices in the United States and abroad. Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such initial grant. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical products or product candidates, or limit the duration of the patent protection of our product candidates. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

Our ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components or methods that are used in connection with their products and services. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product or service. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering our product candidates are invalidated or found unenforceable, or if a court found that valid, enforceable patents held by third parties covered one or more of our product candidates, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights. If we initiate lawsuits to protect or enforce our patents, or litigate against third-party claims, such proceedings would be expensive and would divert the attention of our management and technical personnel.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

 

•

any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our product candidates;

 

•

any of our pending patent applications or those of our licensors may issue as patents;

 

•

others will not or may not be able to make, use, offer to sell, or sell products that are the same as or similar to our own but that are not covered by the claims of the patents that we own or license;

 

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•

we will be able to successfully commercialize our product candidates on a substantial scale, if approved, before the relevant patents that we own or license expire;

 

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we or our licensors were the first to make the inventions covered by each of the patents and pending patent applications that we own or license;

 

•

we or our licensors were the first to file patent applications for these inventions;

 

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others will not develop similar or alternative technologies that do not infringe the patents we own or license;

 

•

any of the patents we own or license will be found to ultimately be valid and enforceable;

 

•

any patents issued to us or our licensors will provide a basis for an exclusive market for our commercially viable products or will provide us with any competitive advantages;

 

•

a third party may not challenge the patents we own or license and, if challenged, a court would hold that such patents are valid, enforceable and infringed;

 

•

we may develop or in-license additional proprietary technologies that are patentable;

 

•

the patents of others will not have an adverse effect on our business;

 

•

our competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

 

•

we will develop additional proprietary technologies or product candidates that are separately patentable; or

 

•

our commercial activities or products will not infringe upon the patents of others.

Where we obtain licenses from or collaborate with third parties, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties, or such activities, if controlled by us, may require the input of such third parties. We may also require the cooperation of our licensors and collaborators to enforce any licensed patent rights, and such cooperation may not be provided. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Moreover, if we do obtain necessary licenses, we will likely have obligations under those licenses, and any failure to satisfy those obligations could give our licensor the right to terminate the license. Termination of a necessary license, or expiration of licensed patents or patent applications, could seriously harm our business.

Furthermore, our owned and in-licensed intellectual property rights may be subject to a reservation of rights by one or more third parties. For example, the research resulting in certain of our in-licensed patent rights and technology was funded in part by the U.S. government. As a result, the government may have certain rights, or march-in rights, to such patent rights and technology. When new technologies are developed with government funding, the government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the government to use the invention for non-commercial purposes. These rights may permit the government to disclose our confidential information to third parties and to exercise march-in rights to use or allow third parties to use our licensed technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the government of such rights could seriously harm our business.

 

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The lives of our patents may not be sufficient to effectively protect our product candidates and business.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective non-provisional filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates, proprietary technologies and their uses are obtained, once the patent life has expired, we may be open to competition. In addition, although upon issuance in the United States a patent’s life can be extended based on certain delays caused by the USPTO and clinical development, this extension can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. If we do not have sufficient patent life to protect our product candidates, proprietary technologies and their uses, our business would be seriously harmed.

If we are unable to protect the confidentiality of our trade secrets, our business would be seriously harmed.

We rely on the protection of our trade secrets, including unpatented know-how, technology and other proprietary information to maintain our competitive position. We have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees and consultants. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Despite these efforts, we cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. In addition, such security measures may not provide adequate protection for our proprietary information, for example, in the case of misappropriation of a trade secret by an employee, consultant, customer or third party with authorized access. Our security measures may not prevent an employee, consultant, collaborator or customer or third party from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our product candidates that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Even though we use commonly accepted security measures, the criteria for protection of trade secrets can vary among different jurisdictions.

In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, third parties may still obtain this information or may come upon this or similar information independently, and we would have no right to prevent them from using that technology or information to compete with us. Trade secrets will over time be disseminated within the industry through independent development, the publication of journal articles and the movement of personnel skilled in the art from company to company or academic to industry scientific positions. Though our agreements with third parties typically restrict the ability of our employees, collaborators, licensors, third-party contractors and consultants to publish data potentially relating to our trade secrets, our agreements may contain certain limited publication rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. Because from time to time we have relied on, and in future expect to rely on third parties in the development, manufacture, and distribution of our product candidates and provision of

 

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our services, we must, at times, share trade secrets with them. Despite employing the contractual and other security precautions described above, the need to share trade secrets increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. If any of these events occurs or if we otherwise lose protection for our trade secrets, the value of this information may be greatly reduced and our competitive position would be harmed. If we do not apply for patent protection prior to such publication or if we cannot otherwise maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.

Our rights to develop and commercialize our product candidates are subject in part to the terms and conditions of licenses granted to us by others, and the patent protection, prosecution and enforcement for some of our product candidates may be dependent on our licensors.

We currently are reliant upon licenses of certain patent rights and proprietary technology from third parties that are important or necessary to the development of our technology, including technology related to our product candidates. For example, we rely on our exclusive license agreements with U.C. Berkeley for all of our rights with respect to the intellectual property covering certain compositions of matter and methods of use of certain AAV variants related to our research candidates in lead optimization stage. These and other licenses we may enter into in the future may not provide adequate rights to use such intellectual property and technology in all relevant fields of use or in all territories in which we may wish to develop or commercialize our technology and product candidates in the future. As a result, we may not be able to develop and commercialize our technology and product candidates in fields of use and territories for which we are not granted rights pursuant to such licenses.

Licenses to additional third-party technology that may be required for our development programs may not be available in the future or may not be available on commercially reasonable terms, which could seriously harm our business.

In some circumstances, we may not have the right to control the preparation, filing, prosecution and enforcement of patent applications, or to maintain the patents, covering technology that we license from third parties. In addition, some of our agreements with our licensors require us to obtain consent from the licensor before we can enforce patent rights, and our licensor may withhold such consent or may not provide it on a timely basis. Therefore, we cannot be certain that our licensors or collaborators will prosecute, maintain, enforce and defend such intellectual property rights in a manner consistent with the best interests of our business, including by taking reasonable measures to protect the confidentiality of know-how and trade secrets, or by paying all applicable prosecution and maintenance fees related to intellectual property registrations for any of our product candidates. We also cannot be certain that our licensors have drafted or prosecuted the patents and patent applications licensed to us in compliance with applicable laws and regulations, which may affect the validity and enforceability of such patents or any patents that may issue from such applications. If they fail to do so, this could cause us to lose rights in any applicable intellectual property that we in-license, and as a result our ability to develop and commercialize products or product candidates may be adversely affected and we may be unable to prevent competitors from making, using and selling competing products.

Our current licenses, and our future licenses likely will, impose various royalty payments, milestones, and other obligations on us. If we fail to comply with any of these obligations, we may be required to pay damages and the licensor may have the right to terminate the license. Termination by the licensor would cause us to lose valuable rights, and could prevent us from developing and commercializing our product candidates and proprietary technologies. Our business would be seriously

 

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harmed if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. Furthermore, if any current or future licenses terminate, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties may gain the freedom to seek regulatory approval of, and to market, products identical to ours. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannot currently determine the amount of royalty obligations we would be required to pay on the sales of future products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in product candidates that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize any product candidates, we may be unable to achieve or maintain profitability.

If our trademarks and trade names, whether registered in the future or unregistered now, are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Any trademarks we may register in the future or any current unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. We may license our trademarks and trade names, to the extent any are registered, to third parties, such as distributors. Though these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could seriously harm our business.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

 

•

others may be able to make gene therapy products that are similar to our product candidates or utilize similar gene therapy technology but that are not covered by the claims of the patents that we own or have exclusively licensed;

 

•

we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or have exclusively licensed;

 

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•

we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions;

 

•

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

 

•

it is possible that our pending patent applications will not lead to issued patents;

 

•

issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors;

 

•

our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

 

•

we may not develop additional proprietary technologies that are patentable; and

 

•

the patents of others may have an adverse effect on our business.

Should any of these events occur, they could seriously harm our business.

Any collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our products.

Any future collaborations that we enter into may not be successful, such as our collaboration agreements with Pfizer that was terminated in 2018 and with AstraZeneca that concluded in 2020 without AstraZeneca exercising its option. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which may include that:

 

•

collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations;

 

•

collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

 

•

collaborators could independently develop, or develop with third parties, products and product candidates that compete directly or indirectly with our product candidates;

 

•

a collaborator with marketing, manufacturing and distribution rights to one or more products and product candidates may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;

 

•

we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;

 

•

collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

 

•

disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future product candidates or that results in costly litigation or arbitration that diverts management attention and resources;

 

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•

collaborations may be terminated, and, if terminated, may adversely affect the price of our common stock and may result in a need for additional capital to pursue further development or commercialization of the applicable current or future product candidates;

 

•

collaborators may own or co-own intellectual property covering our product candidates that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and

 

•

a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.

Risks Related to Our Operations

We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. The loss of the services provided by any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements, could result in delays in the development of our product candidates and harm our business.

We conduct our operations at our facilities in Emeryville, California, in a region that is headquarters to many other biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel is intense and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. We expect that we may need to recruit talent from outside of our region, and doing so may be costly and difficult.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock option grants. The value to employees of these equity grants that vest over time may be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. In addition, our employees are employed at-will, which means that any of our employees could leave our employment at any time, with or without notice. If we are unable to attract, incentivize and retain quality personnel on acceptable terms, or at all, it could seriously harm our business.

We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

As of September 30, 2020, we had 78 full-time employees. As our development plans and strategies develop, and as we transition into operating as a public company, we must add a significant number of additional managerial, operational, financial and other personnel. Future growth will impose significant added responsibilities on members of management, including:

 

•

identifying, recruiting, integrating, retaining and motivating additional employees;

 

•

managing our internal development efforts effectively, including the clinical and FDA review process for our current and future product candidates, while complying with our contractual obligations to contractors and other third parties;

 

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expanding our operational, financial and management controls, reporting systems and procedures; and

 

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managing increasing operational and managerial complexity.

 

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Our future financial performance and our ability to continue to develop and, if approved, commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth. Our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to manage these growth activities.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. Portions of our future clinical trials may be conducted outside of the United States and unfavorable economic conditions resulting in the weakening of the U.S. dollar would make those clinical trials more costly to operate. Furthermore, a severe or prolonged economic downturn, including a recession or depression resulting from the current COVID-19 pandemic or political disruption could result in a variety of risks to our business, including weakened demand for our product candidates or any future product candidates, if approved, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption, including any international trade disputes, could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our potential products. Any of the foregoing could seriously harm our business, and we cannot anticipate all of the ways in which the political or economic climate and financial market conditions could seriously harm our business.

The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, or at all.

Market opportunity estimates and growth forecasts included in this prospectus are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. The estimates and forecasts included in this prospectus relating to size and expected growth of our target market may prove to be inaccurate. Even if the markets in which we compete meet the size estimates and growth forecasts included in this prospectus, our business may not grow at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.

 

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If we engage in acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.

We may engage in various acquisitions and strategic partnerships in the future, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. Any acquisition or strategic partnership may entail numerous risks, including:

 

•

increased operating expenses and cash requirements;

 

•

the assumption of indebtedness or contingent liabilities;

 

•

the issuance of our equity securities which would result in dilution to our stockholders;

 

•

assimilation of operations, intellectual property, products and product candidates of an acquired company, including difficulties associated with integrating new personnel;

 

•

the diversion of our management’s attention from our existing product candidates and initiatives in pursuing such an acquisition or strategic partnership;

 

•

retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

 

•

risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and

 

•

our inability to generate revenue from acquired intellectual property, technology and/or products sufficient to meet our objectives or even to offset the associated transaction and maintenance costs.

In addition, if we undertake such a transaction, we may incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.

Our information technology systems, or those used by our third-party research institution collaborators, CROs or other contractors or consultants, may fail or suffer security breaches and other disruptions.

We have experienced cyberattacks, including a phishing attack in September 2019 in which the email account of a single non-officer employee was compromised. Our security controls detected the compromise, and we were able to block the unauthorized access, but not before the attacker was able to use the account to send out additional phishing emails. We do not believe the phishing attack was a material incursion because, among other reasons, we believe that none of our data was accessed or compromised, and we have not incurred any related material remediation costs. Despite the implementation of security measures like those that detected the phishing attack, our internal information technology systems and those of our collaborators, future CROs and other contractors and consultants may be vulnerable to damage from computer viruses, natural disasters, terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks and other social engineering schemes, denial or degradation of service attacks, unauthorized access or use, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. The costs to us to investigate and mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to

 

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address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity and other harm to our business and our competitive position. Although to our knowledge we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss, corruption or unauthorized disclosure of our trade secrets, personal data or other proprietary or sensitive information or other similar disruptions.

For example, the loss of clinical trial data from completed, ongoing or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. If a security breach or other incident were to result in the unauthorized access to or unauthorized use, disclosure, release or other processing of clinical trial data or personal data, it may be necessary to notify individuals, governmental authorities, supervisory bodies, the media, and other parties pursuant to privacy and security laws. Likewise, we rely on our third-party research institution collaborators for research and development of our product candidates and other third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their information technology systems could also seriously harm our business. Any security compromise affecting us, our partners or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness of our security measures, and lead to regulatory scrutiny. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability, our competitive position could be harmed, and the further development and commercialization of our product candidates could be delayed.

Business disruptions could seriously harm our business.

Our operations, and those of our CROs, CMOs, suppliers, and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions, for which we are partly uninsured. In addition, we rely on our third-party research institution collaborators for conducting research and development of our product candidates, and they may be affected by government shutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our business.

All of our operations including our corporate headquarters are located in multiple facilities in Emeryville, California. Damage or extended periods of interruption to our corporate, development or research facilities due to fire, earthquake and other natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our product candidates. Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances and our business could be seriously harmed by such delays and interruption.

Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.

The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal data, such as information that we may collect in connection with clinical trials in the United States and abroad. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have

 

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on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could seriously harm our business.

As our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the United States, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder, imposes, among other things, certain standards on certain health care providers, health plans, and health care clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. In addition, California enacted the California Consumer Privacy Act (CCPA) on June 28, 2018, which went into effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal data. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability, and many similar laws have been proposed at the federal level and in other states. In the event that we are subject to or affected by HIPAA, the CCPA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition. In Europe, the GDPR went into effect in May 2018 and introduces strict requirements for processing the personal data of individuals within the European Economic Area (EEA) and the United Kingdom. The law is also developing rapidly and, in July 2020, the Court of Justice of the European Union limited how organizations could lawfully transfer personal data from the EU to the U.S. by invalidating the EU-U.S. Privacy Shield as a basis for transfers of personal data from the EU to the U.S. and raising questions about the continued validity of one of the primary alternatives to the EU-U.S. Privacy Shield, namely the European Commission’s Standard Contractual Clauses. At present, there are few, if any, viable alternatives to the EU-U.S. Privacy Shield and the Standard Contractual Clauses. Inability to transfer personal information from the European Union, Switzerland or United Kingdom to the United States or elsewhere, may restrict our activities in those jurisdictions and limit our ability to provide our products and services in those jurisdictions. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. Relatedly, following the departure of the United Kingdom from the EU after the expiry of the transition period, the United Kingdom will operate a separate but similar regime to the EU, which allows for fines of up to £17.5 million or 4% of the total worldwide annual turnover of the preceding financial year.

Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified,

 

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interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, CROs, collaborators, or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to us, damage our reputation, and seriously harm our business.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards (NOLs) and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or other pre-change tax attributes if we undergo a future ownership change. We have experienced ownership changes in the past. We may also experience ownership changes as a result of this offering or as a result of subsequent shifts in our stock ownership, some of which are outside our control. As a result, our ability to use our NOLs and other pre-change tax attributes to offset post-change taxable income or taxes may be subject to limitation. We will be unable to use our NOLs or other tax attributes if we do not attain profitability sufficient to offset our available NOLs or other tax attributes prior to their expiration, to the extent subject to expiration.

Changes in tax laws or regulations that are applied adversely to us or our customers may seriously harm our business.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of any of our future domestic and foreign earnings. Any new taxes could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.

Risks Related to This Offering and Ownership of Our Common Stock

We do not know whether an active market will develop for our common stock or what the market price of our common stock will be, and, as a result, it may be difficult for you to sell your shares of our common stock.

Before this offering, there was no public trading market for our common stock. If an active market for our common stock does not develop or is not sustained, it may be difficult for you to sell your shares of our common stock at an attractive price, or at all. We cannot predict the prices at which our common stock will trade. It is possible that in one or more future periods our results of operations and progression of our product pipeline may not meet the expectations of public market analysts and investors, and, as a result of these and other factors including those identified in this “Risk Factors” section, the price of our common stock may fall.

The market price of our common stock may be volatile, which could result in substantial losses for investors purchasing shares in this offering.

The initial public offering price for our common stock was determined through negotiations with the underwriters. This initial public offering price may differ from the market price of our common stock

 

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after the offering. As a result, you may not be able to sell your common stock at or above the initial public offering price. Some of the factors that may cause the market price of our common stock to fluctuate include:

 

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results from, and any delays in, our clinical trials for our clinical-stage product candidates or any other future clinical development programs, including any delays related to the COVID-19 pandemic;

 

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the success of existing or new competitive products or technologies;

 

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commencement or termination of collaborations for our product candidates;

 

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failure or discontinuation of any of our product candidates;

 

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failure to develop our Therapeutic Vector Evolution platform technology;

 

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results of preclinical studies, clinical trials or regulatory approvals of product candidates of our competitors, or announcements about new research programs or product candidates of our competitors;

 

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regulatory or legal developments in the United States and other countries;

 

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developments or disputes concerning patent applications, issued patents or other proprietary rights;

 

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the recruitment or departure of key personnel;

 

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the commencement of litigation;

 

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the level of expenses related to any of the research programs or product candidates that we may develop;

 

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the results of our efforts to develop additional product candidates or products;

 

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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

 

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announcement or expectation of additional financing efforts;

 

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sales of our common stock by us, our insiders, or other stockholders;

 

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expiration of market standoff or lock-up agreements;

 

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variations in our financial results or those of companies that are perceived to be similar to us;

 

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changes in estimates or recommendations by securities analysts, if any, that cover our stock;

 

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changes in the structure of healthcare payment systems;

 

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market conditions in the pharmaceutical and biotechnology sectors;

 

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general economic, industry, and market conditions; and

 

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the other factors described in this “Risk Factors” section.

In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Further, the stock market in general has been highly volatile due to the COVID-19 pandemic and political uncertainty in the United States. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. Following periods of such

 

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volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock could decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

A significant portion of our total outstanding shares is restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our common stock to decline significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, upon the expiration of the market standoff and lock-up agreements, the early release of these agreements or the perception in the market that the holders of a large number of shares of our common stock intend to sell shares, could reduce the market price of our common stock. After this offering and after giving effect to the automatic conversion of                 outstanding shares of our redeemable convertible preferred stock into an equivalent number of                 shares of our common stock immediately prior to the completion of this offering, we will have                 shares of our common stock outstanding based on                 shares of our common stock outstanding as of September 30, 2020. Of these shares, the                 shares we are selling in this offering may be resold in the public market immediately, unless purchased by our affiliates. The remaining                 shares, or                 % of our outstanding shares after this offering, are currently prohibited or otherwise restricted under securities laws, market standoff agreements entered into by our stockholders with us, or lock-up agreements entered into by our stockholders with the underwriters. However, subject to applicable securities law restrictions and excluding shares of restricted stock that will remain unvested, prohibitions and restrictions on the sale of these shares in the public market will be lifted beginning 180 days after the date of this prospectus. Goldman Sachs & Co. LLC, BofA Securities, Inc. and Evercore Group L.L.C. may, in their sole discretion, release all or some portion of the shares subject to lock-up agreements at any time and for any reason. Shares issued upon the exercise of stock options outstanding under our equity incentive plans, or pursuant to future awards granted under those plans, will become available for sale in the public market to the extent permitted by the provisions of applicable vesting schedules, any applicable market standoff and lock-up agreements, and Rule 144 and Rule 701 under the Securities Act of 1933, as amended (the Securities Act). See the section of this prospectus titled “Shares Eligible for Future Sale” for additional information.

Moreover, after this offering, holders of an aggregate of                 shares of our common stock will have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also plan to register all shares of our common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance and once vested, subject to volume limitations applicable to affiliates and the lock-up agreements described in

 

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the section of this prospectus titled “Underwriters.” If any of these additional shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

We will seek additional capital through one or a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. We, and indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future offerings. To the extent that we raise additional capital through the sale of equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.

Insiders will continue to have substantial influence over us after this offering, which could limit your ability to affect the outcome of key transactions, including a change of control.

After this offering, our directors, executive officers, holders of more than 5% of our outstanding stock and their respective affiliates will beneficially own shares representing approximately     % of our outstanding common stock. As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might affect the market price of our common stock.

We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an “emerging growth company” the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

 

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We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the year following the fifth anniversary of the consummation of this offering, (2) the last day of the year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We will incur significant costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, which could result in sanctions or other penalties that would seriously harm our business.

We will incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Exchange Act and regulations regarding corporate governance practices. The listing requirements of the Nasdaq Global Market and the rules of the Securities and Exchange Commission (SEC) require that we satisfy certain corporate governance requirements relating to director independence, filing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.

After this offering, we will be subject to Section 404 of The Sarbanes-Oxley Act of 2002 (Section 404) and the related rules of the SEC, which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Beginning with the second annual report that we will be required to file with the SEC, Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. However, for so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting.

To date, we have never conducted a review of our internal control for the purpose of providing the reports required by these rules. During the course of our review and testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports.

 

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Furthermore, if we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, as a public company we will be required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. In order to report our results of operations and financial statements on an accurate and timely basis, we will depend in part on CROs to provide timely and accurate notice of their costs to us. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from the Nasdaq Global Market or other adverse consequences that would seriously harm our business.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock before giving effect to this offering. Accordingly, if you purchase our common stock in this offering, you will incur immediate substantial dilution of $                 per share, based on an assumed initial public offering price of $                 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and our pro forma net tangible book value as of September 30, 2020. In addition, following this offering, purchasers in this offering will have contributed approximately     % of the total gross consideration paid by stockholders to us to purchase shares of our common stock, through September 30, 2020, but will own only approximately     % of the shares of our common stock outstanding immediately after this offering. Furthermore, if the underwriters exercise their option to purchase additional shares, or outstanding options and warrants are exercised, you could experience further dilution. For a further description of the dilution that you will experience immediately after this offering, see the section titled “Dilution.”

Delaware law and provisions in our certificate of incorporation and bylaws that will become effective upon the closing of this offering might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions in our certificate of incorporation and bylaws that will become effective upon the closing of this offering may discourage, delay, or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our charter documents will:

 

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provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

 

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eliminate cumulative voting in the election of directors;

 

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authorize our board of directors to issue shares of preferred stock and determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval;

 

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provide our board of directors with the exclusive right to elect a director to fill a vacancy or newly created directorship;

 

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provide that our directors may be removed only for cause;

 

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permit stockholders to only take actions at a duly called annual or special meeting and not by written consent;

 

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prohibit stockholders from calling a special meeting of stockholders;

 

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provide for a staggered board, which will result in only a few directors being up for re-election in each calendar year;

 

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require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings;

 

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authorize our board of directors, by a majority vote, to amend the bylaws;

 

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require the affirmative vote of at least 66 2/3% or more of the outstanding shares of our common stock to amend many of the provisions described above; and

 

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limit the liability of, and provide indemnification to, our directors and officers.

In addition, Section 203 of the General Corporation Law of the State of Delaware (DGCL) prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

Any provision of our certificate of incorporation, bylaws, or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws to be effective immediately prior to the completion of this offering and our indemnification agreements that we have entered into with our directors and officers will provide that:

 

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We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

 

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We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.

 

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We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

 

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We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except

 

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with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.

 

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The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.

 

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We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation and amended and restated bylaws will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. Nothing in our amended and restated certificate of incorporation and amended and restated bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice of forum provision that will be contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could seriously harm our business.

 

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We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future. Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.

General Risk Factors

Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

We are and may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, such as disputes or employment claims made by our current or former employees. Any litigation, whether meritorious or not, could harm our reputation, will increase our costs and may divert management’s attention, time and resources, which may in turn seriously harm our business. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs and could seriously harm our business.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk when and if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to cease commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

 

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decreased or interrupted demand for our products;

 

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substantial monetary awards to trial participants or patients;

 

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product recalls, withdrawals or labeling, marketing or promotional restrictions;

 

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injury to our reputation;

 

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withdrawal of clinical trial participants and inability to continue clinical trials;

 

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initiation of investigations by regulators;

 

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costs to defend the related litigation;

 

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a diversion of management’s time and our resources;

 

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loss of revenue;

 

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exhaustion of any available insurance and our capital resources;

 

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the inability to commercialize any product candidate; and

 

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a decline in our share price.

Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators. Our insurance policies may have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

Our employees, independent contractors, consultants, research or commercial partners or collaborators and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent contractors, consultants, research or commercial partners or other collaborators, including the foundations we work with, and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with the laws of the FDA, EMA and other comparable foreign regulatory authorities; provide true, complete and accurate information to the FDA, EMA and other comparable foreign regulatory authorities; comply with manufacturing standards we have established; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, research, sales, marketing, education and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, educating, marketing and promotion, sales and commission, certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could seriously harm our business, including the imposition of significant fines or other sanctions.

If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could seriously harm our business.

We and any contract manufacturers and suppliers we engage are subject to numerous federal, state and local environmental, health, and safety laws, regulations, and permitting requirements,

 

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including those governing laboratory procedures; the generation, handling, use, storage, treatment and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air and water; and employee health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.

Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research, product development and manufacturing efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty, and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended, which could seriously harm our business.

Reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Reliance on third parties to conduct clinical trials, assist in research and development and to manufacture our product candidates, will at times require us to share trade secrets with them. We seek to protect our proprietary technology by in part entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s independent discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may seriously harm our business.

 

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We may fail to comply with any of our obligations under existing or future agreements pursuant to which we license or have otherwise acquired intellectual property rights or technology, which could result in the loss of rights or technology that are material to our business.

We are party to various agreements that we depend on to operate our business. Our rights to use currently licensed intellectual property, or intellectual property to be licensed in the future, are or will be subject to the continuation of and our compliance with the terms of these agreements. These agreements are complex, and certain provisions in such agreements may be susceptible to multiple interpretations which could lead to disputes, including but not limited to those regarding:

 

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the scope of rights granted under the license agreement and other interpretation-related issues;

 

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the extent to which our proprietary technology and product candidates infringe on intellectual property of the licensor that is not subject to the licensing agreement;

 

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the sublicensing of patent and other rights;

 

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diligence obligations under the license agreement and what activities satisfy those diligence obligations;

 

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the ownership of inventions and know-how resulting from the creation or use of intellectual property by us or our counterparties, alone or jointly;

 

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the scope and duration of our payment obligations;

 

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rights upon termination of such agreement; and

 

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the scope and duration of exclusivity obligations of each party to the agreement.

The resolution of any contractual interpretation dispute that may arise, if unfavorable to us, could seriously harm our business. Such resolution could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, increase what we believe to be our financial or other obligations under the relevant agreement, or decrease the third party’s financial or other obligations under the relevant agreement.

If disputes over intellectual property rights that we have licensed or acquired from third parties prevent or impair our ability to maintain our current license agreements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. If we fail to comply with our obligations under current or future license agreements, these agreements may be terminated or the scope of our rights under them may be reduced and we might be unable to develop, manufacture or market any product that is licensed under these agreements.

Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products.

Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. However, our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts. We cannot assure you that our operations do not, or will not in the future, infringe existing or future patents or other proprietary rights of third parties.

Third parties may have or obtain patents or other proprietary rights that could limit our ability to make, use, sell, offer for sale or import our product candidates and future approved products, if any, or impair our competitive position. There is a substantial amount of litigation, both within and outside the

 

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United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, reexaminations, inter partes review proceedings and post-grant review proceedings before the USPTO and/or corresponding foreign patent offices. Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields in which we are developing product candidates. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.

Furthermore, the scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history and can involve other factors such as expert opinion. Our interpretation of the relevance or the scope of claims in a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. Further, we may incorrectly determine that our technologies or product candidates are not covered by a third-party patent or may incorrectly predict whether a third party’s pending patent application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our product candidates.

As the biotechnology industry expands and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell our product candidates. We do not always conduct independent reviews of pending patent applications of and patents issued to third parties. Patent applications in the United States and elsewhere are typically published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Certain U.S. applications that will not be filed outside the United States can remain confidential until patents issue. In addition, patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived. Furthermore, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, our product candidates or the use of our product candidates. As such, there may be applications of others now pending or recently revived patents of which we are unaware. These applications may later result in issued patents, or the revival of previously abandoned patents, that will prevent, limit or otherwise interfere with our ability to make, use or sell our product candidates. As a result, we may be unaware of third-party patents that may be infringed by commercialization of our product candidates, and cannot be certain that we were the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Any claims of patent infringement asserted by third parties would be time consuming and could:

 

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result in costly litigation;

 

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divert the time and attention of our technical personnel and management;

 

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cause development delays;

 

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prevent us from commercializing our product candidates until the asserted patent expires or is held finally invalid or not infringed in a court of law;

 

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require us to develop non-infringing technology, which may not be possible on a cost-effective basis;

 

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require us to pay damages to the party whose intellectual property rights we may be found to be infringing, which may include treble damages if we are found to have been willfully infringing such intellectual property;

 

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require us to pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; and/or

 

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require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all.

Although no third party has asserted a claim of patent infringement against us as of the date of this prospectus, others may hold proprietary rights that could prevent our product candidates or any future products from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to our product candidates or proprietary technologies could subject us to potential liability for damages, including treble damages if we were determined to willfully infringe, and require us to obtain a license to manufacture or market our product candidates or any future products. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be time-consuming and a substantial diversion of management and employee resources from our business. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. Even if such licenses are available, we could incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins, and the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. In addition, we cannot be certain that we could redesign our product candidates or proprietary technologies to avoid infringement, if necessary, or on a cost-effective basis. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing and commercializing our product candidates or any future products which could seriously harm our business. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity and could prohibit us from marketing or otherwise commercializing our product candidates and technology.

If we collaborate with third parties in the development of technology in the future, our collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation or potential liability. Further, collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability. Also, we may be obligated under our agreements with our collaborators, licensors, suppliers and others to indemnify and hold them harmless for damages arising from intellectual property infringement by us.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming, and unsuccessful. Further, our issued patents could be found invalid or unenforceable if challenged.

Competitors may infringe our intellectual property rights or those of our licensors. To prevent infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in a patent infringement proceeding, a court or administrative tribunal may decide that a patent we own or license is not valid, is unenforceable and/or is not infringed. If we or any of our potential future collaborators were to initiate legal proceedings

 

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against a third party to enforce a patent directed at one of our product candidates, the defendant could counterclaim that our patent is invalid and/or unenforceable in whole or in part. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO, even outside the context of litigation. Similar mechanisms for challenging the validity and enforceability of a patent exist in foreign patent offices and may result in the revocation, cancellation, or amendment of any foreign patents we hold in the future. The outcome following legal assertions of invalidity and unenforceability is unpredictable, and prior art could render our patents or those of our licensors invalid. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we could lose at least part, and perhaps all, of the patent protection on an affected product candidate. Such a loss of patent protection would seriously harm our business.

Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO, or equivalent actions brought in foreign jurisdictions, may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be seriously harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties or enter into development or manufacturing partnerships that would help us bring our product candidates to market.

Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace and seriously harm our business.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

 

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We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and licenses.

We currently have rights to the intellectual property, through licenses from third parties and under patents that we own, to develop our product candidates. Because our programs may require the use of proprietary rights held by third parties, the growth of our business will depend in part on our ability to acquire, license or use these proprietary rights. We may be unable to acquire or license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment.

We have collaborated with, and are currently collaborating with, U.S. academic institutions and may in the future collaborate with U.S. and foreign academic institutions to accelerate our preclinical research or development under written agreements with these institutions. These institutions may provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of that program and our business could be seriously harmed.

We may be subject to claims that we have wrongfully hired an employee from a competitor or that we, our employees or consultants have wrongfully used or disclosed alleged confidential information or trade secrets of their former or concurrent employers or former or current clients.

As is common in the biotechnology and biopharmaceutical industries, in addition to our employees, we engage the services of consultants to assist us in the development of our product candidates. Many of these consultants, and many of our employees, were previously employed at, or may have previously provided or may be currently providing consulting services to, other biotechnology or biopharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may become subject to claims that we, our employees or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. We may also be subject to claims that patents and applications we have filed to protect inventions of our employees or consultants, even those related to one or more of our product candidates, are rightfully owned by their former or concurrent employer or former or current client. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, which could seriously harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management and other employees.

 

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We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

Our agreements with employees and consultants provide that any inventions conceived by an individual in the course of rendering services to us shall be our exclusive property. Although our policy is to have all such individuals complete these agreements, we may not obtain these agreements in all circumstances, and individuals with whom we have these agreements may not comply with their terms. The assignment of intellectual property may not be self-executing and despite such agreement, such inventions may become assigned to third parties. In the event of unauthorized use or disclosure of our trade secrets or proprietary information, these agreements, even if obtained, may not provide meaningful protection, particularly for our trade secrets or other confidential information. We may also be subject to claims that former employees, consultants, or other third parties have an ownership interest in our patents or other intellectual property. In addition, we may face claims by third parties that our agreements with employees or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Such an outcome could seriously harm our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and distraction to our management and other employees.

If we do not obtain patent term extension for our product candidates, our business may be seriously harmed.

Depending upon the timing, duration and specifics of FDA marketing approval of any of our product candidates, one or more of our U.S. patents may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA approved product as compensation for the patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended. Patent term extension may also be available in certain foreign countries upon regulatory approval of our product candidates. However, we may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration of the applicable product, and our business may be seriously harmed.

Changes in patent law in the United States or in other countries could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

Our patent rights may be affected by developments or uncertainty in the U.S. or foreign patent statutes, patent case laws, USPTO rules and regulations or in the rules and regulations of foreign patent offices.

There are a number of recent changes to the U.S. patent laws that may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, on

 

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September 16, 2011, the Leahy-Smith America Invents Act (Leahy-Smith Act) was signed into law. The Leahy-Smith Act includes a number of significant changes to the U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in post-grant proceedings including opposition, derivation, reexamination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position. This could have a negative impact on some of our intellectual property and could increase uncertainties surrounding obtaining and enforcement or defense of our issued patents. In addition, Congress may pass patent reform legislation that is unfavorable to us. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future. Similarly, statutory or judicial changes to the patent laws of other countries may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Complying with these laws and regulations could limit our ability to obtain new patents in the future that may be important for our business.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending all current and future patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

The legal systems of many foreign countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be

 

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inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our business may be seriously harmed.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We employ reputable professionals and rely on such third parties to help us comply with these requirements and effect payment of these fees with respect to the patents and patent applications that we own, and if we license intellectual property we may have to rely upon our licensors to comply with these requirements and effect payment of these fees with respect to any patents and patent applications that we license. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

We cannot specify with certainty the uses of the majority of the net proceeds we will receive from this offering. Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section of this prospectus titled “Use of Proceeds.” Our management may spend a portion or all of the net proceeds from this offering in ways that our stockholders may not desire or that may not yield a favorable return. The failure by our management to apply these funds effectively could seriously harm our business. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Participation in this offering by our existing stockholders and/or their affiliated entities may reduce the public float for our common stock.

To the extent certain of our existing stockholders and their affiliated entities participate in this offering, such purchases would reduce the non-affiliate public float of our shares, meaning the number of shares of our common stock that are not held by officers, directors and controlling stockholders. A reduction in the public float could reduce the number of shares that are available to be traded at any given time, thereby adversely impacting the liquidity of our common stock and depressing the price at which you may be able to sell shares of common stock purchased in this offering.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

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the success, cost and timing of our development activities, preclinical studies and clinical trials, including our clinical trials for 4D-310, 4D-125 and 4D-110;

 

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the timing of IND-enabling studies and results from such studies, including our IND-enabling studies in 4D-150 and 4D-710;

 

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the timing and success of lead optimization for our product candidates in lead optimization, including for 4D-135;

 

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the translation of our preclinical results and data into future clinical trials in humans;

 

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the timing of any manufacturing runs for materials to be used in patient trials;

 

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the number, size and design of our planned clinical trials, and what regulatory authorities may require to obtain marketing approval

 

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the potential effects of the COVID-19 pandemic on our preclinical and clinical programs and business;

 

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the timing or likelihood of regulatory filings and approvals;

 

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our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations and/or warnings in the label of any approved product candidate;

 

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our ability to obtain funding for our operations, including funding necessary to develop and commercialize our product candidates;

 

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the rate and degree of market acceptance of our product candidates;

 

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the success of competing products or platform technologies that are or may become available;

 

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our plans and ability to establish sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain approval;

 

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future agreements with third parties in connection with the commercialization of our product candidates;

 

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the size and growth potential of the markets for our product candidates, if approved for commercial use, and our ability to serve those markets;

 

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existing regulations and regulatory developments in the United States and foreign countries;

 

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the expected potential benefits of strategic collaboration agreements, including our relationships with Roche and uniQure, and our ability to attract collaborators with development, regulatory and commercialization expertise;

 

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the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

 

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potential claims relating to our intellectual property and third-party intellectual property;

 

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our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

 

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the pricing and reimbursement of our product candidates, if approved;

 

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our ability to attract and retain key managerial, scientific and medical personnel;

 

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the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

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our financial performance;

 

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our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;

 

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our anticipated use of the proceeds from this offering; and

 

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other risks and uncertainties, including those listed under the section titled “Risk Factors.”

These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this prospectus. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See the section titled “Where You Can Find More Information.”

 

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INDUSTRY AND MARKET DATA

This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our product candidates, including data regarding the estimated patient population and market size for our product candidates, as well as data regarding market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

 

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USE OF PROCEEDS

We estimate that the net proceeds from the issuance and sale of                 shares of our common stock in this offering will be approximately $                million, or approximately $                million if the underwriters exercise their option to purchase additional shares in full, based on the assumed initial public offering price of $                per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase or decrease in the assumed initial public offering price of $                per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $                million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million shares in the number of shares we are offering would increase or decrease, as applicable, the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $                million, assuming the assumed initial public offering price stays the same. We do not expect that a change in the initial price to the public or the number of shares by these amounts would have a material effect on the uses of the proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

 

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approximately $                 million to fund our ongoing and planned clinical and preclinical development of our product candidates, including ongoing clinical trials for 4D-310 and 4D-125 and IND-enabling study activities for 4D-150 and 4D-710;

 

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approximately $                 million to fund the further development and expansion of our pipeline including to complete lead optimization and IND-enabling studies for 4D-135, and potentially other research candidates;

 

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approximately $                 million to fund the continued expansion of our manufacturing capabilities and facilities; and

 

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any remaining amounts for working capital and other general corporate purposes.

Based on our current operating plan, we estimate that our current cash and cash equivalents, together with the anticipated net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next     months. In particular, we expect that these capital resources will be sufficient to fund:

 

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our ongoing Phase 1/2 clinical trial for 4D-125 through our anticipated initial clinical data in 2021, our ongoing Phase 1 clinical trial for 4D-110 through our anticipated initial clinical data in 2022 and our ongoing Phase 1/2 clinical trial for 4D-310 through our anticipated initial clinical data in 2021; and

 

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our ongoing IND-enabling study activities for 4D-150 and 4D-710 through our anticipated IND submission and Phase 1/2 clinical trial initiation for each of these product candidates in the second half of 2021.

 

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The amounts and timing of our actual expenditures and the extent of our research and development activities may vary significantly depending on numerous factors, including the progress of our development efforts, the status of and results from any preclinical or clinical trials we may commence in the future, our ability to take advantage of expedited programs or to obtain regulatory approval for any other product candidates we may identify and pursue, the timing and costs associated with the manufacture and supply of any other product candidates we may identify and pursue for clinical development or commercialization, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

We may also use a portion of the remaining net proceeds and our existing cash and cash equivalents to in-license, acquire, or invest in complementary businesses, technologies, products or assets. However, we have no current commitments or obligations to do so.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. If we receive any additional proceeds from this offering, we expect to use such proceeds on a proportional basis to the categories described above (other than funding for manufacturing capabilities and facilities).

Pending their use, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short and intermediate-term, interest-bearing, investment-grade securities, and government securities.

 

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DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our board of directors.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2020:

 

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on an actual basis;

 

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on a pro forma basis to give effect to: (i) the automatic conversion of                 shares of our outstanding redeemable convertible preferred stock as of September 30, 2020 into an equivalent number of shares of our common stock immediately prior to the completion of this offering, and (ii) the filing and effectiveness of our amended and restated certificate of incorporation, which will occur, in each case, immediately prior to the completion of this offering; and

 

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on a pro forma as adjusted basis to give further effect to sale and issuance of                 shares of our common stock in this offering, assuming an initial public offering price of $                 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this information together with our financial statements and related notes included elsewhere in this prospectus and the information set forth in the sections titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

		As of September 30, 2020
		Actual				Pro Forma				Pro Forma As Adjusted(1)
		(in thousands, except share and per share amounts)
Cash and cash equivalents		$	88,755			$				$
Redeemable convertible preferred stock, $0.0001 par value: 11,575,984 shares authorized, issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma or pro forma as adjusted		$	175,448			$				$
Stockholders’ (deficit) equity:
Preferred stock, $0.0001 per value: no shares authorized, issued and outstanding, actual;                authorized and no shares issued or outstanding, pro forma and pro forma as adjusted			—
Common stock, $0.0001 par value: 20,866,244 shares authorized; 5,257,742 shares issued and outstanding, actual;                 shares authorized, pro forma and pro forma as adjusted;                 shares issued and outstanding, pro forma;                 shares issued and outstanding, pro forma as adjusted			1
Additional paid-in capital			9,839
Accumulated deficit			(115,132	)
Total stockholders’ (deficit) equity			(105,292	)
Total capitalization		$	70,156			$				$

 

 

(1)

Each $1.00 increase or decrease in the assumed initial public offering price of $                 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, each of the amount of our cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by $                ,

 

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assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million in the number of shares offered by us would increase or decrease, as applicable, each of the amount of our cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by $                , assuming the assumed initial public offering price of $                 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

The number of shares of our common stock issued and outstanding pro forma and pro forma adjusted in the table above is based on 16,833,726 shares of our common stock (including our redeemable convertible preferred stock on an as-converted basis) outstanding as of September 30, 2020, and excludes:

 

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2,928,321 shares of our common stock issuable upon the exercise of stock options to purchase common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $9.11 per share;

 

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68,669 shares of our common stock issuable upon the exercise of outstanding warrants, with a weighted-average exercise price of $1.85 per share;

 

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41,897 shares of our common stock reserved for issuance pursuant to future awards under our 2015 Equity Incentive Plan (the Plan) and associated amendments as of September 30, 2020;

 

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shares of our common stock reserved for issuance pursuant to future awards under our 2020 Equity Incentive Award Plan (the 2020 Plan), as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the completion of this offering; and

 

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shares of our common stock reserved for issuance pursuant to future awards under our 2020 Employee Stock Purchase Plan (the ESPP), as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the completion of this offering.

 

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DILUTION

If you invest in our common stock in this offering, your interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately after the completion of this offering.

As of September 30, 2020, our historical net tangible book value (deficit) was $(105.4) million, or $(20.04) per share of our common stock. Our historical net tangible book value (deficit) per share represents total tangible assets less total liabilities and redeemable convertible preferred stock divided by the number of shares of our common stock outstanding on September 30, 2020.

Our pro forma net tangible book value as of September 30, 2020, before giving effect to this offering, was $                million, or $                per share of our common stock. Pro forma net tangible book value represents our historical net tangible book value (deficit), before the issuance and sale of shares in this offering, and gives effect to the automatic conversion of                 shares of our outstanding redeemable convertible preferred stock as of September 30, 2020 into an equivalent number of shares of our common stock immediately prior to the completion of this offering.

Our pro forma as adjusted net tangible book value represents our pro forma net tangible book value, plus the effect of the sale of                 shares of our common stock in this offering at an assumed initial public offering price of $                per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We determine dilution per share to investors participating in this offering by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by investors participating in this offering.

The following table illustrates this per share dilution:

 

Assumed initial public offering price per share						$
Historical net tangible book value (deficit) per share as of September 30, 2020		$	(20.04	)
Pro forma increase in historical net tangible book value (deficit) per share
Pro forma net tangible book value per share as of September 30, 2020
Increase in pro forma net tangible book value per share attributable to new investors
Pro forma as adjusted net tangible book value per share
Dilution per share to new investors participating in this offering						$

Each $1.00 increase or decrease in the assumed initial public offering price of $                per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value as of September 30, 2020 after this offering by $                million, or $                per share, and would decrease or increase dilution to investors in this offering by $                per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million shares in the number of shares we are offering would increase or decrease, as applicable, our pro forma as adjusted net tangible book value as of September 30, 2020 after this offering by $                million, or $                per share, and would decrease or increase, as applicable, dilution to investors in this offering by $                per share,

 

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assuming the assumed initial public offering price per share remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

If the underwriters fully exercise their option to purchase additional shares, pro forma as adjusted net tangible book value after this offering would increase to $                per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $                per share and the dilution to new investors purchasing shares in this offering would be $                per share.

To the extent that outstanding options with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share are exercised, new investors will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

The following table shows, as of September 30, 2020, on a pro forma as adjusted basis, the number of shares of our common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders and by new investors purchasing common stock in this offering, assuming an initial public offering price of $                per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us (in thousands, except share and per share amounts and percentages):

 

		Shares Purchased								Total Consideration								Weighted- Average Price Per Share
		Number				Percent				Amount				Percent
Existing stockholders								%		$						%		$
New investors participating in this offering																		$
Total							100	%			$				100	%

If the underwriters were to fully exercise their option to purchase additional shares, the percentage of shares of our common stock held by existing investors would be     %, and the percentage of shares of our common stock held by new investors would be     %.

The foregoing tables and calculations (other than the historical net tangible book value calculation) are based on 16,833,726 shares of our common stock (including our redeemable convertible preferred stock on an as-converted basis) outstanding as of September 30, 2020, and excludes:

 

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2,928,321 shares of our common stock issuable upon the exercise of stock options to purchase common stock that were outstanding as of September 30, 2020, with a weighted-average exercise price of $9.11 per share;

 

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68,669 shares of our common stock issuable upon the exercise of outstanding warrants, with a weighted-average exercise price of $1.85 per share;

 

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41,897 shares of our common stock reserved for issuance pursuant to future awards under our 2015 Equity Incentive Plan (the Plan) and associated amendments as of September 30, 2020;

 

•

shares of our common stock reserved for issuance pursuant to future awards under our 2020 Equity Incentive Award Plan (the 2020 Plan), as well as any automatic increases in the

 

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number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the completion of this offering; and

 

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shares of our common stock reserved for issuance pursuant to future awards under our 2020 Employee Stock Purchase Plan (the ESPP), as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the completion of this offering.

To the extent that outstanding options or warrants are exercised, new options or other securities are issued under our equity incentive plans, or we issue additional shares of our common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

 

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SELECTED FINANCIAL DATA

The following tables present our selected financial data for the periods and as of the dates indicated. We derived the selected statements of operations and comprehensive loss data for the years ended December 31, 2018 and 2019 and the selected balance sheet data as of December 31, 2018 and 2019 from our audited financial statements included elsewhere in this prospectus. We derived the selected statements of operations and comprehensive loss data for the nine months ended September 30, 2019 and 2020 and the selected balance sheet data as of September 30, 2020 from our unaudited interim financial statements that are included elsewhere in this prospectus. Our unaudited interim financial statements are prepared on the same basis as our audited financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, that are necessary for the fair statement of the financial information set forth in those financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future and our historical results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the remainder of 2020. You should read this data together with our financial statements and related notes included elsewhere in this prospectus and the information under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

		Year Ended December 31,								Nine Months Ended September 30,
		2018				2019				2019				2020
		(in thousands, except share and per share data)
Statements of Operations and Comprehensive Loss Data:
Revenue:
Collaboration and license revenue		$	8,987			$	6,960			$	4,930			$	14,340
Collaboration and license revenue, related parties			5,143				26				26				249
Total revenue			14,130				6,986				4,956				14,589
Operating expenses:
Research and development			18,362				38,718				26,359				40,433
Acquired in-process research and development			—				5,137				5,137				—
General and administrative			6,167				13,895				7,936				10,398
Total operating expenses			24,529				57,750				39,432				50,831
Loss from operations			(10,399	)			(50,764	)			(34,476	)			(36,242	)
Other income (expense)			848				1,458				1,285				96
Net loss and comprehensive loss		$	(9,551	)		$	(49,306	)		$	(33,191	)		$	(36,146	)
Net loss per share attributable to common stockholders, basic and diluted(1)		$	(1.89	)		$	(9.59	)		$	(6.46	)		$	(6.97	)
Weighted-average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted(1)			5,049,203				5,142,560				5,135,622				5,188,628
Pro forma net loss per share, basic and diluted(1)
Weighted-average shares outstanding used in computing pro forma net loss per share, basic and diluted(1)

 

(1)

See Notes 2 and 14 to our financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share attributable to common stockholders, pro forma net loss per share, and the weighted-average number of shares of our common stock used in the computation of the per share amounts.

 

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		As of December 31,								As of September 30,
		2018				2019				2020
		(in thousands)
Balance Sheet Data:
Cash and cash equivalents		$	91,761			$	49,652			$	88,755
Working capital(1)			86,014				39,553				78,258
Total assets			96,969				58,234				98,192
Accumulated deficit			(30,026	)			(79,025	)			(115,132	)
Total stockholders’ deficit			(27,587	)			(72,970	)			(105,292	)

 

(1)	We define working capital as current assets less current liabilities. See our financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes thereto included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section titled “Risk Factors”, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. All amounts are expressed in thousands other than share and per share amounts. Please also see the section of this prospectus titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage gene therapy company pioneering the development of product candidates using our targeted and evolved AAV vectors. We seek to unlock the full potential of gene therapy using our platform, Therapeutic Vector Evolution, which combines the power of directed evolution with our approximately one billion synthetic capsid sequences to invent evolved vectors for use in targeted gene therapy products. Our targeted and evolved vectors are invented with the goal of being delivered through clinically routine, well-tolerated and minimally invasive routes of administration, of transducing diseased cells in target tissues efficiently, of having reduced immunogenicity and, where relevant, of having resistance to pre-existing antibodies. We believe these key design features will help us to potentially create targeted gene therapy product candidates with improved therapeutic profiles, and address a broad range of diseases from rare to large patient populations, including those that other gene therapies are unable to address. Each of our product candidates is created with our targeted and evolved AAV vectors. Our platform is designed to be modular, in that an evolved vector invented for a given set of diseases can be equipped with different transgene payloads to treat other diseases affecting the same tissue types. We believe this modularity will help inform the clinical development of subsequent product candidates using the same vector.

We have built a deep portfolio of gene therapy product candidates initially focused in three therapeutic areas: ophthalmology (intravitreal vector), cardiology (intravenous vector) and pulmonology (aerosol vector). We have three product candidates that are in clinical trials. We are developing 4D-125 for the treatment of X-linked retinitis pigmentosa (XLRP), currently in Phase 1/2 clinical trial with initial clinical data expected in 2021. We are advancing 4D-110 for the treatment of choroideremia, currently in a Phase 1 clinical trial with initial clinical data expected in 2022. Roche holds an exclusive worldwide license to 4D-110 and has the exclusive option to in-license 4D-125 prior to initiation of pivotal clinical trials. We received FDA Fast Track designation for 4D-310 for the treatment of Fabry disease, which is currently in a Phase 1/2 clinical trial, with initial clinical data expected in 2021. Our two IND candidates are 4D-150 for the treatment of wet age-related macular degeneration (wet AMD), and 4D-710 for the treatment of cystic fibrosis lung disease. We expect to file the IND and to initiate clinical trials for both of these programs in the second half of 2021.

From our inception in September 2013 through September 30, 2020, we have funded our operations primarily with an aggregate of $175.4 million in net proceeds from the sale and issuance of redeemable convertible preferred stock and to a lesser extent from cash received pursuant to our collaboration and license agreements. As of September 30, 2020, we had cash and cash equivalents of $88.8 million. Based on our current operating plan, we estimate that our cash and cash equivalents, together with the anticipated net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next      months. We have based

 

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this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources.”

To date, we have devoted substantially all of our resources to building our Therapeutic Vector Evolution platform, developing manufacturing processes, assembling our core capabilities in drug development for genetic therapies and performing preclinical and clinical development of our product candidates.

We have incurred significant operating losses and expect that our operating losses will increase significantly as we, among other things, continue to advance our product candidates through preclinical and clinical development, seek regulatory approval, and prepare for, and, if approved, proceed to commercialization; broaden and improve our platform; acquire, discover, validate and develop additional product candidates; maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. In addition, upon the completion of this offering we expect to incur additional costs associated with operating as a public company.

Our net losses were $9.6 million, $49.3 million, $33.2 million and $36.1 million for the years ended December 31, 2018 and 2019 and nine months ended September 30, 2019 and 2020, respectively. As of September 30, 2020, we had an accumulated deficit of $115.1 million. We do not expect positive cash flows from operations in the foreseeable future. We expect to continue to incur significant and increasing net operating losses for at least the next several years as we:

 

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advance our product candidates through preclinical and clinical development;

 

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seek regulatory approval, prepare for and, if approved, proceed to commercialization of our product candidates;

 

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continue our research and development efforts and expand our pipeline of product candidates;

 

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attract, hire and retain additional personnel;

 

•

maintain, expand and protect our intellectual property portfolio;

 

•

operate as a public company;

 

•

implement operational, financial and management information systems;

 

•

establish a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval; and

 

•

invest in our manufacturing facility.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We do not have any products approved for sale and have not generated any revenue from product sales since our inception. Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates, if approved.

We will require substantial additional funding to support our continuing operations and further the development of our product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, which could include income from collaborations, strategic partnerships or other strategic arrangements, for the foreseeable future. Adequate funding may not be available when needed or on terms acceptable to us, or at all. If we are unable to raise additional capital as needed,

 

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we may have to significantly delay, scale back or discontinue development of our product candidates. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic and otherwise. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

The global COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely. The extent of the impact of the COVID-19 pandemic on our business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the outbreak and its impact on our clinical trial enrollment, trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and the majority of our employees working remotely. We will continue to actively monitor the rapidly evolving situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At this point, the extent to which the COVID-19 pandemic may affect our business, operations and clinical development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.

Components of Results of Operations

Revenue

Our revenue to date has been generated through payments from our collaboration and license agreements, primarily from upfront and milestone payments and expense reimbursement. We have not generated any revenue from the sale of approved products and do not expect to do so for the foreseeable future.

In 2019, we recognized $7.0 million of revenue, principally from our agreements with Roche and AstraZeneca (previously MedImmune). For the nine months ended September 30, 2020, we recognized $14.6 million of revenue, principally from our agreements with Roche and uniQure.

 

•

We expect payments from Roche for reimbursement of our internal and third-party costs as well as the recognition of a $21.0 million upfront payment received in 2017 and milestones received to date to be our principal drivers of revenue for the year ending December 31, 2020. Under our Collaboration and License Agreement with Roche, we are entitled to receive $5.0 million upon the release of clinical trial material for our Phase 1 clinical trial for 4D-110 to treat choroideremia, and an additional $5.0 million upon dosing our first patient in the trial. We achieved these milestones and received these payments in the second quarter and third quarter of 2020, respectively. If Roche continues the development of 4D-110, we will be entitled to further development and approval milestone payments, and, if the product candidate is approved, royalty payments in the mid-to high-single digits on net sales and sales-based milestones. Roche also has the option to assume the development and commercialization of 4D-125 to treat XLRP prior to pivotal trial initiation in return for an option payment and assumption of all future expenses. If Roche exercises this option, we would be entitled to future milestone payments upon development of 4D-125 and, if approved, royalty payments ranging from the mid-single digits to the mid-teens on future net sales and sales-based milestones.

 

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•

In August 2019, we amended our agreement with uniQure to primarily eliminate the exclusivity clause that required us to work exclusively with uniQure on treatments for the central nervous system and liver and entered into a separate new collaboration and license agreement granting uniQure an exclusive license to a certain number of new AAV capsid variants that affect certain central nervous system and liver targets selected by uniQure. Neither party was required to pay monetary consideration in connection with the amendment or new agreement. We determined the incremental transaction price of the amendment and new agreement to be $5.1 million and recorded the amount as deferred revenue. We began recognizing revenue related to this in 2020 and expect to recognize revenue over the next three to four years. See Note 6 to our financial statements included elsewhere in this prospectus for further discussion regarding the accounting treatment of this transaction.

 

•

In June 2019, the research phase of our agreement with AstraZeneca concluded, and we delivered our final report to AstraZeneca. AstraZeneca’s option to obtain the license of up to three project vector variants identified in the final report expired unexercised in the second quarter of 2020. We do not expect to recognize any revenue from AstraZeneca in 2020.

Future collaboration and license revenue is highly dependent on the successful development and commercialization of products by our collaboration partners, which is uncertain, and revenue may fluctuate significantly from period to period. Additionally, we may never receive the consideration from our license agreements that is contemplated for option fees, development and sales-based milestone payments or royalties on sales of licensed products, given the contingent nature of these payments. We expect that our license revenue in 2020 will be primarily from Roche. If our agreement with Roche were terminated, it may materially impact the amount of license revenue we recognize in future periods.

Operating Expenses

Our operating expenses consist of research and development and general and administrative expenses. Personnel costs including salaries, benefits, bonuses and stock-based compensation expense, comprise a significant component of research and development and general and administrative expenses. We allocate indirect expenses associated with our facilities, information technology costs, depreciation and other overhead costs between research and development and general and administrative categories based on employee headcount and the nature of work performed by each employee.

Research and Development

Our research and development expenses primarily consist of costs incurred for the discovery and preclinical and clinical development of our product candidates, which include:

 

•

salaries and personnel-related costs, including benefits, stock-based compensation and travel, for our scientific personnel performing research and development activities;

 

•

costs related to executing preclinical studies and clinical trials, including payments to CROs;

 

•

costs related to acquiring, developing and manufacturing materials for preclinical studies and clinical trials including payments to CMOs;

 

•

costs related to obtaining technology licenses for in-process research;

 

•

costs related to laboratory supplies, research materials and other costs related to development and characterization of new AAV vectors and new product candidates;

 

•

fees paid to consultants and other third parties who support our product candidate development, including CROs, CMOs and other service providers;

 

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•

other costs in seeking regulatory approval of our product candidates; and

 

•

allocated facility-related costs, information technology costs, depreciation expense and other overhead.

We expense all research and development costs in the periods in which they are incurred. We have entered into various agreements with CROs and CMOs. Costs of certain activities are recognized based on an evaluation of the progress to completion of specific tasks. Payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.

We do not allocate our costs by product candidate, as a significant amount of research and development expenses includes internal costs, such as payroll and other personnel expenses, laboratory supplies and allocated overhead, and external costs, such as fees paid to third parties to conduct research and development activities on our behalf, none of which are tracked by product candidate. In particular, with respect to internal costs, several of our departments support multiple product candidate research and development programs, and therefore the costs cannot be allocated to a particular product candidate or development program.

At this time, we cannot reasonably estimate or know the nature, timing or estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, and incur expenses associated with hiring additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. Our research and development expenses may vary significantly based on factors such as:

 

•

the number and scope of preclinical and IND-enabling studies;

 

•

the phases of development of our product candidates;

 

•

the progress and results of our research and development activities;

 

•

the number of trials required for regulatory approval;

 

•

the length of time required to enroll eligible subjects and initiate clinical trials;

 

•

the number of subjects that participate in the trials;

 

•

potential additional safety monitoring requested by regulatory agencies;

 

•

the duration of subject participation in the trials and follow-up;

 

•

the cost and timing of manufacturing of our product candidates;

 

•

the receipt of regulatory approvals from applicable regulatory authorities;

 

•

the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;

 

•

the hiring and retention of research and development personnel;

 

•

the degree to which we obtain, maintain, defend and enforce our intellectual property rights; and

 

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•

the extent to which we establish collaborations, strategic partnerships or other strategic arrangements and the performance of any related third parties.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

General and Administrative

Our general and administrative expenses consist primarily of personnel-related expenses, including salaries, employee benefit costs and stock-based compensation expense, for our personnel in executive, finance and accounting, human resources, business development and other administrative functions. General and administrative expenses also include professional fees for legal, patent, consulting, accounting and tax services, allocated overhead, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We expect our general and administrative expenses to increase in the future as we increase our headcount to support our continued research activities and development of our programs. We also expect increased personnel-related costs, patent costs for our product candidates, consulting, legal and accounting services associated with maintaining compliance with stock exchange listing and requirements of the SEC, investor relations costs, director and officer insurance premiums and other costs associated with being a public company.

Other Income (Expense)

Our other income (expense) primarily consists of interest income earned on our cash equivalents and adjustments for the change in the fair value of our derivative liability which must be remeasured at each reporting period.

Results of Operations

Comparison of the Nine Months Ended September 30, 2019 and 2020

The following table summarizes our results of operations for the periods indicated (dollars in thousands):

 

		Nine Months Ended September 30,
		2019				2020				$ Change				% Change
Revenue:
Collaboration and license revenue		$	4,930			$	14,340			$	9,410				191	%
Collaboration and license revenue, related parties			26				249				223				858	%
Total revenue			4,956				14,589				9,633				194	%
Operating Expenses:
Research and development			26,359				40,433				14,074				53	%
Acquired in-process research and development			5,137				—				(5,137	)			(100	%)
General and administrative			7,936				10,398				2,462				31	%
Total operating expenses			39,432				50,831				11,399				29	%
Loss from operations			(34,476	)			(36,242	)			(1,766	)			5	%
Other Income (Expense)			1,285				96				(1,189	)			(93	)%
Net loss and comprehensive loss		$	(33,191	)		$	(36,146	)		$	(2,955	)			9	%

 

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Revenue

Revenue increased from $5.0 million for the nine months ended September 30, 2019 to $14.6 million for the nine months ended September 30, 2020. The increase of $9.6 million, or 194%, was due to a $9.8 million increase in revenue recognized under our Collaboration and License Agreement with Roche, which was partially offset by a decline in revenue recognized from other collaboration and license agreements.

Research and Development Expenses

The following table provides a breakout of research and development expenses for the periods indicated (dollars in thousands):

 

		Nine Months Ended September 30,
		2019				2020				$ Change				% Change
External expenses		$	14,257			$	23,253			$	8,996				63	%
Payroll and personnel expenses			8,574				11,584				3,010				35	%
Other research and development expenses			3,528				5,596				2,068				59	%
Total research and development expenses		$	26,359			$	40,433			$	14,074				53	%

Research and development expenses increased from $26.4 million for the nine months ended September 30, 2019 to $40.4 million for the nine months ended September 30, 2020. The increase of $14.1 million, or 53%, was due to the following:

 

•

a $9.0 million increase in external costs as we continue to develop novel vectors and identify potential product candidates and progress our preclinical studies and clinical trials;

 

•

a $3.0 million increase in payroll and personnel expenses due to increased headcount of research and development personnel, including a $0.4 million increase in employee stock-based compensation expense; and

 

•

a $2.1 million increase in other research and development expenses primarily for allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

Acquired In-Process Research and Development Expenses

We recorded acquired in-process research and development expenses of $5.1 million in the nine months ended September 30, 2019. This was due to the acquisition of in-process research and development from uniQure as a result of the execution of an Amended and Restated Collaboration and License Agreement and a separate Collaboration and License Agreement. See Note 6 to our financial statements included elsewhere in this prospectus for further discussion regarding the accounting treatment of this transaction. We do not currently expect to recognize any acquired in-process research and development expenses in 2020.

General and Administrative Expenses

General and administrative expenses increased from $7.9 million for the nine months ended September 30, 2019 to $10.4 million for the nine months ended September 30, 2020. The increase of $2.5 million, or 31%, was primarily due to the following:

 

•

a $1.6 million increase for personnel costs as a result of increased headcount of general and administrative personnel, including a $0.6 million increase in employee and nonemployee director stock-based compensation expense; and

 

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•

a $0.7 million increase for allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

Other Income (Expense)

Other income (expense) decreased from $1.3 million for the nine months ended September 30, 2019 to $0.1 million for the nine months ended September 30, 2020. The decrease of $1.2 million, or 93%, was primarily due to lower interest rates and lower average investment balances.

Comparison of the Years Ended December 31, 2018 and 2019

The following table summarizes our results of operations for the periods indicated (dollars in thousands):

 

		Year Ended December 31,
		2018				2019				$ Change				% Change
Revenue:
Collaboration and license revenue		$	8,987			$	6,960			$	(2,027	)			(23	%)
Collaboration and license revenue, related parties			5,143				26				(5,117	)			(99	%)
Total revenue			14,130				6,986				(7,144	)			(51	%)
Operating Expenses:
Research and development			18,362				38,718				20,356				111	%
Acquired in-process research and development			—				5,137				5,137				—
General and administrative			6,167				13,895				7,728				125	%
Total operating expenses			24,529				57,750				33,221				135	%
Loss from operations			(10,399	)			(50,764	)			(40,365	)			388	%
Other Income (Expense)			848				1,458				610				72	%
Net loss and comprehensive loss		$	(9,551	)		$	(49,306	)		$	(39,755	)			416	%

Revenue

Revenue decreased from $14.1 million for the year ended December 31, 2018 to $7.0 million for the year ended December 31, 2019. The decrease of $7.1 million, or 51%, was primarily due to the following:

 

•

a $5.0 million decrease in revenue recognized as a result of termination of our Collaboration and License Agreement with Pfizer in 2018;

 

•

a $1.2 million decrease in revenue recognized under our Collaboration and License Agreement with Roche; and

 

•

a $0.5 million decrease in revenue recognized under our Collaboration and License Agreement with AstraZeneca.

 

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Research and Development Expenses

The following table provides a breakout of research and development expenses for the periods indicated (dollars in thousands):

 

		Year Ended December 31,
		2018				2019				$ Change				% Change
External expenses		$	9,740			$	21,342			$	11,602				119	%
Payroll and personnel expenses			4,960				12,206				7,246				146	%
Other research and development expenses			3,662				5,170				1,508				41	%
Total research and development expenses		$	18,362			$	38,718			$	20,356				111	%

Research and development expenses increased from $18.4 million for the year ended December 31, 2018 to $38.7 million for the year ended December 31, 2019. The increase of $20.4 million, or 111%, was due to the following:

 

•

an $11.6 million increase in external costs as we continue to develop novel vectors and identify potential product candidates and progress our preclinical studies;

 

•

a $7.2 million increase in payroll and personnel expenses due to increased headcount of research and development personnel, including a $1.6 million increase in employee stock-based compensation expense; and

 

•

a $1.5 million increase in other research and development expenses primarily for allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

Acquired In-Process Research and Development Expenses

We recorded acquired in-process research and development expenses of $5.1 million in the year ended December 31, 2019. This was due to the acquisition of in-process research and development from uniQure as a result of the execution of an Amended and Restated Collaboration and License Agreement and a separate Collaboration and License Agreement. See Note 6 to our financial statements included elsewhere in this prospectus for further discussion regarding the accounting treatment of this transaction.

General and Administrative Expenses

General and administrative expenses increased from $6.2 million for the year ended December 31, 2018 to $13.9 million for the year ended December 31, 2019. The increase of $7.7 million, or 125%, was due to the following:

 

•

a $2.6 million increase for personnel costs as a result of increased headcount of general and administrative personnel, including a $0.6 million increase in employee stock-based compensation expense;

 

•

a $2.6 million increase for public offering costs incurred for the year ended December 31, 2019, which were expensed, as a result of delays in the IPO process;

 

•

a $2.1 million increase for professional services, including legal, accounting and other advisory services; and

 

•

a $0.4 million increase for allocated overhead, including rent, equipment, depreciation, information technology costs and utilities.

 

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Other Income (Expense)

Other income (expense) increased from $0.8 million for the year ended December 31, 2018 to $1.5 million for the year ended December 31, 2019. The increase of $0.7 million, or 88%, was primarily due to increased interest income in 2019 as a result of higher average investment balances resulting from the $84.5 million net proceeds from our Series B redeemable convertible preferred stock financing in August 2018.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2019 and September 30, 2020, we had cash and cash equivalents of $49.7 million and $88.8 million, respectively. We primarily generate cash and cash equivalents from the sale of our equity securities, including from the sale of our Series B and Series C redeemable convertible preferred stock, and to a lesser extent from cash received pursuant to our collaboration and license agreements.

In August 2018, we completed the private offering of 5,154,632 shares of our Series B redeemable convertible preferred stock at a price of $17.46 per share. The net proceeds from the offering were $84.5 million.

In April and June 2020, we completed the private offering of a total of 4,200,353 shares of our Series C redeemable convertible preferred stock at a price of $18.00 per share. The net proceeds from the offering were $72.5 million.

Future Funding Requirements

We have experienced recurring net losses and had an accumulated deficit of $115.1 million as of September 30, 2020. Our transition to profitability is dependent upon the successful development, approval and commercialization of our product candidates and those of our collaboration partners and achieving a level of revenue adequate to support our cost structure. We do not expect to achieve such revenue and expect to continue to incur losses for the foreseeable future.

We expect that our research and development and general and administrative expenses will continue to increase for the foreseeable future. Additionally, we expect our capital expenditures will increase significantly in the future for costs associated with building additional manufacturing capacity. As a result, we will need significant additional capital to fund our operations, which we may obtain through one or more equity offerings, debt financings or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements.

Because of the numerous risks and uncertainties associated with the development and commercialization of gene therapy product candidates, we are unable to estimate the amount of increased capital we will need to raise to support our operations and the outlays and operating expenditures necessary to complete the development of our product candidates and build additional manufacturing capacity, and we may use our available capital resources sooner than we currently expect.

Our future capital requirements will depend on many factors, including:

 

•

the progress of our current and future product candidates through preclinical and clinical development;

 

•

potential delays in our preclinical studies and clinical trials, whether current or planned, due to the COVID-19 pandemic, or other factors;

 

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•

expanding our manufacturing facilities and working with our contract manufacturers to scale up the manufacturing processes for our product candidates;

 

•

continuing our research and discovery activities;

 

•

continuing the development of our Therapeutic Vector Evolution platform;

 

•

initiating and conducting additional preclinical, clinical or other studies for our product candidates;

 

•

changing or adding additional contract manufacturers or suppliers;

 

•

seeking regulatory approvals and marketing authorizations for our product candidates;

 

•

establishing sales, marketing and distribution infrastructure to commercialize any products for which we obtain approval;

 

•

acquiring or in-licensing product candidates, intellectual property and technologies;

 

•

making milestone, royalty or other payments due under any current or future collaboration or license agreements;

 

•

obtaining, maintaining, expanding, protecting and enforcing our intellectual property portfolio;

 

•

attracting, hiring and retaining qualified personnel;

 

•

potential delays or other issues related to our operations;

 

•

meeting the requirements and demands of being a public company;

 

•

defending against any product liability claims or other lawsuits related to our products; and

 

•

the impact of the COVID-19 pandemic, which may exacerbate the magnitude of the factors discussed above.

We believe that our existing cash and cash equivalents, together with the anticipated net proceeds from this offering, will enable us to fund our operating expenses and capital expenditure requirements through at least      months from the date of this prospectus.

Without giving effect to the anticipated net proceeds from this offering, based on our current operating plan, we expect that our existing cash and cash equivalents will not be sufficient to fund our operating expenses and capital expenditure requirements for the 12 months from the reissuance date of our financial statements for the year ended December 31, 2019 and from the issuance date of the unaudited interim financial statements for the nine months ended September 30, 2020. To finance our operations beyond that point, we will need to raise additional capital, which cannot be assured. We have concluded that this circumstance raises substantial doubt about our ability to continue as a going concern for at least one year from the date our annual and unaudited interim financial statements were available for reissuance and issuance, respectively. See Note 1 to our financial statements included elsewhere in this prospectus for additional information on our assessment. Similarly, our independent registered public accounting firm included an explanatory paragraph in its report on our reissued financial statements as of and for the year ended December 31, 2019, describing the existence of substantial doubt about our ability to continue as a going concern.

We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing sooner than currently projected, which may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

 

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We do not have any committed external sources of funds. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources to complete the clinical development for the product candidates in treatment of Fabry disease, XLRP or choroideremia or any other indication we may pursue. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter would result in fixed payment obligations and may involve agreements that include grants of security interests on our assets and restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, granting liens over our assets, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business. Any debt financing or additional equity that we raise may contain terms that could adversely affect our common stockholders. Further, additional funds may not be available when we need them, on terms that are acceptable to us, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

If we are unable to obtain additional funding, we expect to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or investment in internal manufacturing capabilities, which could adversely affect our business. If we raise additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.

Summary Statement of Cash Flows

The following is a summary of cash flows for the periods indicated below (in thousands):

 

		Year Ended December 31,								Nine Months Ended September 30,
		2018				2019				2019				2020
Net cash used in operating activities		$	(16,252	)		$	(36,711	)		$	(28,025	)		$	(33,410	)
Net cash used in investing activities			(414	)			(3,203	)			(2,726	)			(492	)
Net cash provided by (used in) financing activities			84,577				(2,195	)			(1,525	)			73,005
Net increase (decrease) in cash and cash equivalents		$	67,911			$	(42,109	)		$	(32,276	)		$	39,103

Net Cash Used in Operating Activities

Net cash used in operating activities was $33.4 million for the nine months ended September 30, 2020. This was primarily due to the net loss of $36.1 million and a decrease in deferred revenue of $2.1 million, which were partially offset by stock-based compensation expense of $3.3 million and depreciation and amortization expense of $1.1 million.

Net cash used in operating activities was $28.0 million for the nine months ended September 30, 2019. This was primarily due to the net loss of $33.2 million, which was partially offset by the acquisition of in-process research and development of $5.1 million.

Net cash used in operating activities was $36.7 million for the year ended December 31, 2019. This was primarily due to the net loss of $49.3 million, which was partially offset by the acquisition of in-process research and development of $5.1 million, stock-based compensation expense of $3.5 million, write-off of public offering costs of $2.6 million and depreciation and amortization expense of $1.0 million.

 

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Net cash used in operating activities was $16.3 million for the year ended December 31, 2018. This was primarily due to the net loss of $9.6 million and a decrease in deferred revenue of $8.6 million, which were partially offset by stock-based compensation expense of $1.4 million and depreciation and amortization expense of $0.7 million.

Net Cash Used in Investing Activities

Net cash used in investing activities was $0.5 million for the nine months ended September 30, 2020, all of which was used to purchase property and equipment.

Net cash used in investing activities was $2.7 million for the nine months ended September 30, 2019, all of which was used to purchase property and equipment.

Net cash used in investing activities was $3.2 million for the year ended December 31, 2019, all of which was used to purchase property and equipment.

Net cash used in investing activities was $0.4 million for the year ended December 31, 2018, all of which was used to purchase property and equipment.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $73.0 million for the nine months ended September 30, 2020, which was primarily due to $72.5 million of net proceeds received from the issuance of our Series C redeemable convertible preferred stock in April and June 2020.

Net cash used in financing activities was $1.5 million for the nine months ended September 30, 2019, which was primarily for payments of public offering costs of $1.5 million.

Net cash used in financing activities was $2.2 million for the year ended December 31, 2019, which was primarily for payments of public offering costs of $2.3 million.

Net cash provided by financing activities was $84.6 million for the year ended December 31, 2018, which was primarily due to $84.5 million of net proceeds received from the issuance of our Series B redeemable convertible preferred stock in August 2018.

Contractual Obligations, Commitments and Contingencies

Our commitments include obligations under vendor contracts to provide research services and other purchase commitments with our vendors. In the normal course of business, we enter into services agreements with contract research organizations, contract manufacturing organizations and other third parties. Generally, these agreements provide for termination upon notice, with specified amounts due upon termination based on the timing of termination and the terms of the agreement. The actual amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided. These amounts are not fixed and determinable and therefore are not included in the table below.

The following table summarizes our contractual obligations, commitments and contingencies as of December 31, 2019 (in thousands):

 

						Payments Due by Period
		Total				Less Than 1 Year				1-3 Years				3-5 Years				More Than 5 Years
Operating lease payments		$	29,896			$	2,759			$	5,866			$	6,207			$	15,064
Total contractual obligations		$	29,896			$	2,759			$	5,866			$	6,207			$	15,064

 

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In October 2018, we entered into a long-term lease for additional office and laboratory space in Emeryville, California, at a cost of $9.3 million over an 87-month term (the Second Lease). We concurrently amended our existing lease to extend the lease term to end at the same time as the Second Lease, which has a remaining cost of $4.2 million.

In May 2019, we amended the Second Lease (the Second Lease Amendment) to add 17,497 square feet to the space being leased pursuant to the Second Lease. The Second Lease Amendment extended the term of the Second Lease to December 31, 2029.

Critical Accounting Policies and Significant Judgments and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenue and expenses during the reported periods. We evaluate these estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies and recently announced accounting pronouncements, including the expected impact of such pronouncements, are described in Note 2 to our financial statements included elsewhere in this prospectus. We believe the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements and understanding and evaluating our reported financial results.

Revenue Recognition

Effective January 1, 2019, we adopted ASC 606, using the modified retrospective transition method. As a result, we changed our accounting policies for revenue recognition as detailed below.

We determine revenue recognition for arrangements within the scope of ASC 606 by performing the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

Our revenue is primarily derived through our license, research, development and commercialization agreements. The terms of these types of agreements may include (i) licenses to our technology, (ii) research and development services, and (iii) services or obligations in connection with participation in research or steering committees. Payments to us under these arrangements typically include one or more of the following: nonrefundable upfront and license fees, research funding, milestone and other contingent payments to us for the achievement of defined collaboration objectives and certain preclinical, clinical, regulatory and sales-based events, as well as royalties on sales of any commercialized products. Arrangements that include upfront payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until performance obligations are met. The event-based milestone payments, royalties and cost

 

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reimbursements represent variable consideration, and we use the most likely amount method to estimate this variable consideration. Royalty payments are recognized when earned or as the sales occur. We record cost reimbursements as accounts receivable when right to consideration is unconditional.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. We allocate the total transaction price to each performance obligation based on the estimated selling price and recognize revenue when, or as, the performance obligation is satisfied. We include the unconstrained amount of estimated variable consideration in the transaction price. At the end of each reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjust our estimate of the overall transaction price.

Prior to the adoption of ASC 606 on January 1, 2019, we recognized revenue when all of the following criteria were met: persuasive evidence of an arrangement exists; transfer of technology has been completed or services have been rendered; the price to the customer is fixed or determinable and collectability is reasonably assured.

In arrangements involving the delivery of more than one element, each required deliverable was evaluated to determine whether it qualified as a separate unit of accounting. The determination was based on whether the deliverable had “standalone value” to the customer. If a deliverable did not qualify as a separate unit of accounting, it was combined with the other applicable undelivered item(s) within the arrangement and these combined deliverables were treated as a single unit of accounting.

The arrangement’s consideration that was fixed or determinable was allocated to each separate unit of accounting based on the relative selling price methodology in accordance with the selling price hierarchy, which included vendor-specific objective evidence (VSOE) of selling price, if available, or third-party evidence of selling price if VSOE was not available, or the best estimate of selling price, if neither VSOE nor third-party evidence was available.

Payments or reimbursements for our research and development efforts for the arrangements where such efforts were considered as deliverables were recognized as the services were performed and were presented on a gross basis. When upfront payments were received and if there was no discernible pattern of performance, we recognized revenue ratably over the associated period of performance.

Accrued Research and Development Expenses

We estimate our accrued research and development expenses as of each balance sheet date. This process involves reviewing contracts and purchase orders with service providers, identifying services that have been performed on our behalf and estimating the level of service performed, the expected remaining period of performance and the associated expenses incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. Depending on the timing of payments to the service providers and the estimated expenses incurred, we may record net prepaid or accrued research and development expenses relating to these costs.

Examples of estimated accrued research and development expenses include fees paid to:

 

•

CROs in connection with preclinical development and clinical studies; and

 

•

CMOs and other vendors related to process development and manufacturing of materials for use in preclinical development and clinical studies.

 

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Our understanding of the status and timing of services performed relative to the actual status and timing may vary and may result in us reporting changes in estimates in any particular period. To date, there have been no material differences from our estimates to the amounts actually incurred.

Stock-Based Compensation

We use a fair value-based method to account for all stock-based compensation arrangements with employees and nonemployees including stock options and stock awards. Our determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option pricing model.

The fair value of the option granted is recognized on a straight-line basis over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period, which usually is the vesting period. Prior to January 1, 2020, the stock-based compensation expense for nonemployees was subject to remeasurement until the related vesting conditions were met. Effective January 1, 2020, the measurement date for nonemployee awards is the date of grant without changes in the fair value of the award. We account for forfeitures as they occur for both employees and nonemployees.

Estimates of the fair value of equity awards as of the grant date using valuation models such as the Black-Scholes option pricing model are affected by assumptions with a number of complex variables.

Changes in the following assumptions can materially affect the estimate of fair value and ultimately how much stock-based compensation expense is recognized; and the resulting change in fair value, if any, is recognized in our statement of operations and comprehensive loss during the period the related services are rendered. These inputs are subjective and generally require significant analysis and judgment to develop:

 

•

Expected Term—The expected term for employee options is calculated using the simplified method as we do not have sufficient historical information to provide a basis for estimate. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The expected term for nonemployee options is the contractual term of the options.

 

•

Expected Volatility—For all stock options granted to date, the expected volatility was estimated based on a study of publicly traded industry peer companies as we did not have any trading history for our common stock. We selected the peer group based on similarities in industry, stage of development, size and financial leverage with our principal business operations. For each grant, we measured historical volatility over a period equivalent to the expected term.

 

•

Risk-Free Interest Rate—The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues whose term is similar in duration to the expected term of the respective stock option.

 

•

Expected Dividend Yield—We have not paid and do not currently anticipate paying any dividends on our common stock. Accordingly, we have estimated the dividend yield to be zero.

As of September 30, 2020, the unrecognized stock-based compensation expense related to stock options was $14.7 million and is expected to be recognized as expense over a weighted-average period of approximately 3.0 years. The intrinsic value of all outstanding stock options as of September 30, 2020 was approximately $                million, based on the assumed initial public offering price of $                 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, of which approximately $                million related to vested options and approximately $                million related to unvested options.

 

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Common Stock Valuations

The estimated fair value of the common stock underlying our stock options and stock awards was determined at each grant date by our board of directors, with input from management. All options to purchase shares of our common stock are intended to be exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant.

In the absence of a public trading market for our common stock, on each grant date, we develop an estimate of the fair value of our common stock based on the information known to us on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of our common stock, and in part on input from an independent third-party valuation firm.

Our valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the Practice Aid).

The assumptions used to determine the estimated fair value of our common stock are based on numerous objective and subjective factors, combined with management’s judgment, including:

 

•

external market conditions affecting the pharmaceutical and biotechnology industry and trends within the industry;

 

•

our stage of development and business strategy;

 

•

the rights, preferences and privileges of our redeemable convertible preferred stock relative to those of our common stock;

 

•

the prices at which we sold shares of our redeemable convertible preferred stock;

 

•

our financial condition and operating results, including our levels of available capital resources;

 

•

the progress of our research and development efforts;

 

•

equity market conditions affecting comparable public companies;

 

•

general U.S. market conditions; and

 

•

the lack of marketability of our common stock.

The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of our common stock at each valuation date. In accordance with the Practice Aid, we considered the following methods:

 

•

Option Pricing Method. Under the option pricing method (OPM) shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the preferred and common stock are inferred by analyzing these options.

 

•

Probability-Weighted Expected Return Method. The probability-weighted expected return method (PWERM) is a scenario-based analysis that estimates value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to us, as well as the economic and control rights of each share class.

Based on our early stage of development and other relevant factors, we determined that a hybrid approach of the OPM and the PWERM methods was the most appropriate method for allocating our enterprise value to determine the estimated fair value of our common stock. In determining the estimated fair value of our common stock, our board of directors also considered the fact that our

 

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stockholders could not freely trade our common stock in the public markets. Accordingly, we applied discounts to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity. The estimated fair value of our common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

Following the completion of this offering, our board of directors intends to determine the fair value of our common stock based on the closing quoted market price of our common stock on the date of grant.

Redeemable Convertible Preferred Stock

We record all shares of redeemable convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The redeemable convertible preferred stock is recorded outside of permanent equity because while it is not mandatorily redeemable, in certain events considered not solely within our control, such as a merger, acquisition, or sale of all or substantially all of our assets, each of which we refer to as a deemed liquidation event, the convertible preferred stock will become redeemable at the option of the holders of at least a majority of the then outstanding such shares. We have not adjusted the carrying values of the redeemable convertible preferred stock to its liquidation preference because a deemed liquidation event obligating us to pay the liquidation preferences to holders of shares of redeemable convertible preferred stock is not probable of occurring. Subsequent adjustments to the carrying values to the liquidation preferences will be made only when it becomes probable that such a deemed liquidation event will occur.

Income Taxes

We account for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the financial statement reporting and tax basis of our assets and liabilities. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized.

We account for uncertain tax positions by assessing all material positions taken in any assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

NOLs and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (IRS) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. We have experienced ownership changes in the past. As a result of the ownership changes, we determined that $0.9 million of our NOLs will expire unutilized for federal income tax purposes and such amounts are excluded from our NOLs as of December 31, 2019. Subsequent ownership changes may result in additional limitations.

 

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Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of September 30, 2020, we had cash and cash equivalents of $88.8 million, consisting of bank deposits and interest-bearing money market funds, for which the fair value would be affected by changes in the general level of U.S. interest rates. However, due to the short-term maturities of our cash equivalents, an immediate 10% change in interest rates would not have a material effect on the fair value of our cash equivalents.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and development costs. We do not believe that inflation has had a significant impact on our results of operations for any periods presented herein.

JOBS Act

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, while we are an emerging growth company, we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earlier of (i) the last day of the year following the fifth anniversary of the completion of this offering, (ii) the last day of the year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the Exchange Act), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

 

•

we will present only two years of audited financial statements, plus unaudited financial statements for any interim period, and related management’s discussion and analysis of financial condition and results of operations;

 

•

we will avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act);

 

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we will provide less extensive disclosure about our executive compensation arrangements;

 

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•

we will not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements; and

 

•

we will take advantage of extended transition periods to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies.

As a result, the information in this prospectus and that we provide to our investors in the future may be different than what you might receive from other public reporting companies.

Recent Accounting Pronouncements

See Note 2 to our financial statements included elsewhere in this prospectus for information.

 

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BUSINESS

Overview

We are a clinical-stage gene therapy company pioneering the development of product candidates using our targeted and evolved AAV vectors. We seek to unlock the full potential of gene therapy using our platform, Therapeutic Vector Evolution, which combines the power of directed evolution with our approximately one billion synthetic capsid sequences to invent evolved vectors for use in targeted gene therapy products. Our targeted and evolved vectors are invented with the goal of being delivered through clinically routine, well-tolerated and minimally invasive routes of administration, of transducing diseased cells in target tissues efficiently, of having reduced immunogenicity and, where relevant, of having resistance to pre-existing antibodies. We believe these key features will help us to potentially create targeted gene therapy product candidates with improved therapeutic profiles, and to address a broad range of diseases from rare to large patient populations, including those that other gene therapies are unable to address. Each of our product candidates is created with one of our targeted and evolved AAV vectors. Our platform is designed to be modular, in that an evolved vector invented for a given set of diseases can be equipped with different transgene payloads to treat other diseases affecting the same tissue types. We believe this modularity will help inform the clinical development of subsequent product candidates using the same vector.

We have built a deep portfolio of gene therapy product candidates initially focused in three therapeutic areas: ophthalmology (intravitreal vector), cardiology (intravenous vector) and pulmonology (aerosol vector). We have three product candidates that are in clinical trials: 4D-125 for the treatment of X-linked retinitis pigmentosa (XLRP) in a Phase 1/2 clinical trial, 4D-110 for the treatment of choroideremia in a Phase 1 clinical trial, and 4D-310 for the treatment of Fabry disease in a Phase 1/2 clinical trial. Our two IND candidates are 4D-150 for the treatment of wet age-related macular degeneration (wet AMD), and 4D-710 for the treatment of cystic fibrosis lung disease. We expect to file the INDs and to initiate clinical trials for both of these programs in second half of 2021.

We believe our competitive advantages, combined with our highly experienced team, helps to position our company to create, develop, manufacture, if approved, and effectively commercialize targeted gene therapies that could transform the lives of patients suffering from debilitating diseases.

Our Approach: Therapeutic Vector Evolution Platform

Gene therapy holds tremendous promise as a transformative therapeutic class. However, the majority of gene therapies have encountered limitations such as inflammation and toxicity, high dose requirements, limited efficacy and neutralization by pre-existing antibodies, due in part to their utilization of conventional AAV vectors that are naturally occurring and non-targeted. Through our Therapeutic Vector Evolution platform we apply the principles of directed evolution to invent targeted and evolved vectors for the delivery of genes to specific tissue types for diseases involving the same target tissue(s). Our product candidates are designed and engineered to utilize our targeted and evolved vectors to potentially address the limitations encountered with gene therapies utilizing conventional AAV vectors.

Leveraging a wide range of molecular biology techniques, we have developed a collection of 40 distinct libraries that are comprised of approximately one billion synthetic capsid sequences. We next define a Target Vector Profile that identifies the optimal vector features for the specific tissue type(s) and related set of diseases we seek to target, with the goal of overcoming limitations encountered by conventional AAVs. We then deploy Therapeutic Vector Evolution with our capsid libraries in NHPs and use competitive selection to identify targeted and evolved vectors from our libraries that demonstrate the strongest match to the Target Vector Profile. Our three lead vectors have unique structural changes as compared to the conventional naturally occurring AAV capsid as shown below.

 

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Our three lead targeted and evolved vectors comprise numerous diverse and biologically important differences from the conventional AAV capsid, as illustrated in the computer generated representations of the three-dimensional capsid structures depicted below. The colorized areas illustrate these differences.

 

Based on preclinical data reported to date from our NHP and human cell models, including preclinical head-to-head comparisons with relevant conventional AAV vectors, we observed that our targeted and evolved vectors were well-tolerated and achieved enhanced delivery, increased transgene expression, reduced immunogenicity and/or improved antibody resistance when compared to conventional AAV vectors.

As we advance through clinical trials, we expect to demonstrate the superior capabilities of our targeted and evolved vectors and product candidates that may include the following design features:

 

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Tolerability:    Well-tolerated therapies with a low inflammation profile, low dose requirements and routine, safe routes of delivery

 

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Biologic activity:    Effective delivery to targeted tissues, efficient transgene expression in targeted tissues, and/or resistance to neutralization by pre-existing antibodies

 

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Routine routes of administration:    Routine, well-tolerated and minimally invasive routes of administration, including intravitreal, aerosol and intravenous delivery

 

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Antibody resistance:    Resistance to neutralization by pre-existing antibodies, translating into improved efficacy, larger addressable patient populations, and the potential for re-dosing

 

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Our Product Candidate Pipeline

We are developing a diverse pipeline of product candidates for both rare and large market diseases, including patient populations that other gene therapies are unable to address. Our initial product candidates are focused on the following therapeutic areas: ophthalmology, cardiology and pulmonology. Each of our product candidates leverages a targeted and evolved vector we invented through our Therapeutic Vector Evolution platform. Below is a summary of our product candidate pipeline and our next anticipated milestones:

 

* 4DMT is responsible for the development of this product candidate; Roche has an exclusive option to assume development and commercialization at its sole cost and expense. Such an option may be exercised prior to pivotal trial initiation.

‡ Reporting in coordination with our partner Roche.

§ Lead optimization involves in vivo and in vitro evaluation of various transgene and promoter construct candidates in cell and animal models, and the selection of at least one product candidate to move forward into IND-enabling studies.

Our most advanced discovery and research programs are shown in the chart below:

 

§ Lead optimization involves in vivo and in vitro evaluation of various transgene and promoter construct candidates in cell and animal models, and the selection of at least one product candidate to move forward into IND-enabling studies.

Ophthalmology Pipeline: Intravitreal Product Candidates

We are developing product candidates to treat tissues throughout the retina. Our targeted and evolved AAV vector, R100, was invented for routine intravitreal injection, leading to transgene expression across the entire surface area of the retina, and in the major cell layers of the retina.

 

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We currently have four ophthalmology product candidates that utilize our proprietary intravitreal R100 vector:

 

1.

4D-125:    4D-125 is in an ongoing Phase 1/2 clinical trial in patients with XLRP due to mutations in the RPGR gene. We are enrolling patients with a broad range of disease severity, including those earlier in the progression of their disease. We expect to report initial clinical data from this trial in 2021. We currently hold worldwide commercialization rights for 4D-125, and Roche holds an exclusive option to in-license the product prior to pivotal trial initiation.

 

2.

4D-110:    4D-110 is in an ongoing Phase 1 clinical trial in patients with choroideremia. We are enrolling patients with a broad range of disease severity, including those earlier in the progression of their disease. In coordination with our partner Roche, we expect to report initial clinical data from this trial in 2022. We licensed exclusive worldwide rights to 4D-110 to Roche.

 

3.

4D-150:    4D-150 is in IND-enabling preclinical development for wet AMD and diabetic retinopathy, two large market ophthalmology indications. We wholly own this product candidate. We expect to file an IND and to initiate a Phase 1/2 clinical trial for 4D-150 in the second half of 2021.

 

4.

4D-135:    4D-135 is in preclinical development for autosomal dominant retinitis pigmentosa (adRP) due to mutations in the RHO gene. We wholly own this product candidate. We expect to initiate IND-enabling studies for 4D-135 in 2021.

Cardiology Pipeline: Intravenous Product Candidates

With our cardiology product candidates, all of which are wholly owned, we plan to treat patient populations in both primary cardiomyopathies, that involve the heart only, as well as cardiomyopathies that are secondary to systemic diseases, such as lysosomal storage diseases. Our cardiology product candidates utilize our targeted and evolved AAV vector, C102, which was invented for routine low dose intravenous administration and delivery to the heart, leading to transgene expression in heart muscle cells throughout the organ. For lysosomal storage diseases involving the heart and other organs, including Fabry disease, our product candidates are designed for transgene expression both within the heart and in other targeted tissues.

Our initial cardiology product candidate 4D-310 is in an ongoing Phase 1/2 clinical trial in adult patients with classic (severe) Fabry disease. 4D-310 is designed to address all critically affected organs, including the heart, kidney, and blood vessels through direct intracellular transgene expression. To our knowledge, 4D-310 is the only Fabry product candidate specifically designed to treat cardiomyocytes. We expect to report initial clinical data from this trial in 2021.

Pulmonology Pipeline: Aerosol Delivery Product Candidates

With our pulmonology product candidates, all of which are wholly owned, we plan to treat diseases that affect the lungs. Our pulmonology product candidates utilize our targeted and evolved vector, A101, which was invented for aerosol delivery to all major regions within the lung, including airways and alveoli, and successful penetration of the mucus barrier for transduction of lung airway cells, overcoming potential barriers such as pre-existing AAV antibodies and other inhibitory proteins within the mucus barrier. Our products utilizing A101 are designed for delivery as an aerosol to the lung epithelial cell surface resulting in efficient airway and alveolar cell transduction and transgene expression.

Our initial pulmonology product candidate 4D-710 is in IND-enabling preclinical development for cystic fibrosis lung disease. We expect to file an IND and to initiate a Phase 1/2 clinical trial for 4D-710 in the second half of 2021.

 

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Our Team

Our experienced team consists of biotherapeutics developers, entrepreneurs, innovative gene therapy scientists and clinicians to execute our platform, product design and development and commercialization strategies. Collectively, our team has more than 100 years of combined experience in the field of viral vector gene therapy, including leadership of over 30 clinical trials from Phase 1 through Phase 3 and product approval. We are led by our Chief Executive Officer and co-founder, David Kirn, M.D., who has over 25 years of experience creating and growing therapeutic platform companies, including viral vector gene therapy and oncolytic virus technologies, and advising on the design, preclinical translation and clinical development of viral vector gene therapeutics for leading life science companies, such as Onyx Pharmaceuticals, Novartis International AG, Pfizer Inc., Bayer AG and Biogen Inc. Our Executive Chairman, John Milligan, Ph.D., is the former CEO and President of Gilead Sciences, where he spent over 29 years scaling the company and commercializing numerous transformative therapies across multiple disease areas. Our Chief Scientific Advisor and co-founder, David Schaffer, Ph.D., pioneered the application of directed evolution to the capsid of AAV vectors 20 years ago. Our Chief Operating Officer and Chief Technical Officer, Fred Kamal, Ph.D., has over 25 years of industry experience in product manufacturing and quality, including most recently with AveXis, Inc. where he was a key contributor to the development and biologics license application (BLA) for the AAV product Zolgensma (onasemnogene abeparvovec). Our Chief Medical Officer, Robert S. Fishman, M.D., brings over 20 years of clinical trial execution and product development expertise. Our board of directors also brings significant experience in biopharmaceutical commercial execution and strategic initiatives.

Our Strategy

Our vision is to unlock the full potential of gene therapy to address as many patient populations as possible in both rare and large market diseases. We have developed the following strategies and guiding principles to achieve our goals:

Invent targeted and evolved AAV vectors using the power of directed evolution to unlock the full potential of gene therapy with transformative gene therapy products

Our Therapeutic Vector Evolution platform allows us to move beyond conventional AAV vectors and has enabled us to develop proprietary targeted and evolved vectors based on a Target Vector Profile for any set of diseases we strive to treat. This platform empowers us to select the best (or “fittest”) targeted and evolved vector, matching the Target Vector Profile for any set of related diseases, out of our 40 distinct libraries comprising approximately one billion synthetic capsid sequences. Our goal is to unlock the full potential of gene therapy by creating targeted gene therapies based on these vectors. As compared to gene therapy products utilizing conventional AAV vectors, we believe our targeted gene therapies, if approved, will enable treatment of broader patient populations within specific diseases, diseases currently not addressed by gene therapy and large market diseases.

Apply our modular product design and engineering to help inform the clinical development of subsequent product candidates using the same vectors used for prior product candidates

Our targeted gene therapy product candidates are modular, in that a single targeted and evolved vector can be equipped with different transgene payloads to enable treatment of multiple different diseases affecting the same tissue type(s). Our preclinical and clinical development will provide us with insights and clinical proof-of-concept for a given vector equipped with one transgene. Development of subsequent product candidates could also be more efficient, as manufacturing, preclinical, clinical and regulatory activities will be guided by experience with preceding product candidates using the same vector.

 

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Develop and commercialize a diverse portfolio of transformative gene therapy products in a broad range of therapeutic areas with significant unmet needs, including rare and large patient populations

We are building a diverse portfolio of product candidates. We believe this diversity increases our likelihood of success in contrast to relying on a single vector or disease area as evidenced by our: (1) multiple proprietary vectors delivered by different routine, well-tolerated and minimally invasive routes of administration specific to the disease, (2) therapeutic area diversity including ophthalmology, cardiology and pulmonology; and (3) opportunity to address both rare and large patient populations not currently addressed with conventional AAV vectors. We seek to develop our wholly owned product candidates through market approval and to retain product marketing rights for key products, regions and strategic therapeutic areas.

Build a fully integrated biopharmaceutical company by advancing our capabilities in product development and commercialization, and expanding our manufacturing facilities and internal proprietary Good Manufacturing Practice (GMP) capabilities

To become a fully integrated biopharmaceutical company, we are building robust internal capabilities including translational and clinical research and development, regulatory affairs, manufacturing and quality which can mitigate operational risks, reduce costs, and increase product development control and speed. In the future we intend to build commercialization capabilities, including sales and marketing.

We believe robust internal manufacturing capabilities are of particular importance in gene therapy due to the high complexity of producing these therapies. Our current in-house manufacturing capabilities include GMP manufacturing, production capabilities for IND-enabling GLP toxicology studies and research candidate production (upstream, downstream and fill/finish). We intend to further maximize the robustness and internal control of our manufacturing processes from discovery and process development through to clinical-grade cGMP manufacturing and to scale these capabilities to support later stage clinical programs and indications where clinical trials require more patients and/or higher intravenous doses. In the future we intend to build manufacturing capacity sufficient to support commercialization of any product candidates that are approved.

Selectively execute strategic collaborations to maximize the potential value of our Therapeutic Vector Evolution platform

We intend to enter into patient advocacy foundation alliances and academic collaborations, and to evaluate potential strategic corporate partnerships. We believe that alliances with patient advocacy organizations, such as the Cystic Fibrosis Foundation, can be beneficial for funding, patient enrollment, regulatory strategy, product design and clinical development. In addition, we intend to further expand our enabling technologies and our intellectual property portfolio by pursuing new opportunities through our sponsored research agreements with our Chief Scientific Advisor Dr. Schaffer and U.C. Berkeley. We will continue to evaluate new opportunities to partner with biopharmaceutical companies that we believe enhance our ability to deliver value for stockholders and clinical benefits for patients.

Our Therapeutic Vector Evolution Platform

Gene Therapy Successes and Limitations of Current Conventional Non-Targeted AAV Vectors

Gene Therapy Overview

Gene therapy aims to address diseases caused by gene mutations and gene dysregulation. Gene therapies hold the promise of delivering transformative and durable benefit to the patient by

 

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addressing the underlying molecular root cause of genetic diseases, in many cases, by introducing a functional version of the patient’s defective gene into their own cells. Gene therapy has shown the potential to halt the progression of rare diseases, as well as to enable or restore critical human functions. Gene therapies may be delivered to their target cells either in vivo or ex vivo and can be paired with other therapeutic approaches including cell therapy and gene editing.

The transformative potential of gene therapy has been demonstrated across multiple rare disease areas. There has been significant progress over the last decade in the field of gene and cell therapies, including with AAV based gene therapy. Further, the number of companies developing gene and cell therapy products has increased significantly over the last five years. There are currently a number of approved viral vector gene therapy products, including Zynteglo, Zolgensma, Luxturna, Imlygic and Strimvelis.

The physical construct of gene therapies are comprised of two essential components:

 

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Vector:    A vehicle that packages and delivers the promoter and transgene into the body and transports them through the protective cell membrane and ultimately into the cell nucleus. As a result, the vector plays an essential role in delivery and transduction, the process of guiding the transgene into the cell with subsequent expression of the transgene product. The vector is foundational to the potential safety and efficacy of gene therapies, as the vector is ideally relied on to deliver the promoter and transgene to the diseased cells safely and in sufficient quantities to result in clinical benefit.

 

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Promoter and Transgene Payload:    The promoter is the DNA region that controls and initiates transcription of the transgene in the desired cell type(s), while the transgene is the functional gene intended to be delivered into the target cell and expressed at the RNA and/or protein levels. Examples include enzymes, structural proteins, cell surface protein receptors, antibodies, gene editing machinery and inhibitory RNA molecules.

Generalized components of an AAV gene therapy include the vector and a therapeutic payload consisting of DNA encoding a promoter, transgene, polyadenylated (pA) tail for stability, and inverted terminal repeats (ITR) to support packaging and other functionality within the target cell.

 

Key Challenges with Conventional AAV Vectors

The fundamental gene therapy components used in current gene therapy candidates originated largely from academia, some as early as the 1960s, with limited improvements since their discovery. The majority of AAV gene therapy companies use conventional AAV vectors that are comprised of

 

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naturally occurring AAV capsids (protein shells) of a few specific subtypes, including AAV1, AAV2, AAV5, AAV8, AAV9, AAVhu68, AAVrh10, and AAVrh74. In some cases, minor changes have been made to these naturally occurring, non-targeted capsids in an attempt to enhance non-specific transduction. While gene therapy holds tremendous promise as a transformative therapeutic class, the demonstrated hurdles with conventional AAV vectors may limit the diseases and patient populations that can be effectively addressed.

We believe that there are four fundamental challenges that hinder gene therapies that utilize conventional AAV vectors which may adversely impact their product safety, efficacy and commercial potential:

 

1.

Lack of effective delivery to desired target tissues and/or cell types due to physical barriers:     Conventional AAV vectors have not been engineered to circumvent natural barriers to viral vector delivery by various routes of delivery, such as the inner-limiting membrane of the retina or clearance by the liver, and they are not targeted to specific tissues or cells. As a result, products using these vectors may require suboptimal delivery mechanisms, such as subretinal injection compared with intravitreal dosing, or high doses, such as with intravenous administration for the treatment of muscle diseases, to achieve therapeutic benefit. These strategies may result in toxicities and even patient deaths, as well as commercialization challenges.

 

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Lack of efficient transduction and transgene expression from target cells:     To yield therapeutic benefit, the vector must efficiently deliver its transgene from the cell surface into the target cell nucleus, resulting in subsequent therapeutic transgene expression within the cell. Conventional AAV vectors are not engineered for efficient transduction of specific target cells. As a consequence, conventional AAV vectors may be associated with inefficient transduction and transgene expression which would limit efficacy.

 

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Potential to cause toxicity due to inflammation:     Conventional AAV vectors have been associated with inflammation-related toxicities in some patients. Potential contributing factors may include the lack of specificity with current conventional AAV vectors, the high intravenous doses required for delivery to target tissues systemically, and the ability of these conventional AAV vectors to transduce immune cells. For example, intravenous gene therapy programs in patients with DMD using doses of 2E14-3E14 vg/kg have been associated with acute inflammation and transient kidney dysfunction resulting in intermittent clinical holds from the FDA. Another high dose intravenous gene therapy program utilizing a conventional AAV vector, for patients with X-linked myotubular myopathy, resulted in serious adverse events including three patient deaths.

 

4.

Neutralization by pre-existing antibodies:     The human immune system has evolved to fight viruses, including conventional AAVs which are present in nature. Widespread exposure to these conventional AAVs has resulted in neutralizing antibodies in approximately 30% to 70% of the population depending on the vector serotype and patient population. These antibodies to conventional AAV vectors can limit gene therapy efficacy and the addressable patient population. In addition, re-dosing with the same conventional AAV vector is generally not feasible given the induction of neutralizing antibodies to the vector.

Our Solution: Evolved Vectors for Targeted Gene Therapy

We are pioneering the development of targeted gene therapies based on our targeted and evolved vectors. Using our Therapeutic Vector Evolution platform, we invent targeted and evolved vectors that are designed to address specific diseases and their associated tissue(s). We believe our proprietary vectors will allow us to overcome known limitations of conventional AAV vectors, and to potentially address a broad range of both rare and large patient populations that cannot be addressed

 

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with conventional vectors. Based on our Target Vector Profile for a set of diseases, we select vectors in NHPs from our 40 distinct libraries made up of approximately one billion synthetic capsid sequences. Subsequently, we characterize and evaluate a lead targeted and evolved vector for delivery and transgene expression through extensive studies in NHP and human cell and organotypic tissue assays.

The first step in directed evolution is to generate massive genetic diversity. Starting with the genomes of multiple naturally occurring AAV variants, and their ancestral predecessors, we employ numerous molecular biology techniques to create our 40 distinct libraries comprising approximately one billion synthetic capsid sequences.

 

 

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Starting with our 40 distinct libraries comprising approximately one billion synthetic capsid sequences, we conduct Therapeutic Vector Evolution, including competitive selection, to identify targeted and evolved vectors that fit a Target Vector Profile. The illustration below highlights the Target Vector Profile design and subsequent selection process whereby competitive pressure is applied over a varying number of selection rounds for each program. Capsids with the best fitness for the Target Vector Profile are enriched at each round and are designated lead vectors.

 

Key Design Features of Our Targeted and Evolved Vectors

Through our proprietary Therapeutic Vector Evolution platform, we invent targeted and evolved vectors that we believe have the potential to display superiority to conventional AAV vectors with respect to four key design features:

 

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Targeted delivery to specific tissues by routine, well-tolerated and minimally invasive routes of administration

 

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Improved transduction of target cell types and tissues

 

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Lower toxicity with reduced inflammation

 

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Ability to resist neutralization by pre-existing antibodies in humans

As shown below, we have generated animal proof-of-concept data in both NHP and knock-out mouse disease models in vivo, and in human cells in vitro, that we believe provide evidence regarding the potential for our targeted and evolved vectors to show superiority over conventional AAV vectors. Our goal is to develop products that are safer, more efficacious, administered at lower doses, more efficiently manufactured, and, if approved, more effectively commercialized.

Targeted Delivery to, and Transduction of, Specific Tissues by Routine Clinical Routes of Administration

We select targeted and evolved vectors that are administered through what we believe to be the optimal method of delivery for a particular disease, with the goal of circumventing physical barriers en route to specific tissues or cell types in the body.

 

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In our first example of targeted delivery in NHPs in vivo, our targeted and evolved vector for the retina, R100, was invented for intravitreal administration. We believe intravitreal injection is the optimal route of gene therapy administration for the retina, as evidenced by widespread use of approved intravitreally administered biologics, that generate over $9.7 billion in annual global sales for the treatment of wet AMD, diabetic retinopathy and related diseases. The R100 vector is leveraged in modular fashion for use in all four of our current ophthalmology product candidates: 4D-110, 4D-125, 4D-135 and 4D-150. Conventional AAV capsid vectors such as AAV2 are not able to reach retinal cells effectively following intravitreal injection due to barriers such as the inner-limiting membrane barrier between the vitreous and target retinal cells. As a result, gene therapies utilizing conventional vectors have relied on delivery by subretinal surgery. This is a complex procedure that requires highly-specialized retinal surgeons to perform surgery in an operating room setting, and results in a bleb of fluid within a detached area of retina that comprises less than 1% of the total retina surface, based on published data. Potential complications include retinal tears and retinal detachments.

In contrast, in preclinical studies intravitreal R100 transduced the entire retinal surface area and a high percentage of cells in all layers of the retina, including photoreceptors and retinal pigment epithelial (RPE) cells in NHP. Of note, the ocular anatomy and physiology in NHPs closely mirrors that of humans. We therefore believe our products designed and engineered with R100 have potential tolerability, biologic activity and commercial advantages compared with product candidates that require subretinal surgical injection.

Structure-function studies suggested that the potential of R100 to penetrate through the inner-limiting membrane barrier may be associated with reduced binding to heparan sulfate, which is a major component of the barrier. R100 subsequently binds and transduces target retinal cells at higher efficiency than the conventional AAV2 vector. The improved transduction was associated with enhanced binding to sialic acid on the target cells.

 

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Target Vector Profile for R100 intravitreal delivery to the retina:

Following intravitreal injection, conventional AAV vectors (top panel) such as AAV2 are not able to reach retinal cells effectively due to barriers such as the inner-limiting membrane barrier between the vitreous and target retinal cells. R100 administered by intravitreal injection (bottom panel) was able to penetrate through these barriers to transduce the entire retinal surface area when administered to NHP. A high percentage of cells was subsequently transduced in all layers of the retina, including photoreceptors and retinal pigment epithelial (RPE) cells. Structure-function studies suggest that the potential of R100 to penetrate through barriers such as the inner-limiting membrane barrier was associated with reduced binding to heparan sulfate. R100 subsequently bound and transduced target retinal cells at higher efficiency than the conventional AAV2 capsid. This improved transduction was associated with enhanced binding to sialic acid on the target cells.

 

 

 

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The subretinal surgical injection route of administration with conventional AAV vectors resulted in delivery to a limited bleb area of the retina (top panel, dotted line), leaving the vast majority of the retina untreated; according to published data bleb coverage was <1% of the retina with subretinal injection. Within this bleb, viable retinal cells were transduced (top panel, colorized area). The intravitreal route of administration with conventional vector AAV2 resulted in a small area of transduction around the fovea due to interference across the retina by the inner limiting membrane (ILM) (center panel, colorized ring). By contrast, intravitreal injection route of administration with our targeted and evolved vector, R100, resulted in transduction across the entire surface area of the retina, including the major cell layers of the retina (bottom panel, colorized area) in NHP.

 

 

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Intravitreal injection route of administration with our targeted and evolved vector, R100, resulted in transduction across the entire surface area of the retina, including the major cell layers of the retina in NHP.

 

R100 has been well-tolerated in both NHP and in patients. In our on-going clinical trials, we have administered two product candidates utilizing our R100 vector to patients via intravitreal injection. Treatment has been generally well-tolerated with no dose-limiting toxicities. In addition, we have administered these product candidates in 91 NHP eyes injected in three different GLP toxicology studies with no adverse findings reported.

 

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To date, our two clinical stage ophthalmology product candidates 4D-125 and 4D-110, both of which utilize the R100 vector, have exhibited favorable toxicity and tolerability profiles in GLP toxicology studies as summarized below.

 

In our second example of targeted delivery in NHPs in vivo, our targeted and evolved vector, C102, was invented for improved delivery to and transduction of cardiac muscle tissues (cardiomyocytes), when administered by IV at low doses, with minimal inflammation. Barriers to IV delivery to heart muscle may include organs such as the liver and blood components including complement, immune cells and antibodies.

 

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Target Vector Profile for C102 intravenous delivery to the heart:

Conventional AAV capsid vectors (top panel) such as AAV8 do not effectively deliver to heart muscle tissue following low dose IV administration. Potential barriers include clearance by organs such as the liver, and blood components including complement, immune cells and antibodies. Conversely, IV administered C102 (bottom panel) has exhibited robust delivery and broad transduction of cardiac tissues, including cardiomyocytes.

 

 

In NHPs, we observed that intravenous delivery of C102 at relatively low doses for delivery to muscles (1E13 – 5E13 vg/kg) resulted in genome delivery to 100% of the 30 heart tissue samples evaluated through all regions of the heart in NHP. Transgene protein expression was detected in 29 of the 30 samples, providing evidence of intracellular protein production in cardiomyocytes.

 

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C102 delivery to, and transduction of, NHP cardiomyocytes:

The figure below illustrates the broad distribution of samples collected in our C102 biodistribution study. Samples were collected from 10 locations across the four regions of the heart in 3 NHPs. Intravenous delivery of C102 at relatively low doses (1E13 vg/kg) resulted in genome delivery to 100%, and protein expression in 97%, of the 30 heart tissues evaluated.

 

Immunohistochemistry for marker transgene protein expression showed widespread gene expression in cardiomyocytes in a preclinical study. In addition, in a preclinical study we observed that C102 was more efficiently delivered to cardiac tissues than conventional vectors such as AAV8 (shown below) and AAV9. C102 targeted the heart muscle tissue more efficiently than AAV8, and showed a 12-fold improvement in genome delivery to the heart muscle tissue.

 

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C102 delivered genetic payloads to cardiac tissue more efficiently than conventional AAV vectors in NHP:

In vector characterization studies in NHP, C102 delivered 12-fold more EGFP marker gene to cardiac tissue on average than did AAV8

 

 

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Cardiac muscle tissue transduction and protein expression in NHP heart:

NHP cardiomyocyte transduction and marker transgene expression (EGFP) was detected by immunoflourescence 8 weeks after intravenous injection of C102 (right panel), whereas conventional vector AAV8 transduced cardiomyocytes to a lesser extent than did C102 (center panel). Non-transduced control NHP heart did not exhibit visible EGFP staining (left panel) (L, left; R, right, V, ventricle; A, atrium)

 

In our third example of targeted delivery in NHPs in vivo, our targeted and evolved AAV vector for lung tissues, A101, was invented for aerosol delivery to lung airway and alveolar cells. This vector was selected for penetration through the mucus and other potential barriers, and for resistance to pre-existing antibodies in humans. A101 is used as the targeted and evolved vector in 4D-710, our product candidate for patients with cystic fibrosis lung disease.

 

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Target Vector Profile for A101 aerosol delivery to lung airway and alveoli:

Conventional AAV capsid vectors such as AAV2 (top panel) are not able to reach lung tissue effectively following aerosol administration, due to mucus and other potential barriers including antibodies and components of innate immunity. Conversely, aerosol administered A101 (bottom panel) is designed for robust and broad transduction of lung cells, including trachea, bronchi and alveoli.

 

 

In NHPs, we observed that aerosol delivery of A101 via a standard nebulization device, approved for use in humans, resulted in genome delivery to, and GFP marker gene expression and transduction of, 100% of the 48 lung sites evaluated. We evaluated proximal and medial airways and alveoli in the lung. In addition to efficient lung tissue transduction, we also observed distribution to organs outside the lung was minimal. Genomes in tissues outside the lung were either undetectable or in extremely low concentrations (less than 0.1% of the average genomes per microgram of DNA in the lung tissues) as shown below. This data confirms the efficient protein production throughout all major regions of the lung with minimal biodistribution to the rest of the body.     

 

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The figure below illustrates the broad distribution of samples in NHPs collected in our A101 biodistribution study. Samples were collected from 16 locations in the three regions of the lung in 3 NHPs. Aerosol delivery of A101 at a dose of 1E13 vg resulted in genome delivery to, and protein expression in, 100% of the 48 lung tissues evaluated.

 

Aerosol delivery of A101 carrying the EGFP transgene in NHPs was associated with EGFP protein detection (red) by immunofluorescence in proximal (trachea) and medial (bronchi) airway and alveoli.

 

 

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Aerosol delivery of A101 in NHPs resulted in high levels of genome localization as exhibited in the chart below. A101 genome localization was limited in liver and heart, and not present in other tissues outside the lung. EGFP marker protein expression was also detected in all lung samples.

 

Potential for Improved Transduction and Transgene Expression in Target Human Cell Types and Tissues

We invent targeted and evolved vectors for a specific set of diseases to fit a defined Target Vector Profile, in an effort to generate higher levels of transgene expression than conventional AAV vectors.

In our first example of improved target tissue transduction leading to higher levels of expression and more cells transduced, we observed superior transduction with R100, our intravitreally administered targeted and evolved vector. R100 was significantly more efficient than AAV2 at transducing human retina cells in vitro, such as RPE cells below. These in vitro studies comparing R100 to AAV2 helped to inform our decision to move the vector forward and to develop R100-based product candidates. We have not conducted any clinical studies in patients comparing AAV2 to R100. AAV2 is the conventional vector most commonly used for retina treatment in humans. R100 is leveraged in modular fashion for use in all of our ophthalmology product candidates, including 4D-110, 4D-125, 4D-135 and 4D-150.

 

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R100 exhibited significantly higher transduction of stem cell derived human retinal pigment epithelial cells in vitro compared to conventional AAV2 across a broad range of concentrations. R100 transduced a higher percentage of cells than AAV2, and marker transgene expression was superior to AAV2

 

PMEL17 = premelanosome protein, a marker of retinal pigmented epithelial cell identity

%EGFP+/PMEL17+ Cells = the percentage of EGFP-expressing cells within the PMEL17-expressing retinal pigmented epithelia population, a

quantification of the transduction efficiency of the capsid for the target cell type

MOI = multiplicity of infection, a description of dose (vg per cell) for in vitro experiments

In our second example of improved transduction versus conventional AAV vectors, our targeted and evolved vector C102 was invented to efficiently target human heart muscle cells (cardiomyocytes); C102 is used in 4D-310 for Fabry disease. Conventional AAV vectors AAV1, AAV8 and AAV9 have been used by competitors to target heart muscle cells; however, we believe limited transduction with these conventional AAV vectors may limit efficacy and lead to high dose requirements that may present safety challenges. In preclinical studies, C102 exhibited significantly improved transduction of human cardiomyocytes (ventricular phenotype) compared to conventional AAV vectors across a wide range of concentrations, as shown below. These in vitro studies comparing C102 to AAV1, AAV8 and AAV9 helped to inform our decision to move the vector forward and to develop C102-based product candidates. We have not conducted any clinical studies in patients comparing conventional vectors to C102.

 

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C102 exhibited significantly higher transduction in vitro relative to conventional AAV1, AAV8 and AAV9, in human cardiomyocytes of ventricular phenotype. C102 transduced a higher percentage of cells than conventional AAV, and marker transgene expression was superior to conventional AAV

 

cTnT = cardiac troponin T, a marker of cardiomyocyte cell identity

DAPI = a marker of cell nuclei

MOI = multiplicity of infection, a description of dose (vg per cell) for in vitro experiments

%EGFP+/cTnT+ Cells = the percentage of EGFP-expressing cells within the cTnT-expressing cardiomyocyte population, a quantification of the transduction efficiency of the capsid for the target cell type

Potential for Low Toxicity with Reduced Inflammation Profile

We believe that targeted and evolved vectors invented via Therapeutic Vector Evolution have the potential to cause less inflammation, require lower doses and lead to a lower overall toxicity profile versus conventional AAV vectors such as AAV8 and AAV9. As others have reported, high IV doses with AAV9-based gene therapies in humans and NHPs have been associated with toxicity and inflammation in heart, kidney, liver and neural tissues. Others have also reported that high dose IV treatments with a product candidate incorporating AAV8 have, tragically, resulted in three patient deaths in a clinical trial for X-linked myotubular myopathy.

As illustrated below, in contrast to AAV9, our targeted and evolved vector C102 (used in 4D-310 for Fabry disease) was not associated with significant inflammation or toxicities in NHP heart tissues after IV administration. AAV9 was associated with inflammation and damage in heart tissue as shown on histology and blood tests shown below. These in vivo studies comparing C102 to AAV9 helped to inform our decision to move the vector forward and to develop C102-based product candidates. We have not conducted any clinical studies in patients comparing AAV9 to C102.

 

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After dosing of NHPs with IV C102, no meaningful heart inflammation or toxicity was observed, in contrast to meaningful heart inflammation and necrosis observed in NHPs receiving AAV9, as illustrated in the H&E staining below. Immune cell infiltrate (dark purple) and cardiomyocyte death (rounded formation of cardiomyocytes in pink) associated with AAV9 are highlighted in the left image below. Lack of similar infiltrate associated with C102 is highlighted in the right image below (no dark purple, elongated cardiomyocytes in pink with magenta cell nuclei). Quantification of the full histological analysis provided by an independent veterinary pathologist is included below these images. Of note, the two vectors carried the same CAG promoter and EGFP transgene payload, were packaged and purified using the same process, were quantified using the same assay, and administered in identical fashion at the same contract research organization (CRO).

 

 

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After dosing of NHPs with IV C102, no meaningful cardiac troponin release into the blood was observed, in contrast to meaningful elevations in cardiac troponin observed in NHPs receiving AAV9. Of note, the two vectors carried the same CAG promoter and EGFP transgene payload, were packaged and purified using the same process, were quantified using the same assay, and administered in identical fashion at the same CRO.

 

 

*

Peak cardiac troponin levels for both NHP 1 and NHP 5 were detectable within the normal range (0.04 ng/mL)

 

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Overall, our three lead targeted and evolved vectors, R100, C102 and A101, have exhibited favorable tolerability results in NHPs and mice in toxicology studies across our lead product candidate development programs, as summarized below.

 

Potential to Resist Inhibition by Pre-Existing Neutralizing Antibodies from Humans: Potential for Re-Dosing and Treating Larger Patient Populations

We have invented targeted and evolved vectors for resistance to inhibition by pre-existing neutralizing antibodies in the human population. We believe that vectors invented in this fashion may broaden our potential addressable patient population compared to conventional AAV vectors. We believe that enhanced resistance to antibodies may result in less neutralization, and therefore potentially better efficacy, after patient treatment. Finally, we believe we have the potential to re-dose patients after receiving other AAV gene therapies, and when desirable by developing product candidates with different targeted and evolved vectors that target the same tissues. This approach would utilize a vector whose antibodies do not cross-react with the vector used in the preceding AAV gene therapy treatment.

For example, the Target Vector Profile for our targeted and evolved vector A101 included aerosol delivery and resistance to antibodies in humans; A101 is used in 4D-710 for cystic fibrosis. As shown below, we observed that A101 had significantly greater antibody resistance than conventional AAV1, AAV2, AAV5, AAV8 and AAV9. These in vitro studies comparing A101 to conventional vectors helped to inform our decision to move the vector forward and to develop A101-based product candidates. We have not performed any clinical studies in patients comparing conventional vectors to A101.

 

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A101 exhibited superior resistance to human antibodies (present in human IVIG) in vitro compared to conventional AAV vectors AAV1, AAV2, AAV5, AAV8 and AAV9 as measured by transduction percentage.

 

Our Proprietary Therapeutic Vector Evolution Platform

Our proprietary Therapeutic Vector Evolution platform is based on the principles of directed evolution. Directed evolution is a high-throughput platform approach that harnesses the power of evolution in order to create biologics with new and desirable characteristics.

The first step of directed evolution involves the generation of massively diverse libraries of biological variants. In the second step, a target profile is designed with desired biological characteristics. In the final step, selective pressures are applied to these libraries forcing competition to select for improved variants with the desired biological characteristics. This method has been successfully utilized by other researchers to generate protein therapeutics with enhanced biological activities, antibodies with enhanced binding affinity and enzymes with new specificities. The importance of this biotechnology was demonstrated when the Nobel Prize for Chemistry was awarded in 2018 for work on directed evolution of proteins, antibodies and enzymes performed by academic investigators including Dr. Frances H. Arnold at Caltech; these investigators have no relationship to 4DMT.

Our co-founder and Chief Scientific Advisor, Dr. David Schaffer, pioneered the use of directed evolution to create improved AAV capsids for use as gene therapy vectors at U.C. Berkeley over 20 years ago. Over the past seven years, we have developed and industrialized our Therapeutic Vector Evolution platform to invent targeted and evolved vectors for use in human therapeutic products. Since in-licensing several libraries from the U.C. Berkeley and creating over 30 newer libraries at our company, we have a total of 40 diverse libraries comprising approximately one billion proprietary synthetic capsid sequences. In addition, we have developed significant experience in performing Therapeutic Vector Evolution programs in NHPs, with 14 capsid selections completed to

 

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date. We believe this will help us to develop product candidates to address a broad swath of diseases in rare and large patient populations, including those other gene therapies cannot.

Diverse Libraries of Synthetic Capsid Sequences

Each library results from the application of a different genetic diversification methodology, such as variable loop mutagenesis, random peptide insertion, random point mutagenesis, DNA shuffling and ancestral reconstruction, and is also defined by its starting material (AAV capsid gene sequences). Furthermore, we apply bioinformatics, emerging technologies, and experience and know-how resulting from previous discovery programs to continually improve and expand our libraries and improve our ability to select customized targeted and evolved vectors.

We believe the size and diversity of our proprietary synthetic capsid libraries represent a differentiating competitive advantage for us in the field of gene therapy.

Our 40 distinct libraries comprise approximately one billion synthetic capsid sequences. Each library results from the application of a different genetic diversification methodology, such as variable loop mutagenesis, random peptide insertion, random point mutagenesis, DNA shuffling and ancestral reconstruction, and is also defined by its starting material (AAV capsid gene sequences). We have estimated the number of capsid sequences for 37 of these libraries as illustrated below.

 

The Target Vector Profile Followed by Competitive Vector Selection

We employ a rigorous approach to inventing targeted and evolved vectors based on what we consider an optimal vector and product profile, which we term the Target Vector Profile. For any set of

 

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target diseases that affect the same tissue(s), this profile includes any combination of the following: the optimal route of administration for targeting the specific tissue(s) in humans, the optimal dose range, the desired distribution of vector transduction within the target organs, overall biodistribution and/or antibody resistance.

We use our Therapeutic Vector Evolution platform to select the “fittest” targeted and evolved capsid that best matches our Target Vector Profile. We achieve this through serial rounds of “selection”, or discovery, with each round of selection filtering down to fewer and fewer synthetic capsids from the original library. This funneling process is achieved by applying selective pressures—forcing competition—among all synthetic capsid variants in the library to achieve delivery to the target cells as defined in the Target Vector Profile. Each round is performed in a primate in vivo, sometimes in the presence of human antibodies.

By the end of a typical Therapeutic Vector Evolution process, we will have identified approximately two to four targeted and evolved vectors, or hits, based on their frequency in the final pool of synthetic capsid sequences, in addition to numerous sequences present at lower frequencies. We then file patent applications disclosing select identified gene sequences from the discovery program. We believe this deliberate approach to selection in vivo in NHPs and in human tissues should lead to identification of targeted and evolved vectors with a higher likelihood of therapeutic benefit in humans.

Vector Invention Results to Date

We have completed 14 unique vector selection programs or “selection processes” for specific proprietary synthetic capsids with specific Target Vector Profiles. Across our clinical development and discovery portfolio, we have utilized four different routes of administration, including intravenous, intravitreal, aerosol, and intrathecal administrations. We have completed discovery programs targeting a diverse array of tissue types including various retinal cell types, heart and skeletal muscle tissues, different lung cell types, liver, brain, dorsal root ganglia, and synovial joints. We have identified and filed patent applications on over 300 unique targeted and evolved vectors.

Characterization of Novel Vector Variant “Hits” and “Leads”

Vector hits are typically characterized by three major criteria: manufacturing, human cell and human organotypic model transduction, and delivery to tissues in NHPs by the designated route of administration. Vector hits may also be evaluated for transduction in the presence of human antibodies. In order to perform characterization studies, vectors are armed with marker gene payloads such as enhanced green fluorescent protein (EGFP). After these hits have been evaluated, a lead vector is selected.

Directed Evolution-Based Promoter and Transgene Discovery Platforms

To complement our Therapeutic Vector Evolution platform and modular development approach, we are generating next-generation optimized promoter elements and transgenes using a combination of directed evolution and proprietary algorithms.

Currently available promoters may lack sufficient strength of expression and selectivity for clinical benefit of AAV gene therapies. In addition, for some AAV gene therapy products a smaller promoter region may be essential for the gene payload to fit in the AAV. Therefore, we believe there is a need for better promoters for many AAV products to enable or enhance their therapeutic benefit. We generate Target Promoter Profiles for any given product and disease target. This promoter profile includes target cell specificity and strength in order to maximize tolerability and/or biologic activity, as

 

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well as any necessary size constraints. Under one of our sponsored research agreements with U.C. Berkeley, we are working with our co-founder Dr. Schaffer to create customized and proprietary promoters for use in our pipeline products. Our libraries of novel and diverse synthetic promoters have been engineered and currently comprise approximately ten million unique sequences. Our discovery platform identifies the best promoters within the libraries for a specific Target Promoter Profile.

In addition to our synthetic promoters, we are developing next-generation optimized transgene discovery platform. Our discovery platform uses a high-throughput approach, harnessing both directed evolution and rationale design algorithms, to identify novel transgenes that express therapeutics proteins. For example, we have developed transgenes to express RNAi in target cells of interest for treatment of disease. These transgene-expressed RNAi molecules, or ddRNAi, are anchored by a microRNA backbone that not only enhances stability and limits off-target effects, but also facilitates high expression within target cells and thereby increases efficacy. Our technology allows us to powerfully knock down disease-causing transcripts, combining a design for a high degree of selectivity with the goal of long-term expression afforded by AAV-based gene therapy.

Product Pipeline

Overview

Our platform enables a broad and diverse pipeline of transformative targeted gene therapies that we are advancing through clinical trials. We currently have a product pipeline that includes targeted gene therapies in three therapeutic areas: ophthalmology, cardiology (primary or secondary to systemic diseases) and pulmonology.

For each of these therapeutic areas, we invented a targeted and evolved lead vector employing Therapeutic Vector Evolution. These lead vectors were designed for delivery by optimal and routine clinical routes to the target tissue(s). As illustrated below, our platform is designed to be modular in that an evolved vector invented for a given therapeutic area can be equipped with different transgene payloads to produce unique product candidates to treat other diseases affecting the same tissue type(s). We believe this modularity will help inform the clinical development of subsequent product candidates using the same vector.

 

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Lead vectors that have been invented through Therapeutic Vector Evolution are used to design and engineer product candidates for specific diseases. These product candidates are tested in NHP and in human cell & disease models prior to IND filing and entry into clinical trials. While a first product candidate utilizing one of our targeted and evolved vectors is advancing through development, we build additional product candidates to follow closely and rapidly by using the same lead vector in modular fashion.

 

Our pipeline includes product candidates for both rare disease and large patient populations and is represented in the chart below.

 

* 4DMT is responsible for the development of this product candidate; Roche has an exclusive option to assume development and commercialization at its sole cost and expense. Such an option may be exercised prior to pivotal trial initiation.

‡ Reporting in coordination with our partner Roche.

§ Lead optimization involves in vivo and in vitro evaluation of various transgene and promoter construct candidates in cell and animal models, and the selection of at least one product candidate to move forward into IND-enabling studies.

 

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Our most advanced discovery and research programs are shown in the chart below:

 

§ Lead optimization involves in vivo and in vitro evaluation of various transgene and promoter construct candidates in cell and animal models, and the selection of at least one product candidate to move forward into IND-enabling studies.

Ophthalmology Therapeutic Area

Introduction

We are developing product candidates to treat severe ophthalmology diseases. Our targeted and evolved vector, R100, is used in all four of our ophthalmology product candidates and was invented for routine intravitreal injection, leading to transgene expression across the entire surface area of the retina, and in the major cell layers of the retina. We believe this modularity will help inform the clinical development of subsequent product candidates using the same vector.

Our product candidate 4D-125 is enrolling patients in an ongoing Phase 1/2 dose-escalation clinical trial in patients with XLRP related to mutations in the RPGR gene. The primary objectives of this trial are to evaluate the safety and maximum-tolerated dose of 4D-125. Secondary endpoints include assessments of biologic activity, including both visual field function and anatomical endpoints. Four patients have been treated and followed for up to 15 weeks to date. 4D-125 has been well tolerated without any dose-limiting toxicities. We expect to report initial clinical data in 2021. 4DMT currently holds the worldwide commercialization rights for 4D-125 and Roche holds an exclusive option to in-license the product prior to pivotal trial initiation.

Our product candidate, 4D-110, is enrolling patients in an ongoing Phase 1 dose-escalation clinical trial in patients with choroideremia related to mutations in the CHM gene. The primary objectives of this trial are to evaluate the safety and maximum-tolerated dose of 4D-110. Secondary endpoints include assessments of biologic activity, including visual acuity, visual field function and anatomical endpoints. Enrolled patients have been followed previously on our natural history study, in which we have enrolled 55 patients, and have followed 47 of these patients for at least two years. Three patients have been treated and followed for up to 18 weeks to date. 4D-110 has been well tolerated without any dose-limiting toxicities. In coordination with our partner Roche, we expect to report initial clinical data in 2022.

We also have two wholly owned preclinical product candidates. We are developing 4D-150 for the treatment of wet AMD and diabetic retinopathy, including DME, and we expect to initiate a wet AMD clinical trial for 4D-150 in the second half of 2021. We are also developing 4D-135 for the treatment of autosomal dominant retinitis pigmentosa (adRP). We expect to initiate IND enabling studies for 4D-135 in 2021.

 

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4D-125 for X-Linked Retinitis Pigmentosa (XLRP)

Disease Background, Unmet Medical Need and Target Patient Population

XLRP is a rare inherited X-linked recessive genetic disorder that causes progressive vision loss and blindness in boys and young men. There are currently no approved therapies for XLRP. Seventy percent of cases are caused by mutations in the retinitis pigmentosa GTPase regulator (RPGR) gene. The estimated worldwide prevalence of XLRP due to RPGR variants is approximately one in 25,600 people, which represents approximately 24,000 patients in the United States, and France, Germany, Italy, Spain and the United Kingdom (together, EU-5). It is characterized by dysfunction and degeneration of photoreceptors in the retina. Loss of RPGR function in retinal cells causes the progressive loss of rod and cone photoreceptors, leading to the progressive loss of vision. Symptoms of XLRP are initially characterized by night blindness, followed by loss of peripheral visual field, decreasing visual acuity and eventually blindness. While males are usually the most affected, approximately 25% of heterozygous females experience loss of vision.

Our Solution

We are developing 4D-125 for the treatment of patients with XLRP with RPGR mutations. 4D-125 is designed to benefit patients at all stages of XLRP, including early stage patients whose entire viable retinas are not adequately treated by subretinal surgery. This product candidate is comprised of R100 and carries a codon-optimized RPGR transgene engineered for expression within human photoreceptors. In NHP models, we have observed widespread transduction and transgene expression across the entire retinal surface. We believe that 4D-125 has the potential to successfully treat XLRP patients at the earliest stages of their disease progression and ideally, slow or prevent progression and retain vision.

Competition and Differentiation: AAV Gene Therapy for XLRP

Several companies are developing subretinal AAV gene therapies for patients with XLRP. Subretinal administration results in transduction and direct treatment of only a small fraction of the retina. On Phase 1 and 2 trials, investigators have reported improvements in visual field function within the localized retina area receiving the treatment bleb in a subset of patients. These AAV gene therapies require invasive subretinal surgery, which has been associated with subretinal surgery-related adverse events. In addition, subretinal surgery results in transduction of only a small fraction of the retina and is therefore limited to patients with more advanced disease with a small remaining area of viable retinal cells.

We believe 4D-125 has the potential to be differentiated from other AAV gene therapies in clinical development, to our knowledge, on the basis of four design features:

 

1.

Safe and routine intravitreal route of administration:    Product candidates that utilize conventional AAV vectors such as AAV2, must be administered by subretinal surgery for XLRP. Unlike those product candidates, R100, which is included in our product candidate 4D-125, was specifically invented for intravitreal injection. Notwithstanding any potential design features of 4D-125, this easier and widely used route of administration should result in safer and faster clinical trial enrollment, better efficacy and faster market uptake.

 

2.

Treatment of the entire retinal surface:    Unlike conventional AAV vectors administered by subretinal surgery, which reportedly treat only a small fraction of the retinal surface, 4D-125 can be used to treat the entire retinal surface following intravitreal injection, potentially broadening its therapeutic applicability.

 

3.

Feasibility of treating early stage patients:    We believe it will be feasible to safely treat early stage patients before they start to lose their retina. 4D-125 is designed to treat the entire

 

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surface of the retina, including the periphery where degenerative diseases like XLRP start. In addition, intravitreal injection is recognized as a safe, simple and routinely used method of administering therapeutics.

 

4.

Commercial opportunity:    Intravitreal injections are widely adopted by many practicing ophthalmologists and used to treat a number of ophthalmological indications. As a result, we believe 4D-125 has the potential for rapid market uptake, if approved.

Preclinical Animal Model Pharmacology and Toxicology Studies

We completed a single dose IND-enabling toxicology and biodistribution study in 30 NHPs with 4D-125. 4D-125 was administered at doses of 1E11 vg/eye or 1E12 vg/eye by intravitreal injection. Animals were sacrificed at three weeks, three months or six months. No meaningful toxicities were reported anywhere in the body, including specifically within the retina. Mild, transient uveitis was observed, but no chronic inflammation was reported; all animals were under systemic immunosuppression during the study. We detected vector genomes and XLRP transgene RNA expression in all treated retinas at both dose levels; the genome and RNA levels were higher in the high dose animals.

In an in vitro model of the disease, XLRP patient photoreceptors were derived from XLRP-diseased white blood cells that had been reprogrammed into induced pluripotent stem cells. Diseased photoreceptors were transduced with 4D-125 and protein lysates were harvested 30 days post-transduction. 4D-125 transduced cells expressed significantly more transgene product (hRPGRorf15) than control cells. Moreover, this expressed protein was shown to be active as measured by glutamylation (GT335).

Clinical Development: Phase 1/2 Clinical Trial

We are currently enrolling patients on a Phase 1/2 dose-escalation clinical trial, with four patients treated to date. This is a dose-escalation trial of intravitreal injection with 4D-125 in patients with clinically significant XLRP due to RPGR gene mutation. The primary objectives of this trial are to evaluate the safety and maximum tolerated dose of 4D-125. Secondary endpoints include assessments of biologic activity, including both visual field function and anatomical endpoints. In the four patients treated to date on this trial and followed for up to 15 weeks, 4D-125 has been well-tolerated and has not resulted in dose-limiting toxicities. No serious adverse events related to the agent have been reported.

4D-110 for Choroideremia

Disease Background, Unmet Medical Need and Target Patient Population

Choroideremia is a monogenic blinding disease, affecting approximately 13,000 patients in the United States and EU-5. No products are approved currently for the treatment of this disease in the United States or European Union. This X-linked, progressive degenerative disease of the retina and choroid is caused exclusively by mutations in the CHM gene that encodes for the REP1 protein. While choroideremia primarily affects men, some heterozygous females also suffer variable visual loss from the condition.

Choroideremia initially manifests as night-blindness and peripheral visual field defects, usually starting in the first two decades of life. As the disease progresses, the visual field begins to constrict relatively early in the disease’s progression, which hinders patients’ ability to conduct daily activities, such as driving. Many patients become blind by 30 years of age. A patient with advanced disease will be legally blind by virtue of poor visual acuity and minimal preserved visual field. Almost all mutations

 

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in the CHM gene result in production of a non-functional REP1 protein. REP1 is essential for the activation (prenylation) of Ras-associated binding (Rab) proteins involved in intracellular vesicle trafficking.

Our Solution

We are developing 4D-110 for the treatment of choroideremia. 4D-110 is designed for a single intravitreal injection and to benefit patients at all stages of disease, including early stage patients whose entire viable retinas are not adequately treated by subretinal injection. 4D-110 is comprised of R100 and is engineered to deliver the CHM transgene, the dysfunctional gene in choroideremia, to human RPE cells safely. We believe that 4D-110 has the potential, if approved, to successfully treat choroideremia patients at the earliest stages of their disease progression and ideally, slow or prevent progression and retain vision.

Competition and Differentiation: AAV Gene Therapy for Choroideremia

Conventional subretinal AAV gene therapy approaches are being developed to treat choroideremia. Subretinal administration results in transduction and direct treatment of only a small fraction of the retina. Biogen is developing a subretinally administered product candidate for choroideremia called NSR-REP1. In 2018, data was reported from a Phase 1/2 clinical trial in patients with end-stage choroideremia, who have only a small remaining area of viable retinal cells in the central field of vision and reduced visual acuity. In this trial, investigators concluded that best corrected visual acuity improved in a subset of patients. A pivotal randomized Phase 3 clinical trial was initiated in 2018. This AAV gene therapy approach requires invasive subretinal surgery, which has been associated with subretinal surgery-related adverse events. In addition, subretinal surgery results in transduction of only a small fraction of the retina and is therefore limited to patients with more advanced disease who have a small remaining area of viable retinal cells.

We believe 4D-110 has the potential to be differentiated from AAV gene therapies in development on the basis of four design features:

 

1.

Safe and routine intravitreal route of administration:    Unlike conventional AAV vectors such as AAV2, which are utilized in subretinal surgery product candidates for choroideremia, R100 was specifically selected for simple and safe intravitreal injection. Notwithstanding any potential design features of 4D-110, this ease of administration should result in safer and faster clinical trial enrollment, better efficacy and faster market uptake.

 

2.

Treatment of the entire retinal surface:    Unlike products candidates utilizing conventional AAV vectors and administered by subretinal surgery, which reportedly treat a small fraction of the retinal surface, 4D-110 can be used to treat the entire retinal surface following intravitreal injection.

 

3.

Feasibility of treating early stage patients:    We believe 4D-110 has the potential to safely treat early stage patients before they start to lose their retina. 4D-110 is designed to treat the entire surface of the retina, including the periphery where degenerative diseases like choroideremia start. In addition, intravitreal injection is recognized as a safe, simple and routinely used method of administering therapeutics.

 

4.

Commercial opportunity:    Intravitreal injections are widely adopted by many practicing ophthalmologists and used to treat a number of ophthalmological indications. As a result, we believe 4D-110 has the potential for rapid market uptake, if approved.

Preclinical Animal Model Pharmacology and Toxicology Studies

A total of 44 NHPs have been treated with 4D-110 on two GLP toxicology and biodistribution studies. No significant adverse effects or toxicities were reported.

 

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We completed a single dose IND-enabling toxicology and biodistribution study in 27 NHPs dosed with 4D-110. 4D-110 was administered at doses of 1E11 vg/eye or 1E12 vg/eye by intravitreal injection. Animals were sacrificed at three weeks, three months or six months. No meaningful toxicities were reported anywhere in the body, including specifically within the retina. Mild, transient cortico-steroid responsive anterior uveitis was reported in a minority of treated NHP. No chronic inflammation was reported; all animals were under systemic immunosuppression during the study. We detected vector genomes and CHM/REP1 transgene RNA expression in all treated retinas at both dose levels; the genome and RNA levels were higher in the high dose animals.

We subsequently completed a bilateral intravitreal 4D-110 GLP toxicology and biodistribution study in 17 NHPs dosed with 4D-110. 4D-110 was administered at doses of 3E11 vg/eye or 1E12 vg/eye by intravitreal injection. Animals were sacrificed at three weeks, 13 weeks and 26 weeks. No meaningful toxicities were reported anywhere in the body, including specifically within the retina. Transient cortico-steroid responsive uveitis was reported. No chronic inflammation was reported; all animals were under systemic immunosuppression during the study. We detected vector genomes and CHM/REP1 transgene RNA expression in treated retinas at both dose levels.

In preclinical pharmacology studies involving human choroideremia patient-derived RPE cells, 4D-110 led to functional REP1 protein expression that corrected RAB27A trafficking from the cytoplasm to the cell membrane. In similar fashion to normal RPE cells, 4D-110-treated diseased RPE cells derived from choroideremia patients had RAB27A protein associated with their cell membranes; this finding confirmed the functionality of the REP1 protein expressed from 4D-110. In contrast, in untreated diseased cells, RAB27A was demonstrated diffusely throughout the cytoplasm.

Clinical Development: Phase 1 Clinical Trial and Natural History Study

We have fully enrolled a natural history study of over 50 patients with choroideremia to document rate of visual and anatomical decline, and to identify candidates who are most likely to benefit from participation in our current Phase 1/2 clinical trial. Fifty-five patients were enrolled and 47 of these patients have been followed for at least two years. Statistically significant declines in fundus autofluorescence area were reported by investigators over the two-year span after enrollment, with progression evident within 12 months. We expect that many of these subjects will enroll in our current Phase 1 clinical trial, or in future trials we may conduct.

We are currently enrolling patients on a Phase 1 clinical trial, with three patients treated to date. This is a dose-escalation trial of intravitreal injection with 4D-110 in patients with choroideremia due to CHM gene mutation. The primary objectives of this trial are to evaluate the safety and maximum-tolerated dose of 4D-110. Secondary endpoints include assessments of biologic activity, including visual acuity, visual field function and anatomical endpoints. Endpoint changes in each individual treated patient over time, before treatment while on the Natural History Study, will be compared to endpoint changes after 4D-110 treatment in the same patient whenever possible. Patients may therefore serve as their own control for assessments of these endpoints. In three patients treated on this Phase 1 trial to date and followed for up to 18 weeks, 4D-110 has been well-tolerated and has not resulted in dose-limiting toxicities.

We licensed exclusive worldwide rights of 4D-110 to Roche in 2017. We are primarily responsible for initial development, including preclinical development, manufacturing, filing and maintaining the IND and conducting the Phase 1 clinical trial. Upon completion of initial development, Roche will be responsible for development including conducting any pivotal clinical trials and commercialization, if approved. We are entitled to development costs reimbursement, development milestones and royalties and sales milestones on this product candidate.

 

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4D-150 for Wet AMD and Diabetic Retinopathy

Disease Background, Unmet Medical Need and Target Patient Population

Wet AMD is a type of macular degeneration where abnormal blood vessels (choroidal neovascularization or CNV) grow into the macula, the central area of the retina. As a consequence, CNV causes retina swelling and edema, and bleeding can occur and cause visual distortion and reduced acuity. The proliferation of abnormal blood vessels in the retina is stimulated by VEGF. This process distorts and can potentially destroy central vision and may progress to blindness without treatment. There are on average 200,000 new incidences of wet AMD per year in the United States alone. Wet AMD accounts for approximately 10% of all diagnosed cases of AMD, but it results in an estimated 90% of the legal blindness caused by all types of AMD. High expression levels of VEGF appear to play a causal role in the symptoms of wet AMD.

Diabetes mellitus affects approximately 400 million adults worldwide and the prevalence is expected to increase by approximately 45% in the next decade. Diabetic eye disease, primarily diabetic retinopathy (DR), is a leading cause of vision loss and blindness in working-age adults and occurs due to the development of diabetic macular edema (DME; swelling, edema and hemorrhage in the central vision) and complications arising from proliferative diabetic retinopathy (PDR; retinal neovascularization causing bleeding and retinal detachment). The prevalence of diabetic retinopathy is high, affecting almost one-third of adults over 40 years of age with diabetes. In the United States approximately 4.2 million adults have DR and 655,000 have vision-threatening DR.

The current treatment paradigm for wet AMD and diabetic retinopathy, including DME, is intravitreal injection of patients with anti-VEGF proteins that inhibit the proliferation of new blood vessels, reducing edema and bleeding and allowing some visual acuity to be recovered. Most anti-VEGF therapies require repeated intravitreal injections in office every few weeks to every few months to obtain full efficacy. When patients miss doses, they may experience accelerated vision decline. Based on current clinical experience, after several years of treatment, the early vision gains are frequently lost, and acuity declines are observed for reasons that may include variable treatment regimens and poor patient compliance.

We believe these major retinal diseases are ideal candidate applications for gene therapy. There are multiple products on the market that validate the anti-VEGF therapeutic approach, and emerging randomized clinical trial data suggests that inhibiting additional molecular targets can extend the efficacy and durability of anti-VEGF alone. Delivering intravitreal therapies to the eye is routine, and there is an advantage for a single dose gene therapy that can provide long-term efficacy in patients for whom compliance, or treatment resistance, is a problem.

Our Solution

We are developing 4D-150, a wholly owned intravitreal AAV gene therapy candidate for wet AMD and diabetic retinopathy, including DME. These angiogenic diseases of the retina, including wet AMD and diabetic retinopathy, represent therapeutic markets of over $9.7 billion in annual global sales. We retain all worldwide rights to 4D-150.

This product candidate is engineered for three distinct mechanisms-of-action. 4D-150 is engineered to inhibit VEGF and PlGF (placental growth factor) via aflibercept expression and secretion, and to inhibit a third angiogenic factor via an additional transgene insert. We believe that targeting three different angiogenic factors has the potential for greater efficacy versus a single anti-VEGF mechanism-of-action in patients with these retinal diseases, including patients with resistance to anti-VEGF therapy alone. Intravitreal delivery of biologics to the eye is routine, and there would be an advantage for a single dose therapy that could provide long-term efficacy in patients for whom compliance, or treatment resistance, is a problem.

 

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Competition and Differentiation: AAV Gene Therapy for wet AMD and Diabetic Retinopathy

AAV gene therapy approaches are being developed by several companies to treat wet AMD by delivering a functional copy of an anti-angiogenic transgene by either subretinal injection with a conventional AAV vector, or intravitreal administration with a mouse-evolved vector. It remains to be demonstrated whether conventional AAVs or mouse-evolved vectors can deliver significant retinal coverage while limiting off-target effects. In comparison, our targeted and evolved vectors are designed and tested in NHPs which more closely resembles the anatomy of the human eye. We believe this provides comprehensive retinal coverage through less invasive and more commonly used intravitreal injections while delivering an improved tolerability profile with limited inflammation. To our knowledge, 4D-150 would be the only AAV gene therapy asset in wet AMD and DR to utilize an intravitreal vector (R100) discovered through directed evolution in NHP, and that has shown superior transduction on human retinal cells ex vivo versus conventional AAV vectors such as AAV2. R100 has been associated with a low inflammation profile and lack of adverse findings in 91 NHP eyes injected on GLP toxicology studies.

In addition, to our knowledge, 4D-150 is the first gene therapy product candidate for the eye designed to implement three mechanisms of action by directly inhibiting three different angiogenic growth factor targets, including VEGF and PlGF. We therefore believe there is significant differentiation between our gene therapy product candidate and other AAV gene therapeutics in development in this therapeutic area.

We believe 4D-150 has the potential to be differentiated from approved agents, and those in clinical development to our knowledge, on the basis of five design features:

 

1.

Three distinct mechanisms-of-action:    An intravitreal dose of 4D-150 should result in sustained anti-angiogenic effects through three distinct mechanisms of action.

 

2.

One-time therapy:    Unlike intravitreal protein therapeutics that require repeat dosing every few weeks for a patient’s lifetime, 4D-150 is designed as a one-time dose.

 

3.

Novel vector evolved in NHPs for efficient intravitreal delivery:    Unlike conventional AAV vectors such as AAV2 or the mouse-evolved AAV vector 7m8, R100 was specifically selected from our collection of over one billion synthetic capsid sequences in NHPs and for use in humans.

 

4.

Low inflammation profile design:    Following intravitreal injection, R100 has shown low inflammation profile and no significant adverse findings in three GLP toxicology studies, involving 91 NHP eyes, with two different 4DMT products utilizing the R100 vector (4D-110, 4D-125).

 

5.

Commercial opportunity:    Intravitreal injections are widely adopted by many practicing ophthalmologists and used to treat a number of ophthalmological indications. As a result, we believe 4D-150 has the potential for rapid market uptake, if approved. Additionally, the low inflammation profile we have observed in our R100-based GLP toxicology studies, if reproduced in the clinic with 4D-150, may promote broad product adoption if approved.

Preclinical Animal Model Pharmacology and Toxicology Studies

We carried out a proof-of-concept efficacy study in NHPs with a research construct using the R100 vector to deliver an anti-VEGF transgene (R100.anti-VEGF). In this study using the retinal laser-induced CNV model, we treated animals with intravitreal R100.anti-VEGF at doses of both 1E11 and 1E12 vg per eye. Animals received steroid treatment for 28 days following IVT administration of R100.anti-VEGF and remained off steroids for the remainder of the study. No adverse findings were reported in-life through 12 months of follow up. Control animals had the most severe (grade 4) angiogenic and leaky retina lesions in approximately 26% (19 of 72) of laser-targeted sites at two

 

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weeks and four weeks. Conversely, none of the sites in treated animals at either dose level at either timepoint had grade 4 lesions (p<0.0001).

Our 4D-150 prototype comprising R100 expressing an anti-VEGF protein prevented development of Grade IV lesions at 2 and 4 weeks after administration in 100% of lasered locations in the NHP retina at both low and high doses

 

† In the 1E12 vg treatment group, three NHP eyes (18 lesions) and two NHP eyes (12 lesions) were not assessable at the 2 week and 4 week timepoints, respectively.

A study of 4D-150 in the retinal laser-induced CNV model in NHPs is in the planning stages, as is a GLP toxicology and biodistribution study in NHP.

Development Plan

We have initiated an IND-enabling GLP toxicology and biodistribution study in NHPs and expect to initiate a clinical trial in the second half of 2021.

 

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4D-135 for Autosomal Dominant Retinitis Pigmentosa (adRP)

Disease Background, Unmet Medical Need and Target Patient Population

adRP is a rare inherited autosomal dominant genetic disorder that occurs in both sexes and causes progressive vision loss and blindness. There are currently no approved therapies for adRP. adRP is characterized by dysfunction and degeneration of photoreceptors in the retina. Approximately 35% of adRP cases are caused by mutations in the rhodopsin (RHO) gene. The estimated worldwide prevalence of adRP due to RHO variants is approximately one in 52,000 people, which represents approximately 11,600 patients in the United States and EU-5. Loss of RHO function in retinal cells causes the progressive loss of rod photoreceptors, leading to the loss of vision experienced by patients. Symptoms of adRP are initially characterized by night blindness, followed by loss of peripheral visual field, decreasing visual acuity and eventually blindness.

Our Solution

We are developing 4D-135, a wholly owned intravitreal AAV gene therapy product candidate for the treatment of patients with adRP caused by mutations of the RHO gene. 4D-135 is designed to benefit patients at all stages of adRP, including early stage patients whose entire viable retina are not adequately treated by subretinal surgery. This product candidate is comprised of R100, an intravitreally administered targeted and evolved vector. 4D-135 is engineered to carry an RNAi targeting mutation-independent adRP and a RHO transgene resistant to the RNAi in a broad suppress and replace approach. We retain all worldwide rights to 4D-135.

Competition and Differentiation: AAV Gene Therapy for adRP

A few companies are developing therapies for patients with adRP, including a subretinal AAV gene therapy product candidate. We believe 4D-135 has the potential to be differentiated from other AAV gene therapies in development to our knowledge, on the basis of five design features:

 

1.

Long term durable RNAi activity:    In contrast to relatively short-acting ASO technology, 4D-135 is designed for DNA-based delivery of long-term RNAi activity against the mutant RHO gene product.

 

2.

Safe and routine intravitreal route of administration:    Unlike conventional AAV such as AAV2, which are utilized in subretinal surgery product candidates for other retinal diseases like XLRP, R100 was specifically selected for safe and routine intravitreal injection. This ease of administration should result in faster clinical trial enrollment.

 

3.

Treatment of the entire retinal surface:    Unlike product candidates utilizing conventional AAV vectors and administered by subretinal surgery, which reportedly treats a small fraction of the retinal surface, 4D-135 is designed to be used to treat the entire retinal surface following intravitreal injection.

 

4.

Feasibility of treating early stage patients:    Given the potential of 4D-135 to treat the entire surface of the retina, including the periphery where degenerative disease like adRP start, we believe it will be feasible to safely treat early stage patients before onset of retinal degeneration. In addition, intravitreal injection is recognized as a safe, simple and routinely used method of administering therapeutics.

 

5.

Commercial opportunity:    Intravitreal injections are widely adopted by many practicing ophthalmologists and used to treat a number of ophthalmological indications. As a result, we believe 4D-135 has the potential for rapid market uptake, if approved.

 

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Preclinical Animal Model Pharmacology and Toxicology Studies

We plan to complete a single dose IND-enabling toxicology and biodistribution study in NHP. We are also developing an in vitro model of diseased photoreceptors derived from adRP patients. These diseased photoreceptors will be treated with 4D-135.

Development Plan

We expect to initiate IND-enabling studies for 4D-135 in 2021.

Cardiology Therapeutic Area

Introduction

We are developing product candidates to treat cardiomyopathies. These target indications may include both primary cardiomyopathies that involve the heart exclusively, as with hypertrophic cardiomyopathies, or secondary cardiomyopathies that occur in the context of a systemic disease syndrome, as with lysosomal storage diseases. In the context of secondary cardiomyopathies, such as Fabry disease, we design and engineer the product to treat all diseased organs including the high unmet medical need in the heart. Our targeted and evolved vector C102, used in all of our cardiology product candidates, was invented for low dose intravenous infusion, leading to transgene expression throughout the myocardium in all regions of the heart. We believe that this modular product approach, utilizing C102 for all of our cardiology product candidates, and by switching the therapeutic transgene inserts, will help inform the clinical development of subsequent product candidates using the same vector.

Our lead product candidate, 4D-310, is currently in an ongoing Phase 1/2 clinical trial in adult patients with classic (severe) Fabry disease. The primary objectives of this trial are to evaluate the safety and maximum-tolerated dose of 4D-310. Secondary endpoints include biomarker assessments of plasma AGA activity and markers of biologic activity in the heart, including cardiac MRI. We expect to treat early onset classic Fabry disease patients initially and hope to expand into severely affected late-onset patients, including those with cardiomyopathy. We expect to report initial clinical data in 2021. 4D-310 received Fast Track Designation from the FDA in third quarter of 2020 for the treatment of Fabry disease to improve pain, disability and organ dysfunction.

4D-310 for Fabry Disease

Disease Background, Unmet Medical Need and Target Patient Population

Fabry disease is a monogenic disease caused by mutations in the GLA gene which encodes for the alpha-galactosidase A (AGA) enzyme that results in the body’s inability to produce sufficient AGA enzyme activity, causing the accumulation of toxic levels of sphingolipids, such as the substrate globotriaosylceramide-3 (Gb3), in critical organs, including the heart, kidney and blood vessels. The cardiomyopathy in Fabry disease is the leading cause of death, accounting for 54% of deaths, and is secondary to the systemic lysosomal storage disease syndrome. Such substrate accumulation in the heart can lead to life-threatening heart failure, arrhythmias, vascular blockages. Fabry disease is progressive and fatal, with an average life expectancy of approximately 50 years. Progression of the disease causes significant reduction in the quality of life and significant economic burden associated with greater patient needs for supportive care.

Annual worldwide sales of Fabry medicines were approximately $1.5 billion in 2019. We estimate the potential initial addressable male Fabry patient population in the United States and EU-5 to be up to 19,000 individuals, 57% of which suffer from Classic Fabry disease. Of note, we estimate the

 

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prevalence of individuals with Fabry disease-associated GLA mutations in the United States and EU-5 falls between 50,000 and 70,000 in the United States and the EU-5 based on recent newborn screening. Pre-treatment antibody titers to gene therapy, including 4D-310, may result in a reduction in the addressable patient population, if antibody titers at baseline are shown to be predictive of treatment response and/or tolerability.

The current treatment paradigm for Fabry disease is an infusion of replacement AGA enzyme every two weeks, a class of therapies broadly referred to as enzyme replacement therapies (ERT). For example, Fabrazyme received accelerated regulatory approval in the United States based on improvements in kidney interstitial capillary substrate biopsy endpoint, but it failed the primary endpoint in registrational trials and lacks full approval in the United States.

In addition to high burdens of therapy, due to the short-half life in the blood, patients on ERTs lack therapeutic concentrations of AGA in their blood for the majority of time between infusions, potentially limiting clinical benefit. Furthermore, since AGA is normally produced within target cells themselves, ERTs reportedly lack efficient uptake by parenchymal cells including cardiomyocytes; hence, patients remain at risk of cardiac complications including death. Finally, antibodies develop to AGA in the majority of classic Fabry disease patients after ERT and can further worsen clinical outcomes.

Therefore, we believe cardiac-targeted treatment of Fabry disease is still an unmet medical need.

Our Solution

We are developing 4D-310 for the comprehensive systemic treatment of Fabry disease. 4D-310 is designed for an efficient, single low dose IV administration to benefit classic and late onset patients, including those who have previously received ERT. 4D-310 is comprised of C102 and is engineered with a codon-optimized GLA transgene under control of a ubiquitous promoter. 4D-310 is designed to generate both high, stable plasma AGA activity, potentially resulting in cross correction of a broad range of critical organs, and to generate AGA activity via intracellular production within disease cells including cardiomyocytes.

We believe 4D-310 has the potential for “mutation independent” treatment of both “classic” (early onset, severe) as well as late onset Fabry disease, both of which are often associated with cardiomyopathy. We believe reducing substrate in cardiomyocytes would represent a strategic advantage and significant opportunity in the treatment of Fabry-associated cardiomyopathy, which we believe remains a significant unmet medical need and leading cause of death in Fabry disease patients.

In addition, AGA produced by 4D-310 within target cells themselves will not be exposed to serum antibodies against AGA. These antibodies develop following ERT in approximately 80% of classic Fabry disease patients. We therefore have the potential to treat this patient population via intracellular production of AGA, in contrast to approaches that rely exclusively on delivery of AGA through the bloodstream.

Finally, single dose gene therapy treatment with 4D-310 may obviate the need for biweekly ERT infusions in these patients, and/or for every other day small molecule medicines for patients amenable to AGA chaperone therapy.

Competition and Differentiation: AAV and Lentivirus-Engineered Stem Cell Gene Therapy for Fabry Disease

Several companies are developing liver-expressing AAV gene therapy for Fabry disease through the use of non-targeted AAV designed for expression from the liver only using liver-specific promoters

 

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to restrict transgene expression to the liver. These product candidates are designed to produce and secrete AGA enzyme for activity in the blood, as with ERT, but with more stable blood levels than achieved with intermittent ERT infusions. When administered as ERT in patients, the AGA protein has not been shown definitively to enter cardiomyocytes or other affected parenchymal cells. It is therefore unclear whether gene therapy production of AGA from the liver or stem cells alone, with secretion into the bloodstream, would result in effective correction in cardiac muscle cells or other affected parenchymal cells such as in the kidney.

We believe 4D-310 is the only gene therapy candidate designed specifically to express the AGA enzyme in cardiac tissues, as well as in other affected tissues in these patients, potentially addressing a major unmet medical need.

We believe 4D-310 has the potential to be differentiated from approved agents, and those in clinical development to our knowledge, on the basis of four design features:

 

1.

Dual mechanisms-of-action:    An IV dose of 4D-310 is designed to generate both stable sustained levels of AGA enzyme activity in blood and endothelial cells following secretion from the liver, plus high AGA levels directly within muscle cells throughout the heart. Cells within the kidney, blood vessels and small intestine also produce intracellular AGA after 4D-310 treatment, albeit at significantly lower levels than in the heart.

 

2.

One-time therapy:    Unlike AGA chaperones that require dosing every other day for a patient’s life, or IV ERT every two weeks for life, 4D-310 is designed as a single dose potentially curative therapy.

 

3.

AGA mutation-independent biologic activity:    Unlike AGA chaperones that are only effective against specific AGA mutations present in a minority of Fabry patients, 4D-310 is designed to treat in Fabry patients with any AGA mutation.

 

4.

Resistance to AGA antibodies:    We believe that 4D-310 may be able to treat patients that have anti-AGA antibodies. Those antibodies develop in approximately 80% of classic Fabry disease patients (early onset, severe disease) treated with ERT. This is in contrast to competing approaches that rely exclusively on AGA delivery through the bloodstream, that may be inhibited by these antibodies since AGA comes into contact with anti-AGA antibodies that may inhibit delivery to target organs. Unlike ERT and gene therapies that are designed to rely exclusively on AGA production and secretion from the liver into the blood, 4D-310 is designed to include intracellular AGA production in target tissues themselves, thus avoiding antibody contact and inhibition. We therefore plan to evaluate the treatment of patients with pre-existing AGA antibodies, potentially resulting in a larger addressable patient population.

 

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The target product profile for 4D-310 is compared to competing technologies below. Many aspects of this profile have been supported by data generated to date with either the C102 vector or with 4D-310 itself.

 

Preclinical Animal Model Pharmacology and Toxicology Studies

We completed an IND-enabling GLP toxicology and biodistribution study of 4D-310 in normal mice. No meaningful toxicity was reported at doses up to 1.5E14 vg/kg, based both on in-life and histopathology assessments. This dose is 300% of the highest planned dose in our Phase 1/2 clinical trial. 4D-310-mediated AGA expression and/or AGA enzyme activity was observed in all target tissues tested, including heart, kidney, blood vessels, small intestine and blood.

Pharmacology studies have been completed in Fabry disease knock-out mice. We observed that a single IV treatment with 4D-310 resulted in high stable blood concentrations and durable AGA production in target tissues, including the heart and kidney, and that toxic Gb3 metabolites were reduced significantly in all evaluated target tissues versus vehicle control. Efficacy was demonstrated with doses as low as 1E12 vg/kg. No adverse findings were observed in these knock-out animals at doses as high as 5E13 vg/kg.

 

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Plasma AGA activity in Fabry mice after treatment with 4D-310 was measured to be approximately 1,200-fold higher than in control vehicle-treated Fabry mice at all measured timepoints after treatment with 4D-310 at 5E13 vg/kg.

 

WT = wild type

KO = Fabry knock out mouse model

Dose-dependent decrease in plasma lyso-Gb3 was measured at Week 8 in Fabry mice after treatment with 4D-310. 1E13 and 5E13 dose levels achieved reduction of plasma lyso-Gb3 by greater than 95%.

 

WT = wild type

KO = Fabry knock out mouse model

 

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Dose-dependent decrease in tissue Gb3 was measured at Week 8 in Fabry mice after treatment with 4D-310). Tissue Gb3 levels in Fabry mice approached that of normal mice in both heart and liver at 1E13 vg/kg and 5E13 vg/kg dose levels. Kidney Gb3 levels were reduced by approximately 75% in the 1E13 vg/kg group and levels approached normal in the 5E13 vg/kg dose group.

 

In studies with 4D-310 in vitro in human Fabry patient-derived cardiomyocytes, we observed dose-related AGA expression and function. Data in Fabry patient-derived cardiomyocytes demonstrated that treatment with 4D-310 results in efficient transduction and functional AGA protein production; AGA activity was observed both within Fabry cardiomyocytes and secreted into the media.

 

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Cardiomyocytes that were differentiated from Fabry patient-derived fibroblasts expressed functional secreted AGA enzyme after treatment with 4D-310.

 

MOI = multiplicity of infection

n.s. = not significant

NT = not treated

We performed a dose-ranging toxicity and biodistribution study in NHPs. Doses of 3E12, 1E13 and 5E13 vg/kg were well-tolerated and resulted in AGA activity concentrations in blood equal to 1.5-fold, 3.4-fold and 70-fold higher than pretreatment blood levels, respectively, within 14 days after treatment. NHPs used in this study were healthy and had normal baseline levels of AGA activity. No meaningful toxicity was noted clinically or with blood testing. Histopathology assessments were normal. Tissue analyses demonstrated dose-related 4D-310 genome delivery, RNA expression and AGA activity throughout the heart, especially within the left ventricle which is the key target tissue; AGA expression and enzymatic activity were also demonstrated within the kidney.

Delivery (genomes) and transduction (mRNA) were consistently measured throughout organs important to the management of Fabry disease in all NHPs treated with 4D-310. The number of positive tissue samples within NHPs across all three dose levels are indicated below.

 

 

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Median plasma AGA activity in NHPs after treatment with 4D-310 was measured to be approximately 70-fold, 3.4-fold and 1.5-fold higher than baseline at 8 weeks after treatment with 4D-310 at 5E13, 1E13 and 3E12 vg/kg doses, respectively. Average plasma AGA activity levels for these time points are presented below.

 

 

*

One NHP in the low dose cohort has been excluded from the dataset as a positive statistical outlier as it exhibited AGA activity that was 66 to 124 standard deviations higher than the average of other NHPs treated with low dose 4D-310.

Tissue AGA activity was measured in key organs in healthy NHPs, with normal baseline AGA activity levels, after treatment with 4D-310 at low, medium and high doses. Below are data for tissues which are most important to the management of Fabry disease.

 

 

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IV delivery of 4D-310 in NHPs was associated with AGA enzyme detection (brown) by immunohistochemistry in the heart, kidneys and liver at low and high dose. Illustrative images below highlight transduction of cardiomyocytes at 5E13 vg/kg dose.

 

Clinical Development: Phase 1/2 Clinical Trial

Our Phase 1/2 clinical trial is open at two sites in the United States. GMP-grade clinical trial material has been produced and released by 4DMT for use in patients on this trial, and we have an open and active IND for 4D-310. We expect to enroll early onset classic Fabry disease patients initially, and eventually to also enroll severely affected late-onset patients, including those with cardiomyopathy. The primary objectives of this trial are to evaluate the safety and maximum-tolerated dose of 4D-310. Secondary objectives include biomarker assessments of plasma AGA activity and markers of biologic activity in the heart, including cardiac MRI. We expect to report initial clinical data from this trial in 2021.

Pulmonology Therapeutic Area

Introduction

We are developing product candidates to treat lung diseases. Our targeted and evolved vector, A101, is used in all of our pulmonology disease product candidates and was invented for aerosol delivery, leading to transgene expression throughout all regions of the lung airways and alveoli, as well as resistance to pre-existing antibodies in the human population. We believe that this modular product approach, utilizing A101 for multiple product candidates by switching the therapeutic transgene insert, will help inform the clinical development of subsequent product candidates using the same vector.

Our first pulmonology product candidate is 4D-710 for cystic fibrosis lung disease. This IND candidate has completed a non-GLP dose-ranging toxicology and biodistribution testing study in NHPs by aerosol delivery. No notable adverse effects were reported, and widespread biodistribution and transgene expression were observed throughout all lung segments tested in all NHPs. We have initiated an IND-enabling GLP toxicology and biodistribution study in NHPs. We expect to initiate a Phase 1/2 clinical trial for 4D-710 in the second half of 2021.

4D-710 for Cystic Fibrosis Lung Disease

Disease Background, Unmet Medical Need and Target Patient Population

Cystic fibrosis is the most common fatal inherited disease in the United States and results from mutations in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. Cystic fibrosis

 

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causes impaired lung function, inflammation and bronchiectasis and is commonly associated with repeat and persistent lung infections due to the inability to clear thickened mucus from the lung, often resulting in frequent exacerbations and hospitalizations and eventual end-stage respiratory failure. There is no cure for cystic fibrosis, and the median age of death for patients is approximately 40 years in developed countries. Cystic fibrosis is considered a rare, or orphan, disease by both the FDA and the EMA. According to the Cystic Fibrosis Foundation, more than 30,000 people in the United States and more than 70,000 people worldwide are living with cystic fibrosis, and approximately 1,000 new cases of cystic fibrosis are diagnosed in the United States each year. Patients with cystic fibrosis require lifelong treatment with multiple daily medications, frequent hospitalizations and, ultimately, lung transplants in some end-stage patients. The quality of life for cystic fibrosis patients is compromised as a result of spending significant time on self-care every day and frequent outpatient doctor visits and hospitalizations.

Until recently, approved therapies to treat cystic fibrosis patients were only designed to treat the symptoms of cystic fibrosis, for example by preventing and controlling infections that occur in the lungs, rather than addressing the underlying cause of the disease. Accordingly, antibiotics are frequently used along with mucus-thinning drugs.

More recently, a new class of drugs called correctors and modulators target CFTR for patients with certain gene mutations. Several therapies from Vertex Pharmaceuticals Inc. have been approved for marketing in the United States and the European Union based on their ability to improve lung function in genetically defined subsets of cystic fibrosis patients. In 2019, the FDA approved triple drug therapy with Trikafta (elexacaftor/ivacaftor/tezacaftor), which Vertex believes would be applicable for up to 90% of cystic fibrosis patients, leaving at least 10% with no CFTR-targeted options. While these therapies improve lung function, they fall short of restoring it to the normal range in most patients, and these chronic therapies require daily dosing for the patient’s lifetime. In addition, the existing cystic fibrosis drugs have been associated with tolerability issues, thus limiting their use.

We believe there is a clinical need and market opportunity for a durable aerosolized therapy, delivered by breath-actuated nebulizer, that can restore normal CFTR function across all cystic fibrosis patient subgroups, including patients who are receiving combination CFTR-modulator therapies and/or do not have appreciable CFTR protein expression and are therefore not amenable to CFTR modulators. We expect to explore single agent therapy with 4D-710 initially in patients who are not amenable to CFTR modulators (estimated to include approximately 10% of all cystic fibrosis patients), and to explore single agent or combination therapy with CFTR modulators for the remaining approximately 90% of cystic fibrosis patients.

Our Solution

We are developing 4D-710 for the treatment of a broad range of cystic fibrosis patients independent of their specific CFTR mutation. 4D-710 is designed for efficient single dose aerosol delivery to the proximal and medial airways and alveoli, subsequent mucus barrier penetration, lung epithelial cell transduction, and resistance to pre-existing antibodies in humans. The intended result is to achieve CFTR expression within lung airway epithelial cells for correction of cystic fibrosis lung disease. 4D-710 is comprised of our targeted and evolved vector, A101, and a codon-optimized version of a synthetic truncated CFTR transgene deltaR-CFTR, which we refer to as microCFTR. microCFTR is a construct that retains the most critical functional components of the full-size CFTR gene and is small enough to fit within AAV vector packaging constraints.

We believe 4D-710 has the potential to treat a broad range of cystic fibrosis patients independent of their specific CFTR mutation. Initially we plan to focus on the approximately 10% of all patients who are not amenable to existing medicines targeting the CFTR protein as we believe these patients have

 

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the highest unmet medical need. In patients with CFTR mutations that are amenable to modulator medicines, while therapies demonstrate improvements in lung function, these modulators do not restore normal lung function in most patients. Further, these chronic therapies require daily dosing for the patient’s lifetime. We therefore expect to eventually develop 4D-710 in this patient population, as a single agent and/or in combination with these CFTR modulator small molecule medicines.

We have funding and an on-going research and development collaboration with the Cystic Fibrosis Foundation for the development of 4D-710.

Competition and Differentiation: AAV Gene Therapy for Target Disease

A number of biotechnology companies have pursued gene therapy solutions to treat cystic fibrosis. We believe these prior attempts to deliver AAV gene therapy to the lungs of cystic fibrosis patients have failed due to an inability of conventional AAV vectors to penetrate through the lung mucus barrier and transduce lung cells efficiently. Further, we believe antibody neutralization of AAV likely also played a role in the lack of significant efficacy, as the mucosal immune system actively transports large quantities of antibodies into all mucus secretions, including the lung mucosa.

While a number of companies are currently pursuing other gene therapy solutions utilizing liposomes, lentivirus or conventional AAV vectors, these product candidates are in early stages of development. Moreover, they are not, to our knowledge, comprised of AAV vectors evolved in NHPs for aerosol delivery diffusely throughout the lung airways and alveoli. In addition, we believe these products were not designed for resistance to pre-existing antibodies to conventional AAVs, which is potentially a key requirement for successful delivery in the lung. As a result, to our knowledge, 4D-710 is the only AAV gene therapy product candidate in development designed specifically with a vector selected for aerosol delivery in NHPs, including humans, and with resistance to antibodies in the human population.

We believe 4D-710 has the potential to be differentiated from approved agents, and those in clinical development to our knowledge, on the basis of four design features:

 

1.

Corrective mechanism-of-action:    An aerosol dose of 4D-710 is designed to result in high levels of the CFTR protein directly within target cells lining the airway and alveoli. 4D-710 comprises a targeted and evolved vector invented for aerosol delivery, mucus barrier penetration and transduction of epithelial cells within the airways and alveoli of NHPs and humans.

 

2.

One-time therapy:    Unlike CFTR-targeted small molecules that require daily dosing for a patient’s entire life, 4D-710 is designed for single or significantly less frequent dosing.

 

3.

CFTR mutation-independent efficacy:    Unlike CFTR-targeted small molecules that are only effective against specific mutations, 4D-710 is designed to be used in cystic fibrosis patients with any mutation, including in the approximately 10% of patients who are not amenable to standard medical therapy.

 

4.

Resistance to AAV antibodies:    Unlike conventional AAV vectors, which are sensitive to anti-AAV antibody inhibition, 4D-710 utilizes A101, a vector invented for resistance to human antibody inhibition.

Preclinical Proof-of-Concept Study with Evolved AAV for Aerosol Delivery in the Cystic Fibrosis Pig Model

Our co-founder Dr. Schaffer and his academic colleagues conducted preclinical proof-of-concept studies for utilizing directed evolution to discover vectors for delivering a corrective CFTR gene

 

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construct to cystic fibrosis lung tissue in a large animal model of cystic fibrosis, and in a human cystic fibrosis patient lung tissue model. Building on these previous proof-of-concept studies, our product candidate 4D-710 will utilize a vector, A101, that was evolved and selected in NHPs, which we believe is more relevant for human use. The product was designed to package the same microCFTR transgene payload in this vector that was customized for use in humans.

Dr. Schaffer and his colleagues first demonstrated the potential to treat cystic fibrosis via aerosolized delivery of a targeted and evolved AAV vector (AAV2H22) in a pig model of cystic fibrosis. AAV2H22 was selected for highly efficient transduction of lung epithelial cells in pigs by conducting multiple rounds of directed evolution using aerosolized dosing in pigs. Aerosol delivery of microCFTR using the AAV2H22 vector resulted in CFTR expression in diseased pig lungs with expression patterns that resembled those observed in normal lungs from both pigs and humans. In addition to CFTR protein expression, AAV2H22-CFTR gene therapy also resulted in a significant increase in chloride ion transport compared to untreated controls as well as a reduction in bacterial colonies within the lungs of treated animals. Therefore, selection of an aerosol AAV vector in vivo in normal pigs led to the discovery of an AAV vector that was subsequently able to penetrate the thickened mucus barrier in the severe pig cystic fibrosis model.

 

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Illustrative images in the top panels below exhibit the pattern of microCFTR expression observed by Steines et al. in normal pigs, untreated cystic fibrosis pigs and cystic fibrosis pigs treated with AAV2H22 carrying the microCFTR transgene payload (also referred to as CFTR-deltaR; same transgene utilized in 4D-710, but different AAV vector). The study involved six healthy pigs, six untreated cystic fibrosis pigs and three AAV2H22.microCFTR-treated cystic fibrosis pigs. These animals are represented by the dots in each of the graphs in the bottom panels which illustrate the range of responses between animals, and the significant difference between treated and untreated cystic fibrosis pigs.

 

CFTRDR = MicroCFTR, Cystic Fibrosis transmembrane conductance regulator with removal of the R domain, a truncated version of the CFTR transgene engineered to fit within the payload size limitations of AAV

Cl-= chloride ion

I_sc = short circuit current, a measurement of Cl- movement through cell membranes

mA = microAmp

cm2 = square centimeter.

In addition, Dr. Schaffer and colleagues used directed evolution in an in vitro human organotypic air-liquid interface model of lung epithelium to select AAV2.5T, which we in-licensed with exclusive worldwide rights. In preclinical studies, AAV2.5T carrying microCFTR transduced human lung epithelial tissue and resulted in expression of functional protein as suggested by increased chloride ion transport as compared to untreated control.

We believe that these results demonstrate that a targeted and evolved vector can penetrate the mucus layer of diseased cystic fibrosis lungs and deliver functional CFTR protein in a well-validated large animal model of the disease, as well as in human cystic fibrosis patient-derived organotypic lung models.

 

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Preclinical Animal Model Pharmacology and Toxicology Studies

In our NHP study of a single aerosol delivered dose of 4D-710 at two different dose levels, treatment resulted in widespread distribution, CFTR transgene expression throughout both proximal and medial airways and alveoli. No meaningful inflammation or adverse findings were reported on in-life examinations, hematology or clinical chemistry analyses, or lung histology analyses. Ex vivo studies demonstrated highly significant resistance to neutralization by human pooled antibody preparations, with human IVIG pooled from over 1,000 individuals.

Delivery (genomes) and transduction (mRNA) were consistently measured throughout lung segments and samples in NHPs treated with 3E13 vg of aerosolized 4D-710. Number of positive tissue samples across three NHPs are indicated below.

 

Aerosol delivery of 4D-710 in NHPs was associated with microCFTR protein detection by IHC (brown) in the proximal (trachea) and medial (bronchi) airway and in alveoli at low and high dose. Illustrative images below highlight transduction of the NHP lung at the 3E13 dose.

 

We plan to perform pharmacology studies in human cystic fibrosis lung tissues ex vivo in order to evaluate the function of the microCFTR transgene product; this protein has previously been shown to have relatively normal functional activity in a similar model ex vivo.

Development Plan

We have initiated an IND-enabling GLP toxicology and biodistribution study of 4D-710 in NHP. We expect to initiate a Phase 1/2 clinical trial for 4D-710 in the second half of 2021.

 

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Competition

We are aware of several companies focused on developing gene therapies in various indications as well as companies addressing methods for modifying genes and regulating gene expression. We may also face competition from large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions with genetic medicine and other therapeutic approaches.

With respect to 4D-125 for the treatment of XLRP, we consider our most direct AAV gene therapy competitors to be as follows: Biogen Inc. (candidate administered by subretinal surgery in a Phase 2 clinical trial), Applied Genetic Technologies Corporation (candidate administered by subretinal surgery in a Phase 1/2 clinical trial), Janssen Pharmaceuticals Inc. / MeiraGTx Holdings Plc (candidate administered by subretinal surgery in a Phase 1/2 clinical trial).

With respect to 4D-110 for the treatment of choroideremia, we consider our most direct competitors to be as follows: Biogen Inc. (candidate administered by subretinal surgery in a Phase 3 clinical trial) and Spark Therapeutics, Inc., a wholly owned subsidiary of Roche Holdings AG (candidate administered by subretinal surgery in a Phase 1/2 clinical trial).

We consider our most direct competitors with respect to 4D-150 for the treatment of diabetic retinopathy and wet AMD to be Eylea (aflibercept) from Regeneron Pharmaceuticals Inc., which is the current wet AMD standard of care, and a combination of antibody-based programs including Lucentis and faricimab from Roche, KSI-301 from Kodiak Sciences Inc., and OPT-302 from Opthea Limited, and gene-therapy based programs including ADVM-022 from Adverum Biotechnologies and RGX-314 from RegenxBio Inc., which are both AAV-based programs in Phase 1 studies. In addition, Roche is developing the Port Delivery System with Lucentis for use in patients with wet AMD.

We consider our most direct competitors with respect to 4D-310 for the treatment of Fabry disease to be Amicus Therapeutics, which has Galafold (migalastat) approved as a small molecule chaperone for specific mutations, and several gene therapy companies including AvroBio Inc., which is in Phase 3 development of an ex-vivo lenti-AGA based program, Freeline Therapeutics Holdings Plc, which is in Phase 1 development of AAVS2-based FLT-190, and Sangamo, which is in Phase 1 development of AAV2/6-based ST-920. Other competitors include Sanofi Genzyme, Takeda Pharmaceutical Company Limited and Protalix BioTherapeutics, all of which either commercialize or develop enzyme replacement therapy for the treatment of Fabry.

We consider our most direct competitors with respect to 4D-710 for the treatment of cystic fibrosis to be Vertex, which has several approved CFTR modulators, as well as other gene therapy companies in preclinical development of cystic fibrosis programs, including Krystal Biotech Inc., Abeona Therapeutics Inc., Spirovant Sciences Inc. and Editas Medicine Inc.

Manufacturing

CMC Strategy

In order to fulfill our strategy to maximize the robustness and internal control of our manufacturing processes from discovery and process development through to clinical-grade cGMP manufacturing, we have designed and are continually developing and scaling a robust in-house manufacturing platform for both GMP and non-GMP manufacturing. While many companies in the AAV gene therapy field in-license clinical trial material or manufacturing technologies from other companies or academic manufacturing centers, in contrast, our manufacturing processes were developed internally using internal technology transfers from our own process development labs. Our current in-house manufacturing capabilities include GMP manufacturing (upstream, downstream and fill/finish),

 

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production capabilities for IND-enabling GLP toxicology studies and research candidate production. We intend to further scale these capabilities to support later stage clinical programs and indications requiring more patients and/or higher intravenous doses. In addition to our internal activities, we also collaborate with CMOs (Contract Manufacturing Organizations) such as Catalent.

Current Good Manufacturing Practices (cGMP) Capabilities

Our team has extensive experience with the manufacturing and analytical testing of numerous unique AAV capsids. Our team has internally manufactured approximately 90 unique AAV vectors, including both proprietary evolved 4DMT capsid variants and naturally occurring capsids. Our team has manufactured over 160 total lots of AAV vectors for research or clinical use. We have in-house cGMP manufacturing capabilities for clinical trial material production. Our manufacturing team has completed and released multiple lots of clinical trial material for our three product candidates in clinical development. This total also includes 13 lots of product candidate material for GLP toxicology and biodistribution studies. Leveraging internal testing capabilities in addition to qualified contract testing laboratories, we fully test and release our GLP and GMP lots for use in toxicology and clinical trials, respectively. We have developed and qualified assays for characterization, in-process testing and release and stability testing of our internally and externally manufactured proprietary AAV vectors.

Process Development Capabilities

We use robust, scalable and transferable manufacturing unit operations throughout both the vector characterization process and product development, which are both platform-specific and product-specific. The upstream manufacturing step involves triple plasmid transfections in an adherent HEK293 mammalian production cell line. Downstream manufacturing steps for purification and concentration include multiple orthogonal column chromatography steps and tangential flow filtration. The downstream purification columns used in our process are from stable sources including General Electric. Using internally developed manufacturing processes and testing, we characterize our novel capsids and payloads. In addition, leveraging internal expertise and capabilities, we package and test our novel vectors with payloads using internally developed manufacturing processes.

Manufacturing Facilities

Our manufacturing facilities are on site at company headquarters in Emeryville, California and include process development labs, an analytical development lab, and a cGMP manufacturing facility. These manufacturing facilities are also designed for production of material for GLP toxicology and biodistribution studies. Our manufacturing facility is approximately 3,200 square feet, of which approximately 1,500 square feet is dedicated to product manufacturing. For larger scale production for Phase 1 to Phase 3 clinical trials as well as potentially commercial launch materials, we intend to build a second cGMP facility. In this new facility, we expect to utilize large-scale bioreactors that are designed to enable higher titer clinical trial material lots as well as commercial launch materials. These manufacturing facilities are also designed for production of material for GLP toxicology and biodistribution studies.

Manufacturing Team

Our team of approximately 30 highly trained individuals is led by our Chief Technical Officer and Chief Operating Officer, Dr. Kamal, and includes eight Ph.D. scientists. Collectively, they have significant experience in viral vector manufacturing, chemistry-manufacturing-controls (CMC), regulatory affairs, analytical and process development, and quality assurance and controls. Our team also has experience prior to 4DMT with manufacturing multiple viral vectors from preclinical studies through to multiple Phase 3 trials. For example, Dr. Kamal helped to write and compile the AAV gene

 

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therapy BLA for Zolgensma (Novartis), the first AAV gene therapy approved for intravenous administration in infants and babies.

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, manufacturing and process discoveries, and other know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development and implementation of our business. We also rely on trade secrets, know-how, continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position.

Our product and lead optimization candidates were discovered by us utilizing our proprietary technology. We have filed several non-provisional and provisional patent applications, all owned by us, relating to our product and lead optimization candidates in the United States, certain foreign countries, and the World Intellectual Property Organization that are directed to compositions-of-matter, dosage unit forms, methods-of-treatment and medical use. We have also licensed several non-provisional patent applications, granted patents and international patent applications relating to our product and lead optimization candidates from U.C. Berkeley.

As of September 30, 2020, our solely owned patent portfolio includes three pending U.S. non-provisional applications, seventy-six pending foreign applications, two of which have been allowed, six granted foreign patents. We expect that United States and European patents and the patents, if issued, would expire between May 2037 and November 2038, excluding any additional term from patent term adjustment or patent term extension if appropriate maintenance and other governmental fees are paid. Additional patent term for the presently issued or later issued U.S. patents may be awarded as a result of the patent term extension provision of the Hatch-Waxman Amendments of 1984. In the European Union member countries, a supplementary protection certificate, if obtained, provides a maximum five years of market exclusivity. Our solely owned patent portfolio also includes five pending U.S. provisional patent applications.

In other jurisdictions (currently, Australia, Bahrain, Brazil, Canada, Chile, China, Colombia, Costa Rica, Egypt, India, Indonesia, Iran, Israel, Japan, Korea, Kuwait, Malaysia, Mexico, New Zealand, Oman, Peru, Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Thailand, United Arab Emirates, Ukraine and Vietnam), granted patents, and any patents issued on pending applications, where applicable, relating to our product and lead optimization candidates, including composition of matter, dosage unit form, method-of-treatment and medical use, are expected to expire between May 2037 and November 2038, if the appropriate maintenance, renewal, annuity, and other government fees are paid. These patents and patent applications (if applicable), depending on the national laws, may benefit from extension of patent term in individual countries if regulatory approval of any of our product or lead optimization candidates is obtained in those countries. For example, in Japan, the term of a patent may be extended by a maximum of five years in certain circumstances.

As of September 30, 2020, our in-licensed patent portfolio includes four granted U.S. patents and seven granted foreign patents; each of these patents is expected to expire between June 2024. and June 2029. Our in-licensed patent portfolio also includes four pending U.S. non-provisional patent applications and fourteen pending foreign patent applications. We expect that United States and European patents, if issued from applications in our in-licensed portfolio would expire between June 2024 and June 2038.

 

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In other jurisdictions (currently, Australia, Brazil, Canada, China, France, Germany, Great Britain, Hong Kong, India, Italy, Japan, Korea and Mexico), granted patents issued on pending applications, where applicable, relating to our product and lead optimization candidates, including composition of matter and various other patents, including dosage unit form, method-of-treatment and medical use patents are expected to expire between June 2024 and June 2038, if the appropriate maintenance, renewal, annuity, and other government fees are paid. These patents and patent applications (if applicable), depending on the national laws, may benefit from extension of patent term in individual countries if regulatory approval of any of our product or lead optimization candidates is obtained in those countries. For example, in Japan, the term of a patent may be extended by a maximum of five years in certain circumstances.

Individual patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued for regularly filed applications in the United States are effective for 20 years from the earliest effective non-provisional filing date. In addition, in certain instances, a patent term can be extended to recapture a portion of the U.S. Patent and Trademark Office (USPTO) delay in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. However, as to the FDA component, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. The actual protection afforded by a patent varies on a product by product basis, from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

We also protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants, scientific advisors or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Our commercial success will also depend in part on not infringing the proprietary rights of third parties. It is uncertain whether the issuance of any third-party patent would require us to alter our development or commercial strategies, alter our drugs or processes, obtain licenses or cease certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize our future drugs may have a material adverse impact on us.

Strategic Collaborations

Collaboration and License Agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.

In November 2017, we entered into a Collaboration and License Agreement (the Roche Agreement), with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., collectively referred to as Roche. Under the Roche Agreement, we granted Roche an exclusive, sublicenseable, worldwide license under certain intellectual property rights to research, develop, make, use, import, export, and sell products and constructs using our proprietary AAV vectors to treat ophthalmological diseases and disorders, excluding treatment and prevention of cancer and central nervous system conditions (but not retinal nerves) and delivery of DNA-directed RNA interference (the Roche Field).

 

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Under the terms of the Roche Agreement, we and Roche will engage in collaboration programs to develop one or more products, and choroideremia has been designated as the first collaboration program. We are primarily responsible for the initial development of such collaboration programs and Roche agreed to reimburse us for our development costs and expenses in accordance with the terms of the agreement. Upon completion of such initial development, we will transfer data, know-how and regulatory filings to the applicable collaboration program to Roche and Roche will be responsible for the development and commercialization of such program at its own cost and expense.

Subject to the terms of the Roche Agreement, either party may also develop one or more programs in the Roche Field independent of the other party at such party’s own cost and expense. Roche has an option to elect one or more of the programs that we may independently develop under the agreement, including XLRP, which we have designated as our initial independent program. If Roche exercises its option, and subject to its payment of the applicable option exercise fee, we will transfer our data, know-how and regulatory filings related to such programs. If Roche does not exercise its option within the applicable option period, we will have the sole right to commercialization of such product. Each party agreed to various diligence obligations under the agreement.

Pursuant to the Roche Agreement, we received an upfront payment from Roche of $21.0 million. In addition, we are entitled to contingent payments including (i) $1.0 million for each Roche nominated product beyond the first three, (ii) up to $30.0 million upon exercise of the option to convert a product we nominated and developed prior to pivotal clinical studies, (iii) up to $223.0 million in specified development milestones in connection with the licensed products, $86.0 million of which relate to choroideremia; and (iv) sales-based milestones of up to $123.0 million based on worldwide calendar year net sales in connection with licensed products. On a product-by-product basis, Roche will also be required to pay us tiered royalties for worldwide calendar year net sales of products at percentages ranging from the mid-to high-single digit to mid-teens, in each case subject to reductions in accordance with the terms of the agreement. The royalties are payable on a product-by-product and country-by-country basis until the later of ten years after the date of first commercial sale of such product in such country and the expiration of the last-to-expire licensed patent right covering such product, which will expire on May 12, 2037.

The Roche Agreement will expire on the later of expiration of all payment obligations and the date when no products are actively developed by either party or both parties in accordance with the terms of the agreement. Either party may terminate the agreement in its entirety or on a country-by-country basis if the other party fails to cure its material breach within 90 days of receiving notice. Roche may terminate the agreement in its entirety, on a product-by-product basis or on a country-by-country basis upon 90 days’ prior written notice. If we terminate the agreement for Roche’s material breach or if Roche terminates the agreement without cause, the rights to the products generally revert back us. If we commercialize reverted products after such termination, we may be required to pay Roche tiered royalties for worldwide calendar year net sales of such products at percentages ranging from zero to the low-teens, in each case subject to reductions in accordance with the terms of the agreement. If Roche terminates the agreement for our material breach, Roche may retain its rights under the license that we grant to Roche under our intellectual property rights and Roche’s payment obligations will survive.

Collaboration and License Agreements with uniQure biopharma B.V.

In August 2019, we entered into an Amended and Restated Collaboration and License Agreement (the Amended and Restated uniQure Agreement) with uniQure biopharma B.V., now uniQure N.V. (uniQure), which amended and restated the Collaboration and License Agreement that we entered into with uniQure in January 2014.

 

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Under the Amended and Restated uniQure Agreement, we granted uniQure an exclusive, sublicenseable, worldwide license under certain of our intellectual property rights, and other rights, to research, develop, make, use, and commercialize pre-selected AAV capsid variants (Selected Variants), and compounds and products containing such Selected Variants, using our proprietary AAV technology for delivery of gene therapy constructs to cells in the central nervous system and the liver (the uniQure Field). uniQure is solely responsible, at its cost and expense, to develop and commercialize the compounds and products containing the Selected Variants in accordance with the terms of the Amended and Restated uniQure Agreement. We retain all rights to all other AAV capsid variants, and compounds and products containing such AAV capsid variants, in the uniQure Field.

Also in August 2019, we entered into a separate Collaboration and License Agreement with uniQure (Second uniQure Agreement). Under the Second uniQure Agreement, the parties agreed to research and develop new AAV capsid variants that are not Selected Variants (New Variants) using our proprietary AAV technology for delivery of transgene constructs that affect certain targets (uniQure Targets) in the uniQure Field. We are responsible for the research of the New Variants, and uniQure is responsible for the development and commercialization of a certain number of compounds and products containing New Variants, that affect the uniQure Targets (Licensed Products). We granted uniQure an exclusive, sublicenseable, worldwide license under certain of our intellectual property rights, and other rights, to research, develop, make, use, and commercialize the Licensed Products. We retain all rights to New Variants in the uniQure Field that affect targets other than the uniQure Targets. We also retain all rights to any new AAV capsid variants developed under the agreements that are not New Variants, and compounds and products containing such variants.

Under both the Amended and Restated uniQure Agreement and the Second uniQure Agreement, uniQure will be required to pay us royalties on worldwide annual net sales of licensed products at a mid-single digit percentage rate, subject to certain specified reductions. These royalties are payable on a product-by-product and country-by-country basis until the latest of ten years after the date of the first commercial sale of such product in such country, the expiration of the last-to-expire licensed patent right covering such product in such country (of which there are none), and the expiration of any applicable exclusivity granted by a regulatory authority in such country for such product (the uniQure Royalty Term). uniQure will also be required to pay us a portion of the amounts it receives for licensing or sublicensing to third parties our intellectual property rights licensed or other rights otherwise granted under the Amended and Restated uniQure Agreement, and a portion of the amounts it receives for licensing to third parties our intellectual property rights granted under the or the Second uniQure Agreement, each at a rate between mid-single digit to mid-twenties percentages, depending on the stage of development at which such third-party grant occurs.

Under both the Amended and Restated uniQure Agreement and the Second uniQure Agreement, under certain circumstances, we may propose to uniQure, and uniQure may grant to us, a non-exclusive right for us to develop and commercialize certain licensed products based on Selected Variants in the uniQure Field, or the New Variants in the uniQure Field to deliver transgene constructs that affect the uniQure Targets (4DMT Proposed Products). Pursuant to the Second uniQure Agreement, under certain circumstances, uniQure may propose to us, and we may grant to uniQuire a non-exclusive right for uniQure to develop and commercialize certain licensed products using any new AAV capsid variants developed under the agreement that are not New Variants in the uniQure Field to deliver transgene constructs that affect targets other than the uniQure Targets (uniQure Proposed Products). If either party obtains the rights to develop and commercialize a 4DMT Proposed Product or a uniQure Proposed Product, as applicable, such party will be required to pay the other party royalties on worldwide annual net sales of such products at a mid-single digit percentage rate, subject to specified reductions. These royalties will be payable on a product-by-product basis during the uniQure Royalty Term for such products. The party receiving such license will also be required to pay the other party a portion of the amounts that it may receive for licensing or sublicensing to third parties rights for

 

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such 4DMT Proposed Products or uniQure Proposed Products, as applicable, at a rate between mid-single digit to mid-twenties percentages depending on the stage of development at which the sublicense is granted.

Each of the Amended and Restated uniQure Agreement and the Second uniQure Agreement will expire on the expiration of all payment obligations of the parties under such agreement. Each party may terminate either agreement for the other party’s insolvency or bankruptcy. Each party may also terminate either agreement in its entirety in some circumstances or on an indication-by-indication basis if the other party fails to cure its material breach under the applicable agreement within 90 days of receiving notice, subject to an additional cure period in accordance with the terms of such agreement. uniQure may terminate either agreement upon 90 days’ prior written notice. In addition, uniQure may terminate the Second uniQure Agreement at any point prior to the first anniversary of the effective date if the joint research committee determines that it would be futile to continue the research program under the agreement, including if such committee determines that certain agreed-upon development success criteria will not be able to be met, or if we are not making bona fide efforts to achieve the mutually agreed timelines set forth in the research plan. If we terminate either agreement for uniQure’s material breach, insolvency or bankruptcy or if uniQure terminates either agreement for convenience or due to its determination of futility, the rights to the Selected Variants, and compounds and products containing such Selected Variants, or the uniQure New Variants, and compounds and products containing such uniQure New Variants, as applicable, generally revert back to us. If uniQure terminates either agreement for our material breach under the applicable agreement, insolvency or bankruptcy, uniQure may retain its rights to the intellectual property license grant under such agreement and uniQure’s payment obligations will survive.

Exclusive License and Bailment Agreements with The Regents of the University of California

In December 2013, we entered into two Exclusive License and Bailment Agreements (the UC Agreements) with The Regents of the University of California (the UC Regents). Under both UC Agreements, the UC Regents granted us an exclusive, sublicenseable license under certain patent rights to make, use, sell, offer to sell, and import products and services, and to practice methods in the United States and foreign countries where the licensed patent rights exist. The license grant under one UC Agreement is in all fields of use and the license grant under the other UC Agreement is in all fields of use, with the exception of the ophthalmic field. We agreed to certain general and specific diligence obligations under both UC Agreements in connection with the development, manufacture and sales of the licensed products, services and methods, in accordance with the terms of the UC Agreements.

Under each UC Agreement, we paid the UC Regents an upfront payment of $5,000. Further, at the closing of our Series A financing that was a qualified financing pursuant to the UC Agreements, we issued 311,812 shares of our common stock in aggregate under both agreements. Under each UC Agreement, we agreed to pay the UC Regents a specified annual license maintenance fee in each year in which we do not owe royalties to the UC Regents. We also agreed to pay the UC Regents a mid-teens to mid-twenties percentage range of any consideration, including royalties (Sublicense Consideration), we receive for the grant of a sublicense under the licensed patent rights under each UC Agreement, with the consideration payable to the UC Regents to not exceed such percentage range in the aggregate under both UC Agreements for the same sublicense grant. We may reduce any Sublicense Consideration if we sublicense any of our own or third-party patent rights under the sublicense grant based on the relative value of the sublicensed patents. Upon the achievement of specified development and regulatory milestones by the first licensed product or method, we will be required to pay the UC Regents up to $3.1 million under each UC Agreement. We will also be required to pay the UC Regents a royalty on net sales of licensed products, services and methods covered by the patents licensed under the UC Agreements at a percentage in the low single-digit percentage rate, subject to certain specified reductions. Under the UC Agreements, a specified minimum annual royalty

 

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will also be due to the UC Regents beginning the first calendar year after the year in which any net sales of a licensed product first occur, such minimum royalty amount to increase on an annual basis, but not to exceed $0.1 million in the aggregate under both UC Agreements. Under each UC Agreement, royalties are payable until the expiration of the last-to-expire licensed patent right covering the licensed product, service or method, which will expire on June 28, 2038 (the UC Royalty Term). Milestone, royalty and sublicense revenue payments will be due to the UC Regents under only one of the UC Agreements covering any licensed product, regardless of the number of patents covering a given licensed product.

Each UC Agreement will expire at the end of the UC Royalty Term. The UC Regents may terminate each of the UC Agreements if we fail to cure a breach of such UC Agreement within 60 days of notice. If we fail to meet our diligence obligations, the UC Regents has the right to either terminate the UC Agreement or to reduce our exclusive license to a non-exclusive license, after giving us 60 days to cure or request arbitration. We may terminate either UC Agreement at-will in its entirety or with respect to any portion of the licensed patent rights upon 90 days prior written notice. Each UC Agreement will terminate immediately if we or a third party on our behalf files a claim asserting that the licensed patent rights are invalid or unenforceable.

Cystic Fibrosis Foundation

In 2016, we received a grant from Cystic Fibrosis Foundation (CFF) in the amount of $525,000 to support discovery and development of product candidates to treat cystic fibrosis. The grant was increased to $3.5 million in 2017 and was subsequently amended to allocate the $3.5 million to different milestones. The grant provides for repayment to CFF upon the commercialization of any product developed under the grant. The repayment is capped at nine times multiple of the grant actually paid to us.

In April 2020, CFF made a $10.0 million investment in our Series C redeemable convertible preferred stock financing. In return for the investment, CFF received shares of our Series C redeemable convertible preferred stock, and we and CFF entered into a Funding Agreement (the Funding Agreement). Pursuant to the terms of the Funding Agreement, we agreed to use the proceeds of the CFF investment to support development of 4D-710, our product candidate for the treatment of cystic fibrosis, and to match CFF’s support for the product candidate. Upon acceptance by the FDA of an IND for 4D-710 (Acceptance), CFF will make an additional $4.0 million investment (the Subsequent Investment). If our common stock is publicly traded at the time of Acceptance, CFF will receive shares of common stock priced at the 10-day average reported closing price of our common stock for the date of Acceptance. If our common stock is not publicly traded at the time of Acceptance, CFF will receive a convertible note, which shall be convertible into a number of shares issued in our next private preferred stock financing or common stock if an IPO occurs after Acceptance and prior to the next private preferred stock financing. We have agreed to use the additional $4.0 million from the Subsequent Investment to support development of 4D-710 and to match CFF’s support of the product candidate.

Government Regulation

The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biological product candidates such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals

 

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and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

U.S. Biologics Regulation

In the United States, biological products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, and other federal, state, local and foreign statutes and regulations. The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:

 

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completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s GLPs;

 

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submission to the FDA of an IND which must become effective before clinical trials may begin;

 

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approval by an IRB or ethics committee at each clinical site before the trial is commenced;

 

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performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose;

 

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preparation of and submission to the FDA of a BLA after completion of all pivotal clinical trials;

 

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satisfactory completion of an FDA Advisory Committee review, if applicable;

 

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a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;

 

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satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices (GCPs); and

 

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FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States.

Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical trials. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

In addition to the submission of an IND to the FDA, under the National Institutes of Health, or NIH, Guidelines for Research Involving Recombinant DNA Molecules (NIH Guidelines), supervision of certain human gene transfer trials may also require evaluation and assessment by an institutional biosafety committee (IBC), a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to the public health or the environment, and such assessment

 

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may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

 

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Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

 

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Phase 2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

 

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Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may also be made a condition to approval of the BLA.

Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP. The manufacturing process must be capable of consistently producing quality batches of the product

 

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candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Submission and Review by the FDA

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. The submission of a BLA requires payment of a substantial user fee to FDA, and the sponsor of an approved BLA is also subject to an annual program fee. A waiver of user fees may be obtained under certain limited circumstances. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product 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 FDA 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. Once a BLA has been accepted for filing, the FDA’s goal is to review standard applications within ten months after the filing date, or, if the application qualifies for priority review, six months after the filing date. Priority review designation will direct overall attention and resources to the evaluation of applications for products that, if approved, would be significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. In both standard and priority reviews, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may also convene an advisory committee to provide clinical insight on application review questions. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions regarding approval.

Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP 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 sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter (CRL). An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A CRL will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the

 

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data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy (REMS), to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may also require one or more Phase IV post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.

Expedited Development and Review Programs

A sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of new drugs and biological products that meet certain criteria. Specifically, new biological products are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a fast track product has opportunities for more frequent interactions with the applicable FDA review team during product development and, once a BLA is submitted, the product candidate may be eligible for priority review. For a fast track product, the FDA may consider sections of the BLA for review on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable and the sponsor pays any required user fees upon submission of the first section of the application. A fast track designated product candidate may also qualify for priority review, under which the FDA sets the target date for FDA action on the BLA at six months after the FDA accepts the application for filing.

A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product candidate can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.

In 2017, the FDA established a new regenerative medicine advanced therapy (RMAT) designation as part of its implementation of the 21st Century Cures Act. The RMAT designation

 

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program is intended to fulfill the 21st Century Cures Act requirement that the FDA facilitate an efficient development program for, and expedite review of, any drug or biologic that meets the following criteria: (i) the drug or biologic qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (ii) the drug or biologic is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (iii) preliminary clinical evidence indicates that the drug or biologic has the potential to address unmet medical needs for such a disease or condition. RMAT designation provides all the benefits of breakthrough therapy designation, including more frequent meetings with the FDA to discuss the development plan for the product candidate and eligibility for rolling review and priority review. Product candidates granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of clinical trial sites, including through expansion of trials to additional sites.

Any marketing application for a drug or biologic submitted to the FDA for approval, including a product candidate with a fast track designation, RMAT designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval. A product candidate is eligible for priority review if it is designed to treat a serious or life-threatening disease or condition, and if approved, would provide a significant improvement in safety or effectiveness compared to available alternatives for such disease or condition. For original BLAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (as compared to ten months under standard review). Under the accelerated approval program, the FDA may approve a BLA on the basis of either 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. Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the biologic’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. FDA may withdraw approval of a drug or indication approved under accelerated approval on an expedited basis if, for example, the sponsor fails to conduct required post-marketing trials in a timely manner or if such trials fail to verify the predicted clinical benefit of the product.

Fast Track designation, priority review, accelerated approval, RMAT designation and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process. 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 decide that the time period for FDA review or approval will not be shortened.

Orphan Drug Designation and Exclusivity

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

 

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If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease 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, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application user fee.

A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if the second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. We have obtained orphan drug designation for 4D-110 for the treatment of Chroideremia and for 4D-310 for the treatment of Fabry disease, and we plan to seek additional orphan drug designations for some or all of our product candidates in specific orphan indications in which there is a medically plausible basis for the use of these products.

Post-Approval Requirements

Biologics are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

 

•

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

 

•

fines, warning letters, or untitled letters;

 

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•

clinical holds on clinical studies;

 

•

refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

 

•

product seizure or detention, or refusal to permit the import or export of products;

 

•

consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

 

•

mandated modification of promotional materials and labeling and the issuance of corrective information;

 

•

the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or

 

•

injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

Biosimilars and Exclusivity

The Affordable Care Act, signed into law in 2010, includes a subtitle called the BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and

 

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well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.

The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.

Other Healthcare Laws

Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such laws include, without limitation, U.S. federal and state anti-kickback, fraud and abuse, false claims, pricing reporting, data privacy and security, and transparency laws and regulations as well as similar foreign laws in the jurisdictions outside the U.S. For example, the federal Anti-Kickback Statute prohibits, among other things, individuals or entities from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act and the civil monetary penalties statute. The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit, among other things, any individual or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), created additional federal civil and criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation. The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to payments or other transfers of value made to physicians, certain other health care professionals beginning in 2022, and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.

Similar state and local laws and regulations may also restrict business practices in the pharmaceutical industry, such as state anti-kickback and false claims laws, which may apply to business practices, including but not limited to, research, distribution, sales and marketing

 

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arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by patients themselves; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information or which require tracking gifts and other remuneration and items of value provided to physicians, other healthcare providers and entities; state and local laws that require the registration of pharmaceutical sales representatives. Violation of any of such laws or any other governmental regulations that apply may result in significant penalties, including, without limitation, administrative civil and criminal penalties, damages, disgorgement fines, additional reporting requirements and oversight obligations, contractual damages, the curtailment or restructuring of operations, exclusion from participation in governmental healthcare programs and imprisonment.

Data Privacy and Security Laws

Pharmaceutical companies may be subject to domestic and foreign privacy, security and data breach notification laws, which are rapidly evolving in many jurisdictions worldwide. In the United States, federal and state health information laws may govern the collection, use, disclosure and protection of health-related and other personal information. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. State laws may be more stringent, broader in scope or offer greater individual rights with respect to protected health information (PHI) than HIPAA and state laws may differ from each other, which may complicate compliance efforts. For example, California enacted the California Consumer Privacy Act (the CCPA) on June 28, 2018, which went into effect on January 1, 2020. The CCPA gives California residents expanded rights regarding their personal information. Although CCPA contains certain exemptions for health-related information, including PHI, uncertainties over how it applies and how our treatment of non-PHI personal information may be interpreted mean that the CCPA may ultimately increase our compliance costs and potential liability. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by the Department of Health and Human Services (HHS) may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.

European Union member states, the United Kingdom, Switzerland and other jurisdictions have also adopted data protection laws and regulations, which impose significant compliance obligations. In the European Economic Area (EEA) and the United Kingdom, the collection and use of personal data, including clinical trial data, is governed by the provisions of the General Data Protection Regulation (GDPR). The GDPR became effective on May 25, 2018, and imposes strict requirements for processing the personal data of individuals within the EEA and the United Kingdom. The GDPR, together with national legislation, regulations and guidelines of the European Union and EEA member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. In particular, these obligations and restrictions concern the consent of the individuals to whom the personal data relates, the information provided to the individuals, the transfer of personal data out of the EEA or the United Kingdom, security breach notifications, security and confidentiality of the personal data and imposition of substantial potential

 

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fines for breaches of the data protection obligations. The law is also developing rapidly and, in July 2020, the Court of Justice of the European Union limited how organizations could lawfully transfer personal data from the EU to the U.S. European data protection authorities may interpret the GDPR and national laws differently and impose additional requirements, which add to the complexity of processing personal data in or from the EEA or United Kingdom. Guidance on implementation and compliance practices are often updated or otherwise revised.

Coverage and Reimbursement

Sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors. Significant uncertainty exists as to the coverage and reimbursement status of any newly approved product, particularly for gene therapy products where the Centers for Medicare & Medicaid Services (CMS) and other third-party payors in the United States have not yet established a uniform policy of coverage and reimbursement. Therefore, decisions. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. One third-party payor’s decision to cover a particular product does not ensure that other payors will also provide coverage for the product. As a result, the coverage determination process can require manufacturers to provide scientific and clinical support for the use of a product to each payor separately and can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization.

In addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and services. The U.S. government and state legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Third-party payors are more and more challenging the prices charged, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product.

In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of us placing the medicinal product on the market. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect the ability for manufacturers to sell products profitably.

 

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Healthcare Reform

In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively the ACA) was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States. The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement adjustments and fraud and abuse changes. Additionally, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; required collection of rebates for drugs paid by Medicaid managed care organizations; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs, implemented a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; expanded eligibility criteria for Medicaid programs; created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare & Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, in 2017, Congress enacted the Tax Cuts and Jobs Act, which eliminated the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas (the Texas District Court Judge), ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case, although it is unclear when a decision will be made or how the Supreme Court will rule. It is also unclear how other efforts to challenge, repeal or replace the ACA will impact the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers, which will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through December 31, 2020, absent additional congressional action.

Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Additionally, the Trump administration’s budget proposal for the fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Further, on July 24, 2020, the Trump administration announced four executive orders related to prescription drug pricing that attempt

 

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to implement several of the administration’s proposals. While some existing measures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

Individual states in the United States have also become increasingly active in implementing 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, mechanisms to encourage importation from other countries and bulk purchasing. Furthermore, there has been increased interest by third-party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.

Employees and Human Capital

As of September 30, 2020, we had 78 full-time employees. Of these employees, 56 are engaged in research and development. Our employees are not represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.

Facilities

We lease approximately 51,000 square feet of office and laboratory space in Emeryville, California under leases that expire in September 2026 and December 2029. We believe that our facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms, if required.

Legal Proceedings

We are not currently a party to any material legal proceedings. We may, however, in the ordinary course of business face various claims brought by third parties and we may, from time to time, make claims or take legal actions to assert our rights, including intellectual property rights as well as claims relating to employment matters and the safety or efficacy of our products. Any of these claims could subject us to costly litigation and, while we generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage, may be inadequately capitalized to pay on valid claims, or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our operations, cash flows and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business.

 

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MANAGEMENT

Executive Officers and Directors

The following table sets forth information regarding our executive officers and directors as of November 13, 2020:

 

Name		Age				Position(s)
Executive Officers and Employee Directors
David Kirn, M.D.			58			Chief Executive Officer and Director
August Moretti			70			Chief Financial Officer
Theresa Janke			46			Chief Strategy Officer
Peter Francis, M.D., Ph.D.			52			Chief Scientific Officer
Fred Kamal, Ph.D.			58			Chief Operating Officer and Chief Technical Officer
Robert Fishman, M.D.			58			Chief Medical Officer
Non-Employee Directors
John F. Milligan, Ph.D.			59			Executive Chairman
William Burkoth, MBA(1)(2)			44			Director
Jacob Chacko, M.D., MBA(2)			42			Director
Susannah Gray, MBA(1)(2)			60			Director
Nancy Miller-Rich(1)(4)			61			Director
David Schaffer, Ph.D.(3)(4)			49			Director and Chief Scientific Advisor
Charles Theuer, M.D., Ph.D.(2)(3)(4)			57			Director
Shawn Cline Tomasello, MBA(1)(3)			62			Director
Tony Yao, M.D., Ph.D.(1)(4)			48			Director

 

(1)	Member of compensation committee.

(2)	Member of audit committee.

(3)	Member of nominating and corporate governance committee.

(4)	Member of the science and technology committee.

Executive Officers and Employee Directors

David Kirn, M.D., is our co-founder and has served as our Chief Executive Officer and served on our board of directors since our inception in 2013. Dr. Kirn previously served as the Executive Chairman of our board until August 2020 when John Milligan, Ph.D. assumed the position. Dr. Kirn is an Adjunct Professor of Bioengineering at U.C. Berkeley. He previously served as Executive Chairman of the board of Ignite Immunotherapy Inc., where he was a co-founder. Dr. Kirn held senior development positions at Onyx Pharmaceuticals and Celgene, and he was a senior advisor on viral vector gene therapeutics and cancer immunotherapy for over 10 years with numerous companies, including Biogen Idec, Novartis, Cell Genesys, Pfizer and Bayer. Dr. Kirn received a B.A. in Physiology (Departmental Citation; Phi Beta Kappa) from U.C. Berkeley in 1985, an M.D. (Alpha Omega Alpha) from U.C. San Francisco Medical School in 1989 and completed internal medicine residency training at Harvard Medical School, Brigham and Women’s Hospital (including a term as Chief Medical Resident at affiliated VA hospital). He has also completed hematology-oncology and clinical research fellowships at U.C. San Francisco and completed a certificate of business excellence from the Haas Business School at U.C. Berkeley. In 2013, he was awarded the Johnson & Johnson Entrepreneur Innovator award from the J&J Innovation Center. We believe that Dr. Kirn is qualified to serve as a member of our board of directors based on his perspective and the experience he brings as one of our founders and Chief Executive Officer, and because of his extensive experience at other life science companies.

 

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August Moretti has served as our Chief Financial Officer since January 2019. Mr. Moretti previously served as Chief Financial Officer at Assertio Therapeutics (formerly Depomed, Inc.), a publicly held specialty pharmaceuticals company focused in pain and neurology, from January 2012 until August 2018. From 2004 to December 2011, Mr. Moretti served as Chief Financial Officer and Senior Vice President of Alexza Pharmaceuticals, Inc., a publicly-held pharmaceutical company. From 2001 to 2004, Mr. Moretti served as Chief Financial Officer and General Counsel of Alavita, Inc., a privately held personalized medicine company. From 1982 to 2000 Mr. Moretti was a partner in an international law firm. Mr. Moretti received his B.A. in Economics from Princeton University in 1972. He received his J.D. from Harvard Law School in 1975.

Theresa Janke is a co-founder and has served in positions of increasing responsibility since our inception. She served as our Chief Operating Officer from April 2018 until February 2020, at which point she began serving as our Chief Strategy Officer. Ms. Janke previously served in various consulting roles in 2013-2014 including: Senior Director of Corporate Projects & Alliance Management at SillaJen, Inc. (formerly Jennerex Biotherapeutics Inc.), a biotech company focused on engineering and developing oncolytic immunotherapeutics, and Director, Clinical Research & Development—Strategy and Alliances at Celgene Corporation, a global biopharmaceutical company. Prior to that, she served in positions of increasing responsibility, including Director of Clinical Operations, at Jennerex Biotherapeutics Inc., an oncolytic immunotherapy biotech company, from 2007 through 2013. She was a co-founder and served on the board of directors of Ignite Immunotherapy Inc., a private biotech company focused on oncolytic cancer vaccine discovery and development. Ms. Janke received a B.S. in Biopsychology from the U.C. Santa Barbara in 1996.

Peter Francis, M.D., Ph.D., has served as our Chief Scientific Officer since February 2020. Dr. Francis previously served as our Chief Medical Officer from January 2019 to February 2020 and as our Senior Vice President, Clinical Translational R&D, and Retina Therapeutic Area Head from August 2018 to January 2019. Dr. Francis previously served as Chief Medical Officer at RetroSense Therapeutics from February 2012 until August 2016 when it was purchased by Allergan Inc. Dr. Francis practices as a physician at Orion Eye Center. Dr. Francis received his B.Sc. in Molecular Cell Biology from the University of Southampton, England in 1991. He earned his M.D. from the University of Southampton, England in 1992. He earned his Ph.D. in ophthalmic genetics from University College, London in 2000.

Fred Kamal, Ph.D., has served as our Chief Operating Officer since February 2020 and has served as our Chief Technical Officer since October 2018. Dr. Kamal previously served as Senior Vice President of Quality and Regulatory CMC for AveXis Inc., a gene therapy company, from May 2017 through August 2018. Prior to AveXis, Dr. Kamal served as the Vice President of Quality for Juno Therapeutics from May 2015 through April 2017 and prior to that Dr. Kamal served as the Vice President of Quality and Regulatory CMC for Intermune Inc. from January 2013 through March 2015. Dr. Kamal received his B.S. in Chemistry from San Jose State University in 1986. Dr. Kamal received his M.Sc. in Chemistry from The American University in 2000. He received his Ph.D. in Chemistry from The American University in 2003.

Robert Fishman, M.D., has served as our Chief Medical Officer since October 2020. He previously served as the Chief Medical Officer of Xoc Pharmaceuticals, Inc., a private biopharmaceutical company, from February 2019 to October 2020. Prior to that, he served as the Chief Medical Officer of Corcept Therapeutics, a publicly traded biotechnology company, from September 2015 to February 2019. Dr. Fishman received his undergraduate degree in Biology from Harvard University in 1982, and his M.D. from Stanford University School of Medicine in 1986.

 

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Non-Employee Directors

John F. Milligan, Ph.D. has served as Executive Chairman of our board of directors since August 2020. Dr. Milligan previously served as the President and Chief Executive Officer of Gilead Sciences, Inc. from May 2008 and March 2016, respectively, until February 2019, and spent a total of 29 years at Gilead in various roles since 1990. Prior to joining Gilead, Dr. Milligan was a postdoctoral research fellow at the University of California San Francisco Medical Center. Dr. Milligan has served on the board of directors of Pacific Biosciences of California since July 2013, and also serves as the Chair of the Board of Trustees of Ohio Wesleyan University. Dr. Milligan received his B.A. in Chemistry from Ohio Wesleyan University in 1983 and his Ph.D. from the University of Illinois at Urbana-Champaign in 1988. We believe Dr. Milligan is qualified to serve as a member of our board of directors based on his extensive experience and leadership roles in the biopharmaceutical industry.

William Burkoth, MBA, has served as a member of our board of directors since March 2019. Mr. Burkoth has served on the venture investments team of Pfizer Inc. since 2004 and is currently Executive Director at Pfizer Inc. and Senior Partner at Pfizer Ventures. Mr. Burkoth worked in business development at Galileo Pharmaceuticals, Inc. and at IntraBiotics Pharmaceuticals, Inc. from 2002 to 2004. Mr. Burkoth worked as an analyst at Bay City Capital, a life sciences venture capital firm, from 1999 to 2002. He previously served on the board of directors of the following publicly-held company: NovoCure Limited from July 2009 to May 2019. Mr. Burkoth received a B.A. in Chemistry from Whitman College in 1999 and an M.B.A. from Columbia Business School in 2011. We believe Mr. Burkoth is qualified to serve as a member of our board of directors based on his finance background and his extensive investment experience in the life science industry.

Jacob Chacko, M.D., MBA, has served as a member of our board of directors since March 2019. Dr. Chacko has served as Chief Executive Officer of ORIC Pharmaceuticals, Inc., a clinical-stage oncology company focused on discovery and development of novel therapies against treatment-resistant cancers, since May 2018. Prior to ORIC, Dr. Chacko served as Chief Financial Officer of Ignyta, Inc., a publicly traded precision oncology company, from May 2014 until February 2018 when Ignyta was acquired by Roche Holdings, Inc. Prior to Ignyta, Dr. Chacko was an investor at TPG Capital from August 2008 until May 2014. From 2002 until 2003, Dr. Chacko was a consultant serving healthcare clients at McKinsey & Company. Dr. Chacko currently serves on the board of directors of Turning Point Therapeutics, Inc., a publicly-traded biotechnology company, from November 2018. Dr. Chacko served on the board of directors of RentPath Inc., a digital media company, from 2011 until 2014, Envision Pharmaceutical Services, LLC from 2013 until 2014, Bonti, Inc., a biotechnology company, from February 2018 until October 2018 and the Packard Children’s Health Alliance at the Lucile Packard Children’s Hospital Stanford from 2013 until June 2017. Dr. Chacko currently chairs the Western Regional Selection Committee for the Marshall Scholarship. Dr. Chacko concurrently received his M.D. from the U.C. Los Angeles and his M.B.A. from Harvard Business School. Dr. Chacko received a M.Sc. from Oxford University as a Marshall Scholar. We believe Dr. Chacko is qualified to serve as a member of our board of directors based on his medical and finance background, his experience in investing in life science companies and his service on the boards of public and private companies.

Susannah Gray, MBA, has served as a member of our board of directors since July 2020. Ms. Gray served as the Executive Vice President of Finance and Strategy of Royalty Pharma Management, LLC, a buyer of pharmaceutical royalties and a funder across the biopharmaceutical industry, and in various other similar roles from 2005 until 2019. Prior to Royalty Pharma, Ms. Gray served as a managing director and senior analyst covering the healthcare sector of CIBS World Market’s high yield group from 2002 to 2004, and also previously served in similar roles at Merrill Lynch and Chase Securities, Inc. (predecessor of JP Morgan Securities, Inc.). Ms. Gray currently serves on the board of directors of Susan G. Komen and serves on the Board of Trustees of Wesleyan

 

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University. Ms. Gray received a B.A. from Wesleyan University in 1982 and an M.B.A. from Columbia University in 1990. We believe Ms. Gray is qualified to serve as a member of our board of directors based on her experience in corporate finance and capital markets and previous experience in investment banking covering the healthcare sector.

Nancy Miller-Rich, has served as a member of our board of directors since November 2020. She has served as a consultant and advisor to various pharmaceutical and biotechnology companies since September 2017. Previously, Ms. Miller-Rich served in a number of leadership roles at Merck & Co., Inc. and, prior to the merger of the two companies, at Schering-Plough Corporation, including most recently as Senior Vice President, Global Human Health Business Development & Licensing, Strategy and Commercial Support from November 2013 to September 2017 and as Group Vice President, Consumer Care Global New Ventures and Strategic Commercial Development from January 2007 to November 2013. Prior to joining Schering-Plough in 1990, Ms. Miller-Rich served in a variety of commercial and marketing roles at Sandoz Pharmaceuticals and Sterling Drug, Inc. Ms. Miller-Rich has served on the board of directors of several publicly-traded biotechnology companies, such as Intercept Pharmaceuticals, Inc. since April 2018, Aldeyra Therapeutics since January 2020, and Kadmon Corporation since October 2020. She received her undergraduate degree in Business Administration, Marketing, from Ithaca College in New York in 1981. We believe Ms. Miller-Rich is qualified to serve as a member of our board of directors based on her extensive experience as a director of publicly traded biotechnology companies.

David Schaffer, Ph.D. is our co-founder and has served as our Chief Scientific Advisor and a member of our board of directors since our inception in 2013. Dr. Schaffer has served as a Professor of Chemical and Biomolecular Engineering, Bioengineering, Molecular and Cell Biology, and the Helen Wills Neuroscience Institute at the U.C. Berkeley since 1999 and has served as the Director of the Berkeley Stem Cell Center since 2011. He previously served on the board of directors of uniQure NV, a publicly held company, from January 2014 to June 2020. Dr. Schaffer received a B.S. in Chemical Engineering from Stanford University in 1993. He earned his Ph.D. in Chemical Engineering from the Massachusetts Institute of Technology in 1998. We believe Dr. Schaffer is qualified to serve as a member of our board of directors based on his perspective and the experience he brings as one of our founders, and because of his scientific expertise and leading work in directed evolution.

Charles Theuer, M.D., Ph.D., has served as a member of our board of directors since December 2015. Dr. Theuer has served as President and Chief Executive Officer at Tracon Pharmaceuticals, Inc., since June 2006. He previously served as Chief Medical Officer at TargeGen, Inc. until June 2006. He currently serves on the board of directors of the following publicly-held companies: Tracon Pharmaceuticals Inc., since June 2006 and Oncternal Therapeutics Inc. since May 2018, where he serves on the Science and Development and Nominating and Corporate Governance committees. Dr. Theuer received a B.S. in Life Sciences from the Massachusetts Institute of Technology in 1985. He received his M.D. from U.C. San Francisco in 1989. He received his Ph.D. in Environmental Health Science from U.C. Irvine in 2002. We believe that Dr. Theuer is qualified to serve as a member of our board of directors based on his medical and scientific background and because of his experience in leading and serving on the boards of public and private life science companies.

Shawn Cline Tomasello, MBA, has served as a member of our board of directors since November 2020. She served as Chief Commercial Officer of Kite Pharma from December 2015 to July 2018. Before that, Ms. Tomasello served as the Chief Commercial Officer of Commercial and Medical Affairs at Pharmacyclics from August 2014 to June 2015. She has served on the boards of several publicly traded biotechnology companies including UroGen Pharma since July 2018, Mesoblast Ltd. since July 2019 and Gamida-Cell Ltd. since March 2019. Ms. Tomasello received her undergraduate degree in marketing from the University of Cincinnati in 1982 and her MBA from Murray State University in Kentucky in 1989. We believe Ms. Tomasello is qualified to serve as a member of our board of

 

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directors based on her extensive experience in building successful commercial operations for biopharmaceutical companies and her experience as a director of publicly traded life science companies.

Tony Yao, M.D., Ph.D. has served as a member of our board of directors since August 2018. Dr. Yao has served as portfolio manager of life science strategy at ArrowMark Partners since April 2012. He previously served as an equity analyst at Janus Capital Group until March 2012. He currently serves on the board of directors of the following publicly-held company: Precision Biosciences since June 2018, where he serves on the compensation and audit committee. Dr. Yao received a B.S. in biochemistry from Brown University in 1994. He earned an M.D. and a Ph.D. in Immunology from Stanford University in 2002. We believe that Dr. Yao is qualified to serve as a member of our board of directors based on his scientific background and his extensive experience in investing in life science companies.

Family Relationships

There are no family relationships among any of our executive officers or directors.

Board Composition

Director Independence

Our board of directors currently consists of 10 members. Our board of directors has determined that all of our directors, other than Dr. Kirn, qualify as “independent” directors in accordance with the Nasdaq Global Market listing requirements. Dr. Kirn is not considered independent because he is an employee. The Nasdaq Global Market’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his or her family members has engaged in various types of business dealings with us. In addition, as required by the Nasdaq Global Market rules, our board of directors has made a subjective determination as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.

Classified Board of Directors

In accordance with our amended and restated certificate of incorporation to be in effect immediately prior to the consummation of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the consummation of this offering, we expect that our directors will be divided among the three classes as follows:

 

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the Class I directors will be Mr. Burkoth and Drs. Kirn, Schaffer and Yao, and their terms will expire at the annual meeting of stockholders to be held in 2021;

 

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the Class II directors will be Ms. Gray, Drs. Chacko and Theuer, and their terms will expire at the annual meeting of stockholders to be held in 2022; and

 

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the Class III directors will be Dr. Milligan, Mses. Miller-Rich and Tomasello, and their terms will expire at the annual meeting of stockholders to be held in 2023.

Our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of our board of directors. Any additional directorships

 

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resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our board of directors or a change in control.

Voting Arrangements

The election of the members of our board of directors is governed by the Third Amended and Restated Investors’ Rights Agreement, dated as of April 29, 2020, that we entered into with certain holders of our common stock and certain holders of our redeemable convertible preferred stock (the Investors’ Rights Agreement) and the related provisions of our amended and restated certificate of incorporation.

Pursuant to the Investors’ Rights Agreement, the holders of our common stock and redeemable convertible preferred stock who are parties to the Investors’ Rights Agreement are obligated to vote for the election of certain designees of our board of directors which are as follows:

 

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one member designated by Pfizer, for which Mr. Burkoth has been designated;

 

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one member designated by the holders of a majority of our Series B redeemable convertible preferred stock, voting exclusively and as a separate class, for which Dr. Yao has been designated;

 

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one member designated by the holders of a majority of our Series C redeemable convertible preferred stock, voting exclusively as a separate class, for which Dr. Milligan has been designated;

 

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two members designated by the holders of a majority of our common stock (other than any common stock issued or issuable upon the conversion of the redeemable convertible preferred stock), voting exclusively and together as a single class, for which Dr. Kirn and Dr. Shaffer have been designated; and

 

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three members, who are not otherwise affiliated with any of our investors, the first of whom shall be mutually agreed upon by a majority of the other members of our board of directors, for which Ms. Gray has been designated; the second of whom shall be proposed by our management subject to the approval of a majority of the members of our board of directors, for which Dr. Theuer has been designated; and the third of whom shall be an individual that satisfies the independence, financial literacy and financial expertise requirements to serve as an audit committee chairperson pursuant to relevant SEC and Nasdaq laws and regulations, and mutually acceptable to a majority of the other members of our board of directors, for which Dr. Chacko has been designated.

The above provisions of Investors’ Rights Agreement will terminate upon the consummation of this offering and our amended and restated certificate of incorporation will be amended and restated, after which there will be no further contractual obligations or charter provisions regarding the election of our directors. Our directors hold office until their successors have been elected and qualified or appointed, or the earlier of their death, resignation or removal.

Leadership Structure of our Board

Our amended and restated bylaws and corporate governance guidelines will provide our board of directors with flexibility to combine or separate the positions of Chairman of our board of directors and Chief Executive Officer and to implement a lead director in accordance with its determination that utilizing one or the other structure would be in our best interest. Dr. Milligan currently serves as the Executive Chairman of our board of directors. In that role, Dr. Milligan presides over the executive sessions of our board of directors and as a liaison between management and our board of directors.

 

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Our board of directors has concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.

Role of our Board in Risk Oversight Process

Risk assessment and oversight are an integral part of our governance and management processes. Our board of directors encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Throughout the year, senior management reviews these risks with our board of directors at regular board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.

Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. While our board of directors is responsible for monitoring and assessing strategic risk exposure, our audit committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor and control these exposures. The audit committee also monitors compliance with legal and regulatory requirements and considers and approves or disapproves any related person transactions. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance guidelines. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Board Committees

Our board of directors has the following standing committees: an audit committee, a compensation committee, a nominating and corporate governance committee and a science and technology committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below.

Audit Committee

Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee:

 

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appoints our independent registered public accounting firm;

 

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evaluates the independent registered public accounting firm’s qualifications, independence and performance;

 

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determines the engagement of the independent registered public accounting firm;

 

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reviews and approves the scope of the annual audit and pre-approves the audit and non-audit fees and services;

 

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reviews and approves all related party transactions on an ongoing basis;

 

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establishes procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters

 

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discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;

 

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approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services;

 

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monitors the rotation of partners of the independent registered public accounting firm on our engagement team in accordance with requirements established by the SEC;

 

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discusses on a periodic basis, or as appropriate, with management our policies and procedures with respect to risk assessment and risk management;

 

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is responsible for reviewing our financial statements and our management’s discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC;

 

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annually reviews and assesses internal controls and treasury functions including cash management procedures;

 

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investigates any reports received through the ethics helpline and report to our board of directors periodically with respect to the information received through the ethics helpline and any related investigations;

 

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reviews our critical accounting policies and estimates; and

 

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reviews the audit committee charter and the committee’s performance at least annually.

Effective upon the consummation of this offering, the members of our audit committee will be Mr. Burkoth, Dr. Chacko, Ms. Gray and Dr. Theuer. Dr. Chacko will serve as the chairperson of the committee. All members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq Global Market. Our board of directors will have determined that Dr. Chacko is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of The Nasdaq Global Market. Under the rules of the SEC, members of the audit committee must also meet heightened independence standards. Our board of directors will have determined that each of Mr. Burkoth, Dr. Chacko, Ms. Gray and Dr. Theuer are independent under the applicable rules of the SEC and The Nasdaq Global Market. The audit committee will operate under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Global Market.

Compensation Committee

Our compensation committee oversees policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and approves or recommends corporate goals and objectives relevant to compensation of our executive officers (other than our Chief Executive Officer), evaluates the performance of these officers in light of those goals and objectives and approves the compensation of these officers based on such evaluations. The compensation committee also reviews and approves or makes recommendations to our board of directors regarding the issuance of stock options and other awards under our stock plans to our executive officers (other than our Chief Executive Officer). The compensation committee reviews the performance of our Chief Executive Officer and makes recommendations to our board of directors with respect to his compensation and our board of directors retains the authority to make compensation decisions relative to our Chief Executive Officer. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance by the compensation committee with its charter.

 

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Effective upon the consummation of this offering, the members of our compensation committee will be Mr. Burkoth, Ms. Gray, Ms. Miller-Rich, Ms. Tomasello and Dr. Yao. Ms. Gray will serve as the chairman of the committee. Each of the members of our compensation committee will be independent under the applicable rules and regulations of the Nasdaq Global Market, will be a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act and will be an “outside director” as that term is defined in Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (Section 162(m)). The compensation committee will operate under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Global Market.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our board of directors concerning governance matters.

Effective upon the consummation of this offering, the members of our nominating and corporate governance committee will be Dr. Schaffer, Dr. Theuer and Ms. Tomasello. Dr. Theuer will serve as the chairman of the committee. Each of the members of our nominating and corporate governance committee will be an independent director under the applicable rules and regulations of the Nasdaq Global Market relating to nominating and corporate governance committee independence. The nominating and corporate governance committee will operate under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Global Market.

Science and Technology Committee

Our science and technology committee reviews, evaluates and advises the board of directors on the overall strategy, direction and effectiveness of our technology and research and development activities, monitors and evaluates trends in technologies relevant to our present and future business and evaluates and advises the board of directors and management on the soundness, opportunities and risks associated with the products, programs and technologies in which we are or may be considering investing our research and development efforts. The science and technology committee reports regularly to the board of directors and will periodically evaluate its own performance.

Effective upon the consummation of this offering, the members of the science and technology committee will be Ms. Miller-Rich, Dr. Theuer, Dr. Schaffer and Dr. Yao. Dr. Schaffer will serve as the chair of the committee.

Compensation Committee Interlocks and Insider Participation

None of the members of the compensation committee is currently, or has been at any time, one of our executive officers or employees. None of our executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or on our compensation committee.

Board Diversity

Upon consummation of this offering, our nominating and corporate governance committee will be responsible for reviewing with our board of directors, on an annual basis, the appropriate characteristics, skills and experience required for our board of directors as a whole and its individual

 

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members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and our board of directors, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors, including but not limited to the following:

 

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personal and professional integrity;

 

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ethics and values;

 

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experience in corporate management, such as serving as an officer or former officer of a publicly held company;

 

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experience in the industries in which we compete;

 

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experience as a board member or executive officer of another publicly held company;

 

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diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;

 

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conflicts of interest; and

 

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practical and mature business judgment.

Currently, our board of directors evaluates, and following the consummation of this offering will evaluate, each individual in the context of our board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.

Code of Business Conduct and Ethics

Prior to the consummation of this offering, we will adopt a code of business conduct and ethics that will apply to all of our employees, officers and directors, including those officers responsible for financial reporting. Following the consummation of this offering, the code of business conduct and ethics will be available on our website. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

Limitation on Liability and Indemnification Matters

Our amended and restated certificate of incorporation, which will become effective immediately prior to the consummation of this offering, will contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

 

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any breach of the director’s duty of loyalty to us or our stockholders;

 

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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

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unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

 

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any transaction from which the director derived an improper personal benefit.

Each of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to the consummation of this offering, will provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by

 

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Delaware law. Our amended and restated bylaws will also obligate us to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damages.

Director Compensation

Historically, we have not had a formalized non-employee director compensation program. However, we have generally adopted a practice of paying director fees of $35,000 per year, which we recently increased to $40,000 per year, and issuing options to purchase shares of our common stock targeted at certain percentages of our fully diluted capitalization to our independent directors. We paid director fees in the amount of $35,000 to both of our independent directors, Dr. Theuer and Dr. Chacko, for their board service in fiscal year 2019, although Dr. Chacko’s amount was pro-rated for his partial service in 2019 starting in March 2019. In addition, during March 2019, we issued to Dr. Theuer an option to purchase 22,500 shares of our common stock, with per share exercise price of $9.41, which vested as to 100% of its shares in March 2020, subject to Dr. Theuer’s continued service to us through such date. In addition, during March 2019, we issued to Dr. Chacko an option to purchase 37,500 shares of our common stock, with per share exercise price of $9.41, which vested as to one-third of the shares in March 2020 and as to 1/36^th of the aggregate shares in substantially equal monthly installments thereafter, subject to Dr. Chacko’s continued service to us through the applicable vesting date. All unvested options accelerate in full on a change in control. We did not make any other equity grants to our non-employee directors in 2019. In addition, we paid consulting fees in the amount of $50,000 to Dr. Schaffer for research services he provided to us in addition to his service as a member of the board of directors, and we increased Dr. Schaffer’s consulting fees to $85,000 per year beginning July 1, 2020. We paid Dr. Schaffer a one-time bonus of $25,000 for his services in connection with our Series C financing. We also provide reimbursement to our non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and committees of our board of directors.

In August 2020, we entered into a letter agreement with John Milligan, Ph.D. to serve as a member of our board and its Executive Chairman. Under such letter agreement, Dr. Milligan is eligible to receive an annual cash retainer of $150,000, reimbursement of legal fees incurred in negotiating the letter agreement up to $15,000 and was granted an option to purchase 335,243 shares of our common stock. The option will vest as to 25% of the shares on August 17, 2021 and as to 1/48^th of the aggregate shares in substantially equal monthly installments thereafter, subject to Dr. Milligan’s continued service to us through the applicable vesting date. Any unvested shares subject to the option will accelerate in full on a change in control.

 

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In July 2020, we entered into a letter agreement with Susannah Gray to serve as a member of our board. Under such letter agreement, Ms. Gray is eligible to receive an annual cash retainer of $40,000 and was granted an option to purchase 45,000 shares of our common stock. The option will vest as to 33% of the shares on July 20, 2021 and as to 1/36th of the aggregate shares in substantially equal monthly installments thereafter, subject to Ms. Gray’s continued service to us through the applicable vesting date. Any unvested shares subject to the option will accelerate in full on a change in control.

The following table summarizes the total compensation earned during the year ended December 31, 2019 for our non-employee directors. We appointed John Milligan as a member of our board and its Executive Chairman, Susannah Gray, Nancy Miller-Rich and Shawn Cline Tomasello as members of our board, in August, July, November and November 2020, respectively, so they are not included in the table below.

 

Name		Fees Earned or Paid in Cash ($)				Option Awards ($)(1)				All Other Compensation ($)(2)				Total ($)
David Schaffer, Ph.D.			—				—				50,000				50,000
Charles Theuer, M.D., Ph.D.			35,000				159,295				—				194,295
Jacob Chacko, M.D.(3)			27,417				273,091				—				300,508
Tony Yao, M.D., Ph.D.			—				—				—				—
William Burkoth			—				—				—				—

 

(1)

Amounts shown represent the grant date fair value of options granted during fiscal year 2019 as calculated in accordance with ASC Topic 718. See Note 12 of the financial statements included in this prospectus for the assumptions used in calculating this amount. As of December 31, 2019, Dr. Theuer held options to purchase 45,517 shares of our common stock, Dr. Chacko held options to purchase 37,500 shares of our common stock and no other non-employee directors held any outstanding options or other equity awards.

(2)	Amount represents $50,000 consulting payments paid to Dr. Schaffer in consideration for research services provided us in 2019.

(3)	Dr. Chacko was initially appointed as a member of the board in late March 2019, and his board director fees were pro-rated for his partial service in 2019.

 

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EXECUTIVE COMPENSATION

The following is a discussion and analysis of compensation arrangements of our named executive officers (NEOs). This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.

We seek to ensure that the total compensation paid to our executive officers is reasonable and competitive. Compensation of our executives is structured around the achievement of individual performance and near-term corporate targets as well as long-term business objectives.

Our NEOs for fiscal year 2019 were as follows:

 

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David Kirn, M.D., our Chief Executive Officer;

 

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Peter Francis, M.D., Ph.D., our Chief Medical Officer; and

 

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August Moretti, our Chief Financial Officer.

Mr. Moretti started employment with us on January 7, 2019 and Dr. Francis was promoted to our Chief Medical Officer on January 15, 2019 when he was formerly our Senior Vice President, Clinical Translational R&D Program Leader, Retina Therapeutic Area.

2019 Summary Compensation Table

The following table sets forth information concerning the compensation of our NEOs for the years ended December 31, 2018 and 2019.

 

Name and Principal Position		Year				Salary ($)				Bonus ($)				Option Awards ($)(1)				Non-Equity Incentive Plan Compensation ($)(2)				All Other Compensation ($)(3)				Total ($)
David Kirn, M.D.			2019				430,000				—				—				111,800				12,500				554,300
			2018				396,445				—				—				137,700				12,250				546,395
Chief Executive Officer
Peter Francis, M.D., Ph.D.			2019				322,917				—				1,069,139				77,419				84,537				1,554,012
			2018				270,000				24,300				200,024				65,610				46,204				606,138
Chief Medical Officer
August Moretti			2019				374,242				—				1,661,243				89,725				12,500				2,137,710
Chief Financial Officer(4)

 

(1)	Amounts shown represents the grant date fair value of options granted during fiscal year 2019 as calculated in accordance with ASC Topic 718. See Note 12 of the financial statements included in this registration statement for the assumptions used in calculating this amount.

(2)

Amounts represent the annual performance-based cash bonuses earned by our NEOs based on the achievement of certain corporate performance objectives during 2019. These amounts were paid to the NEOs in early 2020. Please see the descriptions of the annual performance bonuses paid to our named executive officers under “2019 Bonuses” below.

(3)

For 2019, amounts represent: (i) for Dr. Kirn, $12,500 for matching contributions made by us under our 401(k) plan; (ii) for Dr. Francis, $72,037 for reimbursements of travel expenses and $12,500 for matching contributions made by us under our 401(k) plan; and (iii) for Mr. Moretti, $12,500 for matching contributions made by us under our 401(k) plan.

(4)	Mr. Moretti commenced employment with us on January 7, 2019.

 

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Outstanding Equity Awards at 2019 Fiscal Year End

The following table lists all outstanding equity awards held by our NEOs as of December 31, 2019. Dr. Kirn does not hold any outstanding equity awards as of December 31, 2019.

 

						Option Awards
Name		Vesting Commencement Date(1)				Number of Securities Underlying Unexercised Options Exercisable (#)				Number Of Securities Underlying Unexercised Options Unexercisable (#)				Option Exercise Price ($)				Option Expiration Date
Peter Francis, M.D., Ph.D.			9/30/2016	(2)			59,070				15,930				3.19				4/19/2028
			1/15/2019	(3)			33,614				113,066				9.41				3/19/2029
August Moretti.			1/7/2019				—				225,060				9.41				3/19/2029

 

(1)

Except as otherwise noted, options vest as to 25% of the shares on the one year anniversary of the vesting commencement date and vest as to 1/48th of the shares monthly thereafter, such that all awards will be vested on the four year anniversary of the vesting commencement date, subject to the holder continuing to provide services to us through such vesting date.

(2)	The options vested as to 11,280 of the shares on the one year anniversary of the vesting commencement date and vest as to 1,770 of the remaining shares monthly thereafter, subject to the holder continuing to provide services through such vesting date.

(3)	The option vests as to 1/48th of the shares on each monthly anniversary of the vesting commencement date, such that all awards will be vested on the four year anniversary of the vesting commencement date, subject to the holder continuing to provide services to us through such vesting date.

Narrative to Summary Compensation Table

2019 Salaries

Our NEOs each receive a base salary to compensate them for services rendered to our company. The base salary payable to each NEO is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.

For fiscal year 2019, Dr. Kirn’s annual base salary was $430,000, Dr. Francis’ base salary was increased to $325,000 effective as of January 15, 2019 and Mr. Moretti’s base salary was $380,000 (pro-rated for his partial employment with us in 2019).

2019 Bonuses

We maintain an annual performance-based cash bonus program in which each of our NEOs participated in 2019. Each NEO’s target bonus is expressed as a percentage of base salary which can be achieved by meeting company goals at target level. The 2019 annual bonuses for Drs. Kirn and Francis and Mr. Moretti were targeted at 40%, 35% and 35%, respectively, of their respective base salaries. Our board of directors has historically reviewed these target percentages to ensure they are adequate, but does not follow a formula. Instead, our board of directors set these rates based on each NEO’s experience in their role with us and the level of responsibility held by the NEO, which we believe directly correlates to their ability to influence corporate results.

For determining performance bonus amounts, our board of directors set certain corporate performance goals after receiving input from our Chief Executive Officer. The performance goals generally relate to product development and other goals relating to our business.

 

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Following its review and determinations of corporate performance for 2019, our board of directors determined an achievement level of 65% for Dr. Kirn and 68.5% for Dr. Francis and Mr. Moretti. The actual amount of the cash bonuses awarded to each NEO for 2019 performance are set forth above in the Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.”

Equity-Based Compensation

In March 2019, we granted to Dr. Francis an option to purchase 146,680 shares of our common stock in connection with his promotion to our Chief Medical Officer. The option vests and become exercisable as to 1/48^th of the shares on each monthly anniversary of January 15, 2019, subject to his continued service through the applicable vesting date. In addition, in March 2019, we granted to Mr. Moretti an option to purchase 225,060 shares of our common stock in connection with his commencement of employment. The option vests and becomes exercisable as to 25% of the shares on the one year anniversary of January 7, 2019 and vest as to 1/48^th of the shares monthly thereafter, subject to his continued service through the applicable vesting date. The exercise price per share for each option was $9.41, which was the fair market value of our common stock as of the date of grant.

We intend to adopt the 2020 Plan, in order to facilitate the grant of cash and equity incentives to directors, employees (including our NEOs) and consultants of our company and certain of its affiliates and to enable us to obtain and retain services of these individuals, which is essential to our long-term success. We expect that the 2020 Plan will be effective on the date on which it is adopted by our board of directors, subject to approval of such plan by our stockholders. For additional information about the 2020 Plan, please see the section titled “Equity Compensation Plans” below.

Other Elements of Compensation

Retirement Savings and Health and Welfare Benefits

We currently maintain a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. Our NEOs are eligible to participate in the 401(k) plan on the same terms as other full-time employees. We make matching contributions equal to 50% of employee contributions of the first ten percent of compensation. Matching contributions will vest annually over 4 years. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our NEOs, in accordance with our compensation policies.

All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans, including medical, dental and vision benefits; medical and dependent care flexible spending accounts; short-term and long-term disability insurance; and life and AD&D insurance.

Perquisites and Other Personal Benefits

We provide limited perquisites to our NEOs, such as the reimbursement of Dr. Francis’ travel reimbursements, when our compensation committee determines that such perquisites are necessary or advisable to fairly compensate or incentivize our employees. We reimbursed Dr. Francis in the amount of $72,037 in 2019 for travel-related expenses incurred in connection with his travel between his home office in Oregon and our headquarters in California.

Executive Compensation Arrangements

Employment Agreements

As of December 31, 2019, we were party to offer letters with each of our NEOs, which set forth their initial base salary, annual bonus opportunity, initial stock option grant, benefit plans participation

 

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and the other benefits noted below for each NEO. In addition, as described below under the heading “—Severance Agreements,” we intend to enter into new severance agreements with all of our named executive officers, which agreements supersede and replace the severance benefits set forth in their respective offer letters described herein.

David Kirn, M.D. In addition to the above, Dr. Kirn is eligible to receive certain severance benefits upon qualifying terminations under the offer letter. In the event we terminate Dr. Kirn other than for cause or Dr. Kirn resigns for good reason, then (i) he will receive a lump sum payment equal to 12 months of his base salary, (ii) a lump sum cash payment equal to his prorated annual target bonus for the year in which the termination occurs and (iii) reimbursement of COBRA premiums for up to 12 months. The severance benefits set forth above are subject to his timely execution and non-revocation of a general release of claims against us. In addition, effective as of late 2018, the board approved that Dr. Kirn is also eligible for 100% accelerated vesting of any of his outstanding equity awards upon a change in control, subject to his continued employment through such date.

Peter Francis, M.D., Ph.D. In addition to the above, effective as of Dr. Francis’ promotion in early 2019, Dr. Francis is eligible to receive certain severance benefits upon qualifying terminations under the offer letter. In the event we terminate Dr. Francis other than for cause or Dr. Francis resigns for good reason, then (i) he will receive a lump sum payment equal to 9 months of his base salary and (ii) reimbursement of COBRA premiums for up to 9 months. In addition to the severance benefits above, in the event we undergo a change in control, he will receive accelerated vesting of 100% of the then-unvested equity awards held by him. The severance benefits set forth above are subject to his timely execution and non-revocation of a general release of claims against us.

August Moretti. In addition to the above, Mr. Moretti is eligible to receive certain severance benefits upon qualifying terminations under the offer letter. In the event we terminate Mr. Moretti other than for cause or Mr. Moretti resigns for good reason, in any case, outside of 1 month prior to, or 12 months following a change in control (as defined in the 2015 Plan), then he will receive (i) a lump sum payment equal to 9 months of his base salary and (ii) reimbursement of COBRA premiums for up to 9 months. In the event we terminate Mr. Moretti other than for cause or Mr. Moretti resigns for good reason, in any case, within the 1 month prior to or the 12 months following a change in control, then, in addition to the benefits in (i) and (ii) above, he will receive accelerated vesting of 100% of the then-unvested equity awards held by him. The severance benefits set forth above are subject to his timely execution and non-revocation of a general release of claims against us and continued compliance with the Confidential Information and Invention Assignment Agreement.

For the purposes of Drs. Kirn’s and Francis’ offer letters, “cause” is defined as (i) their material failure to perform their principally assigned duties or responsibilities as an employee, director or consultant (other than a failure resulting from disability (as defined under Section 22(e)(3) of the Code); provided that, the failure to achieve certain results, such as the our business plan, in and of itself, would not constitute “cause”; (ii) their engaging in any act of dishonesty, fraud or material misrepresentation; (iii) their violation of any federal or state law or regulation applicable to our business that results in or could reasonably be expected to result in harm or creates material risk, as determined by the board of directors; (iv) their breach of any confidentiality agreement or invention assignment agreement, or any other material contract made between us and them or violation of any of our written policies; or (v) their being convicted of, or entering a plea of nolo contendere to, any crime or committing any act of moral turpitude. In the case of (i) above, we shall not terminate Drs. Kirn or Francis without first providing them with written notice of the acts or omissions constituting the grounds for such termination and expiration of a reasonable cure period not to exceed thirty 30 days following the date of such notice if we reasonably judge that such failure may be cured within 30 days.

For the purposes of Mr. Moretti’s offer letter, “cause” is defined as (i) his material failure to perform his principally assigned duties or responsibilities as an employee, director or consultant (other

 

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than a failure resulting from disability (as defined under Section 22(e)(3) of the Code); provided that, the failure to achieve certain results, such as our business plan, in and of itself, would not constitute “cause”; (ii) his engaging in any act of dishonesty, fraud or material misrepresentation; (iii) his violation of any federal or state law or regulation applicable to our business that results in or could reasonably be expected to result in harm, or creates material risk, as determined by the board of directors; (iv) his breach of any confidentiality agreement or invention assignment agreement, or any other material contract between him and us or his violation of any of our written policies (or any of our affiliates); (v) his being convicted of, or entering a plea of nolo contendere to, any crime or committing any act of moral turpitude; or (vi) his commission of any act or involvement in any situation, or occurrence, which brings him into widespread public disrepute, contempt, scandal or ridicule, or which justifiably shocks, insults or offends a significant portion of the community, or his being subject to publicity for any such conduct or involvement in such conduct. In the case of (i) above, we shall not terminate Mr. Moretti without first providing him with written notice of the acts or omissions constituting the grounds for such termination and expiration of a reasonable cure period not to exceed thirty 30 days following the date of such notice if we reasonably judge that such failure may be cured within 30 days.

For the purposes of Mr. Moretti’s offer letter, “good reason” is defined as (i) a material diminution in his salary except for across-the-board salary reductions similarly affecting all or substantially all similarly situated employees, (ii) a material diminution in his authority, duties or responsibilities or (iii) a change of more than 50 miles in the geographic location at which he provides services, provided, however, that in the event of the occurrence of a good reason condition listed above, he must provide notice to us within 30 days of the initial occurrence of such condition and allow us 30 days in which to cure such condition. Additionally, in the event we fail to cure the condition within the cure period provided, he must terminate employment with us within sixty (60) days of the end of the cure period.

For the purposes of Dr. Francis’ offer letter, “good reason” is defined as the occurrence, without his written consent, of (i) a material diminution in his salary except for across-the-board salary reductions similarly affecting all or substantially all similarly situated employees, (ii) any material and adverse change, including any material diminution in his title, duties, authority or responsibilities, but excluding any such changes in the event of a change of control; provided his remaining duties and responsibilities are consistent with industry norms for the title, (iii) a change of more than 50 miles in the geographic location of our offices, (iv) assignment of duties materially inconsistent with his position, or (v) any material breach by us of the offer letter; provided, however, that in the event of the occurrence of a good reason condition listed above, he must provide written notice to us within 20 days of the initial occurrence of such condition and allow us 30 days in which to cure such condition. His termination will be effective once the 30 day period has lapsed and we have failed to materially cure such acts, failures or failures to act that gave rise to the good reason. We may, in our sole election, waive any cure period such that his termination will be effective on such earlier date determined by our board of directors.

For the purposes of Dr. Kirn’s offer letter, “good reason” is defined as (i) a change of more than 50 miles in the geographic location of our offices; (ii) his removal from the our board of directors or (iii) any material and adverse change, including any material diminution in his title, duties, authority or responsibilities, but excluding any such changes or changes in reporting relationships in the event of a Change of Control; provided his remaining duties and responsibilities are consistent with industry norms for the title.

For the purposes of Dr. Kirn’s offer letter, a “change in control” occurs when any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of our securities representing more than 50% of the total voting power or (ii) on the date of the consummation of a merger or consolidation with any other corporation that has

 

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been approved by our stockholders, other than a merger or consolidation which would result in our voting securities outstanding immediately prior to the merger or consolidation continuing to represent at least 50% of the total voting power represented by our voting securities or the voting securities such surviving entity or its parent outstanding immediately after such merger or consolidation; or (iii) the date of the consummation of the sale or disposition by us of all or substantially all the our assets. A transaction will not be deemed a change in control under Dr. Kirn’s offer letter unless the transaction qualifies as a “change in control event” within the meaning of Section 409A of the Code.

Severance Agreements

Pending approval by our board of directors, we intend to enter into new severance agreements with all of our named executive officers, which agreements will supersede and replace the severance benefits set forth in their respective offer letters described above under the heading “—Employment Agreements.”

Dr. Kirn. Under our proposed new severance agreement with Dr. Kirn, if his employment with us is terminated without “cause” or he resigns for “good reason” (as each is defined below), he will be entitled to receive: (i) 12 months of continued base salary, (ii) payment or reimbursement of the cost of continued healthcare coverage for 12 months and (iii) (A) any earned, but unpaid annual performance bonus for the fiscal year prior to the termination date and (B) a pro-rated (based on days of actual service) amount of the annual bonus that he would have earned had he remained employed by us through the end of the calendar year in which his termination occurs. In lieu of the foregoing benefits, if Dr. Kirn’s employment with us is terminated without “cause” or he resigns for “good reason” during the three-month period prior to, or the twelve-month period following, a change in control (as defined in the 2020 Plan), he will be entitled to receive: (i) 18 months of continued base salary, (ii) payment or reimbursement of the cost of continued healthcare coverage for 18 months, (iii) an amount equal to 18 months of his annual bonus for the year of termination assuming 100% of target performance, (iv) full accelerated vesting of any of his unvested equity awards (except for any performance awards) and (v) (A) any earned, but unpaid annual performance bonus for the fiscal year prior to the termination date and (B) a pro-rated (based on days of actual service) amount of the annual bonus that he would have earned had he remained employed by us through the end of the calendar year in which his termination occurs. The foregoing severance benefits are subject to his delivery of an executed release of claims against us and continued compliance with his confidentiality agreement with us.

Dr. Francis and Mr. Moretti. Under our proposed new severance agreements with Dr. Francis and Mr. Moretti, if their employment with us is terminated without “cause” or they resign for “good reason” (as each is defined below), they will be entitled to receive: (i) nine months of continued base salary, (ii) payment or reimbursement of the cost of continued healthcare coverage for nine months and (iii) (A) any earned, but unpaid annual performance bonus for the fiscal year prior to the termination date and (B) a pro-rated (based on days of actual service) amount of the annual bonus that they would have earned had they remained employed by us through the end of the calendar year in which their respective terminations occur. In lieu of the foregoing benefits, if Their employment with us is terminated without “cause” or they resign for “good reason” during the three-month period prior to, or the twelve-month period following, a change in control (as defined in the 2020 Plan), they will be entitled to receive: (i) 12 months of continued base salary, (ii) payment or reimbursement of the cost of continued healthcare coverage for 12 months, (iii) an amount equal to 12 months of their annual bonus for the year of termination assuming 100% of target performance, (iv) full accelerated vesting of any of their unvested equity awards (except any performance awards) and (v) (A) any earned, but unpaid annual performance bonus for the fiscal year prior to the termination date and (B) a pro-rated (based on days of actual service) amount of the annual bonus that they would have earned had they remained employed through the end of the calendar year in which their respective terminations occur. The foregoing severance benefits are subject to their delivery of executed releases of claims against us and continued compliance with their confidentiality agreements with us.

 

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Under Drs. Kirn’s, Francis’ and Mr. Moretti’s proposed new severance agreements, “good reason” is defined as the occurrence, without their written consent, of (i) a material and adverse change, including any reduction in their title, duties, authority or responsibilities but excluding any such reduction in connection with a change in control in which their duties and responsibilities remain consistent with industry norms for their title immediately before the change in control, (ii) a reduction by us of their annual base salary or annual bonus or incentive compensation opportunity, other than pursuant to a reduction in compensation that applies to all similarly situated employees, (iii) a requirement by us that their principal place of employment relocate to a location more than 20 miles, (iv) any material breach by us of any employment agreement between them and us and (v) the assignment to them of duties materially inconsistent with their positions with us.

Under Drs. Kirn’s, Francis’, and Mr. Moretti’s proposed new severance agreements, “cause” is defined as the occurrence of (i) their material failure to perform their principal assigned duties or responsibilities that goes uncured after notice is provided, provided the failure is not due to their disability, (ii) their engaging in any act of dishonesty, fraud or material misrepresentation, (iii) their violation of any federal or state law or regulation applicable to our business that results in or which we may reasonably expect to result in harm or create material risk to us, (iv) their breach of any confidentiality or invention assignment agreement or other material contract between them and us or violation of our written policies or (v) their being convicted of, or entering a plea of nolo contendere to, any crime or committing any act of moral turpitude.

Equity Compensation Plans

The following summarizes the material terms of the long-term incentive compensation plan in which our NEOs will be eligible to participate following the consummation of this offering and our 2015 Equity Incentive Plan, referred to as the 2015 Plan, under which we have previously made periodic grants of equity and equity-based awards to our NEOs and other key employees. We intend to file with the SEC a registration statement on Form S-8 covering the shares of our common stock issuable under the 2020 Plan, the 2015 Plan and the ESPP.

2020 Incentive Award Plan

We intend to adopt the 2020 Plan, which we expect will become effective upon the day prior to the effectiveness of the registration statement to which this prospectus relates, subject to approval of such plan by our stockholders. The principal purpose of the 2020 Plan is to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. The material terms of the 2020 Plan, as it is currently contemplated, are summarized below.

Share reserve.    Under the 2020 Plan,      shares of our common stock will be initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights (SARs) restricted stock awards, restricted stock unit awards and other stock-based awards. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2020 Plan will be increased by an annual increase on the first day of each fiscal year beginning in 2021 and ending in 2030, equal to the lesser of (i) five percent of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares of stock as determined by our board of directors; provided, however, that no more than 13,000,000 shares of stock may be issued upon the exercise of incentive stock options.

 

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The following counting provisions will be in effect for the share reserve under the 2020 Plan:

 

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to the extent that an award terminates, expires or lapses for any reason or an award is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2020 Plan;

 

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to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2020 Plan, such tendered or withheld shares will be available for future grants under the 2020 Plan;

 

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to the extent shares subject to SARs are not issued in connection with the stock settlement of SARs on exercise thereof, such shares will be available for future grants under the 2020 Plan;

 

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to the extent that shares of our common stock are repurchased by us prior to vesting so that shares are returned to us, such shares will be available for future grants under the 2020 Plan;

 

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the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2020 Plan; and

 

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to the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries will not be counted against the shares available for issuance under the 2020 Plan.

Administration.    The compensation committee of our board of directors is expected to administer the 2020 Plan unless our board of directors assumes authority for administration. The compensation committee must consist of at least three members of our board of directors, each of whom is intended to qualify as a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act and an “independent director” within the meaning of the rules of the applicable stock exchange, or other principal securities market on which shares of our common stock are traded. The 2020 Plan provides that the board or compensation committee may delegate its authority to grant awards to employees other than executive officers and certain senior executives to a committee consisting of one or more members of our board of directors or one or more of our officers, other than awards made to our non-employee directors, which must be approved by our full board of directors.

Subject to the terms and conditions of the 2020 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2020 Plan. The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2020 Plan. Our board of directors may at any time remove the compensation committee as the administrator and revest in itself the authority to administer the 2020 Plan. The full board of directors will administer the 2020 Plan with respect to awards to non-employee directors.

Eligibility.    Options, SARs, restricted stock and all other stock-based and cash-based awards under the 2020 Plan may be granted to individuals who are then our officers, employees or consultants or are the officers, employees or consultants of certain of our subsidiaries. Such awards also may be granted to our directors. Only employees of our company or certain of our subsidiaries may be granted incentive stock options (ISOs).

Awards.    The 2020 Plan provides that the administrator may grant or issue stock options, SARs, restricted stock, restricted stock units, other stock- or cash-based awards and dividend equivalents or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

 

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Nonstatutory stock options.    Nonstatutory Stock Options (NSOs) will provide for the right to purchase shares of our common stock at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NSOs may be granted for any term specified by the administrator that does not exceed ten years.

 

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Incentive stock options.    ISOs will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees and must not be exercisable after a period of ten years measured from the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2020 Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant.

 

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Restricted stock.    Restricted stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse, however, extraordinary dividends will generally be placed in escrow, and will not be released until restrictions are removed or expire.

 

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Restricted stock units.    Restricted stock units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

 

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Stock appreciation rights.    SARs may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the 2020 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. SARs under the 2020 Plan will be settled in cash or shares of our common stock, or in a combination of both, at the election of the administrator.

 

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Other stock or cash based awards.    Other stock or cash based awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards. The plan administrator will determine the terms and conditions of other stock or cash based awards, which may include vesting conditions based on continued service, performance and/or other conditions.

 

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Dividend equivalents.    Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of our common stock and may be granted alone or in tandem with awards other than stock options or SARs. Dividend equivalents are credited as of dividend payments dates during the period between a specified date and the date such award terminates or expires, as determined by the plan administrator. In addition, dividend equivalents with respect to shares covered by a performance award will only be paid to the participant at the same time or times and to the same extent that the vesting conditions, if any, are subsequently satisfied and the performance award vests with respect to such shares.

Any award may be granted as a performance award, meaning that the award will be subject to vesting and/or payment based on the attainment of specified performance goals.

Change in control.    In the event of a change in control, unless the plan administrator elects to terminate an award in exchange for cash, rights or other property, or cause an award to accelerate in full prior to the change in control, such award will continue in effect or be assumed or substituted by the acquirer, provided that any performance-based portion of the award will be subject to the terms and conditions of the applicable award agreement. In the event the acquirer refuses to assume or replace awards granted, prior to the consummation of such transaction, awards issued under the 2020 Plan will be subject to accelerated vesting such that 100% of such awards will become vested and exercisable or payable, as applicable. The administrator may also make appropriate adjustments to awards under the 2020 Plan and is authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions.

Adjustments of awards.    In the event of any stock dividend or other distribution, stock split, reverse stock split, reorganization, combination or exchange of shares, merger, consolidation, split-up, spin-off, recapitalization, repurchase or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock that would require adjustments to the 2020 Plan or any awards under the 2020 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the administrator will make appropriate, proportionate adjustments to: (i) the aggregate number and type of shares subject to the 2020 Plan; (ii) the number and kind of shares subject to outstanding awards and terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards); and (iii) the grant or exercise price per share of any outstanding awards under the 2020 Plan.

Amendment and termination.    The administrator may terminate, amend or modify the 2020 Plan at any time and from time to time. However, we must generally obtain stockholder approval to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule). Notwithstanding the foregoing, an option may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date and options may be granted in exchange for, or in connection with, the cancellation or surrender of options having a higher per share exercise price without receiving additional stockholder approval.

No incentive stock options may be granted pursuant to the 2020 Plan after the tenth anniversary of the effective date of the 2020 Plan, and no additional annual share increases to the 2020 Plan’s aggregate share limit will occur from and after such anniversary. Any award that is outstanding on the termination date of the 2020 Plan will remain in force according to the terms of the 2020 Plan and the applicable award agreement.

 

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2015 Equity Incentive Plan

On March 20, 2015, our board of directors adopted, and our stockholders approved, the 2015 Plan. Following the offering, and in connection with the effectiveness of our 2020 Plan, the 2015 Plan will terminate, and no further awards will be granted under the 2015 Plan. However, all outstanding awards will continue to be governed by their existing terms.

Administration.    Our board of directors, or a committee thereof appointed by our board of directors, has the authority to administer the 2015 Plan and the awards granted under it. The plan administrator has broad authority to make determinations and interpretations under, prescribe forms for use with and adopt rules for the administration of, the 2015 Plan, subject to its express terms and conditions. The plan administrator also sets the terms and conditions of all awards under the 2015 Plan, including any vesting and acceleration conditions.

Limitation on awards and shares available.    The aggregate number of shares of our common stock that is authorized pursuant to the 2015 Plan is 4,189,028, which shares may be authorized but unissued shares, reacquired common stock or represent shares underlying forfeited awards. Shares tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award granted under the 2015 Plan and shares issued pursuant to awards of restricted stock or restricted stock units that are repurchased by us or are forfeited due to the failure to vest may be used again for new grants under the 2015 Plan.

Awards.    The 2015 Plan provides that the administrator may grant or issue ISOs, NSOs, SARs, restricted stock and restricted stock units to our employees, directors and consultants, provided that only employees may be granted ISOs. Awards under the 2015 Plan are set forth in award agreements, which detail the terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. Awards are generally settled in shares of our common stock.

 

•

Stock Options.    Stock options provide for the purchase of shares of our common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other Internal Revenue Code requirements are satisfied. The exercise price of a stock option may not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute options granted in connection with a corporate transaction. The term of a stock option may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). Vesting conditions determined by the plan administrator may apply to stock options and may include continued service, performance and/or other conditions. A stock option may provide for “early exercise” prior to vesting in exchange for shares of restricted shares that vest on the option’s vesting schedule.

 

•

Stock appreciation rights.    SARs may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the 2015 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. SARs under the 2015 Plan will be settled in cash or shares of our common stock, or in a combination of both, as set forth in the applicable award agreement.

 

•

Restricted stock.    Restricted stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or

 

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otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse.

 

•

Restricted stock units.    Restricted stock units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions continuing service with us or our affiliates, the attainment of performance goals and/or such other conditions as the plan administrator may determine. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

Certain transactions.    The plan administrator has broad discretion to equitably adjust the provisions of the 2015 Plan, as well as the terms and conditions of existing and future awards, to prevent the diminution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting our common stock, such as a dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, reincorporation, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, reclassification, repurchase or exchange of our shares or our other securities, or other change in our corporate structure. In the event of a merger with or into another corporation or other entity or a change in control (as defined in the 2015 Plan), the plan administrator may provide, in any combination hereof, subject to the applicable award agreement and without the participant’s consent, that (i) the surviving entity assume outstanding awards or substitute economically equivalent awards for such outstanding awards; (ii) that the participant’s awards will terminate upon or immediately prior to the consummation of the merger or change in control; (iii) outstanding awards will vest and become exercisable, realizable or payable, or restrictions applicable to an award will lapse, in whole or in part prior to or upon consummation of such merger or change in control; and (iv) the termination of an award in exchange for any combination of cash, property or other rights, if any, selected by the administrator in its sole discretion, equal in value to the cash or other property that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date of the occurrence of the transaction. The administrator may also make appropriate adjustments to awards under the 2015 Plan and is authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions.

Foreign participants, transferability and participant payments.    The plan administrator may establish sub-plans under the 2015 Plan, subject to the share limits described above, containing such limitations and other terms and conditions that the plan administrator determines is necessary or desirable to satisfy blue sky, securities, tax or other laws of various jurisdictions in which we intend to grant awards or qualifying for favorable tax treatment under applicable foreign laws. With limited exceptions for gifts or executors of the participant’s estate upon the participant’s death, in connection with certain acquisitions or a change in control, and transfers to us, awards under the 2015 Plan are generally non-transferable prior to exercise or delivery and are exercisable only by the participant. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2015 Plan, as applicable, the plan administrator may, in its discretion, accept cash, check, promissory note, shares of our common stock that meet specified conditions, such other consideration and method of payment for the issuance of shares, to the extent permitted by applicable laws, by “net exercise,” a “market sell order” or any combination thereof.

Amendment; termination.    Our board of directors may amend or terminate the 2015 Plan at any time; however, (i) no amendment or termination may adversely affect an outstanding award without the

 

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affected participant’s written consent and (ii) except in connection with certain changes in our capital structure, stockholder approval will be required for (A) any amendment that increases the number of shares available under the 2015 Plan or extends the term of the 2015 Plan, or (B) as required under applicable law. No award may be granted pursuant to the 2015 Plan after the ten year anniversary of the date the 2015 Plan, as amended or restated, was approved by our board of directors or our stockholders (whichever was earlier), however, we will cease granting awards under the 2015 Plan upon effectiveness of the 2020 Plan.

We intend to file with the SEC a registration statement on Form S-8 covering our shares of common stock issuable under the 2015 Plan.

2020 Employee Stock Purchase Plan

We intend to adopt and ask our stockholders to approve the ESPP, which will be effective upon the day prior to the effectiveness of the registration statement to which this prospectus relates. The ESPP is designed to allow our eligible employees to purchase shares of our common stock, at semi-annual intervals, with their accumulated payroll deductions. The ESPP is intended to qualify under Section 423 of the Code. The material terms of the ESPP, as it is currently contemplated, are summarized below.

Administration.    Subject to the terms and conditions of the ESPP, our compensation committee will administer the ESPP. Our compensation committee can delegate administrative tasks under the ESPP to the services of an agent and/or employees to assist in the administration of the ESPP. The administrator will have the discretionary authority to administer and interpret the ESPP. Interpretations and constructions of the administrator of any provision of the ESPP or of any rights thereunder will be conclusive and binding on all persons. We will bear all expenses and liabilities incurred by the ESPP administrator.

Share reserve.    The maximum number of shares of our common stock which will be authorized for sale under the ESPP is equal to the sum of (i) 151,777 shares of common stock and (ii) an annual increase on the first day of each year beginning in 2021 and ending in 2030, equal to the lesser of (A) one percent of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such number of shares of common stock as determined by our board of directors; provided, however, no more than 3,000,000 shares of our common stock may be issued under the ESPP. The shares reserved for issuance under the ESPP may be authorized but unissued shares or reacquired shares.

Eligibility.    Employees eligible to participate in the ESPP for a given offering period generally include employees who are employed by us or one of our subsidiaries on the first day of the offering period, or the enrollment date. Our employees (and, if applicable, any employees of our subsidiaries) who customarily work less than five months in a calendar year or are customarily scheduled to work less than 20 hours per week will not be eligible to participate in the ESPP. Finally, an employee who owns (or is deemed to own through attribution) 5% or more of the combined voting power or value of all our classes of stock or of one of our subsidiaries will not be allowed to participate in the ESPP.

Participation.    Employees will enroll under the ESPP by completing a payroll deduction form permitting the deduction from their compensation of at least 1% of their compensation but not more than 15% of their compensation. Such payroll deductions may be expressed as either a whole number percentage or a fixed dollar amount, and the accumulated deductions will be applied to the purchase of shares on each purchase date. However, a participant may not purchase more than 60,000 shares in each offering period and may not subscribe for more than $25,000 in fair market value of shares of our common stock (determined at the time the option is granted) during any calendar year. The ESPP administrator has the authority to change these limitations for any subsequent offering period.

 

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Offerings.    Generally, the ESPP will offer employees the option to purchase shares through a series of overlapping 24-month offering periods, and each offering period will generally be comprised of four 6-month purchase periods. The initial offering period under the ESPP will be shorter than 24 months, commencing upon the effectiveness of this registration statement and ending on November 14, 2022. The initial purchase period under the ESPP will commence on the first day of the offering period and end on May 15, 2021, with the remaining purchase periods in the initial offering period to be comprised of consecutive six month periods. In no event may an offering period be longer than 27 months in length.

The option purchase price will be the lower of 85% of the closing trading price per share of our common stock on the trading date immediately preceding the first day of an offering period in which a participant is enrolled or 85% of the closing trading price per share on the trading day immediately preceding the last day of each purchase period.

Unless a participant has previously canceled his or her participation in the ESPP before the purchase date, the participant will be deemed to have exercised his or her option in full as of each purchase date. Upon exercise, the participant will purchase the number of whole shares that his or her accumulated payroll deductions will buy at the option purchase price, subject to the participation limitations listed above.

A participant may cancel his or her payroll deduction authorization at any time prior to the end of the offering period. Upon cancellation, the participant will have the option to either (i) receive a refund of the participant’s account balance in cash without interest or (ii) exercise the participant’s option for the current offering period for the maximum number of shares of common stock on the applicable purchase date, with the remaining account balance refunded in cash without interest. Following at least one payroll deduction, a participant may also decrease (but not increase) his or her payroll deduction authorization once during any offering period. If a participant wants to increase or decrease the rate of payroll withholding, he or she may do so effective for the next offering period by submitting a new form before the offering period for which such change is to be effective.

A participant may not assign, transfer, pledge or otherwise dispose of (other than by will or the laws of descent and distribution) payroll deductions credited to a participant’s account or any rights to exercise an option or to receive shares of our common stock under the ESPP, and during a participant’s lifetime, options in the ESPP shall be exercisable only by such participant. Any such attempt at assignment, transfer, pledge or other disposition will not be given effect.

Adjustments upon changes in recapitalization, dissolution, liquidation, merger or asset sale.    In the event of any increase or decrease in the number of issued shares of our common stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the common stock, or any other increase or decrease in the number of shares of common stock effected without receipt of consideration by us, we will proportionately adjust the aggregate number of shares of our common stock offered under the ESPP, the number and price of shares which any participant has elected to purchase under the ESPP and the maximum number of shares which a participant may elect to purchase in any single offering period. If there is a proposal to dissolve or liquidate us, then the ESPP will terminate immediately prior to the consummation of such proposed dissolution or liquidation, and any offering period and purchase period then in progress will be shortened by setting a new purchase date to take place before the date of our dissolution or liquidation. We will notify each participant of such change in writing at least ten business days prior to the new exercise date. If we undergo a merger with or into another corporation or sell all or substantially all of our assets, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or the parent or subsidiary of the successor corporation. If the successor corporation refuses to assume the outstanding options or substitute equivalent options, then any offering period and purchase period

 

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then in progress will be shortened by setting a new purchase date to take place before the date of our proposed sale or merger. We will notify each participant of such change in writing at least ten business days prior to the new exercise date.

Amendment and termination.    Our board of directors may amend, suspend or terminate the ESPP at any time. However, the board of directors may not amend the ESPP without obtaining stockholder approval within 12 months before or after such amendment to the extent required by applicable laws.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions since January 1, 2017 to which we have been a party, in which the amount involved exceeds $120,000, and in which any of our directors, executive officers or beneficial owners of more than 5% of our capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.

Sales and Purchases of Securities

Series B Convertible Preferred Stock Financing

In August 2018, we issued an aggregate of 5,154,632 shares of our Series B convertible preferred stock at $17.46 per share for aggregate proceeds to us of approximately $90.0 million.

The table below sets forth the aggregate number of shares of Series B convertible preferred stock sold to our directors, executive officers or owners of more than 5% of a class of our capital stock, or an affiliate or immediate family member thereof:

 

Name		Number of Shares of Series B Convertible Preferred Stock				Aggregate Purchase Price ($)
Pfizer Inc.(1)			343,642				5,999,989.32

 

(1)	William Burkoth, a member of our board of directors, is an employee of Pfizer Inc.

Series C Convertible Preferred Stock Financing

From April to June 2020, we issued in a series of transactions an aggregate of 4,200,353 shares of our Series C convertible preferred stock at $18.00 per share for aggregate proceeds to us of approximately $75.6 million.

The table below sets forth the aggregate number of shares of Series C convertible preferred stock sold to our directors, executive officers or owners of more than 5% of a class of our capital stock, or an affiliate or immediate family member thereof:

 

Name		Number of Shares of Series C Convertible Preferred Stock				Aggregate Purchase Price ($)
Viking Global Opportunities Illiquid Investments Sub-Master LP			833,333				14,999,994.00
ArrowMark Life Science Fund, LP(1)			27,777				499,986.00
Iron Horse Investments, LLC(1)			152,777				2,749,986.00
Pfizer Ventures (US) LLC(2)			166,666				2,999,988.00

 

(1)	Tony Yao, a member of our board of directors, is employed as a portfolio manager for ArrowMark Colorado Holdings LLC (ArrowMark Colorado). ArrowMark Colorado is investment advisor to ArrowMark Life Science Fund, LP and Iron Horse Investments, LLC.

(2)	William Burkoth, a member of our board of directors, is an employee of Pfizer Inc., which is the parent of Pfizer Ventures (US) LLC.

Director and Executive Officer Compensation

Please see the sections titled “Director Compensation” and “Executive Compensation” for information regarding the compensation of our directors and executive officers.

 

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Employment Agreements

We have entered into employment agreements with our executive officers. For more information regarding these agreements, see the section titled “Executive Compensation—Narrative to Summary Compensation Table and Outstanding Equity Awards at 2019 Fiscal Year End.”

Indemnification Agreements and Directors’ and Officers’ Liability Insurance

We have entered into or intend to enter into indemnification agreements with each of our directors and executive officers. These agreements will require us to, among other things, indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, penalties fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. We have obtained an insurance policy that insures our directors and officers against certain liabilities, including liabilities arising under applicable securities laws. For additional information see the section titled “Management—Limitation of Liability and Indemnification Matters.”

Investors’ Rights Agreement

We entered into an amended and restated investors’ rights agreement with the purchasers of our outstanding redeemable convertible preferred stock, including entities with which certain of our directors are affiliated. As of September 30, 2020, the holders of approximately                 shares of our common stock, including the shares of our common stock issuable upon the automatic conversion of our Series A, Series A-1, Series B and Series C redeemable convertible preferred stock, are entitled to rights with respect to the registration of their shares under the Securities Act. For a more detailed description of these registration rights, see the section titled “Description of Capital Stock—Registration Rights.” The investors’ rights agreement also provides for a right of first refusal in favor of certain holders of redeemable convertible preferred stock with regard to certain issuances of our capital stock. The rights of first refusal will not apply to, and will terminate upon the consummation of, this offering. The investors’ right agreement also provides for certain voting arrangements. For a description of these voting arrangements, see the section titled “Management—Board Composition—Voting Arrangements.”

Right of First Refusal and Co-Sale Agreement

We entered into an amended and restated right of first refusal and co-sale agreement with certain holders of our common stock and redeemable convertible preferred stock. This agreement provides for rights of first refusal and co-sale relating to the shares of our common stock held by the parties to the agreement. Upon the consummation of this offering, the amended and restated right of first refusal and co-sale agreement will terminate.

Other Transactions

In April 2019, we entered into the SRAs with the U.C. Berkeley to conduct research in a lab on the Berkeley campus that is under the direction of Dr. Schaffer. Pursuant to the SRAs, we have committed to pay the U.C. Berkeley a total of $1.5 million, of which $0.4 million was paid upon execution of the SRAs. The SRAs have a three year term ending in 2022. While the SRAs are between us and the UC Regents, the payments under the SRAs may be used to fund the lab under the direction of Dr. Schaffer.

Our former Chief Operating Officer, Anthony Davies, who was employed through November 2017, was the Executive Chairman of Dark Horse Consulting. During the year ended December 31,

 

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2017, we paid $0.2 million to Dark Horse Consulting under a consulting agreement to design and implement pharmaceutical quality manufacturing of and controls for drug products. The consulting agreement terminated in December 2017.

Other than as described above, since January 1, 2017, we have not entered into any transactions, nor are there any currently proposed transactions, between us and a related party where the amount involved exceeds, or would exceed, $120,000, and in which any related person had or will have a direct or indirect material interest. We believe the terms of the transactions described above were comparable to terms we could have obtained in arm’s-length dealings with unrelated third parties.

Policies and Procedures for Related Party Transactions

Prior to the consummation of this offering, our board of directors will adopt a written related person transaction policy, to be effective upon the consummation of this offering, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest, including without limitation purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including but not limited to whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction with an unrelated third party and the extent of the related person’s interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.

 

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PRINCIPAL STOCKHOLDERS

The following table sets forth information relating to the beneficial ownership of our common stock as of November 13, 2020, by:

 

•

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of our common stock;

 

•

each of our directors;

 

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each of our named executives;

 

•

all directors and executive officers as a group.

The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days after November 13, 2020 through the exercise of any stock option, warrants or other rights. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of our common stock held by that person.

The percentage of shares beneficially owned is computed on the basis of                  shares of our common stock outstanding as of November 13, 2020, which reflects the automatic conversion of                  shares of our outstanding shares of redeemable convertible preferred stock into an equivalent number of shares of our common stock. Shares of our common stock that a person has the right to acquire within 60 days after November 13, 2020 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the address for each beneficial owner listed is c/o 4D Molecular Therapeutics, Inc., 5858 Horton Street #455, Emeryville, California 94608.

 

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		Number of Outstanding Shares Beneficially Owned				Number of Shares Exercisable Within 60 Days				Number of Shares Beneficially Owned				Number of Shares Owned After the Offering				Percentage of Beneficial Ownership
Name of Beneficial Owner																		Before Offering				After Offering
5% and Greater Stockholders:
Viking Global Opportunities Illiquid Investments Sub-Master LP(1)			2,837,914				—				2,837,914								16.9	%				%
Entities Affiliated with Pfizer(2)			1,641,658				—				1,641,658								9.7	%
Entities Affiliated with BVF(3)			906,070				—				906,070								5.4	%
Executive Officers and Directors:
David Kirn, M.D.(4)			2,000,000				—				2,000,000								11.9	%
John F. Milligan, Ph.D			—				—				—									*
William Burkoth, MBA			—				—				—									*
Jacob Chacko, M.D(5).			—				21,874				21,874									*
Susannah Gray, MBA			—				—				—									*
Nancy Miller-Rich			—				—				—								—	*
David Schaffer, Ph.D.(6)			2,000,000				—				2,000,000								11.9	%
Charles Theuer, M.D., Ph.D.(7)			32,351				45,517				77,868									*
Shawn Cline Tomasello, MBA			—				—				—								—	*
Tony Yao, M.D., Ph.D.(8)			638,744				—				638,744								3.8	%
August Moretti(9)			—				112,530				112,530									*
Peter Francis, M.D., Ph.D.(10)			—				145,284				145,284									*
All executive officers and directors as a group (12 persons)			4,671,095				325,205				4,996,300								29.7	%

 

*	Indicates beneficial ownership of less than 1% of our total outstanding common stock.

(1)

Consists of (i) 2,004,581 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock and (ii) 833,333 shares of our common stock issuable upon the conversion of our Series C redeemable convertible preferred stock held by Viking Global Opportunities Illiquid Investments Sub-Master LP (Opportunities Fund). Opportunities Fund has the authority to dispose of and vote the shares directly owned by it, which power may be exercised by its general partner, Viking Global Opportunities Portfolio GP LLC (Opportunities GP), and by Viking Global Investors LP (VGI), which provides managerial services to Opportunities Fund. O. Andreas Halvorsen, David C. Ott and Rose Shabet, as Executive Committee members of Viking Global Partners LLC (the general partner of VGI) and Opportunities GP, have shared authority to direct the voting and disposition of investments beneficially owned by the Opportunities Fund and Opportunities GP. The business address of each of the entities is c/o Viking Global Investors LP, 55 Railroad Avenue, Greenwich, CT 06830.

(2)

Consists of (i) 1,131,350 shares of our common stock issuable upon the conversion of our Series A-1 redeemable convertible preferred stock directly held by Pfizer Ventures (US) LLC, (ii) 343,642 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Pfizer Inc. and (iii) 166,666 shares of our common stock issuable upon the conversion of our Series C redeemable convertible preferred stock directly held by Pfizer Ventures (US) LLC. Pfizer Inc. is the parent company to Pfizer Ventures (US) LLC and may be deemed to beneficially own the shares directly owned by Pfizer Ventures (US) LLC. William Burkoth, a member of our board of directors, is an employee of Pfizer Inc. The address for these entities is 235 East 42nd Street, New York, NY 10017.

(3)

Consists of (i) 275,971 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Biotechnology Value Fund, L.P. (BVF), (ii) 206,047 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Biotechnology Value Fund II, L.P. (BVF2), (iii) 40,909 shares of our common stock issuable upon the conversion of our Series B redeemable convertible

 

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preferred stock directly held by Biotechnology Value Trading Fund OS, L.P. (Trading Fund OS), (iv) 49,810 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by certain Partners managed accounts (Partners Managed Accounts), (v) 177,672 shares of our common stock issuable upon the conversion of our Series C redeemable convertible preferred stock directly held by BVF, (vi) 132,703 shares of our common stock issuable upon the conversion of our Series C redeemable convertible preferred stock directly held by BVF2 and (vii) 22,958 shares of our common stock issuable upon the conversion of our Series C redeemable convertible preferred stock directly held by Biotechnology Value Trading Fund OS, L.P. BVF I GP L.L.C. (BVF GP), as the general partner of BVF, may be deemed to beneficially own the shares beneficially owned by BVF. BVF II GP L.L.C. (BVF2 GP), as the general partner of BVF2, may be deemed to beneficially own the shares beneficially owned by BVF2. BVF Partners OS Ltd. (Partners OS), as the general partner of Trading Fund OS, may be deemed to beneficially own the beneficially owned by Trading Fund OS. BVF GP Holdings L.L.C. (BVF GPH), as the sole member of each of BVF GP and BVF2 GP, may be deemed to beneficially own the shares beneficially owned in the aggregate by BVF and BVF2. BVF Partners L.P., (Partners) as the general partner of BVF, BVF2, the investment manager of Trading Fund OS, and the sole member of Partners OS, may be deemed to beneficially own the shares beneficially owned by BVF, BVF2, Trading Fund OS and Partners Managed Accounts. BVF Inc., as the general partner of Partners, may be deemed to beneficially own the shares beneficially owned by Partners. Mark Lampert, as a director and officer of BVF Inc., may be deemed to beneficially own the shares beneficially owned by BVF Inc. The address for BVF Partners L.P. is 44 Montgomery Street 40th Floor, San Francisco, CA 94104.

(4)	Consists of 2,000,000 shares of our common stock.

(5)	Consists of 21,874 shares of our common stock that may be acquired pursuant to the exercise of stock options within 60 days of November 13, 2020.

(6)	Consists of 2,000,000 shares of our common stock directly held by the Shaffer-Hinh Family Trust.

(7)	Consists of (i) 32,351 shares of our common stock and (ii) 45,517 shares of our common stock that may be acquired pursuant to the exercise of stock options within 60 days of November 13, 2020.

(8)

Consists of 2,864 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock held directly by Dr. Yao and, (i) 1,432 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by CF Ascent LLC, (ii) 50,830 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Iron Horse Investments, LLC, (iii) 5,727 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Lookfar Investments, LLC, (iv) 229,095 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Meridian Small Cap Growth Fund, (v) 50,830 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by THB Iron Rose LLC, (vi) 2,864 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by THB Iron Rose LLC, Life Sciences Portfolio, (vii) 57,274 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Arrowmark Fundamental Opportunity Fund L.P., (viii) 57,274 shares of our common stock issuable upon the conversion of our Series B redeemable convertible preferred stock directly held by Arrowmark Life Science Fund, LP, (ix) 27,777 shares of our common stock issuable upon the conversion of our Series C redeemable convertible preferred stock directly held by Arrowmark Life Science Fund, LP and (x) 152,777 shares of our common stock issuable upon the conversion of our Series C redeemable convertible preferred stock directly held by Iron Horse Investments, LLC, which are referred to collectively as the ArrowMark Funds. ArrowMark Colorado Holdings LLC (ArrowMark Colorado) is investment advisor to ArrowMark Funds. Dr. Yao, one of our directors, is employed as a portfolio manager for ArrowMark Colorado and

 

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has direct voting and dispositive control over the shares held by the ArrowMark Funds. Dr. Yao may be considered the beneficial owner of the shares held by ArrowMark Funds and disclaims beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The principal business address of the ArrowMark Funds is 100 Fillmore Street, Suite 325, Denver, Colorado 80206.

(9)	Consists of 112,530 shares of our common stock that may be acquired pursuant to the exercise of stock options within 60 days of November 13, 2020.

(10)	Consists of 145,284 shares of our common stock that may be acquired pursuant to the exercise of stock options within 60 days of November 13, 2020.

 

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DESCRIPTION OF CAPITAL STOCK

The following summary describes our capital stock and the material provisions of our amended and restated certificate of incorporation and our amended and restated bylaws, which will become effective immediately prior to the consummation of this offering, the amended and restated investors’ rights agreement to which we and certain of our stockholders are parties and of the Delaware General Corporation Law. Because the following is only a summary, it does not contain all of the information that may be important to you. For a complete description, you should refer to our amended and restated certificate of incorporation, amended and restated bylaws and amended and restated investors’ rights agreement, copies of which have been filed as exhibits to the registration statement of which this prospectus is part.

General

Immediately prior to the consummation of this offering, we will file our amended and restated certificate of incorporation that authorizes                 shares of common stock, $0.0001 par value per share, and shares of preferred stock, $0.0001 par value per share. As of September 30, 2020, there were outstanding:

 

•

shares of our common stock, on an as-converted basis, held by approximately              stockholders of record; and

 

•

shares of our common stock issuable upon exercise of outstanding stock options.

In connection with this offering, we expect to consummate a forward stock split of our outstanding common stock at a ratio to be determined.

Common Stock

Voting Rights

Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors. In addition, the affirmative vote of holders of 66 2/3% of the voting power of all of the then outstanding voting stock will be required to take certain actions, including amending certain provisions of our amended and restated certificate of incorporation, such as the provisions relating to amending our amended and restated bylaws, the classified board and director liability.

Dividends

Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.

Liquidation

In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.

 

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Rights and Preferences

Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred stock that we may designate in the future.

Fully Paid and Nonassessable

All of our outstanding shares of common stock are, and the shares of our common stock to be issued in this offering will be, fully paid and nonassessable.

Redeemable Convertible Preferred Stock

Immediately prior to the consummation of this offering, all outstanding shares of our redeemable convertible preferred stock will be converted into shares of our common stock. See Note 10 to our audited financial statements included elsewhere in this prospectus for a description of our currently outstanding redeemable convertible preferred stock. Immediately prior to the consummation of this offering, our amended and restated certificate of incorporation will be amended and restated to delete all references to such shares of redeemable convertible preferred stock. From and after the consummation of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to                  shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such series, any or all of which may be greater than the rights of our common stock. The issuance of our preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that such holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control or other corporate action. Immediately after consummation of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

Options

As of September 30, 2020, we had outstanding options to purchase 2,928,321 shares of our common stock, with a per share weighted-average exercise price of $9.11, under our 2015 Equity Incentive Plan.

Warrants

As of September 30, 2020, we had warrants outstanding with the option to purchase 68,669 shares of our common stock, with a weighted-average exercise price of $1.85 per share.

Registration Rights

Under our amended and restated investors’ rights agreement, based on the number of shares outstanding as of September 30, 2020, following the consummation of this offering, the holders of approximately                shares of our common stock, or their transferees, have the right to require us to register their shares under the Securities Act so that those shares may be publicly resold, and the holders of approximately                shares of our common stock, or their transferees, have the right to include their shares in any registration statement we file, in each case as described below.

 

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Demand Registration Rights

Based on the number of shares outstanding as of September 30, 2020, after the consummation of this offering, the holders of approximately                shares of our common stock (on an as-converted basis), or their transferees, will be entitled to certain demand registration rights. Beginning 180 days following the effectiveness of the registration statement of which this prospectus is a part, the holders of at least 50% of these shares can, on not more than two occasions, request that we register all or a portion of their shares if the aggregate price to the public of the shares offered is at least $30.0 million (before deductions of underwriters’ commissions and expenses). Additionally, we will not be required to effect a demand registration during the period beginning 60 days prior to the filing and ending 180 days following the effectiveness of a company-initiated registration statement relating to an initial public offering of our securities.

Piggyback Registration Rights

Based on the number of shares outstanding as of September 30, 2020, after the consummation of this offering, in the event that we determine to register any of our securities under the Securities Act (subject to certain exceptions), either for our own account or for the account of other security holders, the holders of approximately                million shares of our common stock (on an as-converted basis), or their transferees, will be entitled to certain “piggyback” registration rights allowing the holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to a registration related to employee benefit plans, the offer and sale of debt securities, or corporate reorganizations or certain other transactions, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their shares in the registration. In an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to exclude or limit the number of shares such holders may include.

Form S-3 Registration Rights

Based on the number of shares outstanding as of September 30, 2020, after the consummation of this offering, the holders of approximately                shares of our common stock (on an as-converted basis), or their transferees, will be entitled to certain Form S-3 registration rights. The holders of at least 30% of the registrable securities then outstanding of these shares can make a written request that we register their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $5.0 million (before deductions of underwriters’ commissions and expenses). These stockholders may make an unlimited number of requests for registration on Form S-3, but in no event shall we be required to file more than two registrations on Form S-3 in any given twelve-month period.

Expenses of Registration

We will pay the registration expenses of the holders of the shares registered pursuant to the demand, piggyback and Form S-3 registration rights described above, including the expenses in an amount not to exceed $25,000 of one special counsel for the selling holders.

Expiration of Registration Rights

The demand, piggyback and Form S-3 registration rights described above will expire, with respect to any particular stockholder, upon the earlier of five years after the consummation of this offering or when that stockholder can sell all of its shares under Rule 144 of the Securities Act during any three-month period (and without the requirement for us to be in compliance with the current public information required under Section c(1) of Rule 144 of the Securities Act).

 

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Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws and Delaware Law

Certain provisions of Delaware law and our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective immediately prior to the consummation of this offering contain provisions that could make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.

Undesignated Preferred Stock

The ability to authorize undesignated preferred stock will make it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management.

Special Stockholder Meetings

Our amended and restated bylaws will provide that a special meeting of stockholders may be called at any time by our board of directors, or our President or Chief Executive Officer, but such special meetings may not be called by our stockholders or any other person or persons.

Requirements for Advance Notification of Stockholder Nominations and Proposals

Our amended and restated bylaws will establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors or a committee of our board of directors.

 

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Elimination of Stockholder Action by Written Consent

Our amended and restated certificate of incorporation and our amended and restated bylaws will eliminate the right of stockholders to act by written consent without a meeting.

Classified Board; Election and Removal of Directors; Filling Vacancies

Effective upon the consummation of this offering, our board of directors will be divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the shares of our common stock outstanding will be able to elect all of our directors. Our amended and restated certificate of incorporation will provide for the removal of any of our directors only for cause and requires a stockholder vote by the holders of at least a 66 2/3% of the voting power of the then outstanding voting stock. For more information on the classified board, see the section titled “Management—Board Composition.” Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of our board of directors, may only be filled by a resolution of our board of directors unless our board of directors determines that such vacancies shall be filled by our stockholders. This system of electing and removing directors and filling vacancies may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.

Choice of Forum

Our amended and restated certificate of incorporation and amended and restated bylaws will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or stockholders to us or to our stockholders; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended from time to time); or any action asserting a claim against us that is governed by the internal affairs doctrine. As a result, any action brought by any of our stockholders with regard to any of these matters will need to be filed in the Court of Chancery of the State of Delaware and cannot be filed in any other jurisdiction; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation and amended and restated bylaws will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. Nothing in our amended and restated certificate of incorporation and amended and restated bylaws preclude stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.

If any action the subject matter of which is within the scope described above is filed in a court other than a court located within the State of Delaware, or a Foreign Action, in the name of any stockholder, such stockholder shall be deemed to have consented to the personal jurisdiction of the

 

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state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the applicable provisions of our amended and restated certificate of incorporation and amended and restated bylaws and having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Although our amended and restated certificate of incorporation and amended and restated bylaws will contain the choice of forum provision described above, it is possible that a court could find that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

Amendment of Charter Provisions

The amendment of any of the above provisions in our amended and restated certificate of incorporation, except for the provision making it possible for our board of directors to issue undesignated preferred stock, would require approval by a stockholder vote by the holders of at least a 66 2/3% of the voting power of the then outstanding voting stock.

The provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation and our amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Limitations of Liability and Indemnification Matters

For a discussion of liability and indemnification, see the section titled “Management—Limitation on Liability and Indemnification Matters.”

Listing

We have applied to have our common stock listed on the Nasdaq Global Market under the symbol “FDMT.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC. The transfer agent and registrar’s address is 6201 15th Avenue, Brooklyn, New York 11219.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of our common stock, including shares issued upon the exercise of outstanding options or warrants, in the public market after this offering, or the perception that those sales may occur, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future. As described below, only a limited number of shares of our common stock will be available for sale in the public market for a period of several months after consummation of this offering due to contractual and legal restrictions on resale described below. Future sales of our common stock in the public market either before (to the extent permitted) or after restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of our common stock at such time and our ability to raise equity capital at a time and price we deem appropriate.

Sale of Restricted Shares

Based on the number of shares of our common stock outstanding as of September 30, 2020 and assuming an initial public offering price of $                per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, upon the consummation of this offering and assuming (i) the automatic conversion of all shares of our outstanding Series A, Series A-1, Series B and Series C redeemable convertible preferred stock as of September 30, 2020, (ii) no exercise of the underwriters’ option to purchase additional shares and (iii) no exercise of any of our outstanding options or warrants, we will have outstanding an aggregate of approximately                 shares of our common stock. Of these shares, all of the shares of our common stock to be sold in this offering, and any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless the shares are held by any of our “affiliates” as such term is defined in Rule 144 of the Securities Act. All remaining shares of our common stock held by existing stockholders immediately prior to the consummation of this offering will be “restricted securities” as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, which rules are summarized below.

As a result of the lock-up agreements referred to below and the provisions of Rule 144 and Rule 701 under the Securities Act, based on the number of shares of our common stock outstanding as of September 30, 2020 and assumptions (i)-(iii) described above, the shares of our common stock (excluding the shares sold in this offering) that will be available for sale in the public market, subject (A) to any waivers by the underwriters and/or our board of directors under the respective lock-up agreements and (B) with respect to shares held by directors, executive officers and other affiliates, the volume limitations under Rule 144 under the Securities Act, are as follows:

 

Approximate Number of Shares		First Date Available for Sale into Public Market
shares		180 days after the date of this prospectus upon expiration of the lock-up agreements referred to below, subject in some cases to applicable volume limitations under Rule 144

Lock-Up Agreements

In connection with this offering, we, our executive officers, our directors and substantially all of our securityholders have agreed, subject to certain exceptions, with the underwriters not to dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of

 

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our common stock during the period from the date of the lock-up agreement continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman Sachs & Co. LLC, BofA Securities, Inc. and Evercore Group L.L.C. on behalf of the underwriters.

Prior to the completion of the offering, certain of our employees, including our executive officers, and/or directors may enter into written trading plans that are intended to comply with Rule 10b5-1 under the Exchange Act. Sales under these trading plans would not be permitted until the expiration of the lock-up agreements relating to the offering described above.

Following the lock-up periods set forth in the agreements described above, and assuming that the representatives of the underwriters do not release any parties from these agreements, all of the shares of our common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.

Rule 144

In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, a person (or persons whose shares are required to be aggregated) who is not deemed to have been one of our “affiliates” for purposes of Rule 144 at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our “affiliates,” is entitled to sell those shares in the public market (subject to the lock-up agreement referred to above, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than “affiliates,” then such person is entitled to sell such shares in the public market without complying with any of the requirements of Rule 144 (subject to the lock-up agreement referred to above, if applicable). In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our “affiliates,” as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those shares of our common stock that does not exceed the greater of:

 

•

1% of the number of shares of common stock then outstanding, which will equal approximately                  shares of our common stock immediately after this offering (calculated as of September 30, 2020 on the basis of the assumptions (i)-(iii) described above); or

 

•

the average weekly trading volume of our common stock on The Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Such sales under Rule 144 by our “affiliates” or persons selling shares on behalf of our “affiliates” are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us. Notwithstanding the availability of Rule 144, the holders of substantially all of our restricted securities have entered into lock-up agreements as referenced above and their restricted securities will become eligible for sale (subject to the above limitations under Rule 144) upon the expiration of the restrictions set forth in those agreements.

Rule 701

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compensatory stock or option plan or other written agreement in compliance with Rule 701 under the Securities Act before the effective date of the registration statement of which this prospectus is a part (to the extent such common stock is not subject to a lock-up agreement) is entitled to rely on Rule 701 to resell such shares beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act in reliance on Rule 144, but without compliance with the holding period requirements contained in Rule 144. Accordingly, subject to any applicable lock-up agreements, beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act, under Rule 701 persons who are not our “affiliates,” as defined in Rule 144, may resell those shares without complying with the minimum holding period or public information requirements of Rule 144, and persons who are our “affiliates” may resell those shares without compliance with Rule 144’s minimum holding period requirements (subject to the terms of the lock-up agreement referred to above).

Registration Rights

Based on the number of shares outstanding as of September 30, 2020, after the consummation of this offering, the holders of approximately                  shares of our common stock, or their transferees, will, subject to the lock-up agreements referred to above, be entitled to certain rights with respect to the registration of the offer and sale of those shares under the Securities Act. For a description of these registration rights, see the section titled “Description of Capital Stock—Registration Rights.” If the offer and sale of these shares are registered, they will be freely tradable without restriction under the Securities Act.

Stock Plans

We intend to file with the SEC a registration statement under the Securities Act covering the shares of our common stock that we may issue upon exercise of outstanding options reserved for issuance under our 2015 Equity Incentive Plan and our 2020 Plan. Such registration statement is expected to be filed and become effective as soon as practicable after the consummation of this offering. Accordingly, shares registered under such registration statement will be available for sale in the open market following its effective date, subject to Rule 144 volume limitations and the lock-up agreements described above, if applicable.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS⁴

The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.

This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:

 

•

U.S. expatriates and former citizens or long-term residents of the United States;

 

•

persons subject to the alternative minimum tax;

 

•

persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

 

•

banks, insurance companies, and other financial institutions;

 

•

brokers, dealers or traders in securities;

 

•

“controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

 

•

partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

 

•

tax-exempt organizations or governmental organizations;

 

•

persons deemed to sell our common stock under the constructive sale provisions of the Code;

 

•

tax-qualified retirement plans; and

 

•

“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds.

If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

THIS DISCUSSION IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS

 

4	NTD – subject to LW tax review

 

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TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Definition of Non-U.S. Holder

For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

an individual who is a citizen or resident of the United States;

a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

a trust that (i) is subject to the primary supervision of a U.S. court and all substantial decisions of which are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.

Distributions

As described in the section titled “Dividend Policy,” we do not anticipate paying any cash dividends in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “—Sale or Other Taxable Disposition.”

Subject to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable tax treaties.

If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.

Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S. Holder that is a corporation also may be subject to a

 

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branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Sale or Other Taxable Disposition

Subject to the discussion below regarding backup withholding, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:

 

•

the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable);

 

•

the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or

 

•

our common stock constitutes a U.S. real property interest (USRPI) by reason of our status as a U.S. real property holding corporation (USRPHC) for U.S. federal income tax purposes.

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

A Non-U.S. Holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on gain realized upon the sale or other taxable disposition of our common stock, which may be offset by certain U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period.

Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

Payments of dividends on our common stock will not be subject to backup withholding, provided the Non-U.S. Holder certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any distributions on our common stock paid to the

 

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Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting if the applicable withholding agent receives the certification described above or the Non-U.S. Holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated relationships with the United States generally will not be subject to backup withholding or information reporting.

Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act (FATCA)) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below) gross proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (i) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our common stock. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of stock on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.

 

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UNDERWRITING

We and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman Sachs & Co. LLC, BofA Securities, Inc. and Evercore Group L.L.C. are the representatives of the underwriters.

 

Underwriters		Number of Shares
Goldman Sachs & Co. LLC
BofA Securities, Inc.
Evercore Group L.L.C.
Total

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

The underwriters have an option to buy up to an additional                shares from us to cover sales by the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by us. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to buy up to an additional                shares from us.

 

		No Exercise				Full Exercise
Per Share		$				$
Total		$				$

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover page of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $             per share from the initial public offering price. After the initial offering of the shares, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

We and our executive officers, directors, and holders of substantially all of our securityholders have agreed or will agree with the underwriters, subject to certain exceptions, not to dispose of or hedge any of our or their common stock or securities convertible into or exchangeable for shares of our common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman Sachs & Co. LLC, BofA Securities, Inc. and Evercore Group L.L.C. This agreement does not apply to any existing employee benefit plans. See the section titled “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.

Prior to the offering, there has been no public market for the shares. The initial public offering price has been negotiated among us and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will

 

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be our historical performance, estimates of the business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.

We have applied to list our common stock on The Nasdaq Global Market under the symbol “FDMT.”

In connection with the offering, the underwriters may purchase and sell shares of our common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A “covered short position” is a short position that is not greater than the amount of additional shares for which the underwriters’ option described above may be exercised. The underwriters may cover any covered short position by either exercising their option or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. “Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on The Nasdaq Global Market, in the over-the-counter market or otherwise.

We estimate that our share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $            . We have agreed to reimburse the underwriters for certain of their expenses in an amount up to $            .

We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates may in the future provide a variety of these services to the issuer and to persons and entities with relationships with the issuer, for which they will receive customary fees and expenses.

 

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In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities or instruments of the issuer (directly, as collateral securing other obligations or otherwise) or persons and entities with relationships with the issuer. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

European Economic Area and United Kingdom

In relation to each Member State of the European Economic Area and the United Kingdom (each a Relevant State), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation), except that offers of shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:

 

(a)

to any legal entity which is a qualified investor as defined under the Prospectus Regulation;

 

(b)

to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer ; or

 

(c)

in any other circumstances falling within Article 1(4) of the Prospectus Regulation,

provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.

For the purposes of this provision, the expression an “offer to the public” in relation to any shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.

United Kingdom

Each underwriter has represented and agreed that:

 

(a)

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (as amended, the FSMA)) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the company; and

 

(b)

it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

 

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Canada

The shares may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption form, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Hong Kong

The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (Companies (Winding Up and Miscellaneous Provisions) Ordinance) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (Securities and Futures Ordinance), or (ii) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the SFA)) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the

 

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SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the shares under Section 275 of the SFA except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (ii) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (iii) where no consideration is or will be given for the transfer, (iv) where the transfer is by operation of law, (v) as specified in Section 276(7) of the SFA, or (vi) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (Regulation 32).

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the shares under Section 275 of the SFA except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (ii) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (iii) where no consideration is or will be given for the transfer, (iv) where the transfer is by operation of law, (v) as specified in Section 276(7) of the SFA, or (vi) as specified in Regulation 32.

Solely for the purposes of its obligations pursuant to Section 309B of the SFA, we have determined, and hereby notify all relevant persons (as defined in the CMP Regulations 2018), that the shares are “prescribed capital markets products” (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Japan

The shares have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended) (the FIEA). The shares may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.

Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC), in relation to the offering. This offering document does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the shares may only be made to persons (the Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one

 

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or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.

The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.

This offering document contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this offering document is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

Dubai International Financial Centre

This offering document relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This offering document is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth in this prospectus and has no responsibility for the offering document. The shares to which this offering document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this offering document you should consult an authorized financial advisor.

Switzerland

We have not and will not register with the Swiss Financial Market Supervisory Authority (FINMA) as a foreign collective investment scheme pursuant to Article 119 of the Federal Act on Collective Investment Scheme of 23 June 2006, as amended (CISA), and accordingly the shares being offered pursuant to this prospectus have not and will not be approved, and may not be licenseable, with FINMA. Therefore, the shares have not been authorized for distribution by FINMA as a foreign collective investment scheme pursuant to Article 119 CISA and the shares offered hereby may not be offered to the public (as this term is defined in Article 3 CISA) in or from Switzerland. The shares may solely be offered to “qualified investors,” as this term is defined in Article 10 CISA, and in the circumstances set out in Article 3 of the Ordinance on Collective Investment Scheme of 22 November 2006, as amended (CISO), such that there is no public offer. Investors, however, do not benefit from protection under CISA or CISO or supervision by FINMA. This prospectus and any other materials relating to the shares are strictly personal and confidential to each offeree and do not constitute an offer to any other person. This prospectus may only be used by those qualified investors to whom it has been handed out in connection with the offer described in this prospectus and may neither directly or indirectly be distributed or made available to any person or entity other than its recipients. It may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in Switzerland or from Switzerland. This prospectus does not constitute an issue prospectus as that term is understood pursuant to Article 652a and/or 1156 of the Swiss Federal Code of Obligations. We have not applied for a listing of the shares on the SIX Swiss Exchange or any other regulated securities market in Switzerland, and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange.

 

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LEGAL MATTERS

The validity of the issuance of our common stock offered in this prospectus will be passed upon for us by Latham & Watkins LLP, Menlo Park, California. Cooley LLP, San Francisco, California, is acting as counsel for the underwriters in connection with this offering.

EXPERTS

The financial statements as of December 31, 2018 and December 31, 2019 and for the years then ended included in this Prospectus have been so included in reliance on the report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 1 to the financial statements) of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to 4D Molecular Therapeutics, Inc. and the common stock offered hereby, reference is made to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address is www.sec.gov.

Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.4dmoleculartherapeutics.com. Upon completion of this offering, you may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on our website, and you should not consider the contents of our website in making an investment decision with respect to our common stock.

 

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4D Molecular Therapeutics, Inc.

Index to Financial Statements

 

		Page
Report of Independent Registered Public Accounting Firm			F-2
Balance Sheets			F-3
Statements of Operations and Comprehensive Loss			F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit			F-5
Statements of Cash Flows			F-7
Notes to Financial Statements			F-8

 

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Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of 4D Molecular Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of 4D Molecular Therapeutics, Inc. (the “Company”) as of December 31, 2019 and 2018, and the related statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ deficit and of cash flows for the years then ended, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Jose, California

June 19, 2020, except for (i) the effects of disclosing net loss per share information, (ii) the segment information, and (iii) the matters that raise substantial doubt about the Company’s ability to continue as a going concern discussed in Notes 14, 2, and 1, respectively, to the financial statements, as to which the date is October 14, 2020

We have served as the Company’s auditor since 2016.

 

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Table of Contents

4D Molecular Therapeutics, Inc.

Balance Sheets

(In thousands, except share and per share amounts)

 

		As of December 31,								As of September 30, 2020				Pro Forma As of September 30, 2020
		2018				2019
										(Unaudited)				(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	91,761			$	49,652			$	88,755
Accounts receivable			1,124				978				896
Prepaid expenses and other current assets (includes $0, $149 and $295 (unaudited), at December 31, 2018, December 31, 2019 and September 30, 2020, respectively, attributable to related parties)			1,183				1,878				2,885
Total current assets			94,068				52,508				92,536
Property and equipment, net			2,472				5,049				4,981
Other assets			429				677				675
Total assets		$	96,969			$	58,234			$	98,192
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity
Current liabilities
Accounts payable		$	954			$	1,744			$	1,292
Accrued and other current liabilities			2,193				5,347				7,367
Deferred revenue (includes $0, $1,122 and $0 (unaudited), at December 31, 2018, December 31, 2019 and September 30, 2020, respectively, attributable to related parties)			4,907				5,864				5,619
Total current liabilities			8,054				12,955				14,278
Deferred revenue, net of current portion (includes $0, $4,015 and $0 (unaudited), at December 31, 2018, December 31, 2019 and September 30, 2020, respectively, attributable to related parties)			13,076				13,603				11,731
Derivative liability			64				101				117
Other liabilities			382				1,565				1,910
Total liabilities			21,576				28,224				28,036
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, $0.0001 par value; 7,375,638 shares authorized and 7,375,631 shares issued and outstanding at December 31, 2018 and December 31, 2019. 11,575,984 (unaudited) shares authorized, issued and outstanding at September 30, 2020. Liquidation value of $108,596 at December 31, 2018 and December 31, 2019 and $184,202 (unaudited) at September 30, 2020. No shares authorized, issued or outstanding, pro forma (unaudited)			102,980				102,980				175,448
Stockholders’ (deficit) equity
Common stock, $0.0001 par value; 50,000,000 shares authorized at December 31, 2018 and December 31, 2019 and 20,866,244 (unaudited) shares authorized at September 30, 2020; 5,126,344, 5,178,955 and 5,257,742 (unaudited) shares issued and outstanding at December 31, 2018, December 31, 2019 and September 30, 2020, respectively;          shares authorized and          shares issued and outstanding, pro forma (unaudited)			1				1				1
Additional paid-in-capital			2,438				6,054				9,839
Accumulated deficit			(30,026	)			(79,025	)			(115,132	)
Total stockholders’ (deficit) equity			(27,587	)			(72,970	)			(105,292	)
Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity		$	96,969			$	58,234			$	98,192

The accompanying notes are an integral part of these financial statements

 

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4D Molecular Therapeutics, Inc.

Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

 

		Year Ended December 31,								Nine Months Ended September 30,
		2018				2019				2019				2020
										(Unaudited)				(Unaudited)
Revenue:
Collaboration and license revenue		$	8,987			$	6,960			$	4,930			$	14,340
Collaboration and license revenue, related parties			5,143				26				26				249
Total revenue			14,130				6,986				4,956				14,589
Operating expenses:
Research and development (includes $160 and $350 for the years ended December 31, 2018 and 2019 and $224 (unaudited) and $397 (unaudited) for the nine months ended September 30, 2019 and 2020, respectively, attributable to related parties)			18,362				38,718				26,359				40,433
Acquired in-process research and development (includes $0 and $5,137 for the years ended December 31, 2018 and 2019 and $5,137 (unaudited) and $0 (unaudited) for the nine months ended September 30, 2019 and 2020, respectively, attributable to related parties)			—				5,137				5,137				—
General and administrative (includes $220 and $0 for the years ended December 31, 2018 and 2019 and $0 (unaudited) for each of the nine months ended September 30, 2019 and 2020, respectively, attributable to related parties)			6,167				13,895				7,936				10,398
Total operating expenses			24,529				57,750				39,432				50,831
Loss from operations			(10,399	)			(50,764	)			(34,476	)			(36,242	)
Other income (expense):
Interest income			850				1,504				1,286				148
Other income (expense), net			(2	)			(46	)			(1	)			(52	)
Total other income (expense)			848				1,458				1,285				96
Net loss and comprehensive loss		$	(9,551	)		$	(49,306	)		$	(33,191	)		$	(36,146	)
Net loss per share attributable to common stockholders, basic and diluted		$	(1.89	)		$	(9.59	)		$	(6.46	)		$	(6.97	)
Weighted-average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted			5,049,203				5,142,560				5,135,622				5,188,628
Pro forma net loss per share, basic and diluted (unaudited)						$								$
Weighted-average shares outstanding used in computing pro forma net loss per share, basic and diluted (unaudited)

The accompanying notes are an integral part of these financial statements

 

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4D Molecular Therapeutics, Inc.

Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(In thousands, except share amounts)

 

		Redeemable Convertible Preferred Stock								Common Stock								Additional Paid-In Capital				Accumulated Deficit				Total Stockholders’ Deficit
		Shares				Amount				Shares				Amount
Balances at December 31, 2017			2,220,999			$	18,508				5,063,303			$	1			$	884			$	(20,475	)		$	(19,590	)
Issuance of redeemable convertible preferred stock, net of $5,528 of issuance cost			5,154,632				84,472				—				—				—				—				—
Exercise of common stock options			—				—				63,041				—				105				—				105
Issuance of common stock warrants			—				—				—				—				72				—				72
Stock-based compensation			—				—				—				—				1,377				—				1,377
Net loss			—				—				—				—				—				(9,551	)			(9,551	)
Balances at December 31, 2018			7,375,631			$	102,980				5,126,344			$	1			$	2,438			$	(30,026	)		$	(27,587	)
Cumulative effect of adoption of ASC 606			—				—				—				—				—				307				307
Exercise of common stock options			—				—				52,611				—				75				—				75
Stock-based compensation			—				—				—				—				3,541				—				3,541
Net loss			—				—				—				—				—				(49,306	)			(49,306	)
Balances at December 31, 2019			7,375,631			$	102,980				5,178,955			$	1			$	6,054			$	(79,025	)		$	(72,970	)

The accompanying notes are an integral part of these financial statements.

 

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4D Molecular Therapeutics, Inc.

Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit – (Continued)

(In thousands, except share amounts)

 

		Redeemable Convertible Preferred Stock								Common Stock								Additional Paid-In Capital				Accumulated Deficit				Total Stockholders’ Deficit
		Shares				Amount				Shares				Amount
Balances at December 31, 2018			7,375,631			$	102,980				5,126,344			$	1			$	2,438			$	(30,026	)		$	(27,587	)
Cumulative effect of adoption of ASC 606 (unaudited)			—				—				—				—				—				307				307
Exercise of common stock options (unaudited)			—				—				15,000				—				20				—				20
Stock-based compensation (unaudited)			—				—				—				—				2,526				—				2,526
Net loss (unaudited)			—				—				—				—				—				(33,191	)			(33,191	)
Balances at September 30, 2019 (unaudited)			7,375,631			$	102,980				5,141,344			$	1			$	4,984			$	(62,910	)		$	(57,925	)
Balances at December 31, 2019			7,375,631			$	102,980				5,178,955			$	1			$	6,054			$	(79,025	)		$	(72,970	)
Issuance of redeemable convertible preferred stock, net of $3,138 of issuance cost (unaudited)			4,200,353			$	72,468				—				—				—				—				—
Cumulative effect of adoption of ASU 2018-07 (unaudited)			—				—				—				—				(39	)			39				—
Exercise of common stock options (unaudited)			—				—				78,787				—				557				—				557
Stock-based compensation (unaudited)			—				—				—				—				3,267				—				3,267
Net loss (unaudited)			—				—				—				—				—				(36,146	)			(36,146	)
Balances at September 30, 2020 (unaudited)			11,575,984			$	175,448				5,257,742			$	1			$	9,839			$	(115,132	)		$	(105,292	)

The accompanying notes are an integral part of these financial statements

 

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4D Molecular Therapeutics, Inc.

Statements of Cash Flows

(In thousands)

 

		Year Ended December 31,								Nine Months Ended September 30,
		2018				2019				2019				2020
Cash flows from operating activities											(Unaudited)
Net loss		$	(9,551	)		$	(49,306	)		$	(33,191	)		$	(36,146	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense			1,377				3,541				2,526				3,267
Change in fair value of derivative liability			(14	)			37				(1	)			16
Depreciation and amortization			697				1,004				686				1,072
Loss on disposition of property and equipment			16				7				—				—
Write-off of public offering costs			—				2,610				—				—
In-process research and development acquired and expensed in non-monetary related party transaction			—				5,137				5,137				—
Changes in operating assets and liabilities
Accounts receivable			(803	)			146				226				82
Prepaid expenses and other current assets			(855	)			(695	)			(2,140	)			(1,007	)
Other assets			(324	)			(220	)			(309	)			75
Accounts payable			438				533				(175	)			(524	)
Accrued and other liabilities			1,354				3,841				1,511				1,872
Deferred revenue			(8,587	)			(3,346	)			(2,295	)			(2,117	)
Net cash used in operating activities			(16,252	)			(36,711	)			(28,025	)			(33,410	)
Cash flows from investing activities
Acquisition of property and equipment			(414	)			(3,203	)			(2,726	)			(492	)
Net cash used in investing activities			(414	)			(3,203	)			(2,726	)			(492	)
Cash flows from financing activities
Issuance of redeemable convertible preferred stock, net of issuance costs			84,472				—				—				72,468
Issuance of common stock			105				75				20				557
Payments of public offering costs			—				(2,260	)			(1,545	)			(20	)
Payments of private offering costs							(10	)			—				—
Net cash provided by (used in) financing activities			84,577				(2,195	)			(1,525	)			73,005
Net increase (decrease) in cash and cash equivalents			67,911				(42,109	)			(32,276	)			39,103
Cash and cash equivalents, beginning of period			23,850				91,761				91,761				49,652
Cash and cash equivalents, end of period		$	91,761			$	49,652			$	59,485			$	88,755
Supplemental disclosures of non-cash investing and financing information
Purchases of property and equipment in accounts payable and accrued and other liabilities		$	56			$	385			$	396			$	512
Unpaid public offering costs		$	—			$	350			$	867			$	53
Unpaid private offering costs		$	—			$	18			$	—			$	—
Issuance of common stock warrants in return for services		$	72			$	—			$	—			$	—

The accompanying notes are an integral part of these financial statements.

 

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4D Molecular Therapeutics, Inc.

Notes to Financial Statements

1. Organization and Nature of the Business

Organization and Business

4D Molecular Therapeutics, Inc. (the “Company”) was formed as a limited liability company in September 2013 under the name 4D Molecular Therapeutics, LLC. The Company changed its name and converted into a corporation which was incorporated in the state of Delaware in March 2015. The Company is a clinical-stage gene therapy company pioneering the development of product candidates using its targeted and evolved adeno-associated viruses (“AAV”) vectors.

Liquidity and Going Concern

The Company experienced negative operating cash flows of $16.3 million and $36.7 million for the years ended December 31, 2018 and 2019, respectively, and $33.4 million (unaudited) for the nine months ended September 30, 2020. The Company had an accumulated deficit of $30.0 million and $79.0 million as of December 31, 2018 and 2019, respectively, and $115.1 million (unaudited) as of September 30, 2020. Since its inception, the Company has funded its operations primarily with proceeds from sales of redeemable convertible preferred stock and to a lesser extent from cash received pursuant to its collaboration and licensing arrangements. As of December 31, 2019 and September 30, 2020, the Company had $49.7 million and $88.8 million (unaudited) in cash and cash equivalents, respectively. In April and June of 2020, the Company received a total of $75.6 million gross proceeds (net proceeds of $72.5 million) from its issuance of Series C redeemable convertible preferred stock. See Note 10 for further discussion on the Series C Preferred Stock Purchase Agreement.

The Company is seeking to complete an initial public offering of its common stock. In the event the Company does not complete an initial public offering, the Company expects to seek additional funding through private equity financings, debt financings, or other capital sources, including collaborations with other companies or other strategic transactions. There is no assurance that the Company will be successful in obtaining funding on terms acceptable to the Company to fund continuing operations, if at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

If the Company is unable to obtain additional funding, the Company expects to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or investment in internal manufacturing capabilities, which could adversely affect its business prospects. If the Company raises additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, it may have to relinquish valuable rights to future revenue streams or product candidates or grant licenses on terms that may not be favorable to it.

Based on its recurring losses and negative cash flows from operations, expectation of continuing operating losses and negative cash flows from operations for the foreseeable future, and the need to raise additional capital to finance its future operations, management concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the annual and unaudited interim financial statements were available for reissuance and issuance, respectively.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

 

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2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”).

Unaudited Interim Financial Information

The accompanying balance sheet as of September 30, 2020, the statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ deficit and of cash flows for the nine months ended September 30, 2019 and 2020 are unaudited. In the opinion of management, the unaudited data reflects all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2020 and the results of its operations and comprehensive loss and its cash flows for the nine months

ended September 30, 2019 and 2020. The financial data and other information disclosed in these notes related to the nine months ended September 30, 2019 and 2020 are also unaudited. The results for the nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.

Unaudited Pro Forma Information

The unaudited pro forma basic and diluted net loss per share were computed to give effect to the automatic conversion of all outstanding shares of redeemable convertible preferred stock on a one-for-one basis into shares of common stock immediately prior to the completion of a qualified initial public offering (“IPO”) (see Note 10 for further discussion of the conversion of redeemable convertible preferred stock) as though the conversion had occurred as of the beginning of the period or the date of issuance, if later.

The unaudited pro forma redeemable convertible preferred stock and stockholders’ deficit were computed to give effect to the automatic conversion of all outstanding shares of redeemable convertible preferred stock on a one-for-one basis into shares of common stock immediately prior to the completion of a qualified IPO. The unaudited pro forma information does not assume any proceeds from the planned IPO.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses; and disclosure of contingent assets and liabilities as of the date of the financial statements. Such estimates include the determination of useful lives for property and equipment, the contract term, transaction price and costs of collaboration agreements, as well as estimates of the fair value of common stock, stock options and derivative instruments and income tax uncertainties. Actual results could differ from those estimates.

Due to the coronavirus (“COVID-19”) pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of December 31, 2019 and September 30, 2020 (unaudited). While there was not a material impact to the Company’s financial statements as of December 31, 2019 and September 30, 2020 (unaudited) and for the year ended December 31, 2019 and the nine months ended September 30, 2020 (unaudited), these estimates may change, as new events occur and additional information is obtained, as well as other factors related to the COVID-19 pandemic that could result in material impacts to the financial statements in future reporting periods.

 

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Segment Information

The Company operates and manages its business as one reportable and operating segment. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on a consolidated basis for purposes of allocating resources and assessing financial performance.

As of and for the years ended December 31, 2018 and December 31, 2019 and as of and for the nine months ended September 30, 2020 (unaudited), all of the Company’s long-lived assets were located in the United States and all revenue was earned in the United States.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable. The Company’s cash is held at two financial institutions in the United States of America. The Company’s cash equivalents are invested in money market funds. The Company has not experienced any losses on its deposits of cash and cash equivalents. Such deposits may, at times, exceed federally insured limits.

The Company’s partners in collaboration and license agreements who represent 10% or more of the Company’s total revenue are as follows:

 

		Year Ended December 31, 2018				Year Ended December 31, 2019				Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2020
										(Unaudited)				(Unaudited)
Customer A			53	%			90	%			88	%			97	%
Customer B			35	%			*				*				*
Customer C			*				*				*				*
Customer D			*				*				11	%			*
Total			88	%			90	%			99	%			97	%

 

*	Less than 10%

The Company’s partners in collaboration and license agreements who represent 10% or more of the Company’s total accounts receivable are as follows:

 

		December 31, 2018				December 31, 2019				September 30, 2020
										(Unaudited)
Customer A			100	%			64	%			100	%
Customer B			—				—				—
Customer C			—				36	%			—
Customer D			—				—				—
Total			100	%			100	%			100	%

 

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The Company’s total revenues by geographic region, based on the location of the customer, are as follows (in thousands):

 

		Year Ended December 31, 2018				Year Ended December 31, 2019				Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2020
										(Unaudited)				(Unaudited)
Australia		$	200			$	7			$	7			$	—
Netherlands			143				26				26				504
Switzerland			7,460				6,287				4,354				14,174
United States			6,327				666				569				(89	)
		$	14,130			$	6,986			$	4,956			$	14,589

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist of money market funds.

Other Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, suppliers for key raw materials, contract manufacturing organizations (“CMOs”) and contract research organizations (“CROs”), compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties (including for clinical trials and some aspects of research and preclinical testing).

The extent of the impact of the COVID-19 pandemic on the Company’s business will depend upon the duration and spread of the outbreak and the extent and severity of the impact on the Company’s clinical trial activities, research activities and suppliers, all of which are uncertain and cannot be predicted. The extent to which the coronavirus outbreak may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

Fair Value Measurements

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an

 

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asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, a three-level fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

 

•

Level 1—Observable inputs, such as quoted prices in active markets for identical assets and liabilities.

 

•

Level 2—Observable inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

•

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company accounts for transfers of financial instruments between levels of the fair value hierarchy on the date of the event or change in circumstance that caused the transfer.

Accounts Receivable—Allowance for Doubtful Accounts

The Company regularly reviews accounts receivable for collectability and establishes an allowance for probable credit losses and writes off uncollectible accounts as necessary. The Company has determined that no allowance was required at December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited). The Company did not have any write-offs relating to uncollectible accounts receivable during the years ended December 31, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited).

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation for acquired assets. Depreciation is computed using the straight-line method over the estimated useful lives of assets, ranging from three to five years. Leasehold improvements are amortized over the shorter of the useful life of the assets or the length of the lease. Upon sale or retirement of assets, the costs and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected within operating expenses in the statements of operations and comprehensive loss. Maintenance and repairs are charged to expense as incurred.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows, which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is typically measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. There have been no such impairments of long-lived assets in the years ended December 31, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited).

Redeemable Convertible Preferred Stock

The Company records all shares of redeemable convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The redeemable convertible preferred stock is recorded outside of permanent equity because while it is not mandatorily redeemable, in certain events

 

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considered not solely within the Company’s control, such as a merger or consolidation, sale, lease, or license of substantially all of the Company’s assets (each, a “deemed liquidation event”), the convertible preferred stock will become redeemable at the option of the holders of a majority of the outstanding series of redeemable convertible preferred stock. The Company has not adjusted the carrying values of the redeemable convertible preferred stock to the liquidation preference of such shares because a deemed liquidation event obligating the Company to pay the liquidation preference is not considered probable. Subsequent adjustments to the carrying values to the liquidation preference will be made only when it becomes probable that such a deemed liquidation event will occur.

Common Stock Warrants

The Company accounts for common stock warrants which meet the definition of a derivative as liabilities if the warrant requires net cash settlement or gives the holder the option of net cash settlement. The Company accounts for common stock warrants as equity if the contract requires physical settlement or net physical settlement or if the Company has the option of physical settlement or net physical settlement. Common stock warrants classified as liabilities are initially recorded at fair value and remeasured at fair value each balance sheet date with the offset adjustments recorded in other income (expense), net within the statements of operations and comprehensive loss. Common stock warrants classified as equity are initially measured at fair value on the grant date and are not subsequently remeasured.

Revenue Recognition

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), using the modified retrospective transition method. The Company determines revenue recognition for arrangements within the scope of ASC 606 by performing the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company’s revenue is primarily derived through its license, research, development and commercialization agreements. The terms of these types of agreements may include (i) licenses to the Company’s technology, (ii) research and development services, and (iii) services or obligations in connection with participation in research or steering committees. Payments to the Company under these arrangements typically include one or more of the following: nonrefundable upfront and license fees, research funding, milestone and other contingent payments to the Company for the achievement of defined collaboration objectives and certain preclinical, clinical, regulatory and sales-based events, as well as royalties on sales of any commercialized products. Arrangements that include upfront payments are recorded as deferred revenue upon receipt or when due and are recognized as revenue as performance conditions are met. The event-based milestone payments, royalties and cost reimbursements represent variable consideration, and the Company uses the most likely amount method to estimate this variable consideration. Royalty payments are recognized when earned or as the sales occur. The Company records cost reimbursements as accounts receivable when right to consideration is unconditional.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. The Company allocates the total transaction price to each performance obligation based on the estimated standalone selling price and recognizes revenue when, or as, the performance obligation is satisfied. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. At the end of each reporting period, the

 

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Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Prior to the adoption of ASC 606 on January 1, 2019, the Company recognized revenue when all of the following criteria were met: persuasive evidence of an arrangement exists; transfer of technology has been completed or services have been rendered; the price to the customer is fixed or determinable; and collectability is reasonably assured.

In arrangements involving the delivery of more than one element, each required deliverable was evaluated to determine whether it qualified as a separate unit of accounting. The determination was based on whether the deliverable had “standalone value” to the customer. If a deliverable did not qualify as a separate unit of accounting, it was combined with the other applicable undelivered item(s) within the arrangement and these combined deliverables were treated as a single unit of accounting.

The arrangement’s consideration that was fixed or determinable was allocated to each separate unit of accounting based on the relative selling price methodology in accordance with the selling price hierarchy, which included vendor-specific objective evidence (“VSOE”) of selling price, if available, or third-party evidence of selling price if VSOE was not available, or the best estimate of selling price, if neither VSOE nor third-party evidence was available.

Payments or reimbursements for the Company’s research and development efforts for the arrangements where such efforts were considered as deliverables were recognized as the services were performed and were presented on a gross basis. When upfront payments were received and if there was no discernible pattern of performance, the Company recognized revenue ratably over the associated period of performance.

Research and Development Expenses

Costs related to research, design and development of programs are charged to research and development expense as incurred. Research and development costs include, but are not limited to, payroll and personnel expenses including stock-based compensation, materials, laboratory supplies, outside services and allocated overhead, including rent, insurance, repairs and maintenance, depreciation and utilities. The Company expenses all research and development costs in the period in which they are incurred.

Costs incurred in obtaining technology licenses are charged to research and development expense as acquired in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use.

Accrued Research and Development

The Company has entered into various agreements with CROs and CMOs. The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued and other current liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made to CROs or CMOs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

Stock-Based Compensation

As of December 31, 2019, the Company accounts for stock-based compensation as measured at grant date, based on the fair value of the award. The Company measures the fair value of awards

 

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granted using the Black-Scholes option pricing model and recognizes the expense in the Company’s statements of operations and comprehensive loss over the requisite service period using the straight-line method. Forfeitures are accounted for as they occur. The Company’s policy for issuing stock upon stock option exercise is to issue new common stock.

The Company recognizes the fair value of stock options granted to nonemployees as stock-based compensation expense over the period in which the related services are received. Stock-based compensation expense related to stock options granted to nonemployees is recognized based on the vesting date fair value of awards as the stock options are earned. The Company remeasures the stock-based compensation at each reporting period end with the resulting change in fair value being recognized in the statements of operations and comprehensive loss over the period the related services are rendered. The Company believes that the estimated fair value of stock options is more readily measurable than the fair value of the services rendered. In addition, the Company estimates the service period for the awards based on the time that would be required to satisfy the service condition, assuming the service condition will be satisfied. Stock-based compensation expense is recognized over the estimated service period but is accelerated if the performance condition is achieved earlier than estimated.

Stock-Based Compensation (unaudited)

On January 1, 2020, the Company adopted ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees. As of January 1, 2020, the Company accounts for stock-based compensation for stock options granted to employees, directors and nonemployees as measured at grant date, based on the fair value of the award. The Company measures the fair value of awards granted using the Black-Scholes option pricing model and recognizes the expense in the Company’s statements of operations and comprehensive loss over the requisite service period using the straight-line method.

 

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax basis of the Company’s assets and liabilities and their financial statement reported amounts. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and research and development credit carryforwards and are measured using the enacted tax rates and laws that will be in effect when such items are expected to reverse. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized.

The Company accounts for uncertain tax positions by assessing all material positions taken in any assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Embedded Derivative

Embedded derivatives that are required to be bifurcated from the underlying host instrument are accounted for and valued as a separate financial instrument. An embedded derivative exists in the

 

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award agreement with the Cystic Fibrosis Foundation Therapeutics, Inc. (“CFFT”). As described in Note 15, the embedded derivative has been bifurcated and is classified as a liability on the balance sheet and separately accounted for at its fair value. The derivative liability is subject to remeasurement to fair value each reporting period. Changes in the fair value of the derivative liability are recognized as a component of other income (expense), net within the statements of operations and comprehensive loss.

Deferred Offering Costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly related to the Company’s in-process equity financings, including the planned IPO, until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds received as a result of the offering. In the event that a planned offering does not occur or is significantly delayed, all related deferred offering costs will be expensed immediately within the Company’s statements of operations and comprehensive loss. The Company incurred $2.6 million of public offering costs for the year ended December 31, 2019, which were expensed to general and administrative expenses, as a result of delays in the IPO process during the period. There were no material deferred offering costs capitalized as of December 31, 2018 or 2019. As of September 30, 2020, $0.1 million (unaudited) deferred offering costs were recorded on the balance sheet.

Net Loss Per Share Attributable to Common Stockholders

The Company calculates basic and diluted net loss per share to common stockholders in conformity with the two-class method required for companies with participating securities. The Company considers all series of redeemable convertible preferred stock to be participating securities as the holders are entitled to receive non-cumulative dividends on a pari passu basis in the event the dividend is paid on common shares. Under the two-class method, the net loss attributable to common stockholders is not allocated to the redeemable convertible preferred stock as the holders of redeemable convertible preferred stock do not have a contractual obligation to share in losses.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. Diluted net loss per share attributable to common stockholders is computed by giving effect to all potentially dilutive common shares outstanding for the period. For purposes of this calculation, redeemable convertible preferred shares, stock options to acquire shares of common stock, common stock warrants, and unvested common stock subject to repurchase, are considered potentially dilutive common shares, but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASC 606. This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

The Company adopted ASC 606 effective January 1, 2019 using the modified retrospective method only to contracts not completed as of this date. The Company recognized the cumulative effect

 

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of initially applying ASC 606 as an adjustment to the balance of accumulated deficit at January 1, 2019 with a cumulative effect adjustment of $0.3 million reflected as a decrease to the opening balance of accumulated deficit and a decrease to deferred revenue. See Note 6 for further discussion on research and collaboration arrangements.

The following tables summarize the amount by which each financial statement line item was affected by the impact of the cumulative adjustment and as compared with the guidance that was in effect prior to the adoption (in thousands):

Impact of ASC 606 Adoption on

Balance Sheet as of January 1, 2019

 

		As reported under ASC 606				Adjustments				Balances without adoption of ASC 606
Deferred revenue, current portion		$	(6,202	)		$	1,295			$	(4,907	)
Deferred revenue, noncurrent portion		$	(11,474	)		$	(1,602	)		$	(13,076	)
Accumulated deficit		$	(29,719	)		$	(307	)		$	(30,026	)

Impact of ASC 606 Adoption on

Balance Sheet as of December 31, 2019

 

		As reported under ASC 606				Adjustments				Balances without adoption of ASC 606
Deferred revenue, current portion		$	(5,864	)		$	799			$	(5,065	)
Deferred revenue, noncurrent portion		$	(13,603	)		$	235			$	(13,368	)
Accumulated deficit		$	(79,025	)		$	1,034			$	(77,991	)

Impact of ASC 606 Adoption on Statements of Operations and Comprehensive Loss

Year Ended December 31, 2019

 

		As reported under ASC 606				Adjustments				Balances without adoption of ASC 606
Collaboration and research revenue		$	6,986			$	1,341			$	8,327
Net loss		$	(49,306	)		$	1,341			$	(47,965	)
Net loss per share—basic and diluted		$	(9.59	)		$	0.26			$	(9.33	)

Impact of ASC 606 Adoption on Statements of Cash Flows

Year Ended December 31, 2019

 

		As reported under ASC 606				Adjustments				Balances without adoption of ASC 606
Cash flows from operating activities:
Net loss		$	(49,306	)		$	1,341			$	(47,965	)
Changes in operating assets and liabilities:
Deferred revenue		$	(3,346	)		$	(1,341	)		$	(4,687	)

 

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In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10). This ASU clarified certain aspects of the previously issued standard. This ASU is effective on the same effective date as ASU 2016-01. The adoption of this guidance during the year ended December 31, 2019 did not have an impact on the Company’s financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU requires changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The adoption of this guidance during the year ended December 31, 2019 did not have an impact on the Company’s financial statements.

Recently Adopted Accounting Pronouncements (unaudited)

In June 2018, FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payment to employees. Under this ASU, the measurement of equity-classified nonemployee awards will be fixed at the grant date, which may lower their cost and reduce volatility in the statement of operations and comprehensive loss. The transition method provided by this ASU is on a modified retrospective basis, which recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, with early adoption permitted, but no earlier than a company’s adoption date of ASC 606. The Company adopted this guidance effective January 1, 2020 using the modified retrospective method. The Company recorded a less than $0.1 million (unaudited) cumulative-effect adjustment reflected as a decrease to the opening balance of accumulated deficit and a decrease to additional paid-in capital.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU amends the disclosure requirement in ASC 820, Fair Value Measurement, by adding, changing, or removing certain disclosures. This ASU applies to all entities that are required under this guidance to provide disclosure about recurring or nonrecurring fair value measurements. The amendments require new disclosures related to: (i) changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and (ii) the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements. In addition, there are certain changes in disclosure requirements in the existing guidance. For all entities, this ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance effective January 1, 2020 with relevant updates made to disclosures.

New Accounting Pronouncements Not Yet Adopted

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606. This ASU clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606, Revenue from Contracts with Customers, when the counterparty is a customer. This ASU also precludes an

 

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entity from presenting consideration received from a transaction as revenue from contracts with customers if the counterparty is not a customer for that transaction. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted for entities that have adopted ASC 606, Revenue from Contracts with Customers. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, or ASU 2018-15. ASU 2018-15 requires a customer that is a party to a cloud computing service contract to follow the internal-use software guidance in Subtopic 350-40 to determine which implementation costs to capitalize and which costs to expense. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements and related disclosures.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815) (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This ASU simplifies the accounting for certain financial instruments with down round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a downward adjustment of the current exercise price based on the price of future equity offerings. Down round features are common in warrants, preferred shares, and convertible debt instruments issued by private companies and early-stage public companies. This ASU requires companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The amendments in Part I of this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The amendments in Part I should be applied (1) retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the first fiscal year and interim periods; (2) retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented. The amendments in Part II of this ASU do not require any transition guidance because those amendments do not have an accounting effect. The Company does not expect adoption of this ASU to have a material impact on its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which provides clarification to ASU 2016-02. These ASUs (collectively the “new leasing standard”) require lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASC 842 supersedes the previous leases standard, ASC 840, Leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities to elect an optional

 

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transition method where entities may continue to apply the existing lease guidance during the comparative periods and apply the new lease requirements through a cumulative effect adjustment in the period of adoption rather than in the earliest period presented. In March 2019, the FASB issued ASU 2019-01, which provides clarification on implementation issues associated with adopting ASU 2016-02. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates. This ASU provides a one-year deferral of the effective dates of the ASUs on derivatives, hedging and lease for companies that are non-public entities. In June 2020, the FASB issued ASU 2020-05, which deferred the effective date of the new leasing standard by one year for certain entities that have not already issued or made available for issuance their financial statements reflecting the adoption of the standard. ASU 2014-09 is effective for these entities for fiscal years beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements and related disclosures.

3. Fair Value Measurements

The following tables represent the Company’s fair value hierarchy for financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited) (in thousands):

 

		Basis for Fair Value Measurements												Fair Value as of December 31, 2018
		(Level 1)				(Level 2)				(Level 3)
Assets
Money market funds		$	91,761			$	—			$	—			$	91,761
Total		$	91,761			$	—			$	—			$	91,761
Liabilities
Derivative liability		$	—			$	—			$	64			$	64
Total		$	—			$	—			$	64			$	64

 

		Basis for Fair Value Measurements												Fair Value as of December 31, 2019
		(Level 1)				(Level 2)				(Level 3)
Assets
Money market funds		$	15,876			$	—			$	—			$	15,876
Total		$	15,876			$	—			$	—			$	15,876
Liabilities
Derivative liability		$	—			$	—			$	101			$	101
Total		$	—			$	—			$	101			$	101

 

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		Basis for Fair Value Measurements												Fair Value as of September 30, 2020
		(Level 1)				(Level 2)				(Level 3)
Assets
Money market funds		$	88,755			$	—			$	—			$	88,755
Total		$	88,755			$	—			$	—			$	88,755
Liabilities
Derivative liability		$	—			$	—			$	117			$	117
Total		$	—			$	—			$	117			$	117

Level 3 Inputs

The fair value of the warrant obligation is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the common stock warrant obligation was determined using the Black-Scholes option pricing model. In determining the fair value of the common stock warrant obligation, the inputs impacting fair value include the expected term, expected volatility, risk-free interest rate and dividend yield. See Note 13 for further discussion on common stock warrant obligation.

The fair value of the derivative liability is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the derivative liability was determined using a present value analysis with multiple scenarios. In determining the fair value of the derivative liability, the inputs impacting fair value include the change of control payment to CFFT, the probability of a change of control event, the product status at time of a change of control event and the discount rate. See Note 15 for further discussion on embedded derivative.

There were no transfers between Level 1, 2 and 3 during the periods presented.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):

 

		Common Stock Warrant Obligation				Derivative Liability
Balance as of December 31, 2017		$	60			$	78
Issuance of common stock warrant			(59	)			—
Change in fair value included in other income (expense), net			(1	)			(14	)
Balance as of December 31, 2018		$	—			$	64
Change in fair value included in other income (expense), net			—				37
Balance as of December 31, 2019		$	—			$	101
Change in fair value included in other income (expense), net (unaudited)			—				16
Balance as of September 30, 2020 (unaudited)		$	—			$	117

 

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4. Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

 

		December 31, 2018				December 31, 2019				September 30, 2020
										(Unaudited)
Machinery and equipment		$	2,433			$	3,761			$	4,636
Leasehold improvements			1,349				2,405				2,527
Furniture and fixtures			182				541				596
Office equipment			74				98				121
Computer equipment and software			52				306				366
Construction in progress			34				563				432
Total property and equipment			4,124				7,674				8,678
Less: Accumulated depreciation and amortization			(1,652	)			(2,625	)			(3,697	)
Property and equipment, net		$	2,472			$	5,049			$	4,981

All property and equipment are maintained in the United States. Depreciation expense was $0.7 million and $1.0 million for the years ended December 31, 2018 and 2019 and $0.7 million (unaudited) and $1.1 million (unaudited) for the nine months ended September 30, 2019 and 2020, respectively.

5. Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

 

		December 31, 2018				December 31, 2019				September 30, 2020
										(Unaudited)
Payroll and related		$	1,313			$	2,133			$	2,110
Accrued clinical and preclinical study costs			75				494				978
Consulting and professional			549				2,239				3,947
Other accrued expenses			256				481				332
		$	2,193			$	5,347			$	7,367

6. Research and Collaboration Arrangements

Collaboration and license revenue for each period was as follows (in thousands):

 

		Revenue
		Year Ended December 31,								Nine Months Ended September 30,
		2018				2019				2019				2020
uniQure		$	143			$	26			$	26			$	504
Benitec			200				7				7				—
AGTC			272				—				—				—
CRF			—				—				—				—
Pfizer			5,000				—				—				—
Roche			7,460				6,287				4,354				14,174
CFFT			55				118				21				(89	)
AstraZeneca			1,000				548				548				—
		$	14,130			$	6,986			$	4,956			$	14,589

 

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Deferred revenue for each period was as follows (in thousands):

 

		Deferred Revenue
		As of December 31, 2018				As of December 31, 2019				As of September 30, 2020
uniQure		$	—			$	5,137			$	4,634
Benitec			183				—				—
AGTC			—				—				—
CRF			—				—				—
Pfizer			—				—				—
Roche			17,055				13,640				11,937
CFFT			245				690				779
AstraZeneca			500				—				—
		$	17,983			$	19,467			$	17,350

The total amount of revenue in the year ended December 31, 2019, which was included in deferred revenue at January 1, 2019, was $3.6 million. The total amount of revenue in the nine months ended September 30, 2020, which was included in deferred revenue at January 1, 2020, was $4.0 million (unaudited).

uniQure

In January 2014, the Company and uniQure biopharma B.V. (“uniQure”) entered into a Collaboration and License Agreement (the “uniQure Agreement”) to collaborate on the discovery and non-clinical research activities related to the Company’s Therapeutic Vector Evolution platform in order to generate and validate vectors for gene delivery to treat diseases within the central nervous system and liver (together, the “uniQure Field”).

The uniQure Agreement provided uniQure with a research license as well as an exclusive development and commercialization license for each project variant selected for further development. The initial research term is three years with an option for uniQure to extend the research term one time for an additional year. Once the Company’s research plan has concluded, uniQure is solely responsible for the continued development, manufacturing and commercialization of the project variants as potential product candidates. In October 2016, uniQure exercised its option to extend the research term for an additional year to January 2018. The Company was also required to work exclusively with uniQure in the uniQure Field (the “uniQure Exclusivity Clause”).

Pursuant to the uniQure Agreement, the Company received upfront payments of $0.2 million, and was entitled to receive (i) contingent payments for the achievement of research and development milestones of up to $5.0 million for each licensed product selected under the arrangement, and (ii) royalties in the single digit range on future sales of the potential product candidates and sublicense consideration in the low teens to low thirties range on any future sublicensing arrangements. The Company also received capped research and development service fees based on contractual full-time employee rates per year. In connection with the performance obligations under the uniQure Agreement, the founders of 4D Molecular Therapeutics, LLC received equity options to purchase an aggregate of 609,744 of uniQure ordinary shares that vest over the initial three-year term of the agreement.

The upfront payment of $0.2 million was recorded as deferred revenue and was recognized on a ratable basis over the estimated performance period of four years. Payments and reimbursements for research costs were recognized on an as-incurred basis. The options to purchase uniQure shares

 

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were deemed to be a noncash component of the arrangement consideration, as the vesting of options is linked to the uniQure Agreement and there is a requirement for the holders of the options to provide services under the agreement. The fair value of the uniQure options, which was estimated to be $10.6 million, was recognized ratably as revenue over the estimated performance period of four years and the associated compensation expense related to the stock options were recorded as research and development expense.

In August 2019, the Company and uniQure entered into an Amended and Restated Collaboration and License Agreement (the “Amended uniQure Agreement”), which amended and restated the uniQure Agreement, and a separate Collaboration and License Agreement (the “Second uniQure Agreement”). Under these agreements, the Company agreed to transfer incremental rights and services to uniQure in exchange for uniQure eliminating the uniQure Exclusivity Clause and transferring other rights back to the Company.

Under the Amended uniQure Agreement, uniQure continues to have an exclusive license to select AAV capsid variants (the “Selected Variants”) in the uniQure Field. uniQure continues to be solely responsible, at its cost, to develop and commercialize the compounds and products containing the Selected Variants. The amended uniQure Agreement eliminated the uniQure Exclusivity Clause in the uniQure Agreement. Furthermore, the contingent payments that the Company was entitled to from uniQure for the achievement of research and development milestones of up to $5.0 million for each licensed product selected under the uniQure Agreement were eliminated and sublicense consideration on any future sublicensing arrangements was reduced from the low teens to low thirties percentages to mid-single digit to mid-twenties percentages.

Under the Second uniQure Agreement, the parties agreed to research and develop new AAV capsid variants (the “New Variants”) that are not Selected Variants that affect certain targets selected by uniQure (the “uniQure Targets”) in the uniQure Field. The Company is solely responsible, at its cost, for the research of the New Variants. The Company granted uniQure an exclusive license to a certain number of the New Variants (the “uniQure New Variants”) that affect the uniQure Targets. uniQure is solely responsible, at its cost, to develop and commercialize the compounds and products containing the uniQure New Variants that affect the uniQure Targets (the “Licensed Products”). The Company retains all rights to New Variants in the uniQure Field that affect targets other than the uniQure Targets.

Under both the Amended uniQure Agreement and the Second uniQure Agreement, uniQure will be required to pay the Company royalties on worldwide annual net sales of Licensed Products at a mid-single digit percentage rate, subject to certain specified reductions. uniQure will also be required to pay the Company sublicensing consideration for sublicensing the Company’s intellectual property rights licensed under the Amended uniQure Agreement or the Second uniQure Agreement to third parties at a rate between the mid-single digit to mid-twenties. The Company has reciprocal obligations, at the same percentage rates as uniQure, to pay uniQure royalties and sublicensing consideration for sublicensing certain intellectual property rights licensed under the Amended uniQure Agreement or the Second uniQure Agreement to third parties.

The Company concluded that the Amended uniQure Agreement and the Second uniQure Agreement should be accounted for as one combined contract that should be accounted for as a separate contract from the uniQure Agreement given that the incremental licensed intellectual property rights and research and development services are distinct from the rights and services previously transferred to uniQure under the uniQure Agreement and the transaction price increased by an amount that equals the standalone selling price of the incremental rights and services to be transferred to uniQure under the Amended uniQure Agreement and Second uniQure Agreement.

Neither party was required to pay monetary consideration in connection with the execution of the Amended uniQure Agreement or the Second uniQure Agreement or for subsequent performance by

 

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the parties under those agreements, notwithstanding the potential future royalty and sublicense consideration described above. The fair value of the non-monetary consideration given by uniQure to the Company, for the intellectual property right is $5.1 million. This intellectual property right is considered to be an in-process research and development asset with no alternative future use and, accordingly, was written off as acquired in-process research and development expense in the year ended December 31, 2019.

The incremental transaction price described in the paragraph above was recorded as deferred revenue given that the Company identified one single combined performance obligation under ASC 606, which includes the licenses to the New Variants, research services and participation in the joint steering committee (“JSC”). Revenue will be recognized using the input method based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligation. Based on the current estimated timelines, the deferred revenue is expected to be recognized as revenue over approximately three to four years from December 31, 2019.

The Company determined the transaction price using the risk adjusted net present value analysis (“rNPV”) methodology to value the elimination of the uniQure exclusivity clause and other material rights received by the Company, including the potential royalties the Company would receive from uniQure. The rNPVs incorporate estimates and assumptions including the number of products the Company and uniQure would develop, the risk-adjusted probability of successfully developing a biopharmaceutical product, the probability that uniQure will develop a product, the research and development costs, the potential worldwide sales and associated commercialization costs, corporate tax rate, and discount rate.

During the years ended December 31, 2018 and 2019, the Company recognized revenue of $0.1 million and less than $0.1 million under the uniQure Agreement, respectively. During the year ended December 31, 2019, no revenue has been recognized in connection with the Amended uniQure Agreement or Second uniQure Agreement. During the nine months ended September 30, 2019, the Company recognized revenue of less than $0.1 million (unaudited) in connection with the uniQure Agreement. During the nine months ended September 30, 2020, the Company recognized revenue of

$0.5 million (unaudited) in connection with the Amended uniQure Agreement and Second uniQure Agreement. As of December 31, 2018, December 31 2019 and September 30, 2020, deferred revenue relating to uniQure was $0, $5.1 million and $4.6 million (unaudited), respectively. There were no amounts due from uniQure under the uniQure Agreement, Amended uniQure Agreement or Second uniQure Agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited). As of December 31, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligation was $5.1 million. No adjustment was necessary upon adoption of ASC 606 because the uniQure Agreement was substantially completed as of January 1, 2019.

Benitec

In November 2014, the Company and Benitec Biopharma Limited (“Benitec”) entered into a collaboration and license agreement to collaborate on the discovery and non-clinical research activities related to the Company’s Therapeutic Vector Evolution platform in order to generate and validate vectors for gene delivery to treat certain ophthalmic diseases (the “Benitec Agreement”). Benitec has the option of nominating up to three project variants as part of the Benitec Agreement.

The Benitec Agreement provides Benitec with a temporary research license as well as an exclusive development and commercialization license for each project variant selected to further develop. The initial research term is two years and is automatically extended in six-month increments, if necessary, in order to complete additional required studies, for a maximum of five years. Once the

 

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Company’s research plan has concluded, Benitec is solely responsible for the continued development, manufacturing and commercialization of the project variants as potential product candidates.

Pursuant to the Benitec Agreement, the Company received as consideration (i) an upfront payment of $0.5 million, (ii) capped research and development service fees based in part on prescribed full-time equivalent labor rates and (iii) reimbursements of pass-through and overhead costs incurred on behalf of Benitec.

On January 24, 2017, the Benitec Agreement was amended to give Benitec sole responsibility for the performance of certain research work which would have generated research services revenue for the Company under the original agreement. Pursuant to the amendment, the Company received $0.5 million as consideration. This $0.5 million was recorded as deferred revenue and is being recognized over the same period as the upfront payment.

In March 2019, the Benitec Agreement was terminated based on mutual agreement between the Company and Benitec.

Under ASC 605, Revenue Recognition, the payments of $1.0 million were recorded as deferred revenue and were being recognized on a ratable basis over the estimated performance period of five years. Payments and reimbursements for research costs, including pass-through and other out-of-pocket costs, were recognized on an as-incurred basis under ASC 605. Under ASC 606, the Company uses the input method to measure progress toward completion of the performance obligation and concluded that revenue will be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligation. Upon the adoption of ASC 606 on January 1, 2019, the Company recorded an additional $0.2 million of cumulative revenue through a decrease in deferred revenue and decrease in the beginning accumulated deficit, based on the difference between the input method used under ASC 606 and the ratable recognition previously used under ASC 605.

The Company identified one combined performance obligation to provide the research license, exclusive development and commercialization licenses for each project variance selected to further develop, research services and participation in the JSC. The transaction price included the $1.0 million non-refundable upfront fees and $2.4 million reimbursement for costs incurred and the value of labor hours expended. The Company excluded any consideration related to sales-based milestones, including royalties, which are recognized when the related sales occur. For the year ended December 31, 2019, there was no change in the transaction price.

During the years ended December 31, 2018 and 2019, the Company recognized revenue of $0.2 million and less than $0.1 million under the Benitec Agreement, respectively. During the nine months ended September 30, 2019 and September 30, 2020, the Company recognized revenue of less than $0.1 million (unaudited) and $0 (unaudited), respectively. As of December 31, 2018, December 31, 2019 and September 30, 2020, deferred revenue relating to the Benitec Agreement was $0.2 million, $0 and $0 (unaudited), respectively. There were no amounts due from Benitec under the Benitec Agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited), respectively. Upon termination of the Benitec Agreement in March 2019, the Company had no further obligations impacting revenue recognition.

AGTC

In April 2015, the Company entered into a collaboration and option agreement with Applied Genetic Technologies Corporation (“AGTC”) to discover and develop optimized AAV vectors to treat specific ophthalmic disease indications with high unmet medical need (the “AGTC Agreement”). The

 

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AGTC Agreement included both a research funding component as well as a licensing component, wherein AGTC was granted the option to license up to three resulting project variants for up to six products for further development and commercialization. The AGTC Agreement expired in October 2018 when AGTC did not exercise their option to license during the option period.

In accordance with ASC 605, the Company identified the following deliverables at the inception of the AGTC Agreement: (i) the research license, (ii) research services, and (iii) participation in a joint research steering committee. The Company determined that neither the research license nor participation in the joint research steering committee has stand-alone value to AGTC due to the specialized nature of the research services to be provided by the Company, and accordingly, this deliverable was combined with the research services as a single unit of accounting. Further, at the inception of the AGTC Agreement, AGTC’s options to obtain an exclusive development and commercialization license for each research project target did not represent deliverables because they are substantive options and do not contain a significant or incremental discount. No adjustment was necessary upon adoption of ASC 606. The Company elected to use the practical expedients permitted related to adoption, which do not require the Company to apply the revenue standard to contracts that are completed as of the date of initial application.

Pursuant to the AGTC Agreement, the Company received two upfront payments totaling $3.0 million as consideration. The upfront payments of $3.0 million were recorded as deferred revenue and were recognized on a ratable basis over the estimated performance period of three years.

Revenue was fully recognized on the AGTC Agreement in the year ended December 31, 2018. During the years ended December 31, 2018 and 2019, the Company recognized revenue of $0.3 million and $0, respectively. As of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited), deferred revenue relating to the AGTC Agreement was $0. No amount was due from AGTC under the AGTC Agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited).

CRF

In November 2015, the Company entered into a research funding and collaboration agreement (the “CRF Agreement”) with the Choroideremia Research Foundation (“CRF”), a non-profit organization dedicated to finding a cure for choroideremia, a rare inherited disorder that causes progressive vision loss, ultimately leading to complete blindness. The goal of the CRF Agreement is for CRF to contribute funding to help with the advancement of the Company’s choroideremia research program. The Company is responsible for all decision making and execution of any and all of the related activities to be completed in its sole discretion. The initial term of the CRF Research Plan is two years. The agreement includes contribution to CRF of up to $2.5 million upon certain development or approval milestones. The overall arrangement has automatic extensions of up to three additional years. As of December 31, 2019 and September 30, 2020 (unaudited), no milestones have been achieved.

Revenue was fully recognized for this agreement in the year ended December 31, 2017. There was no deferred revenue relating to the CRF Agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited). No amount was due from CRF under the CRF Agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited).

No adjustment was necessary upon adoption of ASC 606. The Company elected to use the practical expedient permitted related to adoption, which does not require the Company to apply ASC 606 to contracts that are completed as of the date of initial application.

 

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Pfizer

In December 2015, the Company signed a collaboration and license agreement (the “Pfizer Agreement”) with Pfizer, Inc. (“Pfizer”). Under the terms of the Pfizer Agreement, the Company agreed to deploy its Therapeutic Vector Evolution platform to generate and validate up to three project variants for gene delivery to treat diseases in cardiac tissue. Once the Company’s research activities concluded, Pfizer would be solely responsible for the continued development, manufacturing and commercialization of the project variants as potential product candidates.

Pursuant to the Pfizer Agreement, the Company received a non-refundable upfront payment of $5.0 million as consideration. No revenue was recognized under the Pfizer Agreement until Pfizer terminated this agreement for convenience in December 2018. The entire upfront payment of $5.0 million was recognized as revenue in December 2018 as the Company had no further obligations impacting revenue recognition. As of December 31, 2018, December 31, 2019 and September 30, 2020 (uanudited), deferred revenue relating to the Pfizer Agreement was $0. No amount was due from Pfizer under the Pfizer Agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited).

No adjustment was necessary upon adoption of ASC 606. The Company elected to use the practical expedient permitted related to adoption, which does not require the Company to apply ASC 606 to contracts that are completed as of the date of initial application.

Roche

In November 2017, the Company entered into a collaboration and license agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (together, “Roche”) to discover and develop products containing optimized next generation AAV Vectors focused on ophthalmological diseases and disorders excluding select criteria (the “2017 Roche Agreement”). The Company and Roche both have the ability to nominate products to discover, develop and commercialize.

At the effective date, choroideremia was designated a Roche product. The Company is responsible for conducting research and development services prior to pivotal clinical studies, and Roche is responsible for conducting subsequent development and commercialization activities. In addition, Roche agreed to pay for research and development services at the agreed upon full-time employee rate for work performed for choroideremia under the 2017 Roche Agreement, except for the costs associated with the manufacturing work for choroideremia.

For any product that the Company nominates and conducts research and development services under the 2017 Roche Agreement prior to pivotal clinical studies, Roche has an option to convert the status of the product to a Roche product during the 90-day option period. If Roche chooses to not exercise its option, the Company can continue subsequent development and commercialization activities and Roche will have no further rights with respect to such product.

Pursuant to the 2017 Roche Agreement, the Company received an upfront payment of $21.0 million as consideration. In addition, the Company is entitled to contingent payments including (i) $1.0 million for each Roche nominated product beyond the first three, (ii) up to $30.0 million upon exercise of the option to convert a product the Company nominated and developed prior to pivotal clinical studies (iii) development milestone payments of up to $223.0 million, of which $86.0 million relates to choroideremia and the rest relate to other licensed products; and (iv) sales-based milestones of up to $123.0 million in connection with licensed products. The 2017 Roche Agreement also includes provisions that entitle the Company to receive royalty payments ranging from the mid-single digits to the mid-teens for the net sales of the licensed products, in each case subject to the reductions in accordance with the terms of the agreement.

 

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Under ASC 605, the upfront payment of $21.0 million was recorded as deferred revenue and was being recognized on a ratable basis over the estimated performance period of five and a half years. Under ASC 606, the Company uses the input method to measure progress toward completion of the performance obligation and concluded that revenue will be recognized based on actual resources consumed, labor hours expended and costs incurred as a percentage of total budgeted costs. Upon the adoption of ASC 606, the Company recognized an additional $0.4 million of cumulative revenue through a decrease to deferred revenue and a decrease in the beginning accumulated deficit, based on the difference between the input method used under ASC 606 and the ratable recognition previously used under ASC 605.

Under ASC 606, the Company identified one single combined performance obligation for the license, research services and participation in the JSC. Furthermore, the Company concluded that at the inception of the agreement, Roche’s option, exercisable prior to pivotal clinical study initiation, does not represent a material right and should be allocated to the single performance obligation and recognized as revenue upon Roche’s exercise of the option. The transaction price related to the agreement upon adoption of ASC 606 included the $21.0 million non-refundable upfront fee and $10.7 million for estimated reimbursements for research and development services at the agreed upon full-time employee rate and third party costs. The Company’s contract with Roche does not include a significant financing component. The Company concluded that the transaction price should not include the variable consideration related to development milestones as they were considered to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal of cumulative revenue in the future. The Company excluded any consideration related to sales-based milestones, including royalties, which are recognized when the related sales occur. The transaction price and estimated period of performance will be re-evaluated at each reporting period. For the year ended December 31, 2019, an adjustment of $4.5 million was made to the transaction price to reflect an increase in the scope of the project and expected reimbursable costs. For the nine months ended September 30, 2019, an adjustment of $4.2 million (unaudited) was made to the transaction price to reflect an increase in the scope of the project and expected reimbursable costs. For the nine months ended September 30, 2020, an adjustment of $15.1 million (unaudited) was made to the transaction price to reflect an increase of $5.1 million (unaudited) in the scope of the project and expected reimbursable costs and the addition of $10.0 million (unaudited) of variable consideration as the uncertainty associated with two development milestones was resolved. The increase in the transaction price and total budgeted costs resulted in a $1.6 million decrease in revenue recognized in the year ended December 31, 2019 related to performance obligations partially satisfied in periods prior to January 1, 2019. For the nine months ended September 30, 2019 and 2020, the change in the transaction price and total budgeted costs resulted in a decrease of $1.5 million (unaudited) and an increase of $7.1 million (unaudited) in revenue recognized related to performance obligations partially satisfied in periods prior to January 1, 2019 and January 1, 2020, respectively.

During the years ended December 31, 2018 and 2019, the Company recognized revenue of $7.5 million and $6.3 million, respectively. During the nine months ended September 30, 2019 and 2020, the Company recognized revenue of $4.4 million (unaudited) and $14.2 million (unaudited), respectively. As of December 31, 2018, December 31, 2019 and September 30, 2020, deferred revenue relating to the Roche Agreement was $17.1 million, $13.6 million and $11.9 million (unaudited), respectively. Accounts receivable from Roche under this agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 was $1.1 million, $0.6 million and $0.9 million (unaudited), respectively. As of December 31, 2019 and September 30, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligation was $21.6 million and $22.6 million (unaudited), respectively. Based on current timelines, the deferred revenue is expected to be recognized as revenue over the next four to six years as the Company continues to develop nominated products until the initiation of pivotal studies.

 

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CFFT

In September 2016, the Company entered into an award agreement for the Optimized Adeno-Associated Virus for Lung Epithelia Gene Delivery Development Program with CFFT, a non-profit organization dedicated to finding a cure for cystic fibrosis, an inherited disorder that causes disease in the pulmonary airways leading to morbidity and mortality. Under this agreement, CFFT contributes funding to help advance the Company’s CF research program. The agreement was subsequently amended in September 2017 and August 2018 (all three agreements are collectively referred to as the “CFFT Agreements”). The total amount of the award under the CFFT Agreements is $3.5 million. As of December 31, 2018, December 31, 2019 and September 30, 2020, the Company achieved milestones totaling $0.6 million, $0.9 million and $0.9 million (unaudited) under the CFFT Agreements, respectively. The remaining award amount will be paid by CFFT based on achievement of certain development milestones by the Company.

The Company expects to make payments to CFFT equal to six times the actual award received by the Company in three installments within the first four years of the first commercial sale of a product developed under this agreement. The Company also has agreed to make future sales-based milestone payments to CFFT of up to three times the actual award received upon achieving specified commercialization milestones with respect to the first of any product developed utilizing any compound covered under the collaboration agreement. The CFFT Agreements also require the Company to pay to CFFT royalties of a mid-single digit percentage, up to six times the actual award received, on any amounts received by the Company from the sale, license or transfer to a third-party of rights in the technology developed as a result of this collaboration. Any such royalty payments shall be credited against the payments owed by the Company upon first commercial sale. In the event of a change of control of the Company, CFFT will receive certain payments, depending on the timing of the change of control and the size of the transaction.

To date, the Company has not developed a commercial product in connection with this award agreement, and it has not licensed, sold or otherwise transferred to another party the product developed under the agreement or the underlying technology.

If at any time prior to the first commercial sale of a product developed as a result of the agreement, the Company ceases to use commercially reasonable efforts to develop or commercialize any product under this agreement for a continuous period of 180 consecutive days and fails to present a reasonable plan to resume commercially reasonable efforts, the Company will grant to CFFT an irrevocable, exclusive worldwide interruption license under all of the Company’s interest in the research plan technology to exploit such product. Any third-party license granted by the Company shall be subject to such interruption license.

Under ASC 605, the Company recognized revenue under this agreement on a ratable basis over the estimated performance period of all milestones. Under ASC 606, the Company uses the input method to measure progress toward completion of the performance obligation and concluded that revenue will be recognized based on actual resources consumed, labor hours expended and costs incurred as a percentage of total budgeted costs. Upon the adoption of ASC 606, the Company decreased cumulative revenue by $0.2 million through an increase to deferred revenue and an increase to beginning accumulated deficit, based on the difference between the input method under ASC 606 and the ratable recognition previously used under ASC 605.

Under ASC 606, the Company identified one performance obligation within the CFFT grant agreement for research activities. The transaction price related to the agreement upon the adoption of ASC 606 included the $0.6 million non-refundable milestones previously met under the CFFT Agreement. The Company’s contract with CFFT does not include a significant financing component.

 

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The Company concluded that the transaction price should not include the variable consideration related to future research milestones as they were considered to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal of cumulative revenue in the future. The Company will re-evaluate the transaction price and estimated period of performance at each reporting period. For the year ended December 31, 2019, an adjustment of $0.4 million was made to the transaction price to reflect the achievement of the second milestone related to in vivo screening of AAV library under the CFFT agreement.

During each of the years ended December 31, 2018 and 2019, the Company recognized revenue of $0.1 million. During the nine months ended September 30, 2019 and 2020, the Company recognized revenue of less than $0.1 million (unaudited) and $(0.1) million (unaudited), respectively. As of December 31, 2018, December 31, 2019 and September 30, 2020, deferred revenue relating to the CFFT Agreement was $0.2 million, $0.7 million and $0.8 million (unaudited), respectively. Accounts receivable from CFFT under this agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 was $0, $0.4 million and $0 (unaudited), respectively. As of December 31, 2019 and September 30, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligation was $0.7 million and $0.8 million (unaudited), respectively. Based on current timelines, the deferred revenue is expected to be recognized as revenue over the next four to five years as the Company performs research services through the completion of IND-enabling studies.

The obligation to make payments to CFFT upon a change of control meets the definition of an embedded derivative that is required to be bifurcated and separately accounted for as a derivative liability. The Company determined the estimated fair value of this derivative liability to be $0.1 million as of December 31, 2018, December 31, 2019 and September 30, 2020. See Note 15 for further discussion of the embedded derivative.

AstraZeneca

In December 2017, the Company entered into a collaboration and option agreement with MedImmune, Inc., the global biologics research and development arm of AstraZeneca, (“AstraZeneca”) to discover and develop optimized AAV vectors to treat specific lung disease indications (the “AstraZeneca Agreement”). The AstraZeneca agreement included both a research funding component as well as a licensing component, wherein AstraZeneca was granted the option to license up to three resulting project vector variants for further development and commercialization.

The initial research term was approximately twelve months with AstraZeneca’s option to extend the term for an additional six months. AstraZeneca requested the six-month extension in October 2018. AstraZeneca’s option to license the resulting project variants expires twelve months after the conclusion of the research phase. Once the Company’s research activities have concluded, AstraZeneca is solely responsible for the continued development, manufacturing and eventual commercialization of the project variants as potential product candidates.

Pursuant to the AstraZeneca Agreement, the Company received an upfront payment of $1.5 million as consideration. In addition, the Company is entitled to contingent payments including (i) a non-refundable license option exercise fee of $2.0 million and (ii) milestones up to $45.0 million for each product. The AstraZeneca Agreement also includes provisions that entitle the Company to receive royalties in the single digit range on future sales of the potential product candidates.

The Company has identified one single combined performance obligations within the AstraZeneca agreement for the research program license, research and development activities and participation in the joint project team and JSC. The Company concluded that the performance obligations are not distinct and, therefore, should be combined into a single combined performance

 

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obligation. Furthermore, the Company concluded that at the inception of the agreement, AstraZeneca’s license option, does not represent a material right and should be allocated to the single performance obligation and recognized as revenue upon AstraZeneca’s exercise of the Option.

The transaction price related to the agreement consists of the $1.5 million non-refundable upfront fee. The Company concluded that the transaction price should not include the variable consideration related to developmental milestones as they were considered to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal of cumulative revenue in the future. The Company excluded any consideration related to sales-based milestones, including royalties, which are recognized when the related sales occur. The Company will re-evaluate the transaction price and estimated period of performance at each reporting period. The Company’s contract with AstraZeneca does not include a significant financing component.

Under ASC 605, the $1.5 million upfront payment was recorded as deferred revenue and was being recognized as revenue on a ratable basis over the estimated performance period of one and a half years. Under ASC 606, the Company used the input method to measure progress toward completion of the performance obligation and concluded that revenue will be recognized based on actual resources consumed, labor hours expended and costs incurred as a percentage of total budgeted costs. Upon the adoption of ASC 606, the Company reduced cumulative revenue by $48,000 through an increase to deferred revenue and an increase to the beginning accumulated deficit, based on the difference between the input method used under ASC 606 and the ratable recognition previously used under ASC 605.

In June 2019, the research phase concluded and the Company delivered its final report to AstraZeneca. The option term continues for twelve months after AstraZeneca’s receipt of the final report where they may exercise the option to obtain the license of up to three project vector variants. In June 2020, AstraZeneca’s option to obtain the license of up to three project vector variants under the AstraZeneca Agreement expired unexercised (unaudited).

During the years ended December 31, 2018 and 2019, the Company recognized revenue of $1.0 million and $0.5 million, respectively. During the nine months ended September 30, 2019 and 2020, the Company recognized revenue of $0.5 million (unaudited) and $0 (unaudited), respectively. As of December 31, 2018, December 31, 2019 and September 30, 2020, deferred revenue relating to the AstraZeneca Agreement was $0.5 million, $0 and $0 (unaudited), respectively. No amount was due from AstraZeneca under this agreement as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited).

7. License Arrangements

The Company has exclusive, worldwide license agreements (the “UC Agreements”) with the Regents of the University of California (the “UC Regents”) relating to the use of certain patents and intellectual property surrounding its core technologies, including Therapeutic Vector Evolution. Pursuant to each of the UC Agreements executed prior to January 2019, the Company was obligated to pay a (i) non-refundable license fee of $5,000 upon execution, (ii) a non-refundable license fee of $5,000 each year thereafter, until sales of a licensed product are made and royalties are paid to the UC Regents, (iii) reimbursement of domestic and foreign patent filing, prosecution and maintenance fees, and (iv) either $50,000 or issuance of a 3% equity interest in the Company upon the closing of the first qualified financing at the option of the UC Regents. The Company’s first qualified financing occurred in 2015 and at the election of the UC Regents, the Company issued the UC Regents in January 2016 an amount of common stock equal to 6% of the equity interests in the Company pursuant to the applicable clause in each of the UC Agreements.

 

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Pursuant to an agreement with the UC Regents executed in January 2019 the Company paid a non-refundable license fee of $50,000 to the UC Regents upon execution of the agreement. The Company is obligated to pay a non-refundable license fee of $5,000 on the one-year anniversary of the contract effective date and each year thereafter, until sales of a licensed product are made and royalties are paid to the UC Regents.

In addition, the Company is obligated to make certain contingent payments including (i) development milestones up to $3.1 million, (ii) low single digit royalties on the net sales of its developed products that consists of a minimum annual royalty of up to $0.1 million per year for the term of the Agreement beginning in the first calendar year after the year in which net sales first occurred, and (iii) sublicense consideration in the mid-teens to the mid-twenties-range on any future sublicensing arrangements the Company may enter into with third-party licensees.

During the years ended December 31, 2018 and 2019, the Company incurred expenses of $0.1 million and $0.3 million, respectively, under the provisions of the UC Agreements. During the nine months ended September 30, 2019 and 2020, the Company incurred expenses of $0.2 million (unaudited) and $0.1 million (unaudited), respectively, under the provisions of the UC Agreements.

8. Commitments and Contingencies

Operating Lease Commitments

In May 2015, the Company executed a lease agreement for office and laboratory space in Emeryville, California. In January 2016, the Company executed the first amendment to the lease agreement for additional rentable office and laboratory space which extends the lease to March 31, 2023. In October 2018, the Company executed a second amendment to extend the lease to end at the same time as the new lease discussed below. Additionally, the second amendment provided a tenant improvement allowance of $0.2 million, which was paid to the Company in November 2018. The Company amortizes the tenant improvement allowance on a straight-line basis over the remaining term of the lease as a reduction of rent expense.

In October 2018, the Company executed a second lease agreement for additional office and laboratory space in Emeryville, California. The new lease has an initial term of 87 months beginning on the rent commencement date with the option to renew the lease for one additional term of five years. The Company did not have to pay rent until October 2019. This lease agreement also provided for a tenant improvement allowance of $0.4 million, which was paid to the Company in December 2019. The Company amortizes the tenant improvement allowance on a straight-line basis over the remaining term of the lease as a reduction of rent expense.

In May 2019, the Company amended the second lease agreement executed in October 2018 to add additional office and laboratory space. The amendment extended the term of the lease to December 31, 2029. The Company did not have to pay rent until December 2019. The annual rent for the additional space is $1.0 million per annum and escalates at 3% annually. This lease agreement also provides for a tenant improvement allowance of at least $1.6 million.

The Company recognizes rent expense on a straight-line basis over the lease term with the difference between the rent payments and the straight-line rent expense recorded as deferred rent. Rent expense for the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020 for these facilities was $0.5 million, $1.3 million, $0.8 million (unaudited) and $2.3 million (unaudited), respectively. Deferred rent (included in prepaid expenses and other current assets on the balance sheets) as of December 31, 2018, December 31, 2019 and September 30, 2020 was $0.4 million, $1.2 million and $1.5 million (unaudited), respectively. In

 

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conjunction with the lease agreements and amendments, the Company paid total security deposits of $0.3 million, $0.6 million and $0.6 million (unaudited), which are included in other assets within the balance sheets as of December 31, 2018, December 31, 2019 and September 30, 2020, respectively.

The following table summarizes the Company’s future minimum commitments under lease contracts (in thousands):

 

As of December 31, 2019
2020		$	2,759
2021			2,893
2022			2,973
2023			3,058
2024			3,149
2025 and beyond			15,064
Total		$	29,896

 

As of September 30, 2020 (unaudited)
Remainder of 2020		$	737
2021			3,000
2022			3,079
2023			3,159
2024			3,249
2025 and beyond			15,089
Total		$	28,313

Common Stock Warrant Obligation

As of December 31, 2017, the Company had an obligation to issue a warrant for 23,669 shares of the Company’s common stock to a service provider. The Company issued the warrant in May 2018. See Note 13 for further discussion on the common stock warrant obligation.

Indemnification Agreements

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions, such as with vendors and other parties. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently maintains directors’ and officers’ liability insurance that would generally enable it to recover a portion of any future amounts paid. The Company believes the estimated fair value of its indemnification agreements in excess of applicable insurance coverage is not material.

Legal Proceedings

From time to time, the Company may become involved in legal proceedings arising from the ordinary course of its business. If applicable, the Company records a legal liability when it believes that

 

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it is both probable that a liability may be imputed, and the amount of the liability can be reasonably estimated. Significant judgment by the Company is required to determine both probability and the estimated amount. As of December 31, 2019 and September 30, 2020 (unaudited), the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

9. Income Taxes

The Company did not record any income tax expense during the years ended December 31, 2018 and 2019. The Company has a net operating loss and has provided a valuation allowance against net deferred tax assets due to uncertainties regarding the Company’s ability to realize these assets. All losses before income taxes arose in the United States.

The effective tax rate of the Company’s income tax expense (benefit) differs from the federal statutory rate as follows:

 

		December 31, 2018				December 31, 2019
Federal statutory income tax rate			21.0	%			21.0	%
Research tax credit			10.0	%			5.2	%
Permanent differences			(1.1	%)			(0.7	%)
Valuation allowance			(27.4	%)			(25.5	%)
Section 382 limitation			(2.5	%)			0.0	%
Provision for income taxes			0.0	%			0.0	%

The tax effects of temporary differences that give rise to significant components of the deferred taxes are as follows (in thousands):

 

		December 31, 2018				December 31, 2019
Deferred Tax Assets
Net operating loss carryforwards		$	1,990			$	10,638
Other accrued liabilities			103				336
Deferred revenue			3,598				2,698
Research tax credits			1,872				4,457
Stock compensation			212				554
Intangible asset basis			—				1,591
Total deferred tax assets		$	7,775			$	20,274
Less: valuation allowance			(7,775	)			(20,274	)
Net deferred tax assets		$	—			$	—

ASC 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance. The valuation allowance increased by $2.6 million and $12.5 million during the years ended December 31, 2018 and 2019, respectively.

 

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The Company had net operating loss carryforwards of $9.5 million and $50.7 million as of December 31, 2018 and 2019, respectively, available to reduce future taxable income, if any, for federal income tax purposes. $9.5 million of the federal net operating loss carryforwards expire in 2037 and the remaining $41.2 million carryforward indefinitely.

As of December 31, 2018 and 2019, the Company had federal research and development credit carryforwards of $1.3 million and $3.3 million, respectively, and state research and development credit carryforwards of $1.4 million and $3.3 million, respectively, available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. The federal credit carryforwards begin expiring in 2035 and the state credits carryforward indefinitely.

Utilization of the net operating loss carryforwards and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code and similar state provisions. Annual limitations may result in the expiration of the net operating losses (NOL) and tax credit carryforwards before they are utilized. The Company has experienced ownership changes in the past as a result of its Series B redeemable convertible preferred stock financing. As a result of the ownership changes, the Company has determined that $0.9 million of its NOLs will expire unutilized for federal income tax purposes and such amounts are excluded from its NOLs as of December 31, 2019. Subsequent ownership changes may affect the limitation in future years.

The reconciliation of the beginning and ending unrecognized tax benefits amounts is as follows (in thousands):

 

		Unrecognized Income Tax Benefits
Balance as of December 31, 2017		$	352
Additions for current year tax positions			333
Reductions of prior year positions			(26	)
Balance as of December 31, 2018			659
Additions for current year tax positions			907
Balance as of December 31, 2019		$	1,566

The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. During each of the years ended December 31, 2018 and 2019, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will materially increase or decrease during the next 12 months.

The Company files income tax returns in the U.S. federal and California tax jurisdictions. All tax returns from inception to December 31, 2019 remain subject to examination. The Company has no ongoing income tax examinations by tax authorities at this time.

10. Redeemable Convertible Preferred Stock

In August 2018, the Company issued 5,154,632 shares of Series B redeemable convertible preferred stock at $17.46 per share for gross proceeds of $90.0 million.

As of December 31, 2018 and 2019, the Company’s certificate of incorporation authorized the Company to issue up to 7,375,638 shares of redeemable convertible preferred stock at a par value of $0.0001 per share.

 

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In April and June of 2020, the Company issued a total of 4,200,353 shares of Series C redeemable convertible preferred stock at $18.00 per share for gross proceeds of $75.6 million (unaudited).

As of September 30, 2020, the Company’s amended certificate of incorporation authorized the Company to issue up to 11,575,984 (unaudited) shares of redeemable convertible preferred stock at a par value of $0.0001 per share.

Redeemable convertible preferred stock consists of the following as of December 31, 2018 and 2019 (in thousands, except per share and share amounts):

 

		Shares Authorized				Original Issuance Price				Shares Issued and Outstanding				Liquidation Value				Proceeds Net of Issuance Cost
Series A			909,312			$	7.70				909,312			$	7,001			$	6,960
Series A-1			1,311,687			$	8.84				1,311,687				11,595				11,548
Series B			5,154,639			$	17.46				5,154,632				90,000				84,472
Total			7,375,638								7,375,631			$	108,596			$	102,980

Redeemable convertible preferred stock consists of the following as of September 30, 2020 (unaudited) (in thousands, except per share and share amounts):

 

		Shares Authorized				Original Issuance Price				Shares Issued and Outstanding				Liquidation Value				Proceeds Net of Issuance Cost
Series A			909,312			$	7.70				909,312			$	7,001			$	6,960
Series A-1			1,311,687			$	8.84				1,311,687				11,595				11,548
Series B			5,154,632			$	17.46				5,154,632				90,000				84,472
Series C			4,200,353			$	18.00				4,200,353				75,606				72,468
Total			11,575,984								11,575,984			$	184,202			$	175,448

The holders of redeemable convertible preferred stock have various rights and preferences including the following:

Liquidation Preference—In the event of a liquidation event, the holders of the shares of Series C (unaudited) and Series B redeemable convertible preferred stock are entitled to receive any distribution of any of the assets of the Company in preference to the holders of the Series A-1 redeemable convertible preferred stock, Series A redeemable convertible preferred stock or common stock, an amount per share equal to the greater of (i) the sum of the original Series C (unaudited) issue price plus all declared but unpaid dividends thereon or the original Series B issue price plus all declared but unpaid dividends and (ii) such amount per share payable had all shares of Series C (unaudited) and Series B redeemable convertible preferred stock been converted into common stock. If upon the occurrence of a liquidation event, the available assets are insufficient to pay the holders of Series C and Series B redeemable convertible preferred stock the full amount to which they are entitled, then the available assets shall be distributed to the holders of the shares of Series C and Series B redeemable convertible preferred stock, in proportion to the full preferential amount each holder is otherwise entitled to receive (unaudited). After full payment to holders of the Series C (unaudited) and Series B redeemable convertible preferred stock, payment should be made to the holders of Series A-1 redeemable convertible preferred stock, in preference to the holders of the Series A redeemable convertible preferred stock or common stock, in an amount equal to the greater of (i) the original Series A-1 issue price plus all declared but unpaid dividends and (ii) such amount per share payable had all shares of Series A-1 redeemable convertible preferred stock been converted into common stock. After

 

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full payment to holders of the Series A-1 redeemable convertible preferred stock, payment should be made to the holders of Series A redeemable convertible preferred stock, in preference to the holders of the common stock, in an amount equal to the greater of (i) the original Series A issue price plus all declared but unpaid dividends and (ii) such amount per share payable had all shares of Series A redeemable convertible preferred stock been converted into common stock. If upon the occurrence of a liquidation event, the available assets are insufficient to pay the holders of Series A-1 or Series A redeemable convertible preferred stock the full amount to which they are entitled, then the available assets shall be distributed to the holders of such redeemable convertible preferred stock on a pro rata, on an equal priority, pari passu basis, in proportion to the full preferential amount such holder is otherwise entitled to receive (unaudited).

Notwithstanding the above, for purposes of determining the amount each holder of shares of redeemable convertible preferred stock is entitled to receive with respect to a Liquidation Event, each such holder of shares of a series of redeemable convertible preferred stock shall be deemed to have converted such holder’s shares of such series into shares of common stock immediately prior to the Liquidation Event if, as a result of an actual conversion, such holder would receive, in the aggregate, an amount greater than the amount that would be distributed to such holder if such holder did not convert such series of redeemable convertible preferred stock into shares of common stock. If any such holder shall be deemed to have converted shares of redeemable convertible preferred stock into common stock pursuant to this paragraph, then such holder shall not be entitled to receive any distribution that would otherwise be made to holders of redeemable convertible preferred stock that have not converted into shares of common stock.

Conversion—Shares of any series of redeemable convertible preferred stock can be converted, at the option of the holder, into such number of fully paid and non-assessable shares of common stock using a conversion rate determined by dividing the applicable original issue price by the applicable conversion price, as adjusted for any anti-dilution adjustments. If, after the issuance date of the redeemable convertible preferred stock, the Company issues or sells, or is deemed to have sold, additional shares of common stock at a price lower than the relevant conversion price in effect, except for certain exceptions allowed, the conversion price of the redeemable convertible preferred stock would be adjusted. As of December 31, 2018 and 2019, the conversion price for the Series A, A-1 and B redeemable convertible preferred stock is $7.700 per share, $8.839 per share and $17.460 per share, respectively, and the conversion ratio is one-for-one. As of September 30, 2020, the conversion price for the Series A, A-1, B and C redeemable convertible preferred stock is $7.700 (unaudited) per share, $8.839 (unaudited) per share, $17.460 (unaudited) per share, and $18.000 (unaudited) per share, respectively, and the conversion ratio is one-for-one.

As of December 31, 2018 and 2019, shares of redeemable convertible preferred stock shall automatically be converted into shares of common stock at the then effective conversion price for such share, immediately prior to either: (i) the completion of an underwritten public offering of the Company’s common stock at a price of at least 1.5 times the original Series B issuance price for any initial public offering consummated at any time prior to the first anniversary of the Series B original issuance date, or 1.25 times the original Series B issuance price for any such IPO thereafter and that provides at least $30.0 million of gross proceeds to the Company (a “Qualified IPO”) or (ii) the conversion by the holders of redeemable convertible preferred stock, which requires the vote of the holders of a majority of the then outstanding shares of redeemable convertible preferred stock, voting together as a single class on an as-converted to common stock basis.

As of September 30, 2020 (unaudited), shares of redeemable convertible preferred stock shall automatically be converted into shares of common stock at the then effective conversion price for such share, immediately prior to either: (i) the completion of an underwritten public offering of the Company’s common stock at a price of at least 1.25 times the original Series C issuance price, as adjusted for any

 

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stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like that provides at least $50.0 million of gross proceeds to the Company (a “Qualified IPO”) or (ii) the conversion by the holders of redeemable convertible preferred stock, which requires the vote of the holders of a majority of the then outstanding shares of redeemable convertible preferred stock voting together as a single class on an as-converted to common stock basis; provided, however that any automatic conversion of the Series C and Series B redeemable convertible preferred stock under (ii) shall require the consent of the holders of a majority of Series C and Series B redeemable convertible preferred stock then outstanding voting together as a single class on an as-converted to common stock basis.

Dividends—Holders of shares of redeemable convertible preferred stock shall be entitled to non-cumulative dividends prior to, and in preference to any declaration or payment of any dividend on common stock. The amount of such dividends payable per share of preferred stock is at least equal to the dividend payable per share of common stock. Through December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited), no dividends had been declared. Given this dividend preference, the Company considers all series of redeemable convertible preferred stock to be participating securities.

Voting Rights—Each holder of redeemable convertible preferred stock shall be entitled to the number of votes equal to the number of shares of common stock into which the shares of redeemable convertible preferred stock held by such holder could be converted as of the record date. Holders of redeemable convertible preferred stock and common stock generally vote as a single class. So long as at least 777,778 shares of Series C redeemable convertible preferred stock issued remain outstanding, the holders of a majority of Series C redeemable convertible preferred stock will be entitled to designate one director (unaudited). So long as at least 916,380 of the Series B redeemable convertible preferred stock issued remain outstanding, the holders of a majority of the Series B redeemable convertible preferred stock will be entitled to designate one director. The holders of record of shares of Series A-1 redeemable convertible preferred stock, exclusively and as a separate class, shall be entitled to designate one director (unaudited).

Redemption and Balance Sheet Classification—The redeemable convertible preferred stock is recorded in mezzanine equity because while it is not mandatorily redeemable, it will become redeemable at the option of the stockholders upon the occurrence of a deemed liquidation event that is considered not solely within the Company’s control.

Funding Agreement with CFF (unaudited)—In April 2020, the Cystic Fibrosis Foundation (“CFF”) made a $10.0 million investment in the Company’s Series C redeemable convertible preferred stock financing. In return for the investment, CFF received shares of Series C redeemable convertible preferred stock, and the Company and CFF entered into a Funding Agreement (“the Funding Agreement”). Pursuant to the terms of the Funding Agreement, except in the event of a technical failure, the $10.0 million received from CFF will be used to advance the development program for 4D-710, the Company’s lead product in cystic fibrosis, or any other therapeutic approved by the Program Advisory Group (“PAG”) to alleviate pulmonary complications of cystic fibrosis (“the Funding Agreement Product”). CFF is committed to provide an additional $4.0 million of funding upon acceptance of an Investigational New Drug application or its equivalent to allow for human testing of the Funding Agreement Product (“Acceptance”), except in the event of a change of control transaction occurring prior to Acceptance or Acceptance occurring after April 29, 2026. If the Company’s common stock is publicly traded at the time of Acceptance, CFF will receive shares of common stock priced at the 10-day average reported closing price of the Company’s common stock on the date of Acceptance. If the Company’s common stock is not publicly traded at the time of Acceptance, CFF will receive a convertible note (“Note”). The Note has a term of three years from date of issuance and carries an 8% interest rate per annum on the outstanding principal amount. All unpaid interest and principal shall be due and payable upon request of CFF on the third anniversary of the issuance of the Note. The Note

 

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shall automatically convert as follows: (i) into common stock at 85% of the public price per share, or (ii) into preferred shares at 85% of the lowest price per share paid by other investors in a secondary or private offering of the Company’s preferred stock of more than $25.0 million. If a conversion has not occurred after five hundred forty days from date of the Note issuance, CFF may elect to convert the principal amount of the Note plus accrued interest into Series C redeemable convertible preferred stock at a price per share of $18.00 upon notice to the Company. Except in the event of a technical failure, the Company is committed to providing an amount equal to the funding provided by CFF to be used solely to advance the Funding Agreement Product. A technical failure is defined as a determination by the Company, after consultation with and approval of the PAG that (i) the Funding Agreement Product has failed to reach its intended endpoints due to safety issues, lack of sufficient transgene expression and/or efficacy, each despite commercially reasonable efforts and (ii) the exercise of further commercially reasonable efforts is unlikely to correct such failure.

11. Common Stock

As of each of December 31, 2018 and 2019, the Company’s certificate of incorporation authorized the Company to issue 50,000,000 shares of common stock at the par value of $0.0001 per share. As of September 30, 2020, the Company’s amended certificate of incorporation authorized the Company to issue 20,866,244 (unaudited) shares of common stock at the par value of $0.0001 per share. The holder of each share of common stock is entitled to one vote per share.

Common stockholders are entitled to dividends if and when declared by the board of directors, subject to the prior rights of the redeemable preferred stockholders. As of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited), no dividends on common stock had been declared by the board of directors.

The number of authorized shares of common stock may be increased or decreased (but not below the number of shares thereof then outstanding or reserved for issuance) by the affirmative vote of the holders of a majority (assuming the conversion of all redeemable convertible preferred stock) of the capital stock of the Company entitled to vote and without a separate class vote of the common stock.

As of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited), the Company has reserved common stock, on an as-converted basis, for future issuance as follows:

 

		December 31, 2018				December 31, 2019				September 30, 2020
										(Unaudited)
Conversion of redeemable convertible preferred stock			7,375,631				7,375,631				11,575,984
Stock options available for future stock option grant			578,842				125,353				41,897
Options issued and outstanding			2,028,274				2,474,152				2,928,321
Common stock warrants			68,669				68,669				68,669
Total common stock reserved			10,051,416				10,043,805				14,614,871

Restricted Common Stock

During 2015, the Company issued common stock to the Company founders of 4,710,060 shares, of which 4,473,374 were fully vested upon issuance. The remainder were deemed to be restricted based on their vesting conditions. The stock agreement contains certain provisions that allow the Company to repurchase unvested portions of stock from such founders in the event they depart from the Company. The repurchase rights on the restricted common stock lapsed over time and fully expired in March 2019. As of December 31, 2018, December 31, 2019 and September 30, 2020, 14,793, 0 and 0 (unaudited) shares of restricted common stock remained subject to repurchase, respectively.

 

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12. Stock-based Compensation

2015 Equity Incentive Plan

In March 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”) under which the board of directors is authorized to issue grants of stock options, stock appreciation rights, restricted stock and restricted stock unit awards to employees, directors and consultants of the Company. As of December 31, 2018, December 31, 2019 and September 30, 2020, there were 2,694,528, 2,739,528 and 3,189,028 (unaudited) shares authorized and reserved for issuance, respectively. Under the 2015 Plan, as of December 31, 2018, December 31, 2019 and September 30, 2020, 578,842, 125,353 and 41,897 (unaudited) of these shares, respectively, were available for grant. All options are exercisable over a period not to exceed the contractual term of ten years from the date the stock options were issued and are granted at prices not less than the estimated fair market value of the Company’s common stock on the grant date as determined by the board of directors. If an individual owns stock representing more than 10% of the Company’s outstanding shares, the exercise price of each share shall be at least 110% of the fair market value on the date of grant.

Stock Options

The following table summarizes the stock options activity:

 

						Options Outstanding
		Number of Shares Available for Grant				Number of Shares Underlying Outstanding Options				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in years)				Aggregate Intrinsic Value (in thousands)
Balances at December 31, 2017			1,004,239				792,290			$	1.16				8.27			$	1,609
Options authorized			873,628				—				—
Options granted			(1,454,173	)			1,454,173				6.56
Options exercised			—				(63,041	)			1.66								488
Options expired			111,401				(111,401	)			1.13
Options forfeited			43,747				(43,747	)			1.95
Balances at December 31, 2018			578,842				2,028,274			$	5.00				8.97			$	8,939
Options authorized			45,000				—				—
Options granted			(1,136,840	)			1,136,840				10.04
Options exercised			—				(52,611	)			1.43								705
Options expired			72,833				(72,833	)			1.80
Options forfeited			565,518				(565,518	)			8.15
Balances at December 31, 2019			125,353				2,474,152			$	6.77				8.46			$	19,974
Options authorized (unaudited)			449,500
Options granted (unaudited)			(822,743	)			822,743				15.73
Options exercised (unaudited)			—				(78,787	)			7.07								859
Options expired (unaudited)			73,103				(73,103	)			5.57
Options forfeited (unaudited)			216,684				(216,684	)			9.44
Balances at September 30, 2020 (unaudited)			41,897				2,928,321			$	9.11				8.26			$	25,949
Shares exercisable, December 31, 2019							928,864			$	3.63				7.42			$	10,414
Shares vested and expected to vest, December 31, 2019							2,474,152			$	6.77				8.46			$	19,974
Shares exercisable, September 30, 2020 (unaudited)							1,306,359			$	4.93				7.22			$	16,567
Shares vested and expected to vest, September 30, 2020 (unaudited)							2,928,321			$	9.11				8.26			$	25,949

 

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The following table is a summary of stock compensation expense for employees and nonemployees by function (in thousands):

 

		Year Ended December 31, 2018				Year Ended December 31, 2019				Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2020
										(Unaudited)				(Unaudited)
Research and development		$	695			$	2,191			$	1,562			$	1,897
General and administrative			682				1,350				964				1,370
Total stock-based compensation		$	1,377			$	3,541			$	2,526			$	3,267

During the years ended December 31, 2018 and 2019, the Company granted 1,234,173 and 1,101,840 stock options to employees with a weighted-average grant date fair value of $5.50 and $8.46 per share, respectively, and 220,000 and 35,000 stock options to nonemployees with a weighted-average grant date fair value of $3.38 and $8.43 per share, respectively. During the nine months ended September 30, 2019 and 2020, the Company granted 1,000,740 (unaudited) and 768,743 (unaudited) stock options to employees with a weighted-average grant date fair value of $8.30 (unaudited) and $11.00 (unaudited) per share, respectively, and 35,000 (unaudited) and 54,000 (unaudited) stock options to nonemployees with a weighted-average grant date fair value of $8.43 (unaudited) and $11.05 (unaudited) per share, respectively. The total fair value of options vested during the years ended December 31, 2018 and 2019 was $0.8 million and $2.2 million, respectively, and $1.5 million (unaudited) and $4.0 million (unaudited) during the nine months ended September 30, 2019 and 2020, respectively. As of December 31, 2019 and September 30, 2020, the unrecognized stock-based compensation of unvested options was $10.7 million and $ 14.7 million (unaudited), respectively, and is expected to be recognized over a weighted-average period of 3.0 years and 3.0 years (unaudited), respectively.

Stock-based compensation expense recorded for employee options was $0.6 million and $2.8 million for the years ended December 31, 2018 and 2019 and $1.9 million (unaudited) and $2.9 million (unaudited) for the nine months ended September 30, 2019 and 2020, respectively. Stock-based compensation expense recorded for nonemployee consultants was $0.8 million and $0.7 million for years ended December 31, 2018 and 2019, respectively, and $0.6 million (unaudited) and $0.4 million (unaudited) for the nine months ended September 30, 2019 and 2020, respectively.

The Company is a privately held company with no active public market for the Company’s common stock. The fair value of the shares of common stock underlying the stock options was estimated by the board of directors at various dates considering the Company’s most recently available third-party valuations of common stock as well as a number of objective and subjective factors including valuation of comparable companies, sales of redeemable convertible preferred stock, operating and financial performance and general and industry specific economic outlook, amongst other factors. The fair value was determined in accordance with the guidance provided by the American Institute of Certified Public Accountants’ Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

 

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The Company estimates the fair value of employee and nonemployee stock options using the Black-Scholes valuation model. The fair value of employee and nonemployee stock options is recognized on a straight-line basis over the requisite service period of the awards. The fair value of the Company’s stock options was estimated using the following assumptions for the years ended December 31, 2018 and 2019 and nine months ended September 30, 2019 and 2020 (unaudited):

 

Year Ended December 31, 2018

Year Ended December 31, 2019

Nine Months Ended September 30, 2019

Nine Months Ended September 30, 2020

Employee

Nonemployee

Employee

Nonemployee

Employee

Nonemployee

Employee

Nonemployee

(Unaudited)

(Unaudited)

Expected term

5.5 –6.3 years

6.7 –9.9 years

5.5 –6.3 years

6.1 –10.0 years

5.5 – 6.3 years

6.1 –10.0 years

5.5 – 6.3 years

6.0 years

Expected volatility

81.4% – 84.1%

80.8% –83.9%

81.9% – 83.0%

81.3% – 83.7%

81.9% – 83.0%

81.3% – 83.7%

82.1% – 83.8%

82.1% – 83.1%

Risk-free interest rate

2.7% – 3.0%

2.6% – 3.2%

1.5% – 2.3%

1.4% – 2.4%

1.9% – 2.3%

1.4% – 2.4%

0.4% – 0.7%

0.4% – 0.7%

Expected dividend yield

0%

0%

0%

0%

0%

0%

0%

0%

Expected Term.    The expected term for employee options is calculated using the simplified method as the Company does not have sufficient historical information to provide a basis for estimate. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The expected term for nonemployee options is the contractual term of the options.

Expected Volatility.    The expected volatility was estimated based on a study of publicly traded peer companies as the Company did not have any trading history for its common stock. The Company selected the peer group based on similarities in industry, stage of development, size and financial leverage with the Company’s principal business operations. For each grant, the Company measured historical volatility over a period equivalent to the expected term.

Risk-free Interest Rate.    The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues whose term is similar in duration to the expected term of the respective stock option.

Expected Dividend Yield.    The Company has not paid and does not anticipate paying any dividends on its common stock in the future. Accordingly, the Company has estimated the dividend yield to be zero.

13. Common Stock Warrants

In 2016, the Company issued a warrant for 45,000 shares of the Company’s common stock to a service provider with an exercise price of $1.14 per share, of which 15,000 warrant shares become exercisable upon completion of an offering of securities in a private placement by the Company with net proceeds in excess of $25.0 million and 30,000 warrant shares become exercisable upon completion of an IPO by the Company. As the services had been completed at the date the warrant had been issued, the fair value of the warrant was determined at the issuance date. In 2018, 15,000 of these warrant shares became exercisable upon the completion of the Series B financing and the $13,000 fair value of these warrant shares, as determined under the Black-Scholes Model, was recorded within operating expenses in the statements of operations and comprehensive loss and within additional paid-in-capital in the balance sheets. The Company has not recognized expense for the remaining 30,000 warrant shares that become exercisable upon completion of an IPO as the vesting condition was not considered probable as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited). If an IPO had occurred on December 31, 2019 or September 30, 2020 (unaudited), the Company would have recorded less than $0.1 million within operating expenses in the statements of operations and comprehensive loss and within additional paid-in-capital in the balance sheets for the 30,000 warrant shares becoming exercisable. The warrant expires in 2023.

 

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The Company also agreed to issue a warrant for 23,669 common stock shares with an exercise price of $3.19 per share to a third party. As the Company had not issued the warrant as of December 31, 2017, the obligation to issue this common stock warrant was remeasured to its fair value of $60,000 as of December 31, 2017 using the Black-Scholes option pricing model. The warrant was issued in May 2018 and the obligation to issue the common stock warrant was remeasured at the fair value of $59,000 and recorded within additional paid-in-capital in the balance sheet upon issuance of the warrant. The warrant expires in 2025.

14. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

 

		Year Ended December 31, 2018				Year Ended December 31, 2019				Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2020
										(Unaudited)				(Unaudited)
Numerator
Net loss attributable to common stockholders		$	(9,551	)		$	(49,306	)		$	(33,191	)		$	(36,146	)
Denominator
Weighted-average shares outstanding			5,090,988				5,143,776				5,137,248				5,188,628
Less: Weighted-average shares subject to repurchase used in computing net loss per share attributable to common stockholders, basic and diluted			(41,785	)			(1,216	)			(1,626	)			—
Weighted-average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted			5,049,203				5,142,560				5,135,622				5,188,628
Net loss per share attributable to common stockholders—basic and diluted		$	(1.89	)		$	(9.59	)		$	(6.46	)		$	(6.97	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive:

 

		December 31, 2018				December 31, 2019				September 30, 2019				September 30, 2020
										(Unaudited)				(Unaudited)
Redeemable convertible preferred stock			7,375,631				7,375,631				7,375,631				11,575,984
Options to purchase common stock			2,028,274				2,474,152				2,535,230				2,928,321
Unvested common stock subject to repurchase			14,793				—				—				—
Common stock warrant			68,669				68,669				68,669				68,669
Total			9,487,367				9,918,452				9,979,530				14,572,974

 

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Unaudited Pro Forma Net Loss Per Share

Unaudited pro forma basic and diluted net loss per share were computed to give effect to the automatic one-for-one conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock in connection with the closing of the planned IPO, using the as-converted method as though the conversion had occurred as of the beginning of the period presented or the date of issuance, if later.

Unaudited pro forma basic and diluted loss per share is computed as follows (in thousands, except share and per share data):

 

		Year Ended December 31, 2019				Nine Months Ended September 30, 2020
Numerator
Net loss used in computing pro forma net loss per share, basic and diluted
Denominator
Weighted-average shares outstanding used in computing net loss per share, attributable to common stockholders, basic and diluted
Adjust: Conversion of redeemable convertible preferred stock
Weighted-average shares outstanding used in computing pro forma net loss per share, basic and diluted
Net loss per share, basic and diluted

15. Derivative Liability

The Company identified an embedded derivative resulting from the change of control provision in the CFFT Agreement. Embedded derivatives that are required to be bifurcated from the underlying host instrument are accounted for and valued as separate financial instruments. At the inception of the derivative in 2017, the Company recognized this derivative as a liability and revenue was reduced by the initial fair value of the derivative liability. The Company remeasures the derivative liability to fair value at each reporting period and records the change in fair value of the derivative liability as other income (expense), net. The Company uses a present value analysis with multiple scenarios, which incorporates assumptions and estimates to value the derivative instrument. The Company assesses these assumptions and estimates on a periodic basis as additional information impacting the assumptions is obtained. Estimates and assumptions impacting the fair value measurement include the change of control payment to CFFT (range of $0 to $10.6 million (unaudited) at September 30, 2020), the probability of a change of control event, the probability of the product achieving development or commercial status at time of change of control (range of 3.4% to 12.3% (unaudited) at September 30, 2020) and the discount rate (20% (unaudited) at September 30, 2020). The Company determined the estimated fair value of this liability as of the inception date of the CFFT Agreement and concluded that the amount was immaterial. The Company determined the fair value of this derivative liability was $0.1 million as of December 31, 2018, December 31, 2019 and September 30, 2020 (unaudited).

16. Related Party Transactions

In January 2014, in connection with the performance obligations under the uniQure Agreement, the founders of the Company received equity options to purchase an aggregate of 609,744 of uniQure ordinary shares that vest over the initial three-year term of the agreement and one of the founders of the Company agreed to serve as a director of uniQure.

 

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In August 2019, the Company and uniQure entered into the amended uniQure Agreement and the Second uniQure Agreement. Under these agreements, the Company agreed to transfer incremental rights and services to uniQure in exchange for uniQure eliminating the exclusivity clause in the uniQure Agreement and transferring other rights back to the Company. Further details and the accounting for these agreements is discussed in Note 6. As of June 17, 2020, uniQure is no longer a related party of the Company (unaudited).

In 2015, the Company signed a collaboration and license agreement with Pfizer and recorded deferred revenue of $5.0 million related to the upfront payment received from Pfizer under the arrangement. In 2018, Pfizer terminated this agreement for convenience. Upon the termination of the agreement, the Company recognized revenue on the $5.0 million upfront payment. As of December 31, 2018 and 2019, Pfizer owns 1,474,992 shares of the Company’s redeemable convertible preferred stock, and as of September 30, 2020, Pfizer owns 1,641,658 (unaudited) shares of the Company’s redeemable convertible preferred stock and has a representative director on the Company’s board of directors.

In the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, the Company paid $50,000, $52,000, $37,500 (unaudited) and $37,500 (unaudited), respectively, to David Schaffer, PhD, the co-founder and Chief Scientific Advisor of the Company for consulting services. In April 2019, the Company entered into two sponsored research agreements (“SRAs”) with the UC Regents to conduct research in a research facility on the Berkeley campus, under the direction of Dr. Schaffer. The SRAs have a three year term ending in May 2022. Under the SRAs, the Company has an option to license (on a royalty-bearing basis) all intellectual property generated under the SRAs. The total amount the Company is committed to pay to the UC Regents under the SRAs is $1.5 million, of which $0.4 million was paid upon the execution of the SRAs. In the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, the Company recorded $0, $0.3 million, $0.2 million (unaudited) and $0.4 million (unaudited), respectively, of expense related to SRAs. Any patent prosecution costs incurred under the SRAs will also be borne by the Company. The Company can terminate the SRAs for convenience and without cause with 60 days’ notice.

In 2016, the Company entered into a consulting agreement with one of its former directors, who resigned as a director in December 2018, to provide business development strategy services. In connection with this agreement, the former director was granted stock options. In the year ended December 31, 2018, the Company recorded $219,500 of stock-based compensation expense related to such stock options.

In 2016, the Chief Executive Officer and several other employees of the Company founded Ignite Immunotherapy (“Ignite”). From 2016 through October 2019, the Company’s Chief Executive Officer served as the Chief Executive Officer and Executive Chairman of Ignite and certain executives of the Company held ownership interests in Ignite and were members of the board of directors of Ignite. Additionally, during this time period, Pfizer, which is a related party of the Company, held a significant equity stake in Ignite. There were no transactions between the Company and Ignite from 2016 to October 2019. As of October 18, 2019, Ignite is no longer a related party of the Company.

17. Subsequent Events

The Company evaluated subsequent events through June 19, 2020, the date on which the financial statements were available for issuance. The Company also evaluated subsequent events through October 14, 2020, the date on which the financial statements were available for reissuance.

In April and June of 2020, the Company entered into a Series C Preferred Stock Purchase Agreement, pursuant to which the Company issued and sold 4,200,353 shares of its Series C redeemable convertible preferred stock at a purchase price of $18.00 per share for gross proceeds of $75.6 million (net proceeds of $72.5 million).

 

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In connection with the closing of this financing, the Company amended and restated its certificate of incorporation to, among other things, (i) decrease the number of shares of common stock that the Company is authorized to issue to an aggregate of 20,866,244 shares, (ii) increase the number of shares of preferred stock that the Company is authorized to issue to an aggregate of 11,575,984 shares, of which 4,200,353 shares shall be designated Series C redeemable convertible preferred stock (iii) establish that the holders of the Series C redeemable convertible preferred stock are entitled to receive dividends, if and when declared by the Board of Directors, at least equal to the dividend payable per share of common stock, (iv) establish that in the event of a liquidation event, the holders of the Series B and Series C redeemable convertible preferred stock are entitled to receive any distribution of any of the assets of the Company in preference to the holders of the Series A-1 redeemable convertible preferred stock, Series A redeemable convertible preferred stock or common stock, an amount per share equal to the greater of (i) the original issue price plus all declared but unpaid dividends and (ii) such amount per share payable had all shares of Series B and Series C redeemable convertible preferred stock been converted into common stock, (v) provide that each share of Series A, Series A-1, Series B and Series C redeemable convertible preferred stock shall automatically be converted to shares of common stock at the then-effective conversion rate upon the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, provided that the offering price per share is not less than $22.50 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to common stock) and the gross cash proceeds to the Company are at least $50.0 million, (vi) provide that each share of Series A, Series A-1, Series B and Series C redeemable convertible preferred stock shall be converted to shares of common stock at the then-effective conversion rate on the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the preferred stock outstanding, voting together as a single class; provided, however, that any conversion of Series B and Series C redeemable convertible preferred stock shall require the consent of the majority of the Series B and Series C redeemable convertible preferred stock outstanding, voting together as a single class and (vii) establish other rights, preferences and privileges of the Series C redeemable convertible preferred stock.

CFF purchased $10.0 million of Series C redeemable convertible preferred stock. Except in the event of a technical failure, the $10.0 million received from CFF will be used to advance the development program for 4D-710, the Company’s lead product in the lung therapeutic area, or any other therapeutic approved by the Program Advisory Group (PAG) to alleviate pulmonary complications of cystic fibrosis (the CF Product). CFF is committed to provide an additional $4.0 million of funding upon acceptance of Investigational New Drug (IND) application or its equivalent to allow for human testing of the CF Product, except in the event of a change of control transaction occurring prior to IND acceptance by a regulatory authority or IND acceptance occurring after April 29, 2026. Except in the event of a technical failure, the Company is committed to providing an amount equal to the funding provided by CFF to be used solely to advance the development program. A technical failure is defined as a determination by the Company, after consultation with and approval of the PAG that i) the CF Product has failed to reach its intended endpoints due to safety issues, lack of sufficient transgene expression and/or efficacy, each despite commercially reasonable efforts and ii) the exercise of further commercially reasonable efforts is unlikely to correct such failure.

In April 2020, the Company achieved a $5.0 million milestone for the first filing of an IND with a good manufacturing practice lot with no clinical hold for the choroideremia program, pursuant to the 2017 Roche Agreement. The Company received the cash payment from Roche in June 2020.

 

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18. Subsequent Events (unaudited)

The Company has evaluated subsequent events from October 1, 2020 through November 17, 2020, the date the unaudited interim financial statements were available for issuance.

From October 1, 2020 through November 17, 2020, the Company granted options for the purchase of 499,000 shares of common stock at an exercise price of $18.66 per share. These options vest over a period of three to four years.

In November 2020, the Company’s board of directors authorized the issuance of a warrant for 30,000 shares of the Company’s common stock to a service provider with an exercise price of $18.00 per share. This warrant vests over a period of four years.

In November 2020, the Company’s board of directors approved an amendment to the 2015 Equity Incentive Plan to increase the number of shares reserved for issuance by 1,000,000 shares.

 

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                        Shares

4D Molecular Therapeutics, Inc.

Common Stock

 

 

 

 

 

 

Goldman Sachs & Co. LLC		BofA Securities		Evercore ISI

 

 

Through and including                 , 2020 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 

 

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PART II INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of common stock being registered. All amounts are estimates except for the SEC registration fee, the Financial Industry Regulatory Authority, Inc. (FINRA) filing fee and The Nasdaq Global Market listing fee.

 

Item		Amount paid or to be paid
SEC registration fee		$	8,183
FINRA filing fee			11,625
The Nasdaq Global Market listing fee			*
Printing and engraving expenses			*
Legal fees and expenses			*
Accounting fees and expenses			*
Blue Sky, qualification fees and expenses			*
Transfer Agent fees and expenses			*
Miscellaneous fees and expenses			*
Total		$	*

 

*	To be completed by amendment.

Item 14. Indemnification of Directors and Officers.

As permitted by Section 102 of the Delaware General Corporation Law, we have adopted provisions in our amended and restated certificate of incorporation and amended and restated bylaws, to be in effect immediately prior to the consummation of this offering, that will limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

 

•

any breach of the director’s duty of loyalty to us or our stockholders;

 

•

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

•

any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or

 

•

any transaction from which the director derived an improper personal benefit.

These limitations of liability do not affect the availability of equitable remedies such as injunctive relief or rescission. Our amended and restated certificate of incorporation will also authorize us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.

As permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws will provide that:

 

•

we may indemnify our directors, officers, and employees to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions;

 

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•

we may advance expenses to our directors, officers and employees in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to limited exceptions; and

 

•

the rights provided in our amended and restated bylaws are not exclusive.

Our amended and restated certificate of incorporation, to be attached as Exhibit 3.2 hereto, and our amended and restated bylaws, to be attached as Exhibit 3.4 hereto, will provide for the indemnification provisions described above and elsewhere herein. We have entered into separate indemnification agreements with our directors and officers which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements generally require us, among other things, to indemnify our officers and directors against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct. These indemnification agreements also generally require us to advance any expenses incurred by the directors or officers as a result of any proceeding against them as to which they could be indemnified. In addition, we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances. These indemnification provisions and the indemnification agreements may be sufficiently broad to permit indemnification of our officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.

The form of Underwriting Agreement, to be attached as Exhibit 1.1 hereto, provides for indemnification by the underwriters of us and our officers who sign this Registration Statement and directors for specified liabilities, including matters arising under the Securities Act.

Item 15. Recent Sales of Unregistered Securities.

The following list sets forth information as to all securities we have sold since January 1, 2017, which were not registered under the Securities Act.

 

1.	In May 2018, we issued a warrant to purchase 23,669 shares of our common stock at a per share exercise price of $3.19.

 

2.	In August 2018, we issued in a series of transactions an aggregate of 5,154,632 shares of our Series B redeemable convertible preferred stock at a price per share of $17.46 for aggregate proceeds to us of $89,999,874.72.

 

3.	In April through June 2020, we issued, in a series of transactions an aggregate of 4,200,353 shares of our Series C redeemable convertible preferred stock at a price per share of $18.00 for aggregate gross proceeds to us of $75,606,354.00.

 

4.

We granted stock options and stock awards to employees, directors and consultants under our 2015 Equity Incentive Plan, covering 4,075,756 shares of common stock, at a weighted-average exercise price of $10.66 per share. Of these, options covering an aggregate of 928,968 shares of common stock were cancelled without being exercised.

We claimed exemption from registration under the Securities Act for the sale and issuance of securities in the transactions described in paragraphs (1) through (3) by virtue of Section 4(a)(2) and/or Regulation D promulgated thereunder as transactions not involving any public offering. All of the purchasers of unregistered securities for which we relied on Section 4(a)(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act. We claimed such exemption on the basis that (a) the purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information and (b) appropriate legends were affixed to the stock certificates issued in such transactions.

 

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We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraph (4) above under Section 4(a)(2) of the Securities Act in that such sales and issuances did not involve a public offering or under Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701.

Item 16. Exhibits and Financial Statement Schedules.

 

(a)

Exhibits.

 

Exhibit Number		Exhibit Description
1.1*		Form of Underwriting Agreement.
3.1		Amended and Restated Certificate of Incorporation, currently in effect.
3.2*		Form of Amended and Restated Certificate of Incorporation, to be in effect immediately prior to the consummation of this offering.
3.3		Bylaws, currently in effect.
3.4*		Form of Amended and Restated Bylaws, to be in effect immediately prior to the consummation of this offering.
4.1*		Reference is made to exhibits 3.1 through 3.4.
4.2*		Form of Common Stock Certificate.
4.3		Amended and Restated Investors’ Rights Agreement, dated as of April 29, 2020, among the Registrant and the investors party thereto.
5.1*		Opinion of Latham & Watkins LLP.
10.1(a)#		2015 Equity Incentive Plan.
10.1(b)#		Form of Stock Option Agreement under 2015 Equity Incentive Plan.
10.2(a)#*		2020 Incentive Award Plan.
10.2(b)#*		Form of Stock Option Grant Notice and Stock Option Agreement under the 2020 Incentive Award Plan.
10.2(c)#*		Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under the 2020 Incentive Award Plan.
10.2(d)#*		Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2020 Incentive Award Plan.
10.3#*		2020 Employee Stock Purchase Plan.
10.4*		Form of Indemnification Agreement for directors and officers.
10.5†		Collaboration and License Agreement, dated November 16, 2017, among the Registrant, F.  Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.
10.6†		Amended and Restated Collaboration and License Agreement, dated August 6, 2019, between the Registrant and uniQure biopharma B.V.
10.7†		Collaboration and License Agreement, dated August 6, 2019, by and between the Registrant and uniQure biopharma B.V.
10.8†		Exclusive License and Bailment Agreement, dated December 19, 2013, between the Registrant and The Regents of the University of California.

 

II-3

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Exhibit Number		Exhibit Description
10.9†		Exclusive License and Bailment Agreement, dated December 19, 2013, between the Registrant and The Regents of the University of California.
10.10#*		Offer Letter, dated March 20, 2015 between David Kirn, M.D. and the Registrant.
10.11#*		Employment Agreement, dated January 15, 2019 between Peter Francis, M.D., Ph.D. and the Registrant.
10.12#*		Offer Letter, dated January 4, 2019 between August Moretti and the Registrant.
23.1		Consent of independent registered public accounting firm.
23.2*		Consent of Latham & Watkins LLP (included in Exhibit 5.1).
24.1		Power of Attorney. Reference is made to the signature page to the Registration Statement.

 

*	To be filed by amendment.

†	Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit.

#	Indicates management contract or compensatory plan.

 

(b)	Financial Statement Schedules. All financial statement schedules are omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or the notes thereto.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

 

1.

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

 

2.

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Emeryville, California on November 17, 2020.

 

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints David Kirn, M.D. and August J. Moretti, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Registration Statement, including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ David Kirn David Kirn, M.D.		Chief Executive Officer and Director (Principal Executive Officer)		November 17, 2020
/s/ August J. Moretti August J. Moretti		Chief Financial Officer (Principal Financial and Accounting Officer)		November 17, 2020
/s/ John F. Milligan John F. Milligan, Ph.D.		Executive Chairman		November 17, 2020
/s/ William Burkoth William Burkoth		Director		November 17, 2020
/s/ Jacob Chacko Jacob Chacko, M.D.		Director		November 17, 2020
/s/ Susannah Gray Susannah Gray		Director		November 17, 2020
/s/ Nancy Miller-Rich Nancy Miller-Rich		Director		November 17, 2020
/s/ David Schaffer David Schaffer, Ph.D.		Director		November 17, 2020

 

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Signature		Title		Date
/s/ Charles P. Theuer Charles P. Theuer, M.D., Ph.D.		Director		November 17, 2020
/s/ Shawn Cline Tomasello Shawn Cline Tomasello, MBA		Director		November 17, 2020
/s/ Tony Yao Tony Yao, M.D., Ph.D.		Director		November 17, 2020

 

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Exhibit 3.1

EXECUTION VERSION

FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

4D MOLECULAR THERAPEUTICS, INC.

4D Molecular Therapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

 

A.

The name of the corporation is 4D Molecular Therapeutics, Inc. The corporation was originally incorporated pursuant to the General Corporation Law of the State of Delaware on March 11, 2015 under the same name.

 

B.

The date of filing of the corporation’s original Certificate of Incorporation with the Secretary of State of the State of Delaware was March 11, 2015, the date of filing the corporation’s Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware was October 6, 2015 and the date of filing the corporation’s Third Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware was August 27, 2018.

 

C.

The Fourth Amended and Restated Certificate of Incorporation of 4D Molecular Therapeutics, Inc. in the form attached hereto as Exhibit A has been duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware by the board of directors and stockholders of the corporation, and prompt written notice was duly given pursuant to Section 228 of the General Corporation Law of the State of Delaware to those stockholders who did not approve the Fourth Amended and Restated Certificate of Incorporation by written consent.

 

D.

The Fourth Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is incorporated herein by this reference.

IN WITNESS WHEREOF, the corporation has caused the Fourth Amended and Restated Certificate of Incorporation to be signed by its duly authorized officer.

Dated: April 29, 2020

 

4D MOLECULAR THERAPEUTICS, INC.
By:		/s/ David Kirn
Name: David Kirn
Title: Chief Executive Officer

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EXECUTION VERSION

EXHIBIT A

FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

4D MOLECULAR THERAPEUTICS, INC.

ARTICLE I

The name of the corporation is 4D Molecular Therapeutics, Inc. (the “Corporation”).

ARTICLE II

The name of the Corporation’s registered agent in the State of Delaware is The Corporation Trust Company, whose address is 1209 Orange Street, City of Wilmington, County of New Castle, 19801.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

ARTICLE IV

The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 20,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and (ii) 11,264,519 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”), (A) 909,312 shares of which shall be designated “Series A Preferred Stock,” (B) 1,311,687 shares of which shall be designated “Series A-1 Preferred Stock,” (C) 5,154,632 shares of which shall be designated “Series B Preferred Stock” and (D) 3,888,888 shares of which shall be designated “Series C Preferred Stock.”

The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of each class or series of capital stock of the Corporation:

 

A.

COMMON STOCK

1. General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the powers, preferences and rights of the holders of Preferred Stock set forth herein.

2. Voting. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders (or by written consent in lieu of meeting), each holder of outstanding shares of Common Stock shall be entitled, with respect to each outstanding share of Common Stock held by such holder, to cast one vote. There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any

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vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.

 

B.

PREFERRED STOCK

Unless otherwise indicated, references to “Sections” or “Subsections” in this Part B of this Article IV refer to Sections and Subsections in this Part B of this Article IV.

1. Dividends.

The Corporation shall not declare, pay or set aside any dividends on shares of any class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock (“Common Stock Dividend”)) unless (in addition to obtaining any consents required elsewhere in this Certificate of Incorporation) the holders of Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, the product of (A) the dividend payable on each share of Common Stock or each share of such class or series that is convertible into Common Stock determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, the amount determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment for any stock dividend, stock split, combination or other similar recapitalization (collectively, “Recapitalizations”) with respect to such class or series) and (B) multiplying such fraction by an amount equal to the applicable Original Issue Price (as defined below); provided, however, that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Preferred Stock dividend. “Original Series A Issue Price” means $7.70, subject to appropriate adjustment for any Recapitalizations with respect to Series A Preferred Stock. “Original Series A-1 Issue Price” means $8.839, subject to appropriate adjustment for any Recapitalizations with respect to Series A-1 Preferred Stock. “Original Series B Issue Price” means $17.46, subject to appropriate adjustment for any Recapitalizations with respect to Series B Preferred Stock. “Original Series C Issue Price” means $18.00, subject to appropriate adjustment for any Recapitalizations with respect to Series C Preferred Stock. The Original Series A Issue Price, Original Series A-1 Issue Price, Original Series B Issue Price and Original Series C Issue Price are collectively referred to as the “Original Issue Price” herein.

2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

 

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2.1 Preferential Payments to Holders of Preferred Stock.

2.1.1 Series C Preferred Stock and Series B Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event (as defined in Subsection 2.3.1), subject to the provisions of Subsection 2.3.2(b) in the case of a Deemed Liquidation Event referred to in Subsection 2.3.l(a)(ii) or Subsection 2.3.1(b), the holders of shares of Series C Preferred Stock and Series B Preferred Stock then outstanding shall be entitled to be paid on a pari passu basis, out of the Available Assets (as defined below), and prior and in preference to any payment of any Available Assets to the holders of Series A-1 Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the sum of the Original Series C Issue Price plus all unpaid but declared dividends thereon or the Original Series B Issue Price plus all declared but unpaid dividends thereon, as the case may be, and (ii) such amount per share as would have been payable on a pari passu basis had all shares of Series C Preferred Stock and Series B Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up of the Corporation or Deemed Liquidation Event (the amount payable pursuant to this sentence, the “Series C Liquidation Amount” and “Series B Liquidation Amount,” as applicable). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the Available Assets shall be insufficient to pay the holders of Series C Preferred Stock and Series B Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1.1, the Available Assets shall be distributed to the holders of Series C Preferred Stock and Series B Preferred Stock, in proportion to the full preferential amount each such holder is otherwise entitled to receive under this Subsection 2.1.1. “Available Assets” means the funds and assets that may be legally distributed to the stockholders of the Corporation.

2.1.2 Series A-1 Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event (as defined in Subsection 2.3.1), subject to the provisions of Subsection 2.3.2(b) in the case of a Deemed Liquidation Event referred to in Subsection 2.3.l(a)(ii) or Subsection 2.3.1(b), the holders of shares of Series A-1 Preferred Stock then outstanding shall be entitled to be paid, out of the Available Assets (as defined below), and prior and in preference to any payment of any Available Assets to the holders of Series A Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the sum of the Original Series A-1 Issue Price plus all declared but unpaid dividends thereon and (ii) such amount per share as would have been payable had all shares of Series A-1 Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up of the Corporation or Deemed Liquidation Event (the amount payable pursuant to this sentence, the “Series A-1 Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the Available Assets shall be insufficient to pay the holders of Series A-1 Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1.2, the Available Assets shall be distributed to the holders of Series A-1 Preferred Stock pro rata, on an equal priority, pari passu basis, in proportion to the full preferential amount each such holder is otherwise entitled to receive under this Subsection 2.1.2.

 

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2.1.3 Series A Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event (as defined in Subsection 2.3.1), subject to the provisions of Subsection 2.3.2(b) in the case of a Deemed Liquidation Event referred to in Subsection 2.3. l(a)(ii) or Subsection 2.3.1(b), the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid, out of the remaining Available Assets, and prior and in preference to any payment of any Available Assets to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the sum of the Original Series A Issue Price plus all declared but unpaid dividends thereon and (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up of the Corporation or Deemed Liquidation Event (the amount payable pursuant to this sentence, the “Series A Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the remaining Available Assets shall be insufficient to pay the holders of Series A Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1.3, such remaining Available Assets shall be distributed to the holders of Series A Preferred Stock pro rata, on an equal priority, pari passu basis, in proportion to the full preferential amount each such holder is otherwise entitled to receive under this Subsection 2.1.3.

2.1.4 Calculation of Liquidation Amounts.

(a) For purposes of calculating the Series C Liquidation Amount, Series B Liquidation Amount, Series A-1 Liquidation Amount and the Series A Liquidation Amount, it shall be assumed that all shares of each series of Preferred Stock that would receive a greater per share liquidation payment if converted into Common Stock than if remaining as Preferred Stock shall have been converted into Common Stock.

(b) Subject to Subsection 2.5, neither the Series C Liquidation Amount, Series B Liquidation Amount nor the Series A-1 Liquidation Amount shall be abrogated or diminished in the event part of the consideration paid in a Deemed Liquidation Event is subject to an escrow holdback or satisfaction of milestones except to the extent that holders of shares of Series C Preferred Stock, Series B Preferred Stock and Series A-1 Preferred Stock have received an amount per share in excess of the sum of the applicable Original Issue Price plus all declared but unpaid dividends thereon.

2.2 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after payment of the full amount required by Subsection 2.1, the remaining Available Assets shall be distributed among the holders of shares of Common Stock pro rata according to the number of shares of Common Stock held by each such holder.

2.3 Deemed Liquidation Events.

2.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of (i) a majority of the then outstanding shares of Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, and (ii) a majority of the then outstanding shares of Series C Preferred Stock and Series B Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, elect otherwise by written notice sent to the Corporation at least 10 days prior to the effective date of any such event:

 

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(a) a merger or consolidation in which

 

(i)

the Corporation is a constituent party or

 

(ii)

a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

except any such merger or consolidation (A) effected exclusively for the purpose of changing the Corporation’s domicile or (B) involving the Corporation or a subsidiary of the Corporation in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock (to be held in substantially the same proportions and with substantially the same rights, preferences and powers) of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

(b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all of the assets or intellectual property of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

2.3.2 Effecting a Deemed Liquidation Event.

(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.l(a)(i) unless the agreement or plan of merger or consolidation for such transaction provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsection 2.1 and Subsection 2.2.

(b) In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or Subsection 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the DGCL within 90 days after such Deemed Liquidation Event (and a subsequent distribution of Available Assets pursuant to Subsection 2.1), then (i) the Corporation shall send a written notice to each holder of record of each series of Preferred Stock no later than the 90th day after such Deemed Liquidation Event advising such holders of the right (and the requirements to be met to secure such right) pursuant to the terms of the following

 

6

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clause (ii) to require the redemption of the shares of such series of Preferred Stock and (ii) if the holders of a majority of the then outstanding shares of such series of Preferred Stock so request in a written instrument delivered to the Corporation no later than 120 days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the board of directors of the Corporation (the “Board”)), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (collectively, the “Available Proceeds”), on the 150th day after such Deemed Liquidation Event (the “Redemption Date”), to redeem all outstanding shares of such series of Preferred Stock at a price per share equal to the Series C Liquidation Amount, Series B Liquidation Amount, Series A-1 Liquidation Amount and the Series A Liquidation Amount, as the case may be. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock which have requested such redemption, the Corporation shall ratably redeem each holder’s shares of Series C Preferred Stock and Series B Preferred Stock to the fullest extent of such Available Proceeds (on a pari passu basis in proportion to the number of shares of Common Stock held by such holders on an as-converted basis); shall thereafter ratably redeem the Series A-1 Preferred Stock to the fullest extent of such Available Proceeds and shall thereafter ratably redeem the Series A Preferred Stock to the fullest extent of any remaining Available Proceeds; and shall thereafter ratably redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. Prior to the distribution or redemption provided for in this Subsection 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business. At least 15, but not more than 40, days prior to the Redemption Date, the Corporation shall send a written notice (the “Redemption Notice”) to each holder of record of Preferred Stock to be redeemed. The Redemption Notice shall state (i) the number of shares of Preferred Stock held by such holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice, (ii) the Redemption Date, (iii) the relevant liquidation amount, and (iv) that such holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed. On or before the Redemption Date, each holder of shares of Preferred Stock to be redeemed on the Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall surrender the certificate or certificates for such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the relevant liquidation amount for such shares shall be payable to the order of the person or entity whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. If less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder. No transfers of Preferred Stock shall be permitted during the five-day period prior to and including the Redemption Date, and the Corporation shall not recognize any such prohibited

 

7

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transfer on its books and records. If (i) the Redemption Notice shall have been duly given and (ii) on the Redemption Date, the relevant liquidation amount payable upon redemption of the shares of Preferred Stock to be redeemed on the Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then, notwithstanding that the certificates evidencing any of the shares of Preferred Stock so called for redemption shall not have been surrendered, after the Redemption Date (A) dividends with respect to such shares of Preferred Stock shall cease to accrue and (B) all rights with respect to such shares (other than the right of the holders of such shares to receive the relevant liquidation amount without interest upon surrender of their certificate or certificates therefor) shall forthwith terminate, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. Any funds deposited with an independent payment agent as described in the preceding sentence (“Deposited Funds”) for the redemption of shares of Preferred Stock thereafter converted into shares of Common Stock prior to the Redemption Date shall be returned to the Corporation forthwith upon such conversion, and the balance of any Deposited Funds that remain unclaimed at the end of one year from the Redemption Date shall be released or repaid to the Corporation, after which time the holders of shares of Preferred Stock called for redemption who have not claimed such funds shall be entitled to receive payment of the relevant liquidation amount only from the Corporation.

2.4 Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event (or, if applicable, redemption pursuant to Subsection 2.3.2(b)) shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board, including the approval of at least one Preferred Director.

2.5 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1, if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the agreement or plan of merger or consolidation for such transaction shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the avoidance of doubt, for purposes of this Subsection 2.5, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

 

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3. Voting.

3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders (or by written consent in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled, with respect to the outstanding shares of Preferred Stock held by such holder, to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter or, if no such record date is established, the date such vote is taken or any written consent of stockholders is solicited. Except as provided by law or by the other provisions of this Certificate of Incorporation, the holders of Preferred Stock shall vote together with the holders of Common Stock as a single class. Subject to Subsections 3.3(h), 3.4(b), 3.5(b), 3.6(c) and 3.7(b), the number of authorized shares of Preferred Stock (or any series thereof) may be increased or decreased (but not below the number of shares thereof then outstanding), and the rights, preferences and privileges of any newly created series of Preferred Stock may be approved, by the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.

3.2 Election of Directors; Board Size.

3.2.1 So long as at least 777,778 shares of Series C Preferred Stock remain issued and outstanding (subject to appropriate adjustment for any Recapitalizations), the holders of record of a majority of the then outstanding shares of Series C Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series C Director”). So long as at least 916,380 shares of Series B Preferred Stock remain issued and outstanding (subject to appropriate adjustment for any Recapitalizations), the holders of record of a majority of the then outstanding shares of Series B Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series B Director”). The holders of record of shares of Series A-1 Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series A-1 Director” and, together with the Series C Director and Series B Director, the “Preferred Directors”). The holders of record of shares of Common Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation (the “Common Directors”), and the holders of record of shares of Common Stock and of any other class or series of voting stock (including Preferred Stock), exclusively and voting together as a single class on an as-converted to Common Stock basis, shall be entitled to elect the balance of the total number of directors of the Corporation (the “Other Directors”). With respect to the election of any director or directors as provided in the preceding sentence, that candidate or those candidates, as applicable, shall be elected who either (1) in the case of any such vote conducted at a meeting, receive(s) the highest number of affirmative votes (on an as-converted to Common Stock basis) of the outstanding shares of the class (or classes) or series of capital stock entitled to elect such director or directors (the “Specified Stock”), up to the number of directors to be elected by such Specified Stock, or (2) in the case of any such vote taken by written consent without a meeting, is or are elected by the written consent of the holders of a majority of the voting power (on an as-converted to Common Stock basis) of the outstanding shares of such Specified Stock. Subject to Section 141(k) of the DGCL, any director elected by the holders of any Specified Stock, or by the Remaining Directors (as defined below) as provided below in this

 

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Subsection 3.2.1, may be removed without cause by, and only by, the affirmative vote of shares representing a majority of the voting power (on an as-converted to Common Stock basis) of the outstanding shares of such Specified Stock entitled to vote, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of Specified Stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2.1, then any directorship not so filled shall remain vacant until such time as the holders of such Specified Stock elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the holders of such Specified Stock, voting exclusively and as a separate class. At any meeting held for the purpose of electing a director, the presence in person or by proxy of (a) the holders of a majority of the shares of Series C Preferred Stock then outstanding, Series B Preferred Stock then outstanding, Series A-1 Preferred Stock then outstanding or the holders of a majority of the shares of Common Stock then outstanding shall constitute a quorum for the election of the Series C Director, Series B Director, Series A-1 Director or the Common Directors, respectively, and (b) the holders of a majority of the voting power (on an as converted to Common Stock basis) of the then outstanding shares of voting stock shall constitute a quorum for the election of the Other Directors. Except as otherwise provided in this Subsection 3.2.1, a vacancy in any directorship elected by the holders of any Specified Stock shall be filled only by either (x) a majority of the remaining director or directors, if any, in office that were so elected by the holders of such Specified Stock (the “Remaining Directors”), by the affirmative vote of a majority of such Remaining Directors (or by the sole remaining director elected by the holders of such Specified Stock if there is but one), or (y) the required vote or written consent of holders of the shares of such Specified Stock that are entitled to elect such director.

3.2.2 Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

3.2.3 Subject to any additional vote required by this Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

3.3 Preferred Stock Protective Provisions. At any time shares of Preferred Stock are outstanding, the Corporation shall not (by amendment, merger, consolidation or otherwise), directly or indirectly, do any of the following without (in addition to any other vote required by law or this Certificate of Incorporation) the written consent or affirmative vote, given in writing or by vote at a meeting, of the holders of a majority of Preferred Stock then outstanding, consenting or voting (as the case may be) as a single class on an as-converted to Common Stock basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

(a) amend, alter or repeal any provision of this Certificate of Incorporation or Bylaws in a manner that would adversely alter the rights, preferences, privileges or powers of, or restrictions provided for the benefit of the Preferred Stock;

 

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(b) liquidate, dissolve or wind up the business and affairs of the Corporation or effect a Deemed Liquidation Event;

(c) increase or decrease the authorized number of directors of the Corporation;

(d) purchase or redeem, or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation, except (i) dividends or other distributions payable on shares of Common Stock solely in the form of additional shares of Common Stock, or (ii) the repurchase of shares held by directors, officers, employees, consultants, independent contractors, advisors or other persons performing services for the Corporation (or a subsidiary) that are subject to agreements under which the Corporation has the option to repurchase such shares (A) at cost, upon the occurrence of certain events, such as termination of employment or services, or (B) at any price pursuant to the Corporation’s exercise of a right of first refusal to repurchase such shares if approved by the Board, including the approval of at least one Preferred Director;

(e) (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with any series of Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to any series of Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to any series of Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with any series of Preferred Stock in respect of any such right, preference or privilege;

(f) create or hold capital stock in any subsidiary of the Corporation that is not a wholly owned subsidiary of the Corporation or dispose of any equity interest of any subsidiary of the Corporation or all or substantially all of the assets of any subsidiary of the Corporation;

(g) create or authorize any debt security or guarantee (whether or not convertible into shares of capital stock of the Corporation); provided that (i) the Corporation may incur aggregate non-convertible indebtedness of up to $2,500,000 to banks and other institutional or venture capital lenders of national reputation; and (ii) without duplication of clause (i), the Corporation may incur aggregate indebtedness of up to $250,000 in connection with the financing of equipment (including leases required to be accounted for as capital leases under United States generally accepted accounting principles);

(h) create or authorize the creation of or issue of any equity security (including, without limitation, (i) any other security convertible into or exercisable for any such equity security or (ii) any unit of debt and equity securities) having rights, preferences or privileges senior to or on parity with any series of Preferred Stock, or increase the authorized number of shares of Preferred Stock; or

 

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(i) create any equity incentive plan or increase the number of securities authorized for issuance under any equity incentive plan.

3.4 Series C Preferred Stock Protective Provisions. At any time shares of Series C Preferred Stock are outstanding, the Corporation shall not (by amendment, merger, consolidation or otherwise), directly or indirectly, do any of the following without (in addition to any other vote required by law or this Certificate of Incorporation) the written consent or affirmative vote, given in writing or by vote at a meeting, of the holders of a majority of Series C Preferred Stock then outstanding, consenting or voting (as the case may be) as a single class on an as-converted to Common Stock basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

(a) amend, alter or repeal any provision of this Certificate of Incorporation or the Bylaws of the Corporation in a manner that would adversely alter the rights the rights, preferences, privileges or powers of, or restrictions provided for the benefit of the holders of Series C Preferred Stock; or

(b) increase or decrease the authorized number of shares of Series C Preferred Stock.

3.5 Series B Preferred Stock Protective Provisions. At any time shares of Series B Preferred Stock are outstanding, the Corporation shall not (by amendment, merger, consolidation or otherwise), directly or indirectly, do any of the following without (in addition to any other vote required by law or this Certificate of Incorporation) the written consent or affirmative vote, given in writing or by vote at a meeting, of the holders of a majority of Series B Preferred Stock then outstanding, consenting or voting (as the case may be) as a single class on an as-converted to Common Stock basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

(a) amend, alter or repeal any provision of this Certificate of Incorporation or the Bylaws of the Corporation in a manner that would adversely alter the rights the rights, preferences, privileges or powers of, or restrictions provided for the benefit of the holders of Series B Preferred Stock; or

(b) increase or decrease the authorized number of shares of Series B Preferred Stock.

3.6 Series A-1 Preferred Stock Protective Provisions. At any time shares of Series A-1 Preferred Stock are outstanding, the Corporation shall not (by amendment, merger, consolidation or otherwise), directly or indirectly, do any of the following without (in addition to any other vote required by law or this Certificate of Incorporation) the written consent or affirmative vote, given in writing or by vote at a meeting, of the holders of a majority of Series A-1 Preferred Stock then outstanding, consenting or voting (as the case may be) as a single class on an as-converted to Common Stock basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

 

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(a) amend, alter or repeal any provision of this Certificate of Incorporation or Bylaws in a manner that would adversely alter the rights, preferences, privileges or powers of, or restrictions provided for the benefit of, the holders of Series A-1 Preferred Stock;

(b) decrease the authorized number of directors of the Corporation to fewer than six (6) directors; or

(c) increase or decrease the authorized number of shares of Series A-1 Preferred Stock.

3.7 Series A Preferred Stock Protective Provisions. At any time shares of Series A Preferred Stock are outstanding, the Corporation shall not (by amendment, merger, consolidation or otherwise), directly or indirectly, do any of the following without (in addition to any other vote required by law or this Certificate of Incorporation) the written consent or affirmative vote, given in writing or by vote at a meeting, of the holders of a majority of Series A Preferred Stock then outstanding, consenting or voting (as the case may be) as a single class on an as-converted to Common Stock basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

(a) amend, alter or repeal any provision of this Certificate of Incorporation or the Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of Series A Preferred Stock; or

(b) increase the authorized number of shares of Series A Preferred Stock.

4. Optional Conversion. The holders of shares of Preferred Stock shall have conversion rights as follows (the “Conversion Rights”).

4.1 Right to Convert.

4.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time (subject to Subsection 4.1.2), and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the applicable Original Issue Price by the applicable Conversion Price (determined as described below) in effect on the date the certificate for such share is surrendered for conversion. The “Conversion Price” shall initially be, with respect to Series A Preferred Stock, the Original Series A Issue Price per share of Series A Preferred Stock, with respect to the Series A-1 Preferred Stock, the Original Series A-1 Issue Price per share of Series A-1 Preferred Stock, with respect to the Series B Preferred Stock, the Original Series B Issue Price per share of Series B Preferred Stock and with respect to the Series C Preferred Stock, the Original Series C Issue Price per share of Series C Preferred Stock. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. Following each adjustment of the Conversion Price of any series of Preferred Stock, such adjusted Conversion Price shall remain in effect until a further adjustment of such Conversion Price hereunder.

 

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4.1.2 Termination of Conversion Rights. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable as a result of such event to the holders of Preferred Stock.

4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Preferred Stock (including any conversion pursuant to Section 4 or Section 5). In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock on the date of conversion as determined in good faith by the Board, including the approval of at least one Preferred Director. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

4.3 Mechanics of Conversion.

4.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent (the “Conversion Notice”). The Conversion Notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificate or certificates (or lost certificate affidavit and agreement) and the Conversion Notice shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate or certificates shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a new certificate for the number of shares, if any, of Preferred Stock represented by the surrendered certificate or certificates that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion, and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

 

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4.3.2 Reservation of Shares. The Corporation shall at all times when Preferred Stock shall be outstanding reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of Preferred Stock (including any conversion pursuant to Section 4 or Section 5), such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. Before taking any action that would cause an adjustment reducing any Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of Preferred Stock, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

4.3.3 Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as provided in this Section 4 shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive the items provided for in the last sentence of Subsection 4.3.1. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the relevant series of Preferred Stock surrendered for conversion or on Common Stock delivered upon conversion.

4.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

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4.4 Adjustments to Conversion Price for Dilutive Issuances.

4.4.1 Special Definitions.

(a) “Additional Shares of Common Stock” means all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Original Series C Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed to be issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”).

 

(i)

shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;

 

(ii)

shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, Subsection 4.6, Subsection 4.7 or Subsection 4.8;

 

(iii)

shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board, including the approval of at least one Preferred Director;

 

(iv)

shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

(v)

shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board, including the approval of at least one Preferred Director;

 

(vi)

shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board, including the approval of at least one Preferred Director;

 

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(vii)

shares of Common Stock, Options or Convertible Securities issued in connection with joint venture agreements or the Corporation’s acquisition of other corporations or entities by merger, purchase of substantially all of the assets or other reorganization pursuant to transactions approved by the Board, including the approval of at least one Preferred Director; or

 

(viii)

shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board, including the approval of at least one Preferred Director.

(b) “Convertible Securities” means any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(c) “Options” means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

(d) “Original Series C Issue Date” means the date on which the first share of Series C Preferred Stock was issued by the Corporation.

4.4.2 No Adjustment of Conversion Price. Notwithstanding anything herein to the contrary, no adjustment of the Conversion Price with respect to any series of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of Preferred Stock, with all series voting together as a single class, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock; provided, however, that (i) the waiver of any adjustment of the Conversion Price applicable to the Series C Preferred Stock shall require the consent of the holders of a majority of the shares of Series C Preferred Stock then outstanding and (ii) the waiver of any adjustment of the Conversion Price applicable to the Series B Preferred Stock shall require the consent of the holders of a majority of the shares of Series B Preferred Stock then outstanding.

 

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4.4.3 Deemed Issuance of Additional Shares of Common Stock.

(a) If the Corporation at any time or from time to time after the Original Series C Issue Date issues any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or fixes a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, upon the conversion or exchange of such Convertible Securities shall be deemed to be Additional Shares of Common Stock issued as of the time of such issuance or, in case such a record date shall have been fixed, as of the close of business on such record date.

(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to any Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, such Conversion Price computed upon the original date of issuance of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to the Conversion Price that would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto). Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the relevant Conversion Price to an amount which exceeds the lower of (1) the relevant Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security (or the occurrence of a record date with respect thereto) or (2) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to any Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than such Conversion Price then in effect or because such Option or Convertible Security was issued before the Original Series C Issue Date), are revised after the Original Series C Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion and/or

 

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exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)), shall be deemed to have been issued effective upon such increase or decrease becoming effective.

(d) Upon the expiration or termination of any unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to any Conversion Price pursuant to the terms of Subsection 4.4.4, such Conversion Price shall be readjusted to the Conversion Price that would have been obtained had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof) never been issued.

(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, (i) is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to any Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3) or (ii) cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to such Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

4.4.4 Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. If, at any time after the Original Series C Issue Date, the Corporation issues Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than the relevant Conversion Price in effect immediately prior to such issuance of Additional Shares of Common Stock, then such Conversion Price in effect immediately prior to such issuance of Additional Shares of Common Stock (“CP₁”) shall be reduced, concurrently with such issuance, to a price (calculated to the nearest one-hundredth of a cent) determined by multiplying CP₁ by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issuance of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon (A) exercise of Options outstanding immediately prior to such issuance of Additional Shares of Common Stock and (B) conversion or exchange of Convertible Securities (including Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issuance of Additional Shares of Common Stock) (the “Outstanding Common Stock Equivalents”) and (ii) the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP₁ (determined by dividing (A) the aggregate consideration

 

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received by the Corporation in respect of such issuance of Additional Shares of Common Stock by (B) CP₁), and the denominator of which shall be the sum of (i) the Outstanding Common Stock Equivalents and (ii) the number of such Additional Shares of Common Stock issued in such transaction.

4.4.5 Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issuance of any Additional Shares of Common Stock shall be computed as follows:

(a) Cash and Property: Such consideration shall:

 

(i)

insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)

insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issuance, as determined in good faith by the Board, including the approval of at least one Preferred Director; and

 

(iii)

in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board, including the approval of at least one Preferred Director.

(b) Options and Convertible Securities. Such consideration shall, in the event that Additional Shares of Common Stock are deemed to have been issued pursuant to Subsection 4.4.3 due to the issuance of any Options or Convertible Securities, be determined, on a per share basis, by dividing:

 

(i)

the total amount, if any, received or receivable by the Corporation as consideration for the issuance of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration), if any,

 

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payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities (or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities); by

 

(ii)

the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities (or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities).

4.4.6 Multiple Closing Dates. If the Corporation issues, on more than one date, Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to any Conversion Price pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the such Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

4.5 Adjustment for Stock Splits and Combinations. If the Corporation at any time or from time to time after the Original Series C Issue Date effects a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock, the relevant Conversion Price in effect immediately before the subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation at any time or from time to time after the Original Series C Issue Date combines the outstanding shares of Common Stock into a smaller number of shares of Common Stock, the relevant Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date that the subdivision or combination, as applicable, becomes effective. The relevant Conversion Price shall be readjusted in the same manner upon the happening of each subsequent subdivision or combination of the outstanding shares of Common Stock.

 

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4.6 Adjustment for Common Stock Dividends. If the Corporation at any time or from time to time after the Original Series C Issue Date makes or issues, or fixes a record date for the determination of holders of Common Stock entitled to receive, a Common Stock Dividend, then in each such event the relevant Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the such Conversion Price then in effect by a fraction:

(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and

(2) the denominator of which shall be the sum of (a) the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date and (b) the total number of shares of Common Stock issuable in payment of such Common Stock Dividend.

Notwithstanding the foregoing, (i) if such record date shall have been fixed and such Common Stock Dividend is not fully paid or made on the date fixed therefor, the relevant Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Conversion Price shall be adjusted pursuant to this Subsection 4.6 as of the time of actual payment of such Common Stock Dividend and (ii) no such adjustment shall be made if the holders of the relevant series of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in an amount equal to the number of shares of Common Stock as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event or such record date, as applicable. The relevant Conversion Price shall be readjusted in the same manner upon the happening of each subsequent Common Stock Dividend.

4.7 Adjustment for Other Dividends and Distributions. If the Corporation at any time or from time to time after the Original Series C Issue Date makes or issues, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a Common Stock Dividend), cash or other property and the provisions of Section 1 do not apply to such dividend or other distribution, then in each such event provision shall be made so that the holders of Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the kind and amount of securities, cash or other property which they would have received had Preferred Stock been converted into Common Stock on the date of such event or such record date, as applicable, and had they thereafter, during the period from the date of such event or such record date, as applicable, to and including the conversion date, retained such securities during such period, giving application to all adjustments called for during such period under this Section 4 with respect to the rights of the holders of Preferred Stock or with respect to such other securities by their terms; provided, however, that no such provision shall be made if the holders of Preferred Stock receive, simultaneously with the dividend or distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event or such record date, as applicable.

 

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4.8 Adjustment for Reorganization. Subject to the provisions of Subsection 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which Common Stock (but not Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsection 4.4, Subsection 4.6 or Subsection 4.7) (any such event, a “Reorganization”), then, following any such Reorganization, each share of Preferred Stock shall thereafter be convertible, in lieu of the shares of Common Stock into which it was convertible prior to such event, into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock issuable upon conversion of one share of Preferred Stock immediately prior to such Reorganization would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board, including the approval of at least one Preferred Director) shall be made in the application of the provisions of this Section 4 with respect to the rights and interests thereafter of the holders of Preferred Stock, to the end that the provisions of this Section 4 (including adjustment of any Conversion Price then in effect and the number of shares issuable upon conversion of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of Preferred Stock. This Subsection 4.8 shall similarly apply to successive Reorganizations. Notwithstanding anything to the contrary contained in this Subsection 4.8, if any Reorganization is approved by the vote of stockholders required by Subsections 3.3, 3.4, 3.5, 3.6 and 3.7, and, to the extent such Reorganization is a Deemed Liquidation Event, is effected in accordance with Subsection 2.3, then such Reorganization and the rights of the holders of Common Stock and Preferred Stock pursuant to such Reorganization shall be governed by the documents entered into in connection with such Reorganization and not by the provisions of this Subsection 4.8. For the avoidance of doubt, nothing in this Subsection 4.8 shall be construed as preventing the holders of Preferred Stock from seeking any appraisal rights to which they are otherwise entitled under the DGCL in connection with a Reorganization triggering an adjustment hereunder, nor shall this Subsection 4.8 be deemed conclusive evidence of the fair value of the shares of Preferred Stock in any such appraisal proceeding.

4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of any Conversion Price pursuant to this Section 4, the Corporation, at its expense, shall promptly (but in any event not later than ten days thereafter) compute such adjustment or readjustment in accordance with the terms hereof and furnish, or cause to be furnished, to each holder of the relevant series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. Upon the written request at any time of any holder of any Preferred Stock, the Corporation shall promptly (but in any event not later than ten days thereafter) furnish, or cause to be furnished, to such holder a certificate setting forth (i) the Conversion Price then in effect and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.

 

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4.10 Notice of Record Date. In the event (x) the Corporation takes a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, (y) of any capital reorganization of the Corporation, any reclassification of Common Stock or any Deemed Liquidation Event, or (z) of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation (the events described in the foregoing clauses (y) and (z), “Other Events”), then in each such case the Corporation shall send, or cause to be sent, to the holders of record of Preferred Stock, a notice specifying, as the case may be, (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and (ii) the effective date on which such Other Event is proposed to take place and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the relevant series of Preferred Stock) for securities or other property deliverable upon such Other Event, and the amount per share and character of such exchange applicable to Common Stock and the relevant series of Preferred Stock. Each notice described in the foregoing sentence shall be sent at least ten days prior to the record date or effective date, as applicable, for the event specified in such notice.

5. Mandatory Conversion.

5.1 Trigger Event. All outstanding shares of Preferred Stock shall automatically, and without any further action on the part of the holders thereof, be converted into shares of Common Stock at the then effective Conversion Price, upon either (a) the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, (i) with a price of at least 1.25 times (1.25X) the Original Series C Issue Price, as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like, and (ii) resulting in at least $50,000,000 of gross proceeds to the Corporation or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Preferred Stock, voting together as a single class on an as-converted to Common Stock basis; provided, however, that any automatic conversion of the Series C Preferred Stock and Series B Preferred Stock pursuant to Section 5.1(b) shall require the consent of the holders of a majority of the shares of Series C Preferred Stock then outstanding and the shares of Series B Preferred Stock then outstanding voting together as a single class on an as-converted to Common Stock basis (the time of such closing or the date and time, or the time of the event, specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”).

5.2 Procedural Requirements. The Corporation shall send, or cause to be sent, to all holders of record of shares of Preferred Stock, written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost

 

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certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in such notice. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. All shares of Preferred Stock shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote (other than as a holder of Common Stock), shall immediately cease and terminate at the Mandatory Conversion Time (notwithstanding the failure of the registered holder or holders thereof to surrender the certificates for such shares at or prior to such time), except only the right of the registered holders thereof, upon surrender of their certificate or certificates therefor (or lost certificate affidavit and agreement), to receive the items provided for in the next sentence of this Subsection 5.2. The Corporation shall, as soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for shares of Preferred Stock so converted, (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion, and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted. Such converted shares of Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

6. Redemption. Neither the Corporation nor the holders of Preferred Stock shall have the unilateral right to call or redeem, or cause to have called or redeemed, any shares of Preferred Stock.

7. No Reissuance of Preferred Stock. Any shares of Preferred Stock that are acquired by the Corporation or any of its subsidiaries by reason of redemption, purchase, conversion or otherwise shall be automatically and immediately retired and cancelled and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.

8. Waiver. Any of the rights, powers, preferences and other terms of Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of Series A Preferred Stock then outstanding. Any of the rights, powers, preferences and other terms of Series A-1 Preferred Stock set forth herein may be waived on behalf of all holders of Series A-1 Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series A-1 Preferred Stock then outstanding. Any of the rights, powers, preferences and other terms of Series B Preferred Stock set forth herein may be waived on behalf of all holders of Series B Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series B Preferred Stock then outstanding. Any of

 

25

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the rights, powers, preferences and other terms of Series C Preferred Stock set forth herein may be waived on behalf of all holders of Series C Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series C Preferred Stock then outstanding.

9. Notices. Any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock shall be (i) mailed by certified or registered mail, return receipt requested and postage prepaid, or delivered by a recognized express courier, fees prepaid, in each case to the address of such holder last shown on the records of the Corporation, or (ii) given by electronic communication in compliance with the provisions of the DGCL. Any such notice shall be deemed given upon such mailing, delivery or electronic transmission, as applicable.

ARTICLE V

Subject to any additional vote required by this Certificate of Incorporation or the Bylaws of the Corporation, in furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend or rescind any or all of the Bylaws of the Corporation.

ARTICLE VI

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision contained in applicable statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation.

ARTICLE VII

To the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived any improper personal benefit. If the DGCL or any other applicable law of the State of Delaware is amended, after approval by the stockholders of this Article VII, to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL or other applicable law of the State of Delaware, as so amended.

Any repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection of any director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

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ARTICLE VIII

To the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees and agents of the Corporation (and any other persons to whom the DGCL permits the Corporation to provide indemnification and advancement of expenses) through Bylaw provisions, agreements with such persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement of expenses otherwise permitted by Section 145 of the DGCL.

Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right or protection of any director, officer, employee or agent of the Corporation existing at the time of such repeal or modification.

ARTICLE IX

The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an officer or employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or Common Stock issued upon the conversion of the Preferred Stock, or any partner, member, director, stockholder, employee or agent of any such holder, excluding (A) any holder that is affiliated with someone who is an officer or employee of the Corporation or any of its subsidiaries, and (B) anyone who is an officer or employee of the Corporation or any of its subsidiaries (the persons and entities being referred to in clauses (i) and (ii), collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

ARTICLE X

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or any of its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or this Certificate of Incorporation or Bylaws of the Corporation, or (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

 

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ARTICLE XI

For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Certificate of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board (in addition to any other consent required under this Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under Section 500 of the California Corporations Code in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).

 

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CERTIFICATE OF AMENDMENT TO THE

FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

4D MOLECULAR THERAPEUTICS, INC.

4D Molecular Therapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

 

A.

The name of the corporation is 4D Molecular Therapeutics, Inc. The corporation was originally incorporated pursuant to the General Corporation Law of the State of Delaware on March 11, 2015 under the same name.

 

B.

The date of filing of the corporation’s original Certificate of Incorporation with the Secretary of State of the State of Delaware was March 11, 2015, the date of filing the corporation’s Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware was October 6, 2015, the date of filing the corporation’s Third Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware was August 27, 2018 and the date of filing of the corporation’s Fourth Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware was April 29, 2020.

 

C.

This Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation of 4D Molecular Therapeutics, Inc. has been duly adopted in accordance with the provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware by the board of directors and stockholders of the corporation, and prompt written notice was duly given pursuant to Section 228 of the General Corporation Law of the State of Delaware to those stockholders who did not approve this Certificate of Amendment by written consent.

 

D.

The first paragraph of Article FOURTH of the Fourth Amended and Restated Certificate of Incorporation is hereby amended to read in its entirety as follows:

“The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 20,866,244 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and (ii) 11,575,984 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”), (A) 909,312 shares of which shall be designated “Series A Preferred Stock,” (B) 1,311,687 shares of which shall be designated “Series A-1 Preferred Stock,” (C) 5,154,632 shares of which shall be designated “Series B Preferred Stock” and (D) 4,200,353 shares of which shall be designated “Series C Preferred Stock.”

 

E.

All other provisions of the Amended and Restated Certificate of Incorporation shall remain in full force and effect.

[Signature page follows]

 

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IN WITNESS WHEREOF, this Certificate of Amendment to the Fourth Amended and Restated Certificate of Incorporation has been signed this 1st day of June, 2020.

 

4D MOLECULAR THERAPEUTICS, INC.
By:		/s/ David Kirn
Name: David Kirn
Title: Chief Executive Officer

 

30

Exhibit 3.3

BYLAWS

OF 4D MOLECULAR THERAPEUTICS, INC.

Adopted March 20, 2015

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TABLE OF CONTENTS

 

				Page
ARTICLE I — MEETINGS OF STOCKHOLDERS					1
1.1		Place of Meetings			1
1.2		Annual Meeting			1
1.3		Special Meeting			1
1.4		Notice of Meetings			2
1.5		Quorum			2
1.6		Adjourned Meeting; Notice			2
1.7		Conduct of Business			3
1.8		Voting			3
1.9		Stockholder Action by Written Consent Without a Meeting			4
1.10		Record Date for Stockholder Notice; Voting; Giving Consents			5
1.11		Proxies			6
1.12		List of Stockholders Entitled to Vote			6
ARTICLE II — DIRECTORS					6
2.1		Powers			6
2.2		Number of Directors			6
2.3		Election, Qualification and Term of Office of Directors			7
2.4		Resignation and Vacancies			7
2.5		Place of Meetings; Meetings by Telephone			8
2.6		Conduct of Business			8
2.7		Regular Meetings			8
2.8		Special Meetings; Notice			8
2.9		Quorum; Voting			9
2.10		Board Action by Written Consent Without a Meeting			9
2.11		Fees and Compensation of Directors			10
2.12		Removal of Directors			10
ARTICLE III — COMMITTEES					10
3.1		Committees of Directors			10
3.2		Committee Minutes			11
3.3		Meetings and Actions of Committees			11
3.4		Subcommittees			12
ARTICLE IV — OFFICERS					12
4.1		Officers			12
4.2		Appointment of Officers			12
4.3		Subordinate Officers			12
4.4		Removal and Resignation of Officers			12
4.5		Vacancies in Offices			13
4.6		Representation of Shares of Other Corporations			13
4.7		Authority and Duties of Officers			13

 

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TABLE OF CONTENTS

(Continued)

 

				Page
ARTICLE V — INDEMNIFICATION					13
5.1		Indemnification of Directors and Officers in Third Party Proceedings			13
5.2		Indemnification of Directors and Officers in Actions by or in the Right of the Company			14
5.3		Successful Defense			14
5.4		Indemnification of Others			14
5.5		Advancement of Expenses			14
5.6		Limitation on Indemnification			15
5.7		Determination; Claim			15
5.8		Non-Exclusivity of Rights			15
5.9		Insurance			16
5.10		Survival			16
5.11		Effect of Repeal or Modification			16
5.12		Certain Definitions			16
ARTICLE VI — STOCK					17
6.1		Stock Certificates; Partly Paid Shares			17
6.2		Special Designation on Certificates			17
6.3		Lost Certificates			18
6.4		Dividends			18
6.5		Stock Transfer Agreements			18
6.6		Registered Stockholders			18
6.7		Transfers			19
ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER					19
7.1		Notice of Stockholder Meetings			19
7.2		Notice by Electronic Transmission			19
7.3		Notice to Stockholders Sharing an Address			20
7.4		Notice to Person with Whom Communication is Unlawful			20
7.5		Waiver of Notice			21
ARTICLE VIII — GENERAL MATTERS					21
8.1		Fiscal Year			21
8.2		Seal			21
8.3		Annual Report			21
8.4		Construction; Definitions			21
8.5		Conflict with Applicable Law or Certificate of Incorporation			22
ARTICLE IX — AMENDMENTS					22

 

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BYLAWS

ARTICLE I — MEETINGS OF STOCKHOLDERS

1.1 Place of Meetings

Meetings of stockholders of 4D Molecular Therapeutics, Inc. (the “ Company”) shall be held at any place, within or outside the State of Delaware, as determined by the Company’s board of directors (the “ Board”). The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “ DGCL”). In the absence of any such determination by the Board, meetings of stockholders shall be held at the Company’s principal executive office.

1.2 Annual Meeting

An annual meeting of stockholders shall be held for the election of directors on such date and at such time as may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting of stockholders. Notwithstanding the foregoing, the Company shall not be required to hold an annual meeting of stockholders, provided that (i) the stockholders are permitted to act by written consent under the Company’s certificate of incorporation and these bylaws, (ii) the stockholders take action by written consent to elect directors, and (iii) the stockholders unanimously consent to such action or, if such consent is less than unanimous, all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

1.3 Special Meeting

A special meeting of stockholders may be called at any time by the Board, Chairperson of the Board, Chief Executive Officer or President (in the absence of a Chief Executive Officer).

At any time or times that the Company is subject to Section 2115(b) of the California Corporations Code (the “ CCC”), stockholders holding 5% or more of the outstanding shares shall have the right to call a special meeting of stockholders as set forth in Section 2.4.

If any person(s) other than the Board calls a special meeting, the request shall:

(i) be in writing;

(ii) specify the general nature of the business proposed to be transacted; and

(iii) be delivered personally or sent by registered mail, return receipt requested, or by facsimile transmission to the Chairperson of the Board, Chief Executive Officer, President (in the absence of a Chief Executive Officer) or Secretary.

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The officer(s) of the Company receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with these bylaws, that a meeting will be held at the place and time determined by the Board, which shall not be fewer than 30 nor more than 120 days after the date of receipt of the request. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 1.3 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the Board may be held.

1.4 Notice of Meetings

Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for determining stockholders entitled to notice of the meeting), and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any meeting of stockholders shall be given not fewer than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.

1.5 Quorum

Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum; provided that, where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter.

If, however, such quorum is not present or represented at any meeting of stockholders, then either (i) the Chairperson of the Meeting (as defined in Section 1.7) or (ii) the holders of a majority of the shares present or represented at the meeting shall have the power to adjourn the meeting from time to time, in the manner provided in Section 1.6, until a quorum is present or represented. A quorum, once established, shall not be broken by the subsequent withdrawal of enough votes to leave less than a quorum.

1.6 Adjourned Meeting; Notice

Any meeting of stockholders may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact

 

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any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If, after the adjournment, a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for notice of such adjourned meeting in accordance with the DGCL and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

1.7 Conduct of Business

Each meeting of stockholders shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by the Chief Executive Officer, or in the absence of the foregoing persons by the President, or in the absence of the foregoing persons by a Vice President, or in the absence of the foregoing persons by a chairperson of such meeting designated by the Board, or in the absence of such designation by a chairperson chosen at such meeting by the holders of a majority of the shares present or represented at such meeting (such presiding person, the “ Chairperson of the Meeting”). The Secretary shall act as secretary of each meeting, but in his or her absence the Chairperson of the Meeting may appoint any person to act as secretary of such meeting. The Chairperson of the Meeting shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

1.8 Voting

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 1.10, subject to Section 217 of the DGCL (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 of the DGCL (relating to voting trusts and other voting agreements).

Unless otherwise provided in the certificate of incorporation and subject to Section 1.10, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question. Elections of directors need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. If authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, (i) in all matters other than the election of directors, the affirmative vote of the majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, (ii) directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled

 

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to vote on the election of directors, and (iii) where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series.

1.9 Stockholder Action by Written Consent Without a Meeting

Unless otherwise provided in the certificate of incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

Every written consent (other than a written consent by electronic transmission) shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered to the Company in the manner herein required, written consents signed by a sufficient number of stockholders to take action are delivered to the Company by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Company having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Company’s registered office shall be by hand or by certified or registered mail, return receipt requested.

An electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxy holder, or by a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for purposes of this Section 1.9, provided that any such electronic transmission sets forth or is delivered with information from which the Company can determine (i) that the electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (ii) the date on which such stockholder or proxy holder or authorized person or persons transmitted such electronic transmission. The date on which such electronic transmission is transmitted shall be deemed to be the date on which such consent was signed.

Notwithstanding the foregoing, in the event that the Board shall have instructed the officers of the Company to solicit the vote or written consent of the stockholders of the Company, an electronic transmission of a stockholder written consent given pursuant to such solicitation may be delivered to the Secretary or President (or to a person designated by the Secretary or President). The Secretary or President (or a person designated by the Secretary or President) shall cause any such written consent by electronic transmission to be reproduced in paper form and inserted into the Company’s corporate records.

 

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1.10 Record Date for Stockholder Notice; Voting; Giving Consents

In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date:

(i) in the case of determination of stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, shall, unless otherwise required by the DGCL, not be more than 60 nor fewer than 10 days before the date of such meeting;

(ii) in the case of determination of stockholders entitled to consent to corporate action in writing without a meeting, shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board; and

(iii) in the case of determination of stockholders for any other action, shall not be more than 60 days prior to such action.

If no record date is fixed by the Board:

(i) the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;

(ii) the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is required by the DGCL, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in accordance with the DGCL, or, if prior action by the Board is required by the DGCL, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and

(iii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided that the Board may fix a new record date for the determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the foregoing provisions of this Section 1.10 at the adjourned meeting.

 

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1.11 Proxies

Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

1.12 List of Stockholders Entitled to Vote

The officer who has charge of the stock ledger of the Company shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (unless the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, in which case the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Company’s principal place of business. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

ARTICLE II — DIRECTORS

2.1 Powers

The business and affairs of the Company shall be managed by or under the direction of the Board, except as may be otherwise provided in the DGCL or the certificate of incorporation.

2.2 Number of Directors

The Board shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

 

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2.3 Election, Qualification and Term of Office of Directors

Except as provided in Section 2.4, and subject to Section 1.2 and Section 1.9, directors shall be elected at each annual meeting of stockholders. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

No stockholder entitled to vote at an election for directors may cumulate votes to which such stockholder is entitled, unless, at the time of such election, the Company is subject to Section 2115(b) of the CCC. During such time that the Company is subject to Section 2115 of the CCC, the Company’s stockholders shall have the right to cumulate their votes in connection with the election of directors as provided by subdivisions (a), (b) and (c) of Section 708 of the CCC.

2.4 Resignation and Vacancies

Any director may resign at any time upon notice given in writing or by electronic transmission to the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these bylaws, when one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.

Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

If at any time, by reason of death or resignation or other cause, the Company should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by Section 211 of the DGCL as far as applicable.

 

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At any time or times that the Company is subject to Section 2115(b) of the CCC, if, after the filling of any vacancy by the directors, the directors then in office who have been elected by the stockholders shall constitute less than a majority of the directors then in office, then (i) any holder or holders of an aggregate of five percent (5%) or more of the total number of shares at the time outstanding having the right to vote for those directors may call a special meeting of stockholders or (ii) the superior court of the proper county shall, upon application of such stockholder or stockholders, summarily order a special meeting of stockholders, to be held to elect the entire Board, all in accordance with Section 305(c) of the CCC, and the term of office of any director shall terminate upon that election of a successor.

A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

2.5 Place of Meetings; Meetings by Telephone

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board may hold meetings within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

2.6 Conduct of Business

Each meeting of the Board shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson of such meeting designated by the Board, or in the absence of such designation by a chairperson chosen at such meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of such meeting.

2.7 Regular Meetings

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.

2.8 Special Meetings; Notice

Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the Secretary or any two directors.

 

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Notice of the time and place of all special meetings shall be:

(i) delivered personally by hand, by courier or by telephone (including a voice messaging system or other technology designed to record and communicate messages) during normal business hours at least 24 hours before the date and time of the meeting;

(ii) sent by United States first-class mail, postage prepaid, deposited at least four days before the date and time of the meeting;

(iii) sent by facsimile during normal business hours at least 24 hours before the date and time of the meeting; or

(iv) sent by electronic mail during normal business hours at least 24 hours before the date and time of the meeting,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Company’s records.

Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting.

2.9 Quorum; Voting

At all meetings of the Board, a majority of the total number of directors shall constitute a quorum for the transaction of business, unless the certificate of incorporation or these bylaws require a greater number. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors if any action taken is approved by at least a majority of the required quorum for that meeting.

The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board, unless the certificate of incorporation or these bylaws requires a vote of a greater number.

If the certificate of incorporation provides that one or more directors shall have greater or fewer than one vote per director on any matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other proportion of the votes of the directors.

2.10 Board Action by Written Consent Without a Meeting

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing (or by electronic transmission) and the writing or writings (or electronic transmission or transmissions) are filed with the minutes of proceedings of the Board or committee.

 

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Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

2.11 Fees and Compensation of Directors

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

2.12 Removal of Directors

Unless otherwise restricted by the DGCL, the certificate of incorporation or these bylaws, and assuming that the Company is not subject to Section 2115(b) of the CCC, any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the certificate of incorporation, this Section 2.12 shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole.

During such time that the Company is subject to Section 2115(b) of the CCC, unless otherwise provided in the Certificate of Incorporation, and subject to applicable law and the rights of the holders of any series of Preferred Stock of the Company, any or all of the directors may be removed without cause by the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote on such removal, provided that, unless the entire Board is removed, no individual director may be removed when the votes cast against such director’s removal, or not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of such director’s most recent election were then being elected.

ARTICLE III — COMMITTEES

3.1 Committees of Directors

The Board may designate one or more committees, each committee to consist of one or more of the directors of the Company. The Board may at any time increase or decrease the number of members of any committee or terminate the existence of any committee. The membership of a committee member shall terminate on the date of his or her death, resignation from such committee or the Board or removal from such committee or the Board. The Board may at any time and for any reason remove any individual committee member, and the Board may fill any committee vacancy created by a committee member’s death, resignation or removal. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall

 

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have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopt, amend or repeal any bylaw of the Company.

3.2 Committee Minutes

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

3.3 Meetings and Actions of Committees

Meetings and actions of committees shall be governed by, and be held and taken in accordance with, the provisions of:

(i) Section 2.5 (Place of Meetings; Meetings by Telephone);

(ii) Section 2.7 (Regular Meetings);

(iii) Section 2.8 (Special Meetings; Notice);

(iv) Section 2.9 (Quorum; Voting);

(v) Section 2.10 (Board Action by Written Consent Without a Meeting); and

(vi) Section 7.5 (Waiver of Notice),

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

(i) the time of regular meetings of a committee may be determined either by resolution of the Board or by resolution of such committee;

(ii) special meetings of committees may also be called by resolution of the Board; and

(iii) notice of special meetings of any committee shall also be given to all alternate members of such committee, who shall have the right to attend all meetings of such committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these bylaws.

 

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3.4 Subcommittees

Unless otherwise provided in the certificate of incorporation, these bylaws or the resolution of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

ARTICLE IV — OFFICERS

4.1 Officers

The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the Board, a Chairperson of the Board (or Co-Chairpersons of the Board, each of whom acting alone shall, unless otherwise directed by the Board, have all the powers and duties of a Chairperson of the Board), a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

4.2 Appointment of Officers

The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of Section 4.3.

4.3 Subordinate Officers

The Board may appoint, or empower the Chief Executive Officer or President (in the absence of a Chief Executive Officer) to appoint, such other officers and agents as the business of the Company may require. Each of such other officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

4.4 Removal and Resignation of Officers

Any officer may be removed, with or without cause, by an affirmative vote of the majority of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Company. Any officer’s resignation shall take effect at the date of the Company’s receipt of such notice or at any later time specified in such notice. Unless otherwise specified in an officer’s notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the resigning officer is a party.

 

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4.5 Vacancies in Offices

Any vacancy occurring in any office of the Company shall be filled by the Board or as provided in Section 4.3.

4.6 Representation of Shares of Other Corporations

Unless otherwise directed by the Board, the President (or any other person authorized by the Board or the President) is authorized to vote, represent and exercise, on behalf of the Company, all rights incident to any and all shares or other securities or interests in, or issued by, any other corporation standing in the name of the Company. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

4.7 Authority and Duties of Officers

Except as otherwise provided in these bylaws, the officers of the Company shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

ARTICLE V — INDEMNIFICATION

5.1 Indemnification of Directors and Officers in Third Party Proceedings

Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any director or officer of the Company who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding other than an action by or in the right of the Company, whether civil, criminal, administrative or investigative (a “ Proceeding”), by reason of the fact that such person is or was a director or officer of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any such Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

 

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5.2 Indemnification of Directors and Officers in Actions by or in the Right of the Company

Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any director or officer of the Company who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of any such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

5.3 Successful Defense

To the extent that a present or former director or officer of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 5.1 or Section 5.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

5.4 Indemnification of Others

Subject to the other provisions of this Article V, the Company shall have the power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.

5.5 Advancement of Expenses

Expenses (including attorneys’ fees) incurred by a director or officer of the Company in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Company under this Article V or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the Company may be so paid upon such terms and conditions, if any, as the Company deems appropriate. The right to advancement of expenses shall not apply to any action, suit or proceeding for which indemnity is excluded pursuant to these bylaws, but shall apply to any action, suit or proceeding referenced in Section 5.6(ii) or Section 5.6(iii) prior to a determination that the person is not entitled to be indemnified by the Company.

 

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5.6 Limitation on Indemnification

Subject to the requirements in Section 5.3 and the DGCL, the Company shall not be obligated to indemnify any person pursuant to this Article V in connection with any action, suit or proceeding (or any part of any action, suit or proceeding):

(i) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;

(ii) initiated by such person, including any action, suit or proceeding (or any part of any action, suit or proceeding) initiated by such person against the Company or any of its directors, officers, employees, agents or other indemnitees, unless (a) the Board authorized the action, suit or proceeding (or the relevant part of the action, suit or proceeding) prior to its initiation, (b) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (c) otherwise required to be made under Section 5.7, or (d) otherwise required by applicable law; or

(iii) if prohibited by applicable law.

5.7 Determination; Claim

If a claim for indemnification or advancement of expenses under this Article V is not paid by the Company or on its behalf within 90 days after the Company’s receipt of a written claim therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. To the extent not prohibited by applicable law, the Company shall indemnify such claimant against all expenses he or she actually and reasonably incurred in connection with any action for indemnification or advancement of expenses from the Company under this Article V, to the extent such claimant is successful in such action. In any such action, the Company shall, to the fullest extent no prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.

5.8 Non-Exclusivity of Rights

The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.

 

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5.9 Insurance

The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL.

5.10 Survival

Subject to the terms contained in any indemnification agreement entered into between the Company and a director, officer, employee or agent, the indemnification and advancement of expenses provided by this Article V shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

5.11 Effect of Repeal or Modification

A right to indemnification or to advancement of expenses arising hereunder shall not be eliminated or impaired by an amendment hereof after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought.

5.12 Certain Definitions

For purposes of this Article V, references to the “ Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article V, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Article V.

 

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ARTICLE VI — STOCK

6.1 Stock Certificates; Partly Paid Shares

The shares of the Company shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of, the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate in bearer form.

The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

6.2 Special Designation on Certificates

If the Company is authorized to issue more than one class of stock or more than one series of any class, then the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Company shall issue to represent such class or series of stock, a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this Section 6.2 or Section 156, Section 202(a) or Section 218(a) of the DGCL or with respect to this

 

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Section 6.2 a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

6.3 Lost Certificates

Except as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the previously issued certificate is surrendered to the Company and cancelled at the same time. The Company may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

6.4 Dividends

The Board, subject to applicable law and any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of the Company’s capital stock. Dividends may be paid in cash, in property or in shares of the Company’s capital stock, subject to applicable law and the certificate of incorporation.

The Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

6.5 Stock Transfer Agreements

The Company shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

6.6 Registered Stockholders

The Company:

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

 

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(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

6.7 Transfers

Stock of the Company shall be transferable in the manner prescribed by law and in these bylaws. Transfers of stock of the Company shall be made on its books only by the person named as the holder thereof on the company’s stock records, in person or by an attorney duly authorized in writing, and, if such stock is certificated, upon the surrender of the certificate thereof, which shall be cancelled before a new certificate or uncertificated shares shall be issued. No transfer of stock of the Company shall be valid as against the Company for any purpose until it shall have been entered in the Company’s stock records by an entry showing from and to whom transferred.

ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER

7.1 Notice of Stockholder Meetings

Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Company’s records. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

7.2 Notice by Electronic Transmission

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any such consent shall be deemed revoked if:

(i) the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent; and

(ii) such inability becomes known to the Secretary or an Assistant Secretary or to the transfer agent or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

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Any notice given pursuant to the preceding paragraph of this Section 7.2 shall be deemed given:

(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iv) if by any other form of electronic transmission, when directed to the stockholder.

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

As used in these bylaws, an “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

This Section 7.2 shall not apply to Section 164, Section 296, Section 311, Section 312 or Section 324 of the DGCL.

7.3 Notice to Stockholders Sharing an Address

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice permitted under this Section 7.3, shall be deemed to have consented to receiving such single written notice. This Section 7.3 shall not apply to Section 164, Section 296, Section 311, Section 312 or Section 324 of the DGCL.

7.4 Notice to Person with Whom Communication is Unlawful

Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or

 

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agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

7.5 Waiver of Notice

Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of stockholders, directors or members of a committee of directors need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

ARTICLE VIII — GENERAL MATTERS

8.1 Fiscal Year

The fiscal year of the Company shall be fixed by resolution of the Board and may be changed by the Board.

8.2 Seal

The Company may adopt a corporate seal, which shall be in such form as may be approved from time to time by the Board. The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

8.3 Annual Report

The Company shall cause an annual report to be sent to the stockholders of the Company to the extent required by applicable law. If and so long as there are fewer than 100 holders of record of the Company’s shares, the requirement of sending an annual report to the stockholders of the Company is expressly waived to the extent permitted by applicable law.

8.4 Construction; Definitions

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

 

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8.5 Conflict with Applicable Law or Certificate of Incorporation

These bylaws are adopted subject to any applicable law and the certificate of incorporation. Whenever these bylaws may conflict with any applicable law or the certificate of incorporation, such conflict shall be resolved in favor of such law or the certificate of incorporation.

ARTICLE IX — AMENDMENTS

These bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the Company may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power, to adopt, amend or repeal bylaws.

A bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board.

 

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Exhibit 4.3

EXECUTION VERSION

4D MOLECULAR THERAPEUTICS, INC.

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

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Table of Contents

 

 

						Page
1.		Definitions					2
2.		Registration Rights					5
		2.1		Demand Registration			5
		2.2		Company Registration			7
		2.3		Underwriting Requirements			7
		2.4		Obligations of the Company			9
		2.5		Furnish Information			10
		2.6		Expenses of Registration			10
		2.7		Delay of Registration			11
		2.8		Indemnification			11
		2.9		Reports Under Exchange Act			13
		2.10		Limitations on Subsequent Registration Rights			14
		2.11		Lock-Up Period			14
		2.12		Restrictions on Transfer			15
		2.13		Assignment of Registration Rights			16
		2.14		Termination of Registration Rights			17
3.		Information Rights					17
		3.1		Delivery of Financial Statements			17
		3.2		Inspection			18
		3.3		Termination of Information			18
		3.4		Confidentiality			18
		3.5		Auditor Independence			19
4.		Rights to Future Stock Issuances					19
		4.1		Right of First Refusal			19
		4.2		Assignment of Right of First Refusal			21
		4.3		Termination of Right of First Refusal			21
5.		Additional Covenants					21
		5.1		Employee Agreements			21
		5.2		Matters Requiring Preferred Director Approval			21
		5.3		D&O Insurance			22
		5.4		Real Property Holding Corporation Notification			22
		5.5		Termination			23
6.		Voting Provisions Regarding Board of Directors					23
		6.1		Board Composition			23

 

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		6.2		Failure to Designate a Board Member			24
		6.3		Removal of Board Members			24
		6.4		No Liability for Election of Recommended Directors			24
		6.5		No “Bad Actor” Designees			25
7.		Drag-Along Right; Vote to Increase Common Stock					25
		7.1		Definitions			25
		7.2		Actions to be Taken			25
		7.3		Exceptions			27
		7.4		Restrictions on Sales of Control of the Company			29
		7.5		Vote to Increase Authorized Common Stock			29
		7.6		Remedies			29
		7.7		Equitable Relief			30
		7.8		Termination			30
8.		Miscellaneous					30
		8.1		Successors and Assigns			30
		8.2		Governing Law; Venue; Jury Trial Waiver			30
		8.3		Counterparts			31
		8.4		Interpretation			31
		8.5		Notices			32
		8.6		Attorneys’ Fees			32
		8.7		Amendments and Waivers; Termination			32
		8.8		Severability			34
		8.9		Delays or Omissions			34
		8.10		Entire Agreement			34
		8.11		Further Assurances			34
		8.12		Adjustments for Stock Splits, Etc			34
		8.13		Additional Parties			35
		8.14		Transfers			35
		8.15		Aggregation of Stock			35
		8.16		Calculations			36
		8.17		Conflict			36
		8.18		Spousal Consent			36
		8.19		Prior Agreement Superseded			36
		8.20		Other Business Activities of Investors			36

 

Schedule 1 -		Investors
Schedule 2 -		Key Holders

 

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4D MOLECULAR THERAPEUTICS, INC.

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

This Third Amended and Restated Investors’ Rights Agreement, dated as of April 29, 2020 (this “Agreement”), is entered into by and among 4D Molecular Therapeutics, Inc., a Delaware corporation (the “Company”), each holder of the Company’s Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), listed on Schedule 1 attached hereto (each, an “Investor” and, collectively, the “Investors”), and each Person (as defined below) listed on Schedule 2 attached hereto (each, a “Key Holder” and collectively, the “Key Holders” and together with the Investors, the “Stockholders”).

WHEREAS, certain of the Investors (the “Prior Investors”) hold shares of Series A Preferred Stock, $0.0001 par value per share, of the Company (“Series A Preferred Stock”), shares of Series A-1 Preferred Stock, $0.0001 par value per share, of the Company (“Series A-1 Preferred Stock”) and/or shares of Series B Preferred Stock, $0.0001 par value per share, of the Company (“Series B Preferred Stock”) (and/or shares of Common Stock (as defined below) issued upon conversion thereof), and possess registration rights, rights of first refusal and other rights pursuant to that certain Second Amended and Restated Investors’ Rights Agreement, dated as of August 27, 2018 (the “Prior Agreement”), by and among the Company, the Key Holders and the Prior Investors;

WHEREAS, the Prior Investors are holders of at least a majority of the Registrable Securities then outstanding (as defined in the Prior Agreement) and the Key Holders hold a majority of the shares of capital stock of the Company held by all of the Key Holders (as defined in the Prior Agreement) who are providing services to the Company as directors, officers, employees or consultants, and the Prior Investors and the Key Holders desire to amend and restate the Prior Agreement in its entirety and accept the rights created pursuant to this Agreement in lieu of the rights granted to them under the Prior Agreement;

WHEREAS, the Company and certain of the Investors are parties to that certain Series C Preferred Stock Purchase Agreement, dated of even date herewith (the “Series C Purchase Agreement”), pursuant to which such Investors have agreed to purchase shares of Series C Preferred Stock, $0.0001 par value per share, of the Company (“Series C Preferred Stock” and, together with the Series A Preferred Stock, Series A-1 Preferred Stock and Series B Preferred Stock, the “Preferred Stock”) and under which certain of the Company’s and such Investors’ obligations are conditioned upon the execution and delivery of this Agreement by the parties hereto;

WHEREAS, in order to induce the Company to enter into the Series C Purchase Agreement and to induce certain of the Investors to invest funds in the Company pursuant to the Series C Purchase Agreement, the parties hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock (as defined below), to receive certain information from the Company and to participate in future equity offerings by the Company, and shall govern certain other matters, all as set forth in this Agreement; and

 

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WHEREAS, the parties also desire to enter into this Agreement to set forth their agreements and understandings with respect to how shares of the Company’s capital stock held by them will be voted on, or tendered in connection with, certain matters.

NOW, THEREFORE, the parties to this Agreement hereby agree as follows:

1. Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms used herein shall be construed to have the meanings set forth or referenced below:

“Affiliate” means, with respect to any specified Person, any other Person who (i) directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including any general partner, managing member, officer or director of such specified Person or any venture capital, private equity or similar investment fund now or hereafter existing which is controlled by one or more general partners or managing members of, or shares the same management company or investment advisor with, such specified Person or (ii) is an Immediate Family Member of or associated with such Person, including their respective trusts and other controlled entities.

“Board” means the Company’s board of directors.

“Common Stock” means shares of Common Stock, par value $0.0001 per share, of the Company.

“Company IPO” means the Company’s first underwritten public offering of Common Stock under the Securities Act that includes securities to be sold on behalf of the Company to the public.

“Damages” means any loss, damage, claim or liability (joint or several) to which a Holder Indemnified Person (as defined in Section 2.8(a)) or a Company Indemnified Person (as defined in Section 2.8(b)) may become subject under the Securities Act, the Exchange Act or any state securities law in connection with a registration statement filed pursuant to Section 2, insofar as such loss, damage, claim or liability (or any action, claim or proceeding in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any such registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act or any state securities law.

“Deemed Liquidation Event” has the meaning given to that term in the Restated Charter.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or any of its subsidiaries pursuant to a stock option, stock purchase or similar plan, (ii) a registration relating to a Rule 145 transaction, (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

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“Form S-1” means such form registration statement under the Securities Act as in effect on the date of this Agreement or any successor form registration statement under the Securities Act subsequently adopted by the SEC.

“Form S-3” means such form registration statement under the Securities Act as in effect on the date of this Agreement or any form registration statement under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

“Holder” means any holder of Registrable Securities who is a party to this Agreement or any assignee of record of such Registrable Securities to whom registration rights set forth in Section 2 have been duly assigned in accordance with Section 2.13.

“Immediate Family Member” means a spouse (or former spouse) or domestic partner, child or stepchild, grandchild, parent, stepparent, sibling, father-in-law, mother-in-law, son-in-law, daughter-or-law, brother-in-law, sister-in-law, grandparent, niece or nephew, including adoptive relationships, of a natural person referred to herein. A person shall be deemed to be a “domestic partner” of another person if the two persons (i) reside in the same residence and plan to do so indefinitely, (ii) have resided together for at least one year, (iii) are each at least 18 years of age and mentally competent to consent to contract, (iv) are not blood relatives closer than would prohibit legal marriage in the state in which they reside, (v) are financially interdependent, as demonstrated to the Company’s reasonable satisfaction, and (vi) have each been the sole spousal equivalent of the other for the year prior to the determination of “domestic partner” status and plan to remain so indefinitely; provided, however, that a person shall not be deemed to be a “domestic partner” if he or she is married to another person or has any other spousal equivalent.

“Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

“Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds at least 450,000 shares of Registrable Securities.

“New Securities” means, collectively, (i) equity securities of the Company, whether or not currently authorized, (ii) rights, options or warrants to purchase equity securities of the Company, and (iii) securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for equity securities of the Company.

“Other Shares” means shares of Common Stock, other than Registrable Securities, with respect to which registration rights have been granted by the Company.

“Person” means an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

 

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“Pfizer” means (i) Pfizer Manufacturing LLC, a Delaware limited liability company, and Pfizer Production LLC, a Delaware limited liability company, acting for and on behalf of C.P. Pharmaceuticals International C.V., a Netherlands limited partnership (commanditaire vennootschap), and (ii) Pfizer Inc.

“Preferred Directors” means the Series A-1 Director (as defined below), so long as Pfizer is entitled to elect a Series A-1 Director, the Series B Director (as defined below), so long as the holders of Series B Preferred Stock are entitled to elect a Series B Director and the Series C Director (as defined below), so long as the holders of Series C Preferred Stock are entitled to elect a Series C Director.

“Registrable Securities” means (i) the Common Stock issued or issuable upon conversion of the Preferred Stock and (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clause (i) above; excluding, in all cases, however, (x) any Registrable Securities Transferred by a Person in a transaction in which the applicable rights under this Agreement are not assigned in accordance with the terms and provisions of this Agreement, (y) any Registrable Securities that have been previously registered, and (z) any Registrable Securities that have been sold to the public either pursuant to a registration statement or Rule 144, and excluding, for purposes of Section 2, any shares for which registration rights have terminated pursuant to Section 2.14.

“Registrable Securities then outstanding” means the number of shares determined by adding (i) the number of shares of outstanding Common Stock which are Registrable Securities that are then issued and outstanding and (ii) the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or then convertible securities that are Registrable Securities.

“Restated Charter” means the Company’s Fourth Amended and Restated Certificate of Incorporation, as amended from time to time.

“Restricted Securities” means (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii) upon any stock combination, stock split, stock dividend, recapitalization or other similar transaction.

“ROFR and Co-Sale Agreement” means that certain Third Amended and Restated Right of First Refusal and Co-Sale Agreement, dated of even date herewith, by and among the Company and the other parties specified therein.

“Rule 144” means Rule 144 promulgated by the SEC under the Securities Act, as amended from time to time, or any similar rule that may be promulgated by the SEC.

“Rule 145” means Rule 145 promulgated by the SEC under the Securities Act, as amended from time to time, or any similar rule that may be promulgated by the SEC.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

 

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“Selling Expenses” means, collectively, (i) all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and (ii) the fees and disbursements of legal counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel (as defined in Section 2.6) borne and paid by the Company as provided in Section 2.6.

“Transfer” means any sale, transfer, assignment, pledge, encumbrance or other disposition; provided, that any customary arrangement in connection with the deposit of Registrable Securities in a non-margin custodial account shall not be deemed a sale, transfer or pledge for purposes of this Agreement so long as such Registrable Securities are in certificated form (it being understood that the Company may require the exchange of any such certificated securities for book-entry shares upon the Company IPO).

“Viking” means Viking Global Opportunities Illiquid Investments Sub-Master LP and its Affiliates.

“Voting Shares” means and includes any securities of the Company the holders of which are entitled to vote for members of the Board, including all shares of Common Stock and Preferred Stock, by whatever name called, now owned or subsequently acquired by a Stockholder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, similar events or otherwise.

2. Registration Rights. The Company covenants and agrees as follows:

2.1 Demand Registration.

(a) Form S-1 Demand. If, at any time after 180 days after the effective date of the registration statement for the Company IPO (or the subsequent date on which all lock-up periods applicable to the Company IPO have terminated), the Company receives a written request from Holders of at least 50% of the Registrable Securities then outstanding that the Company file a Form S-1 with respect to at least 50% of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $50,000,000), then the Company shall (A) within 20 days after the Company’s receipt of such request, give written notice thereof (the “Form S-1 Demand Notice”) to all Holders other than the Initiating Holders and (B) as soon as practicable, and in any event within 60 days after the Company’s receipt of such request, file a Form S-1 under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified in a written notice given by each such Holder to the Company by no later than the 20^th day after the date on which the Form S-1 Demand Notice is, pursuant to Section 8.5, deemed to have been delivered to such Holder, and, in each case, subject to the limitations of this Section 2. Any registration statement filed pursuant to this Section 2.1(a) may, subject to the provisions of Section 2.3, include Company Shares (as defined in Section 2.3(a)) or Other Shares.

 

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(b) Form S-3 Demand. If, at any time when the Company is eligible to use a Form S-3, the Company receives a written request from Holders of at least 30% of the Registrable Securities then outstanding that the Company file a Form S-3 with respect to Registrable Securities then outstanding of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $5,000,000, then the Company shall (i) within 20 days after the Company’s receipt of such request, give a written notice thereof (the “Form S-3 Demand Notice”) to all Holders other than the Initiating Holders and (ii) as soon as practicable, and in any event within 45 days after the Company’s receipt of such request, file a Form S-3 under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified in a written notice given by each such Holder to the Company by no later than the tenth day after the date on which the Form S-3 Demand Notice is, pursuant to Section 8.5, deemed to have been delivered to such Holder, and, in each case, subject to the limitations of this Section 2. Any registration statement filed pursuant to this Section 2.1(b) may, subject to the provisions of Section 2.3, include Company Shares (as defined in Section 2.3(a)) or Other Shares.

(c) Deferral. Notwithstanding the foregoing obligations in Section 2.1(a) and Section 2.1(b), if the Company furnishes to the Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s Chief Executive Officer or President stating that, in the good faith judgment of the Board, it would be materially detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore necessary to defer the filing of such registration statement, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than 120 days after delivery to the Company by the Initiating Holders of such registration request; provided, however, that the Company may not invoke this right more than once in any 12-month period; provided, further, that the Company shall not register any securities for its own account or that of any other stockholder during such 120-day period other than pursuant to an Excluded Registration.

(d) Limitations. The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a): (i) during the period that is 60 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 180 days after the effective date of, a Company-initiated registration, provided that the Company is actively employing, in good faith, commercially reasonable efforts to cause such registration statement to become effective; (ii) if the Company has already effected two (2) registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b): (i) during the period that is 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days after the effective date of, a Company-initiated registration, provided that the Company is actively employing, in good faith, commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has already effected two (2) registrations pursuant to Section 2.1(b) within the 12-month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC; provided, however, that if (i) Holders of a majority of the Registrable Securities to be registered withdraw the request for such registration or a sufficient number of Holders withdraw from such registration so that the minimum offering conditions set forth in Section 2.1(a) or Section 2.1(b), as applicable, are no longer satisfied and (ii) the Holders of a majority of the Registrable Securities agree to

 

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forfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b), as the case may be, as described in Section 2.6, with the Company paying the Withdrawn Registration Expenses (as defined in Section 2.6), then such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d).

2.2 Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), then the Company shall, at such time, promptly give each Holder written notice of such registration (the “Company Notice”). Upon the written request of each Holder given to the Company by no later than the 20th day after the date on which the Company Notice is, pursuant to Section 8.5, deemed to have been delivered to such Holder, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has so requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses of such withdrawn registration (other than Selling Expenses) shall be borne by the Company in accordance with Section 2.6.

2.3 Underwriting Requirements.

(a) If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as part of their request made pursuant to Section 2.1, and the Company shall include such information in the Form S-1 Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. If, within 20 days after the Company’s receipt of a written registration request pursuant to Section 2.1, the Company delivers to the Initiating Holders a written request to include in such registration (x) securities being sold for the Company’s own account (“Company Shares”) or (y) Other Shares, then the Initiating Holders shall, on behalf of all Holders, offer to include the Company Shares and such Other Shares in the underwriting. All Holders proposing to distribute their securities through such underwriting shall, together with the Company as provided in Section 2.4(e) and the holders of any Other Shares that are to be included in such underwriting and registration (such holders, the “Other Holders”), enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2, if the managing underwriter(s) advise(s) the Initiating Holders, in writing, that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so notify the Company, all Holders of Registrable Securities that otherwise would be underwritten and registered and all Other Holders, in writing, and the number of Registrable Securities, Company Shares and Other Shares that may be included in such underwriting and registration shall be allocated as follows: (i) first, among all Holders that requested inclusion of any Registrable Securities in such registration statement, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities held by each selling Holder (or in such other proportion as shall mutually be agreed to, in writing, by all such selling Holders), provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall

 

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not be reduced unless all other securities are first entirely excluded from the underwriting; (ii) second, to the Other Holders; and (iii) third, to the Company. To facilitate the allocation of shares in accordance with the foregoing provisions of this Section 2.3(a), the Company or the underwriter(s) may round the number of shares allocated to any Holder or Other Holder, as the case may be, to the nearest 100 shares.

(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2 (each, a “Company Offering”), the Company will not be required to include any Registrable Securities in such Company Offering unless the Holders of the Registrable Securities to be included in such Company Offering accept the terms of the underwriting as agreed upon between the Company and the underwriter(s) selected by the Company (and enter into an underwriting agreement in customary form with the underwriter(s)selected for such Company Offering), and then only in such quantity, as determined in the sole discretion of the underwriter(s) and the Company, as will not jeopardize the success of such Company Offering. If the total number of securities, including Registrable Securities, requested by stockholders of the Company to be included in a Company Offering exceeds the number of securities to be sold (other than by the Company) that the underwriter(s) and the Company determine is compatible with the success of such Company Offering, then the Company will be required to include in such Company Offering only that number of such securities, including Registrable Securities, which the underwriter(s) and the Company in their sole discretion determine will not jeopardize the success of such Company Offering. If the underwriter(s) and the Company determine that less than all of the Registrable Securities requested to be registered can be included in a Company Offering, then the Registrable Securities that are included in such Company Offering shall be allocated among the selling Holders in proportion (as nearly as practicable) to the number of Registrable Securities held by each selling Holder (or in such other proportion as shall mutually be agreed to, in writing, by all such selling Holders). To facilitate the allocation of shares in accordance with the foregoing provisions of this Section 2.3(b), the Company or the underwriter(s) may round the number of shares allocated to any Holder or Other Holder, as the case may be, to the nearest 100 shares. Notwithstanding the foregoing, in no event shall the number of Registrable Securities to be included in a Company Offering (i) be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from such Company Offering or (ii) be reduced below 30% of the total number of securities included in such Company Offering, unless such Company Offering is the Company IPO, in which case the selling Holders may be excluded further if the underwriter(s) and the Company make the determination described above and no other stockholder’s securities are included in such Company Offering. For purposes of the provisions in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company or corporation, the partners, members, retired partners, retired members, stockholders and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, members, retired partners and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

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(c) For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriters’ and the Company’s cutback in Section 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall use its commercially reasonable efforts to:

(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 90 days or, if shorter, until the distribution contemplated therein has been completed; provided, however, that such 90-day period shall be extended for a period of time equal to the period that the Holders refrain, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;

(b) prepare and file with the SEC such amendments and supplements to the registration statement with respect to such Registrable Securities, or prospectus forming a part thereto, as may be necessary to comply with the Securities Act in order to enable the disposition of all Registrable Securities covered by such registration statement for the period set forth in Section 2.4(a);

(c) furnish to the selling Holders such number of copies of a prospectus (including a preliminary prospectus) as required by the Securities Act and such other documents incident thereto as such Holders may reasonably request in order to facilitate the disposition of their Registrable Securities included in such registration;

(d) register and qualify the Registrable Securities covered by the registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided, however, that the Company shall not be required to qualify to do business, or to file a general consent to service of process, in any such states or jurisdictions;

(e) in the event of any underwritten public offering, enter into an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering, provided that each Holder participating in such underwriting also enters into such agreement;

(f) cause all Registrable Securities covered by the registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

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(h) promptly make all financial and other records, pertinent corporate documents and properties of the Company available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to the registration statement with respect to such Registrable Securities and any attorney, accountant or other agent retained by any such selling Holders or underwriter(s) and cause the Company’s directors, officers, employees and independent accountants to supply all information reasonably requested by any such selling Holder, underwriter, attorney, accountant or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when the registration statement with respect to such Registrable Securities has been declared effective or a supplement to any prospectus forming a part thereto has been filed; and

(j) notify each selling Holder, after a registration statement with respect to such Registrable Securities becomes effective, of any request by the SEC that the Company amend or supplement such registration statement or prospectus forming a part thereto.

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of the Company’s securities under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

2.5 Furnish Information. It shall be a condition precedent to the Company’s obligation to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall have furnished to the Company such information regarding himself/herself/itself, the Registrable Securities held by him/her/it, and the intended method of disposition of such Registrable Securities as is reasonably required in connection with any registration, qualification or compliance referred to in this Section 2.

2.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations pursuant to Section 2.1(a) and Section 2.2 and the first registration pursuant to Section 2.1(b), including all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of legal counsel for the Company, and the reasonable fees and disbursements (not to exceed $25,000) of one legal counsel for the selling Holders (the “Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if such registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered or because a sufficient number of Holders have withdrawn from such registration so that the minimum offering conditions set forth in Section 2.1(a) or Section 2.1(b), as applicable, are no longer satisfied (such expenses, “Withdrawn Registration Expenses”) (in which case, all participating Holders shall bear such Withdrawn Registration Expenses pro rata based upon the number of Registrable Securities that were to be included by each such Holder in such withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b), as the case may be (in which case, such right shall be forfeited by all Holders and the Company shall pay for such Withdrawn Registration Expenses); provided, further, that, if, at the time of such withdrawal, the Holders requesting withdrawal (x) shall have learned of a material adverse change in the condition, business or

 

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prospects of the Company from that known to the Holders at the time of their registration request and (y) have withdrawn their request with reasonable promptness after learning of such material adverse change, then the Holders shall not be required to pay for any of such Withdrawn Registration Expenses and shall not forfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b), as the case may be. Notwithstanding anything to the contrary contained herein, (i) all Selling Expenses and fees and disbursements of the Selling Holder Counsel in excess of $25,000 shall be borne and paid by the Holders pro rata based upon the number of Registrable Securities registered on their behalf (or, in the case of a withdrawn registration, the number of Registrable Securities that were to be included on their behalf) and (ii) all expenses incurred in connection with any registration pursuant to Section 2.1(b) after the first such registration shall be borne and paid by the Holders who participate in such registration pro rata based upon the number of Registrable Securities registered on their behalf (or, in the case of a withdrawn registration, the number of Registrable Securities that were to be included on their behalf).

2.7 Delay of Registration. No Holder shall have any right to take any action to restrain, enjoin or otherwise delay any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.8 Indemnification.

(a) By the Company. If any Registrable Securities are included in a registration statement under this Section 2, then, to the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, the partners, members, directors, officers and stockholders of each such Holder, legal counsel and accountants for each such Holder, any underwriter (as defined in the Securities Act) for each such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act (each, a “Holder Indemnified Person”) against any Damages, and the Company will pay to each Holder Indemnified Person any legal or other expenses reasonably incurred by him/her/it, within three months after a request for reimbursement has been received by the Company, in connection with investigating or defending any action, claim or proceeding from which Damages may result; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such action, claim or proceeding if such settlement is effected without the Company’s prior written consent, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon statements, actions, omissions or violations made in reliance upon, and in conformity with, written information furnished by or on behalf of any such Holder Indemnified Person expressly for use in connection with such registration.

(b) By Selling Holders. If any Registrable Securities are included in a registration statement under this Section 2, then, to the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, the directors, officers and partners of the Company, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act) and each Person, if any, who controls the Company or such underwriter within the meaning of the Securities Act or the Exchange Act (each, a “Company Indemnified Person”) against any Damages, and such selling Holder will pay to each Company Indemnified Person any legal or other expenses reasonably incurred by him/her/it, within three months after a request for reimbursement has been received by such selling Holder,

 

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in connection with investigating or defending any action, claim or proceeding from which Damages may result, in each case only to the extent that such Damages arise out of or are based upon statements, actions, omissions or violations made in reliance upon, and in conformity with, written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such action, claim or proceeding if such settlement is effected without such selling Holder’s prior written consent, which consent shall not be unreasonably withheld; provided, further, that in no event shall the aggregate amounts payable by any selling Holder by way of indemnity under this Section 2.8(b) or contribution under Section 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

(c) Notice. Promptly after (i) receipt by a Holder Indemnified Person or a Company Indemnified Person (each, an “Indemnified Party”) of notice of the commencement of any action, claim or proceeding (including any governmental action, claim or proceeding) for which a party may be entitled to indemnification hereunder or (ii) an Indemnified Party has actual knowledge of any claim as to which indemnity may be sought hereunder, such Indemnified Party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8 (each, an “Indemnifying Party”), give the Indemnifying Party written notice thereof. The Indemnifying Party shall have the right to (x) participate in such action, claim or proceeding and, to the extent the Indemnifying Party so desires, participate jointly with any other Indemnifying Party to which written notice has been given and (y) assume the defense thereof with legal counsel approved by the Indemnified Party (whose approval shall not be unreasonably withheld); provided, however, that the Indemnified Party shall have the right to retain one separate counsel, with the fees and expense to be paid by the Indemnifying Party, if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such action. The failure to give timely written notice to the Indemnifying Party as provided in this Section 2.8(c) (1) shall relieve such Indemnifying Party of any liability to the Indemnified Party under this Section 2.8, but only to the extent that such failure materially prejudices the Indemnifying Party’s ability to defend such action, claim or proceeding and (2) shall not relieve such Indemnifying Party of any liability that it may have to the Indemnified Party otherwise than under this Section 2.8. Each Indemnified Party shall furnish such information regarding such Indemnified Party or the claim in question as the Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such action, claim or proceeding.

(d) Contribution. To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties shall contribute to the aggregate losses, damages,

 

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claims, liabilities or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the Indemnifying Party and the Indemnified Party in connection with the statements, actions, omissions or violations that resulted in such loss, damage, claim, liability or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) in any such case, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder, except in the case of willful misconduct or fraud by such Holder.

(e) Conflict with Underwriting Agreement. Notwithstanding the foregoing provisions of this Section 2.8, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with an underwritten public offering under this Section 2 are in conflict with the foregoing provisions of this Section 2.8, the provisions in the underwriting agreement shall control.

(f) Survival. Unless otherwise superseded by an underwriting agreement entered into in connection with an underwritten public offering under this Section 2, the obligations of the Company and the Holders pursuant to this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2 and otherwise shall survive the termination of this Agreement.

2.9 Reports Under Exchange Act. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell Registrable Securities to the public pursuant to a registration on Form S-3 or without registration, the Company shall use its commercially reasonable efforts to:

(a) at any time from and after 90 days following the effective date of the registration statement filed by the Company for the Company IPO, make and keep available adequate current public information (as those terms are understood and defined in Rule 144) with respect to the Company;

(b) at any time after the Company has become subject to such reporting requirements, file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

 

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(c) so long as a Holder owns any Registrable Securities, furnish to such Holder upon his/her/its written request (i) to the extent accurate, a written statement by the Company that (A) it has complied with the reporting requirements of Rule 144 (at any time from and after 90 days following the effective date of the registration statement filed by the Company for the Company IPO), the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements) or (B) it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies to use such form) and (ii) such other information as may be reasonably requested by such Holder in availing himself/herself/itself of any rule or regulation of the SEC that permits the selling of such securities of the Company to the public pursuant to a registration on Form S-3 (at any time after the Company so qualifies to use such form) or without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act).

2.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the holders of at least a majority of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are pari passu with or senior to the registration rights granted to the Holders hereunder; provided that this limitation shall not apply to Registrable Securities acquired by any additional Investor that becomes a party to this Agreement in accordance with Subsection 8.13(a).

2.11 Lock-Up Period. Each Holder hereby agrees that such Holder will not, during the period commencing on the date of the final prospectus relating to the Company IPO and ending on the date specified by the Company and the managing underwriter(s) (such period not to exceed 180 days), (a) sell, dispose of, make any short sale of, offer, hypothecate, pledge, contract to sell, grant or sell any option or contract to purchase, purchase any option or contract to sell, grant any right or warrant to purchase, lend or otherwise transfer or encumber, directly or indirectly, any shares of Common Stock or other securities convertible into or exercisable or exchangeable (directly or indirectly) for shares of Common Stock held immediately prior to the effectiveness of the Registration Statement for such Offering (such shares and other securities, the “Lock-Up Shares”) or (b) enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Lock-Up Shares, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing provisions of this Section 2.11 (1) shall not apply to the sale of any Lock-Up Shares to an underwriter pursuant to an underwriting agreement or that are permitted to be sold or otherwise transferred under the terms of any then-effective lock-up agreement between the Holder and the underwriter(s) and (2) shall be applicable to the Holders only if all directors and officers of the Company are subject to similar restrictions and the Company uses commercially reasonable effort to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding shares of Preferred Stock). The underwriters for any registered offering described in this Section 2.11 are intended third party beneficiaries of this Section 2.11 and shall have the right, power and authority to enforce the provisions of this Section 2.11 as though they were parties hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriter(s) in connection with any registered offering described in this Section 2.11 and that are consistent with this Section 2.11 or necessary to give further effect thereto; provided, however, that if a Holder has already entered into a lock-up agreement

 

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with the underwriter(s) in connection with a proposed IPO, such Holder agrees to execute an agreement containing terms substantially similar to those set forth in the underwriter lock-up agreement previously executed. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriter(s) shall apply pro rata to all Holders subject to such agreements based on the number of shares subject to such agreements.

2.12 Restrictions on Transfer.

(a) The Restricted Securities, and any beneficial interest therein, shall not be Transferred, and the Company will not recognize, and will issue stop-transfer instructions to its transfer agent with respect to, any such Transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. Each Holder shall cause any proposed purchaser, pledgee or transferee of any Restricted Securities held by such Holder to agree, in a written instrument delivered to the Company, to take and hold such securities subject to the provisions, and upon the conditions, specified in this Agreement (including the obligations set forth in Section 2.11).

(b) Each certificate evidencing any Restricted Securities shall (unless otherwise permitted by the provisions of Section 2.12(c)) bear the following legends (or substantially equivalent legends) in addition to any legends required under applicable securities laws:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AGREEMENTS BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF SUCH SECURITIES (COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE ISSUER) AND BY ACCEPTING ANY INTEREST IN SUCH SECURITIES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO, AND SHALL BECOME BOUND BY, ALL OF THE PROVISIONS OF THOSE AGREEMENTS, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER AND OWNERSHIP SET FORTH THEREIN.

 

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The parties hereby agree that the failure to cause the certificates, if any, evidencing Restricted Securities to bear the legends required by this Section 2.12(b) shall not affect the validity or enforcement of this Agreement. In order to enforce the provisions hereof, the Company may issue appropriate stop-transfer instructions to its transfer agent, if any, and if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Each holder of Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed Transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction (and the proposed transaction is made in accordance with such registration statement), the holder thereof shall give written notice to the Company of such holder’s intention to effect such Transfer (“Transfer Notice”). Each such Transfer Notice shall describe the manner and circumstances of the proposed Transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied, at such holder’s expense, by either (x) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed Transfer may be effected without registration under the Securities Act, (y) a “no action” letter from the SEC to the effect that the proposed Transfer without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto, or (z) any other evidence reasonably satisfactory to legal counsel for the Company to the effect that the proposed Transfer may be effected without registration under the Securities Act, whereupon the holder of such Restricted Securities shall be entitled to Transfer such Restricted Securities in accordance with the terms of the applicable Transfer Notice given by such holder to the Company. The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with Rule 144; or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration. Each certificate evidencing any Restricted Securities that are Transferred as provided in this Section 2.12(c) shall bear, except if such Transfer is made pursuant to Rule 144, the appropriate restrictive legends set forth or described in Section 2.12(b), except that such certificate shall not bear such restrictive legends if, in the opinion of legal counsel for such Transferring holder and legal counsel for the Company, such legends are not required in order to establish compliance with any provisions of applicable securities laws, including the Securities Act.

2.13 Assignment of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 (collectively, “Registration Rights”) may be assigned (but only with all related obligations) by such Holder to a transferee of Registrable Securities that (x) after such Transfer, holds at least 450,000 shares of Registrable Securities, (y) is an Affiliate of such Holder, or (z) is such Holder’s Immediate Family Member or trust for the benefit of such individual Holder (or one or more of his or her Immediate Family Members); provided, however, that (i) such Transfer of Registrable Securities is effected in accordance with Sections 2.12 and 8.14 and all applicable securities laws, (ii) before such Transfer of Registrable Securities, such Holder gives the Company written notice stating the name and address of such transferee and identifying the securities of the Company with

 

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respect to which Registration Rights are intended to be assigned, (iii) such transferee of Registrable Securities agrees, in a written instrument delivered to the Company, to receive such assigned Registration Rights subject to all of the terms and conditions hereof, including the provisions of Section 2.11, and (iv) such transferee of Registrable Securities is not deemed by the Board, in its reasonable judgment, to be a competitor of the Company or a director, officer, employee or holder of more than 10% of a competitor of the Company, provided, however, that none of Pfizer, Viking, or any of their respective Affiliates shall be deemed to be a competitor of the Company for purposes of this Agreement.

2.14 Termination of Registration Rights. The Registration Rights shall automatically terminate and be of no further force or effect upon the earliest to occur of: (i) the dissolution or winding up of the Company; (ii) immediately before the consummation of a Deemed Liquidation Event; (iii) such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all Registrable Securities proposed to be sold by such Holder without limitation during a three-month period; and (iv) the 5-year anniversary of the Company IPO.

3. Information Rights.

3.1 Delivery of Financial Statements. The Company shall deliver to each Major Investor:

(a) as soon as practicable, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Company (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and (iii) a statement of stockholders’ equity as of the end of such fiscal year, all such financial statements to be in reasonable detail, and prepared in accordance with generally accepted accounting principles (“GAAP”), and audited and certified by an independent public accounting firm of nationally recognized standing approved by the Board (including at least one Preferred Director);

(b) as soon as practicable, but in any event within forty-five (45) days after the end of each quarter of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP);

(c) as soon as practicable, but in any event at least thirty (30) days prior to the end of each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly basis, including balance sheets, income statements and statements of cash flows for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company;

(d) such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Subsection 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential or commercially sensitive information (unless covered by a confidentiality agreement, in a form reasonably acceptable to the Company, including in a form as set forth in Section 3.4); or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

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If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

Notwithstanding anything else in this Subsection 3.1 to the contrary, the Company may cease providing the information set forth in this Subsection 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Subsection 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

3.2 Inspection. The Company shall permit each Major Investor, at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Subsection 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential or commercially sensitive information (unless covered by a confidentiality agreement, in form reasonably acceptable to the Company, including in a form as set forth in Section 3.4) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

3.3 Termination of Information. The covenants set forth in Subsection 3.1 and Subsection 3.2 shall terminate and be of no further force or effect (i) immediately before the consummation of the Company IPO; (ii) upon the consummation of a Deemed Liquidation Event; or (iii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first.

3.4 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge or use for any purpose (other than to monitor such Investor’s investment in the Company) any confidential information obtained from the Company pursuant to this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (x) is known or becomes known to the public in general (other than as a result of a breach or violation by such Investor or any of its Affiliates or representatives of this Section 3.4 or any other non-use or confidentiality obligation), (y) is or has been independently developed or conceived by such Investor without use of, derivation from, reference to or reliance upon any of the Company’s confidential information and without violating any of the confidentiality obligations hereunder or any other non-use or confidentiality obligation, or (z) is or has been made known or disclosed to such Investor by a third party without a breach of any legal, fiduciary, contractual or other obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose the

 

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Company’s confidential information (i) to such Investor’s attorneys, accountants, consultants, advisors and other professionals to the extent necessary to obtain their services in connection with monitoring such Investor’s investment in the Company, provided that such Investor informs each such individual that such information is confidential and that by receiving such information such individual is agreeing to maintain the confidentiality of such information, (ii) to any Affiliate, current and prospective partner, member, stockholder or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information, (iii) with prior notification to the Company, to any prospective purchaser of any Registrable Securities from such Investor, provided that such prospective purchaser agrees, in writing, to be bound by provisions not less restrictive than those set forth in this Section 3.4, or (iv) as may be required by applicable law, provided that such Investor delivers to the Company advance written notice of such disclosure and exercises commercially reasonable efforts to minimize the extent of any such required disclosure and obtain assurance that confidential treatment will be accorded to the disclosed information.

3.5 Auditor Independence. The Company shall be reasonably responsive to requests for information from the Investor relating to issues that may impact auditor independence rules applicable to the Investor.

4. Rights to Future Stock Issuances.

4.1 Right of First Refusal. If the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to the Major Investors in accordance with the terms and conditions of this Section 4.1 and subject to applicable securities laws (the “Right of First Refusal”).

(a) The Company shall give written notice (the “Offer Notice”) to each Major Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the type and number of such New Securities to be offered (the “Offered Shares”), and (iii) the price and general terms, if any, upon which it proposes to offer such New Securities.

(b) Each Major Investor, by written notice to the Company (the “Election Notice”) given no later than the twentieth day after the date on which the Offer Notice is, pursuant to Section 8.5, deemed to have been delivered to such Major Investor (such twentieth day, the “Initial Offer Deadline”), may elect to purchase or acquire, at the price and on the general terms specified in the Offer Notice, up to that portion of the Offered Shares which equals the proportion that the Common Stock issued and then held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock then held by such Major Investor bears to the total Common Stock then outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Stock). Each Election Notice shall specify the number of Offered Shares that such Major Investor is electing to purchase or acquire. Promptly after the Initial Offer Deadline, the Company shall give written notice to each Major Investor that has elected to purchase or acquire all of the Offered Shares available to such Major Investor (each, a “Fully Exercising Investor”) of any other Major Investor’s failure to do likewise (the “Second Offer Notice”). Each Fully Exercising Investor may, by giving written notice to the Company (the “Second Election Notice”) during the ten-day period commencing on the date on which the Second Offer Notice is, pursuant

 

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to Section 8.5, deemed to have been delivered to such Fully Exercising Investor (such ten-day period, the “Second Offer Period”), elect to purchase or acquire, in addition to the number of Offered Shares such Fully Exercising Investor has already elected to purchase or acquire and at the same price and on the general terms specified in the Offer Notice, up to that portion of the Offered Shares for which Major Investors were entitled to subscribe but that were not subscribed for by the Major Investors by the Initial Offer Deadline (the “Unsubscribed Shares”) which equals the proportion that the Common Stock issued and then held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock then held, by such Fully Exercising Investor bears to the total Common Stock issued and then held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock then held by all of the Fully Exercising Investors who elect to purchase or acquire Unsubscribed Shares. Each Second Election Notice shall specify the number of Unsubscribed Shares that such Fully Exercising Investor is electing to purchase or acquire. The closing of any sale of New Securities pursuant to this Section 4.1(b) shall occur on or before the later of (i) 90 days after the last date on which the Offer Notice is, pursuant to Section 8.5, deemed to have been delivered to all Major Investors and (ii) the date of initial sale of New Securities pursuant to Section 4.1(c).

(c) If all Offered Shares are not elected to be purchased or acquired as provided in Section 4.1(b), the Company may, during the 90-day period following the expiration of the Second Offer Period for all Fully Exercising Investors, offer and sell the remaining unsubscribed portion of such Offered Shares to any Person or Persons (the “Offerees”) at a price not less than, and upon terms not more favorable than, specified in the Offer Notice. If the Company does not enter into a written agreement with the Offerees for the sale of New Securities within such 90-day period, or if the sale of such New Securities pursuant to such agreement is not consummated within 30 days after the execution thereof, the Right of First Refusal shall be deemed to be revived and such New Securities shall not be offered or sold to any Person or Persons unless first reoffered to the Major Investors in accordance with this Section 4.1.

(d) The Right of First Refusal shall not be applicable to: (i) Exempted Securities (as defined in the Restated Charter); (ii) securities of the Company which are otherwise excluded from the Right of First Refusal by the affirmative vote or consent of the holders of a majority of all shares of Preferred Stock then outstanding; (iii) shares of Common Stock issued in the Company IPO, or (iv) the issuance of shares of Series C Preferred Stock pursuant to Subsection 1.2(c) or Subsection 1.2(d) of the Series C Purchase Agreement. In the event the Right of First Refusal under this Section 4 is waived with respect to an offering of New Securities without a Major Investor’s prior written consent and any party that participated in waiving such rights actually purchases New Securities in such offering, the Company shall grant to any such non-waiving Major Investor the right to purchase, in a subsequent closing of such issuance on substantially the same terms and conditions, the same percentage of its full pro rata share of such New Securities as the highest percentage of any such purchasing waiving party.

(e) Notwithstanding any provision hereof to the contrary, no Major Investor shall have any right to purchase or acquire any New Securities pursuant to this Section 4.1 if such Major Investor cannot demonstrate to the Company’s reasonable satisfaction that such Major Investor is, at the time of the proposed issuance of such New Securities, an “accredited investor” within the meaning of SEC Rule 501 of Regulation D, as then in effect.

 

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4.2 Assignment of Right of First Refusal. The Right of First Refusal may be assigned (but only with all related obligations) by any Major Investor to a transferee of Registrable Securities that (x) after such Transfer, holds at least 450,000 shares of Registrable Securities, (y) is an Affiliate of such Major Investor, or (z) is such Major Investor’s Immediate Family Member or trust for the benefit of such individual Major Investor (or one or more of his or her Immediate Family Members); provided, however, that (i) such Transfer of Registrable Securities is effected in accordance with Sections 2.12 and 8.14 and all applicable securities laws, (ii) before such Transfer of Registrable Securities, such Major Investor gives the Company written notice stating the name and address of such transferee and identifying the securities of the Company with respect to which the Right of First Refusal is intended to be assigned, (iii) such transferee of Registrable Securities agrees, in a written instrument delivered to the Company, to receive such assigned Right of First Refusal subject to all of the terms and conditions hereof and (iv) such transferee of Registrable Securities is not deemed by the Board, in its reasonable judgment, to be a competitor of the Company or a director, officer, employee or holder of more than 10% of a competitor of the Company; provided, however, none of Viking, Pfizer or any of their respective Affiliates shall be deemed to be a competitor of the Company for purposes of this Agreement.

4.3 Termination of Right of First Refusal. The covenants set forth in Section 4.1 shall automatically terminate and be of no further force or effect upon the earliest to occur of: (i) immediately before the consummation of the Company IPO; (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or Section 15(d) of the Exchange Act; (iii) the dissolution or winding up of the Company; and (iv) immediately before the consummation of a Deemed Liquidation Event.

5. Additional Covenants.

5.1 Employee Agreements. The Company shall cause each individual now or hereafter employed by it or any of its subsidiaries (or engaged by the Company or any of its subsidiaries as a consultant or independent contractor) with access to the Company’s trade secrets and/or confidential information to enter into a confidential information and invention assignment agreement, substantially in the form made available to the Investors.

5.2 Matters Requiring Preferred Director Approval. So long as there is at least one Preferred Director serving on the Board, the Company hereby covenants and agrees with each Investor that it shall not, without approval of the Board, which approval must include the affirmative vote of at least one Preferred Director:

(a) make, or permit any of its subsidiaries to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership or other entity unless it is wholly owned by the Company;

(b) make, or permit any of its subsidiaries to make, any loan or advance to any person or entity, including any director or employee, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board;

 

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(c) guarantee (directly or indirectly), or permit any of its subsidiaries to guarantee (directly or indirectly), any indebtedness, except for trade accounts of the Company or any of its subsidiaries arising in the ordinary course of business;

(d) enter into, or be a party to, any transaction with any director, officer or employee of the Company or any “associate” (as defined in Rule 12b 2 promulgated under the Exchange Act) of any such person or entity, except for (x) transactions contemplated by the Transaction Agreements (as defined in the Series C Purchase Agreement) or (y) transactions made in the ordinary course of business and pursuant to reasonable requirements of the Company’s business and upon fair and reasonable terms that are approved by a majority of the Board;

(e) hire, terminate or change the compensation of the Company’s executive officers, including approving any option grants or stock awards to such executive officers, or paying bonuses in excess of 20% of base compensation (such approval not to be unreasonably withheld);

(f) change the Company’s principal business, enter new lines of business or exit the Company’s current lines of business; or

(g) sell, assign, license, pledge or encumber material technology or intellectual property, other than (i) licenses granted in the ordinary course of business, (ii) in connection with a Deemed Liquidation Event or (iii) in connection with equipment leasing transactions of less than $100,000 in the aggregate, in each case as approved by the Board.

5.3 D&O Insurance. The Company shall use its best efforts to maintain in full force and effect directors and officers insurance in the amount of at least three million dollars ($3,000,000) (or such greater amount as determined by the Board), as determined by the Board and covering such risks as are adequate and customary for its size and business, each with financially sound and reputable insurance companies or associations; provided, however, that the Company shall not terminate or reduce such directors and officers insurance to less than three million dollars ($3,000,000) without the prior written consent of Pfizer.

5.4 Real Property Holding Corporation Notification. The Company shall notify the Investors promptly following any “determination date” (as defined in Treasury Regulations section 1.897-2(c)(1)) or otherwise within five (5) business days of becoming aware that the Company is, or is reasonably likely to be deemed to be, a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the U.S. Internal Revenue Code of 1986, as amended. In addition, at any time upon an Investor’s reasonable request, the Company shall issue a statement to the Investor, in form and substance as described in Treasury Regulations sections 1.897-2(h)(1) and 1.1445-2(c) (or any successor regulations) and signed under penalties of perjury, regarding whether any interest in the Company constitutes a “U.S. real property interest” within the meaning of Section 897(c) of the Code, together with an executed notice to the Internal Revenue Services described in Treasury Regulations section 1.897-2(h)(2) (or any successor regulation). Such statement shall be delivered within ten (10) business days of the Investor’s written request therefor.

 

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5.5 Termination. The covenants set forth in this Section 5 shall terminate and be of no further force or effect upon the earliest to occur of: (i) immediately before the consummation of the Company IPO; (ii) the dissolution or winding up of the Company; and (iii) immediately before the consummation of a Deemed Liquidation Event.

6. Voting Provisions Regarding Board of Directors.

6.1 Board Composition. Each Stockholder agrees to vote, or cause to be voted, all Voting Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that, at each annual or special meeting of the Company’s stockholders at which an election of directors is held or pursuant to any written consent of the Company’s stockholders, the following individuals shall be elected to the Board:

(a) one individual designated by Pfizer (the “Series A-1 Director”), which individual shall initially William Burkoth, for so long as Pfizer and its Affiliates continue to own beneficially 25% of the shares of Series A-1 Preferred Stock originally issued pursuant to that certain Series A-1 Preferred Stock Purchase Agreement, dated as of October 6, 2015, by and among the Company and the Investors (as defined therein) party thereto;

(b) one individual designated by the holders of a majority of the Series B Preferred Stock (the “Series B Director”), which individual shall initially be Tony Yao, for so long as at least 916,380 shares of Series B Preferred Stock remain issued and outstanding;

(c) one individual designated by the holders of a majority of the Series C Preferred Stock (the “Series C Director,” together with the Series A-1 Director and the Series B Director, the “Preferred Directors”), which seat shall initially be vacant, for so long as at least 777,778 shares of Series C Preferred Stock remain issued and outstanding;

(d) two individuals designated by the holders of a majority of the outstanding shares of the Common Stock (other than (i) any Common Stock issued or issuable upon conversion of the Preferred Stock or (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clause (i) above) (the “Common Directors”), which individuals shall initially be David Kirn and David Schaffer; and

(e) three individuals who are not otherwise Affiliates (as defined below) of the Company or of any Investor (the “Independent Directors”), (i) the first of whom shall be proposed by the Company subject to the approval of a majority of the other members of the Board, which approval shall not be unreasonably withheld or delayed, which individual shall initially be Charles Theuer, (ii) the second of whom shall be an individual that satisfies the independence, financial literacy and financial expertise requirements to serve as an audit committee chairperson pursuant to relevant SEC, New York Stock Exchange and Nasdaq laws and regulations, and mutually acceptable to a majority of the other members of the Board, which individual shall initially be Jacob Chacko, and (iii) the third of whom shall be mutually agreed upon by a majority of the other members of the Board, which approval shall not be unreasonably withheld or delayed, which shall initially be left vacant.

 

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To the extent that any of clauses (a) through (d) above shall not be applicable, any member of the Board who would otherwise have been designated in accordance with the terms thereof shall instead be elected by all of the Company’s stockholders entitled to vote thereon in accordance with, and pursuant to, the Restated Charter. The Company will fill vacancies on the Board as soon as practicable and in any event within twelve (12) months after the Initial Closing (as defined in the Series C Purchase Agreement). The parties acknowledge that additional seats on the Board shall be determined in connection with future financing and other strategic transactions involving the Company, and to satisfy other needs of the Company for independent directors, and as determined by the Board, may provide for rights to designate directors similar to the rights provided to Pfizer and the holders of a majority of the outstanding shares of Series C Preferred Stock under this Section 6.

6.2 Failure to Designate a Board Member. In the absence of any designation from the Persons or groups with the right to designate a director as specified in Section 6.1, the director previously designated by them and then serving shall be reelected if still eligible to serve as provided herein.

6.3 Removal of Board Members. Each Stockholder agrees to vote, or cause to be voted, all Voting Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that:

(a) no director elected pursuant to Section 6.1 or Section 6.2 may be removed from office unless (i) such removal is directed or approved by the affirmative vote of the Person, or of the holders of a majority of the shares of stock, entitled under Section 6.1 to designate that director or (ii) the Person(s) originally entitled to designate or approve such director pursuant to Section 6.1 is no longer so entitled to designate or approve such director;

(b) any vacancies created by the resignation, removal or death of a director elected pursuant to Section 6.1 or Section 6.2 shall be filled pursuant to the provisions of this Section 6; and

(c) upon the written request of any party entitled to designate a director as provided in Section 6.1(a), Section 6.1(b) or Section 6.1(c) to remove such director, such director shall be removed.

All Stockholders agree to execute any written consents required to perform their obligations as set forth in this Agreement, and the Company agrees, at the written request of any party entitled to designate directors, to call a special meeting of the Company’s stockholders for the purpose of electing directors.

6.4 No Liability for Election of Recommended Directors. No Stockholder, nor any Affiliate of any Stockholder, shall have any liability as a result of designating an individual for election as a director for any act or omission by such designated individual in his or her capacity as a director of the Company, nor shall any Stockholder have any liability as a result of voting for any such designee in accordance with the provisions of this Agreement.

 

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6.5 No “Bad Actor” Designees. Each Person or group with the right to designate, or participate in the designation of, a director as specified in Section 6.1 (each, a “Designator”) hereby represents and warrants to the Company that, to such Designator’s knowledge, none of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)-(viii) promulgated under the Securities Act (each, a “Disqualification Event”), is applicable to such Designator’s initial designee named in Section 6.1, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Any director designee to whom any Disqualification Event is applicable, except for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable, is hereinafter referred to as a “Disqualified Designee.” Each Designator hereby covenants and agrees (i) not to designate, or participate in the designation of, any director designee who, to such Designator’s knowledge, is a Disqualified Designee and (ii) that, in the event such Designator becomes aware that any individual previously designated by any such Designator is or has become a Disqualified Designee, such Designator shall, as promptly as practicable, take such actions as are necessary to remove such Disqualified Designee from the Board and designate a replacement designee who is not a Disqualified Designee.

7. Drag-Along Right; Vote to Increase Common Stock.

7.1 Definitions

(a) “Sale of the Company” means either (i) a Stock Sale (as defined below) or (ii) a Deemed Liquidation Event.

(b) “Stock Sale” means a change in ownership of the Company, other than a Deemed Liquidation Event, that occurs when one Person, or more than one Person acting as a group, acquires ownership of stock of the Company, in a stock sale or exchange, that, together with the stock held by such Person or group, constitutes more than 50% of the total voting power of the stock of the Company; provided, however, that a Stock Sale will not occur if any Person, or more than one Person acting as a group, owns more than 50% of the total voting power of the stock of the Company and acquires additional stock of the Company; provided, further, that any change in the ownership of the stock of the Company as a result of a bona fide equity financing of the Company that is approved by the Board will not be considered a Stock Sale.

(c) “Subject Shares” means all securities of the Company, including securities of the Company acquired upon exercise or conversion of any options, warrants or other convertible securities.

7.2 Actions to be Taken. In the event that the holders of (i) a majority of the then outstanding shares of Common Stock and (ii) a majority of the then outstanding shares of Preferred Stock (voting together as a single class on an as converted to Common Stock basis) (the “Selling Stockholders”) approve a Sale of the Company, in writing, specifying that this Section 7 shall apply to such transaction, then the Company and each Stockholder hereby agrees:

 

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(a) if such transaction requires stockholder approval, with respect to all Voting Shares owned by such Stockholder, or over which such Stockholder has voting control, to vote (in person, by proxy or by written consent, as applicable) such Voting Shares in favor of such Sale of the Company (together with any related amendment to the Restated Charter required in order to implement such Sale of the Company) and in opposition to any and all other proposals that could reasonably be expected to delay or impair the ability of the Company or its stockholders to consummate such Sale of the Company;

(b) to sell or exchange all Subject Shares that such Stockholder then beneficially holds pursuant to the terms and conditions of such Deemed Liquidation Event or, in the case of a Stock Sale, to sell or otherwise transfer to the acquiring Person all Subject Shares that such Stockholder then beneficially holds (or in the event that the Selling Stockholders are selling fewer than all of their Subject Shares, shares in the same proportion as the Selling Stockholders are selling to the acquiring Person) for the same per share consideration in accordance with the provisions of the Restated Charter, and on the same terms and conditions (except as otherwise permitted by Section 7.3), as the Selling Stockholders;

(c) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law (if any) with respect to such Sale of the Company;

(d) to execute and deliver all related documentation and take such other actions as may be reasonably requested, in writing, by the Company or the Selling Stockholders in support of such Sale of the Company, including executing and delivering instruments of conveyance and transfer, any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, governmental filing and share certificates duly endorsed for transfer (free and clear of impermissible liens, claims and encumbrances), and any similar or related documents;

(e) to refrain from entering into any agreement or understanding (including any proxy or voting trust) that would be inconsistent with, or violate, the provisions of this Section 7, unless specifically requested to do so, in writing, by the acquiring Person in connection with such Sale of the Company; and

(f) in the event that a stockholder representative (the “Stockholder Representative”) is appointed with respect to matters affecting the Company’s stockholders under the applicable definitive transaction agreements relating to such Sale of the Company, (i) to consent to (x) the appointment of such Stockholder Representative, (y) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (z) the payment of such Stockholder’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all of such Stockholder Representative’s reasonable fees and expenses arising out of such Stockholder Representative’s services and duties as the representative of the Company’s stockholders in connection with such Sale of the Company, and (ii) not to assert any claim, or commence any suit, against the Stockholder Representative or any other stockholder of the Company with respect to any action or inaction by the Stockholder Representative in connection with his or her service as the Stockholder Representative, absent fraud, gross negligence or willful misconduct.

The provisions of this Section 7 shall (i) (x) with respect to Theresa Janke, supersede and replace the provisions of Section 12 of that certain Contribution Agreement made and entered into as of March 20, 2015 by and between the Company and Theresa Janke and (y) with respect to Melissa

 

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Kotterman, supersede and replace the provisions of Section 12 of that certain Contribution Agreement made and entered into as of March 20, 2015 by and between the Company and Melissa Kotterman and (ii) not be deemed to require any Stockholder to approve any amendment or waiver of any provision of the Restated Charter or otherwise approve a Sale of the Company that would not allocate the consideration in accordance with the Restated Charter.

7.3 Exceptions. Notwithstanding the foregoing, a Stockholder’s obligations pursuant to Section 7.2 in connection with any proposed Sale of the Company (the “Proposed Sale”) shall be subject to the following conditions:

(a) any representations and warranties to be made by such Stockholder in connection with the Proposed Sale are limited to representations and warranties related to authority, ownership and the ability to convey title to the Stockholder’s Shares, including, but not limited to, representations and warranties that (i) the Stockholder holds all right, title and interest in and to the Shares such Stockholder purports to hold, free and clear of all liens and encumbrances, (ii) the obligations of the Stockholder in connection with the transaction have been duly authorized, if applicable, (iii) the documents to be entered into by the Stockholder have been duly executed by the Stockholder and delivered to the acquirer and are enforceable against the Stockholder in accordance with their respective terms; and (iv) neither the execution and delivery of documents to be entered into in connection with the Proposed Sale, nor the performance of the Stockholder’s obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency;

(b) the Stockholder shall not be liable for the inaccuracy of any representation or warranty made by any other Person in connection with the Proposed Sale, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of identical representations, warranties and covenants provided by all stockholders);

(c) the liability for indemnification, if any, of such Stockholder in the Proposed Sale, and for the inaccuracy of any representations and warranties made by the Company or its stockholders in connection with the Proposed Sale, shall be several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders) and, subject to any provisions of the Restated Charter relating to the allocation of the escrow, shall be pro rata in proportion to, and shall not exceed, the amount of consideration paid to such Stockholder in connection with the Proposed Sale.

(d) other than liability in respect of actions or omissions of, or representations and warranties made solely by and with respect to, such Stockholder, liability shall be limited to such Stockholder’s applicable share (determined based on the respective proceeds payable to each Stockholder in connection with such Proposed Sale in accordance with the provisions of the Restated Certificate) of a negotiated aggregate indemnification amount that applies equally to all Stockholders but that in no event exceeds the amount of consideration otherwise payable to such Stockholder in connection with such Proposed Sale, except with respect to claims related to fraud by such Stockholder, the liability for which need not be limited as to such Stockholder;

 

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(e) as a result of the Proposed Sale, (i) each holder of each class or series of capital stock of the Company shall be entitled to receive the same form of consideration (and be subject to the same indemnity and escrow provisions) for their shares of such class or series as is received by other holders with respect to their shares of such same class or series of stock, (ii) each holder of a series of Preferred Stock of the Company shall receive the same amount of consideration per share of such series of Preferred Stock of the Company as is received by other holders with respect to their shares of such same series, (iii) each holder of Common Stock shall receive the same amount of consideration per share of Common Stock as is received by other holders with respect to their shares of Common Stock, and (iv) unless the holders of each series of Preferred Stock agree otherwise by legally sufficient amendment or waiver of the provisions of the Restated Charter then in effect, the aggregate consideration receivable by all holders of Common Stock and Preferred Stock of the Company shall be allocated among the holders of Common Stock and Preferred Stock of the Company on the basis of the relative liquidation preferences to which the holders of each respective series of Preferred Stock of the Company and the holders of Common Stock are entitled in a Deemed Liquidation Event (assuming for this purpose that the Proposed Sale is a Deemed Liquidation Event) in accordance with the Restated Charter in effect immediately prior to the Proposed Sale; provided, however, that, notwithstanding the foregoing, if the consideration to be paid in exchange for the Subject Shares pursuant to the Proposed Sale includes any securities and due receipt thereof by such Stockholder would require, under applicable law, (x) the registration or qualification of such securities or of any Person as a broker, dealer or agent with respect to such securities or (y) the provision to such Stockholder of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, then the Company may cause to be paid to such Stockholder, in lieu of such securities, against surrender of the Subject Shares which would have otherwise been sold by such Stockholder, an amount in cash equal to the fair market value (as determined in good faith by the Company) of the securities that such Stockholder would otherwise receive as of the date of issuance of such securities in exchange for such Stockholder’s Subject Shares;

(f) subject to clause (e) above, requiring the same form of consideration to be available to the holders of any single class or series of capital stock, if any holders of any capital stock of the Company are given an option as to the form and amount of consideration to be received as a result of the Proposed Sale, all holders of such capital stock will be given the same option; provided, however, that nothing in this Section 7.3(f) shall entitle any holder to receive any form of consideration that such holder would be ineligible to receive as a result of such holder’s failure to satisfy any condition, requirement or limitation that is generally applicable to the Company’s stockholders;

(g) no Stockholder or its affiliates shall be required to agree (unless such Stockholder is a Company officer or employee) to any restrictive covenant in connection with the Proposed Sale (including without limitation any covenant not to compete or covenant not to solicit customers, employees or suppliers of any party to the Proposed Sale); and

(h) no Stockholder or its affiliates shall be required to amend, extend or terminate any commercial, contractual or other relationship with the Company, the acquirer or their respective affiliates, except that the Stockholder may be required to agree to terminate the investment-related documents between or among such Stockholder, the Company and/or other stockholders of the Company.

 

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7.4 Restrictions on Sales of Control of the Company. No Stockholder shall be a party to any Stock Sale unless all holders of Preferred Stock are allowed to participate in such transaction and the consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified in the Restated Certificate in effect immediately prior to the Stock Sale (as if such transaction were a Deemed Liquidation Event), unless (i) a majority of the then outstanding shares of Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, and (ii) a majority of the then outstanding shares of Series C Preferred Stock and Series B Preferred Stock, voting together as a single class and on an as-converted to Common Stock basis, elect otherwise by written notice given to the Company at least ten (10) days prior to the effective date of any such transaction or series of related transactions.

7.5 Vote to Increase Authorized Common Stock. Each Stockholder agrees to vote, or cause to be voted, all Voting Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to increase the number of authorized shares of Common Stock from time to time to ensure that there will be sufficient shares of Common Stock available for conversion of all shares of Preferred Stock outstanding at any given time.

7.6 Remedies.

(a) Irrevocable Proxy and Power of Attorney. Each Stockholder hereby constitutes and appoints as such Stockholder’s proxy, and hereby grants a power of attorney to, the Company’s Chief Executive Officer with full power of substitution, to represent and to vote or act by written consent with respect to all securities of the Company that such Stockholder beneficially holds, either as of the date of this Agreement or at any time thereafter (collectively, the “Proxy Shares”), in accordance with Section 6 or this Section 7, if and only if such Stockholder or any transferee of any Proxy Shares (i) fails to vote all of the Proxy Shares in accordance with Section 6 or this Section 7, (ii) attempts to vote any of the Proxy Shares (whether in person, by proxy or by written consent) in a manner that is inconsistent with Section 6 or this Section 7, or (iii) fails to take any action necessary to effect the provisions of Section 6 or this Section 7. Each proxy and power of attorney granted pursuant to the immediately preceding sentence is given to secure the performance of each Stockholder’s duties under Section 6 and this Section 7, and each Stockholder shall take such further action and execute such other instruments as may be necessary to effectuate the intent of such Stockholder’s proxy. Each proxy and power of attorney is coupled with an interest, shall be irrevocable and shall be valid for so long as any of the Proxy Shares are outstanding until the covenants set forth in this Section 7 terminate or expire pursuant to Section 7.8. The authority vested in each proxy shall run with the Proxy Shares regardless of any change in legal ownership thereof. The power of attorney granted by each Stockholder herein is a durable power of attorney and shall survive such Stockholder’s bankruptcy, death or incapacity. Each Stockholder hereby revokes any and all previous proxies and powers of attorney with respect to the Proxy Shares. Each Stockholder and each subsequent holder of any Proxy Shares shall not hereafter, unless and until the covenants set forth in Section 6 and this Section 7 terminate or expire pursuant to Section 7.8, (x) purport to grant any other proxy or power of attorney with respect to any of the Proxy Shares, (y) deposit any of the Proxy Shares into a

 

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voting trust, or (z) enter into any agreement, arrangement or understanding with any Person (other than the Company), directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Proxy Shares, in each case, with respect to any of the matters set forth in Section 6 or this Section 7.

7.7 Equitable Relief. Each party acknowledges and agrees that any breach or threatened breach of the covenants set forth in Section 6 or this Section 7 will cause irreparable injury and that money damages will not provide an adequate remedy. Accordingly, it is agreed that each party hereto shall be entitled to an injunction to prevent breaches of the covenants set forth in Section 6 or this Section 7 or other equitable relief (including specific performance in any action instituted in any court of the United States or any state having subject matter jurisdiction). The aforementioned equitable relief shall be in addition to, and not in lieu of, legal remedies, monetary damages or other available forms of relief.

7.8 Termination. The covenants set forth in Section 6 and this Section 7 shall automatically terminate and be of no further force or effect upon the earliest to occur of: (i) immediately before the consummation of the Company IPO; (ii) the dissolution or winding up of the Company; (iii) the consummation of a Deemed Liquidation Event or a Sale of the Company, with distribution of proceeds to, or escrow for the benefit of, the Company’s stockholders in accordance with the Restated Charter; provided that the provisions of this Section 7 will continue after the closing of any Sale of the Company to the extent necessary to enforce the provisions of this Section 7 with respect to such Sale of the Company.

8. Miscellaneous.

8.1 Successors and Assigns. Except as otherwise provided herein, this Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Stockholder without the Company’s prior written consent, and any attempt by any Stockholder to assign, transfer, delegate or sublicense any right, duty or obligation hereunder without such prior written consent of the Company shall be void. Subject to the foregoing and except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the respective successors, permitted assigns, heirs, executors and administrators of the parties hereto. Nothing herein, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors, permitted assigns, heirs, executors and administrators any rights, duties or obligations under or by reason of this Agreement, except as expressly provided herein.

8.2 Governing Law; Venue; Jury Trial Waiver. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without regard to conflict-of-law principles. Each party hereto hereby (i) irrevocably and unconditionally submits to the jurisdiction of the courts of the State of California located in Alameda County and of the United States of America for the Northern District of California for the purpose of any action, suit or proceeding based upon, arising out of or relating to this Agreement, (ii) agrees not to commence any action, suit or proceeding based upon, arising out of or relating to this Agreement except in the aforesaid courts, and (iii) irrevocably waives, and agrees not to assert, by way of motion, as a defense or otherwise, to the fullest extent permitted by law, in any such action, suit or proceeding, any claim that such party is not subject personally to the jurisdiction of the

 

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aforesaid courts, that such party’s property is exempt or immune from attachment or execution, that such action, suit or proceeding is brought in an inconvenient forum, that the venue of such action, suit or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by the aforesaid courts. EACH PARTY HERETO REPRESENTS AND WARRANTS THAT SUCH PARTY HAS REVIEWED THIS SECTION 8.2 WITH HIS/HER/ITS LEGAL COUNSEL AND THAT SUCH PARTY, FOLLOWING SUCH CONSULTATION WITH LEGAL COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHTS HE/SHE/IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO ENTERING INTO THIS AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION 8.2 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO, AND THE PROVISIONS OF THIS SECTION 8.2 WILL NOT BE SUBJECT TO ANY EXCEPTIONS.

8.3 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. The exchange of copies hereof, including signature pages hereto, by facsimile, e-mail or other means of electronic transmission shall constitute effective execution and delivery hereof as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures transmitted by facsimile, e-mail or other means of electronic transmission shall be deemed to be original signatures for all purposes.

8.4 Interpretation. Capitalized terms shall have the meanings as defined herein, and the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined. For purposes of this Agreement, (i) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation,” (ii) the word “or” is not exclusive, (iii) the words “herein,” “hereof,” “hereby,” “hereto,” “hereunder” and words of similar import refer to this Agreement as a whole, and (iv) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding.” Unless the context otherwise requires, references herein: (a) to a Section, a Schedule or an Exhibit mean a Section, a Schedule or an Exhibit of, or attached to, this Agreement; (b) to agreements, instruments and other documents shall be deemed to include all subsequent amendments, supplements and other modifications thereto; (c) to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to; (d) to any Person includes such Person’s successors and assigns, but, if applicable, only if such successors and assigns are not prohibited by this Agreement; and (e) to any gender includes each other gender. The Exhibits attached hereto shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein. The titles, captions and headings herein are for convenience of reference only and shall not affect the meaning or interpretation hereof. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

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8.5 Notices. Except as may be otherwise provided herein, all notices, requests, consents, claims, demands, waivers and other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered (i) when delivered personally, (ii) one business day after being deposited with an overnight courier service (costs prepaid), (iii) when sent by facsimile or e-mail if sent during the recipient’s normal business hours and on the next business day if sent after the recipient’s normal business hours, in each case with confirmation of transmission by the transmitting equipment, or (iv) when received or rejected by the addressee, if sent by certified or registered mail, return receipt requested, postage prepaid, in each case to the addresses, facsimile numbers and e-mail addresses and marked to the attention of the person (by name or title) designated on Schedule 1 or Schedule 2 attached hereto (or to such address, facsimile number and e-mail address and marked to the attention of the person (by name or title)

(a) indicated in the Company’s records, in the case of any other holder of capital stock of the Company, and (b) on the signature page(s) hereto, in the case of the Company) or to such other address, facsimile number, e-mail address or person as such party may designate by a notice delivered to the other parties hereto. In addition, all notices, requests, consents, claims, demands, waivers and other communications given or delivered to the Company shall include a mandatory copy (which shall not constitute notice) to Latham & Watkins LLP, 140 Scott Drive, Menlo Park, CA 94025, Attn: Alan Mendelson and Ben Potter, Facsimile (650-463-2600), E-mail (alan.mendelson@lw.com and benjamin.potter@lw.com) (or such other Person as the Company may designate by a notice delivered to the other parties hereto).

8.6 Attorneys’ Fees. If any action, suit or proceeding is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

8.7 Amendments and Waivers; Termination. In addition to automatic termination of specific rights and restrictions as provided in Section 2.14, Section 4.3, and Section 7.8, this Agreement may be amended, modified, terminated or supplemented and the observance of any provision hereof may be waived (either generally or in a particular instance, and either retroactively or prospectively) by a writing signed by (i) the Company, (ii) the holders of a majority of the Registrable Securities then outstanding (the “Requisite Investors”) and (iii) the Key Holders holding a majority of the shares of capital stock of the Company held by all of the Key Holders who are then providing services to the Company as directors, officers, employees or consultants (the “Requisite Key Holders”); provided, however, that the Company may, in its sole discretion, waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after receiving written notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); provided, further, that, notwithstanding anything to the contrary in this Section 8.7, any provision hereof may be waived by a party, on such party’s own behalf, without the consent of any other party. Any amendment, modification, termination, supplement or waiver effected in accordance with this Section 8.7 shall be binding on all parties hereto and all of their respective successors, permitted assigns, heirs, executors and administrators whether or not such party, successor, permitted assignee, heir, executor or

 

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administrator entered into or approved such amendment, modification, termination, supplement or waiver. Each Key Holder and each Investor acknowledges that, by operation of this Section 8.7, the Requisite Key Holders and the Requisite Investors will have the right and power to diminish or eliminate all rights of such Key Holder or Investor, as applicable, hereunder. No waivers of, or exceptions to, any term, condition or provision hereof, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of, or exception to, any such term, condition or provision. Notwithstanding the foregoing:

(a) Schedule 1 and Schedule 2 attached hereto may be amended by the Company from time to time in accordance with Section 8.13 to add information regarding additional Investors or Key Holders, as applicable, without the consent of the other parties hereto;

(b) the consent of the Key Holders shall not be required for any amendment, modification, termination, supplement or waiver of any provision hereof if such amendment, modification, termination, supplement or waiver is not directly applicable to the rights of the Key Holders hereunder;

(c) Section 6.1(a), this Section 8.7(c) and Section 8.20 shall not be amended, modified, terminated, supplemented or waived without the written consent of Pfizer, for so long as Pfizer and its Affiliates (as defined below) continue to own beneficially a majority of the shares of Series A-1 Preferred Stock originally issued pursuant to the Series A-1 Purchase Agreement; provided that such sections may be amended in connection with a bona fide preferred stock equity financing pursuant to which this Agreement is amended and restated but such provisions are not otherwise substantially modified;

(d) Section 6.1(b) and this Section 8.7(d) shall not be amended, modified, terminated, supplemented or waived without the written consent of the holders of a majority of the outstanding shares of Series B Preferred Stock, for so long as at least 916,380 shares of Series B Preferred Stock remain issued and outstanding;

(e) Section 6.1(c) and this Section 8.7(e) shall not be amended, modified, terminated, supplemented or waived without the written consent of the holders of a majority of the outstanding shares of Series C Preferred Stock, for so long as at least 777,778 shares of Series C Preferred Stock remain issued and outstanding;

(f) Section 6.1(d) shall not be amended, modified, terminated, supplemented or waived without the written consent of the holders of a majority of the outstanding shares of Common Stock (other than (i) any Common Stock issued or issuable upon conversion of the Preferred Stock or (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clause (i) above); and

(g) Any amendment, modification, termination or waiver of Subsection 7.3 that (i) materially increases the obligations of any Investor under this Agreement, or (ii) materially adversely affects the rights of any Investor, shall require the consent of such Investor; provided, however, that in no circumstances shall this Subsection 8.7(g) be interpreted in such a manner to, except as otherwise provided for herein, require the consent of any Investor to (i) the termination

 

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of this Agreement in accordance with this Section 8.7, (ii) the termination of Section 7 in its entirety in accordance with Section 7.8 hereof or this Section 8.7, or (iii) any amendment or modification of Subsection 7.3 in connection with a bona fide equity financing pursuant to which this Agreement is amended and/or restated but such provisions are not amended or modified in a manner that is materially adverse to such Investor.

8.8 Severability. Should any provision contained herein be held as invalid, illegal or unenforceable, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth herein.

8.9 Delays or Omissions. Except as otherwise provided herein, no delay or omission to exercise any right, power or remedy accruing to any party hereunder upon any breach or default of any other party hereunder shall impair any such right, power or remedy of such non- breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of (or in) any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Subject to Section 8.5 and Section 8.7, any waiver, permit, consent or approval, of any kind or character on the part of any party, of any breach or default hereunder (or any waiver on the part of any party of any provisions or conditions hereof) must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either hereunder or by law or otherwise afforded to any party, shall be cumulative and not alternative.

8.10 Entire Agreement. This Agreement (including the Schedule(s) and Exhibit(s) attached hereto) constitutes the full and entire understanding and agreement of the parties hereto with respect to the subject matter contained herein and supersedes any and all other communications, representations, agreements, understandings and letters of intent, whether written or oral, between or among any of the parties hereto with respect to the subject matter contained herein.

8.11 Further Assurances. Each party hereto agrees to cooperate fully with the other parties hereto and to execute and deliver, or cause to be executed and delivered, such further agreements, instruments and documents and to give such further written assurance and take such further acts as may be reasonably requested by any other party hereto to evidence and reflect the transactions contemplated by this Agreement and to carry into effect the intents and purposes of this Agreement.

8.12 Adjustments for Stock Splits, Etc. All references herein to numbers of shares shall automatically be proportionally adjusted to reflect any stock combination, stock split, stock dividend, recapitalization or other similar transaction affecting the capital stock of the Company occurring after the date of this Agreement.

 

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8.13 Additional Parties.

(a) If the Company issues additional shares of Preferred Stock after the date hereof, the Company shall, as a condition to the issuance of such shares, require the purchaser of such shares to become a party to this Agreement by executing and delivering to the Company (i) the Adoption Agreement, in substantially the form attached hereto as Exhibit A (the “Adoption Agreement”), or (ii) a counterpart signature page hereto agreeing to be bound by, and subject to, the terms hereof as an Investor and Stockholder hereunder. In either event, each such Person shall thereafter be deemed an Investor and a Stockholder for all purposes hereunder.

(b) If the Company issues additional shares of Common Stock after the date hereof representing 1% or more of the Company’s fully-diluted capitalization, the Company shall, as a condition to the issuance of such shares, require the purchaser or recipient of such shares to become a party to this Agreement by executing and delivering to the Company (i) the Adoption Agreement, or (ii) a counterpart signature page hereto agreeing to be bound by, and subject to, the terms hereof as a Key Holder and Stockholder hereunder. In either event, each such Person shall thereafter be deemed a Key Holder and a Stockholder for all purposes hereunder.

8.14 Transfers. Each transferee or assignee of any shares of capital stock of the Company subject hereto shall continue to be bound by, and subject to, the terms and conditions hereof, and, as a condition precedent to any such transfer or assignment of shares, each such transferee or assignee shall agree in writing to be bound by, and subject to, all of the terms and conditions hereof by executing the Adoption Agreement and delivering it to the Company. Upon the execution of the Adoption Agreement (and delivery thereof to the Company) by any transferee or assignee of any shares of capital stock of the Company subject hereto, such transferee or assignee shall be deemed to be (i) a party hereto as if such transferee or assignee were the transferor or assignor and such transferee’s or assignee’s signature appeared on the signature pages of this Agreement and (ii) an Investor and a Stockholder, or a Key Holder and a Stockholder, as applicable. The Company shall not permit the transfer, on its books, of any shares of capital stock of the Company subject hereto or issue a new certificate representing any such shares unless and until such transferee or assignee shall have complied with the terms of this Section 8.14.

8.15 Aggregation of Stock. All shares of capital stock of the Company held or acquired by a Stockholder and/or its Affiliates shall be aggregated together for the purpose of determining the availability of any rights hereunder, and such Affiliated Persons may apportion such rights as among themselves in any manner they deem appropriate. For purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee that is (x) an Affiliate or stockholder of a Holder, (y) a Holder’s Immediate Family Member, or (z) a trust for the benefit of an individual Holder (or one or more of his or her Immediate Family Members) shall be aggregated together and with those of such transferring Holder; provided, however, that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Agreement. Notwithstanding anything to the contrary, the shares held by JANUS HENDERSON GLOBAL LIFE SCIENCES FUND or JANUS HENDERSON CAPITAL FUNDS PLC on behalf of its series, JANUS HENDERSON GLOBAL LIFE SCIENCES FUND will be aggregated solely for the purpose of determining whether either JANUS HENDERSON GLOBAL LIFE SCIENCES FUND or JANUS HENDERSON CAPITAL FUNDS PLC on behalf of its series, JANUS HENDERSON GLOBAL LIFE SCIENCES FUND (or their respective transferees) is a “Major Investor” under this Agreement.

 

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8.16 Calculations. All calculations hereunder, including calculations of pro rata shares, shall be made by the Company and shall be binding upon the parties hereto absent fraud or manifest error. No fractional shares shall be Transferred hereunder.

8.17 Conflict. In the event of any conflict between this Agreement and the Restated Charter or the Company’s Bylaws, the terms of the Restated Charter or the Company’s Bylaws, as the case may be, shall control. In the event of any conflict between this Agreement (or any notice delivered hereunder) and the Company’s books and records, the Company’s books and records shall control absent fraud or manifest error.

8.18 Spousal Consent. If any individual Stockholder is married on the date of this Agreement or the date such Stockholder becomes a party to this Agreement pursuant to Section 8.13 or Section 8.14, such Stockholder’s spouse shall, concurrently with the execution of this Agreement by such Stockholder, execute and deliver to the Company a spousal consent in substantially the form of Exhibit B attached hereto (“Spousal Consent”). Notwithstanding the execution and delivery thereof, such Spousal Consent shall not be deemed to confer or convey to such Stockholder’s spouse any rights in such Stockholder’s shares of capital stock of the Company that do not otherwise exist by operation of law or the agreement of the parties. If any individual Stockholder marries (or remarries) after the date of this Agreement or the date such Stockholder becomes a party to this Agreement pursuant to Section 8.13 or Section 8.14, such Stockholder shall, within 30 days thereafter, obtain his or her new spouse’s acknowledgement of, and consent to, the existence and binding effect of all restrictions contained in this Agreement by causing such spouse to execute and deliver a Spousal Consent.

8.19 Prior Agreement Superseded. Pursuant to Section 8.7 of the Prior Agreement, the undersigned parties who are parties to the Prior Agreement hereby amend and restate the Prior Agreement to read in its entirety as set forth in this Agreement, such that the Prior Agreement shall be of no further force or effect and is hereby entirely replaced and superseded by this Agreement.

8.20 Other Business Activities of Investors. The Company acknowledges that the Investors, and each of their respective Affiliates are in the business of investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises that may have products or services that compete directly or indirectly with those of the Company. Nothing in this Agreement or any other agreement related to the transactions contemplated by this Agreement (collectively, the “Transaction Agreements”) shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise, whether or not such enterprise has products or services that compete with those of the Company. Further, the Company, each Investor and each Key Holder acknowledge and agree that (i) the Investors, and each of their respective Affiliates may presently have, or may engage in the future in, internal development programs, or may receive information from third parties that relates to, and may develop and commercialize products independently or in cooperation with such third parties, that are similar to or that are directly or indirectly competitive with, the Company’s development programs, products or services, and (ii) any employee of any Investor, or any of their respective Affiliates serving on the Board or as an observer thereon is serving in such capacity at the request, and for the benefit, of the Company. Accordingly, the Investors’, or any of their respective Affiliate’s designation of any individual to the Board or as an observer to the Board, the service of such individual on the Board or as an observer thereon on behalf of

 

36

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any Investor, or the exercise by any Investor or any of their respective Affiliates of any rights under this Agreement or any of the Transaction Agreements, shall not in any way preclude or restrict any Investor or their respective Affiliates from conducting any development program, commercializing any product or service or otherwise engaging in any enterprise, whether or not such development program, product, service or enterprise competes with those of the Company, so long as such activities do not result in a violation of applicable law, the confidentiality provisions of this Agreement, any other Transaction Agreement, or any other agreement between the Company, on the one hand, and such Investor or any of their respective Affiliates, on the other hand. Nothing herein or in any other Transaction Agreement shall be construed to impose on any Investor or any of their respective Affiliates or any their respective Board Designees or observers any restriction, duty or obligation other than as expressly set forth herein or therein.

[signature pages follow]

 

37

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

4D MOLECULAR THERAPEUTICS, INC.

By:		/s/ David Kirn

Name: David Kirn
Title: Chief Executive Officer
Address:
5858 Horton Street
Suite 455
Emeryville, CA 94608
Attention: Chief Executive Officer

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

VIKING GLOBAL OPPORTUNITIES ILLIQUID INVESTMENTS SUB-MASTER LP

By: Viking Global Opportunities Portfolio GP LLC, its general partner

By:		/s/ Matthew Bloom

Name:		Matthew Bloom
Title:		Authorized Signatory

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

PFIZER VENTURES (US) LLC

By:		/s/ Barbara Dalton

Name: Barbara Dalton
Title: President

PFIZER INC.

By:		/s/ Barbara Dalton
Name: Barbara Dalton
Title: President

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

RIDGEBACK CAPITAL INVESTMENTS LP
By: Ridgeback Capital Management LP; its Investment Manager
By:		/s/ Christian Sheldon
Name:		Christian Sheldon
Title:		CTO

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

A.M. PAPPAS LIFE SCIENCE VENTURES V, LP
By: AMP&A Management V, LLC, its General Partner
By:		/s/ Arthur M. Pappas
Name:		Arthur M. Pappas
Title:		CEO & Managing Partner, Pappas Capital, LLC
PV V CEO FUND, LP
By: AMP&A Management V, LLC, its General Partner
By:		/s/ Arthur M. Pappas
Name:		Arthur M. Pappas
Title:		CEO & Managing Partner, Pappas Capital, LLC
CHIESI VENTURES, LP
By: Chiesi Ventures, Inc., its General Partner
By: Pappas Capital, LLC, its Management Company
By:		/s/ Arthur M. Pappas
Name:		Arthur M. Pappas
Title:		CEO & Managing Partner, Pappas Capital, LLC

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

BERKELEY CATALYST FUND I LP
By: BCF I LLC
Its: General Partner
By: Berkeley Catalyst Fund Management LLC
Its: General Partner
By:		/s/ Laura A. Smoliar
Name:		Laura A. Smoliar
Title:		Managing Member

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

PERCEPTIVE LIFE SCIENCES MASTER FUND LTD
51 Astor Place, 10th Floor
New York, NY 10003
By:		/s/ James H Mannix
Name:		James H Mannix
Title:		Chief Operating Officer

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

BIOTECHNOLOGY VALUE FUND, L.P.

By:		/s/ Mark Lampert

Name: Mark Lampert
Title: Chief Executive Officer BVF I GP LLC, itself General Partner of Biotechnology Value Fund, L.P.

BIOTECHNOLOGY VALUE FUND II, LP

By:		/s/ Mark Lampert

Name: Mark Lampert
Title: Chief Executive Officer BVF II GP LLC, itself General Partner of Biotechnology Value Fund II, L.P.

BIOTECHNOLOGY VALUE TRADING FUND OS, L.P.

By:		/s/ Mark Lampert

Name: Mark Lampert
Title: President BVF Inc., General Partner of BVF Partners L.P., itself sole member of BVF Partners OS Ltd., itself GP of Biotechnology Value Trading Fund OS, L.P.

INVESTMENT 10, L.L.C.

By:		/s/ Mark Lampert

Name: Mark Lampert
Title: President BVF Inc., General Partner of BVF Partners L.P., itself attorney-in-fact for Investment 10, L.L.C.

MSI BVF SPV, L.L.C. c/o Magnitude Capital B

By:		/s/ Mark Lampert

Name: Mark Lampert
Title: President BVF Inc., itself General Partner of BVF Partners L.P., itself attorney-in-fact for MSI BVF SPV, L.L.C.

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

MERIDIAN SMALL CAP GROWTH FUND
By: its Investment Adviser
ArrowMark Colorado Holdings, LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member
ARROWMARK LIFE SCIENCE FUND, LP
By: its General Partner
AMP Life Science GP, LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member
ARROWMARK FUNDAMENTAL OPPORTUNITY FUND, L.P.
By: its General Partner
ArrowMark Partners GP, LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

LOOKFAR INVESTMENTS, LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member

CF ASCENT LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member
THB IRON ROSE LLC

By: its Investment Adviser
ArrowMark Colorado Holdings, LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member

IRON HORSE INVESTMENT, LLC
By: its Investment Adviser
ArrowMark Colorado Holdings, LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member

THB IRON ROSE LLC, LIFE SCIENCE PORTFOLIO
By: its Investment Adviser
ArrowMark Colorado Holdings, LLC

By:		/s/ David Corkins

Name: David Corkins
Title: Managing Member

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

CYSTIC FIBROSIS FOUNDATION

By:		/s/ /s/ Michael P. Boyle

Name:		Michael P. Boyle, M.D.
Title:		President and CEO

 

By:		/s/ Chris Gegelys

Name:		Chris Gegelys
Title:		SVP & Chief Legal Officer

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

CASDIN PARTNERS MASTER FUND, L.P.
By: Casdin Partners GP, LLC, its General Partner
By:		/s/ Eli Casdin
Name:		Eli Casdin
Title:		Managing Member

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

LONGEVITY VISION FUND I LP
By: Longevity Vision Fund I GP, LLC, its General Partner
By:		/s/ Dmitry Vorontsov
Name:		Dmitry Vorontsov
Title:		Director

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

NH INVESTMENT & SECURITIES CO., LTD.
acting in its capacity as trustee for
QUAD Healthcare Multi-Strategy 5 Fund
By:		/s/ Jeong Young-Chae
Name:		Jeong Young-Chae
Title:		Chief Executive Officer
Address:
Yeoui-daero 60, Yeongdeungpo-gu
Seoul 07325, Korea

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

SAMSUNG SECURITIES CO., LTD.
acting in its capacity as trustee for
QUAD Healthcare Multi-Strategy 8 Fund
By:		/s/ Chang Seok Hoon
Name:		Chang Seok Hoon
Title:		President & CEO
Address:
Seocho-daero 74 Gil 11, Seocho-gu
Seoul 06620, Korea

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

OCTAGON INVESTMENTS MASTER FUND LP
By: Octagon Capital Advisors LP, its Investment Manager
By:		/s/ Ting Jia
Name:		Ting Jia
Title:		Managing Member

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

AMZAK HEALTH INVESTORS, LLC
By:		/s/ Joyce Erony
Name:		Joyce Erony
Title:		Managing Director

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

MIRAE ASSET SECURITIES (HK) LIMITED
By:		/s/ Sang Joon Kim
Name:		Sang Joon Kim
Title:		CEO
MIRAE ASSET GROWTH 4DMT INVESTMENT COMPANY LIMITED
By:		/s/ Sungwon Song
Name:		Sungwon Song
Title:		Alternate Director

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

KEY HOLDER:
By:		/s/ David Kirn
Name: David Kirn

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

KEY HOLDER:
By:		/s/ Theresa Janke
Name: Theresa Janke

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

KEY HOLDER:
By:		/s/ Melissa Kotterman
Name: Melissa Kotterman

 

[Signature Page to Third A&R Investors’ Rights Agreement]

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SCHEDULE 1

SCHEDULE OF INVESTORS

VIKING GLOBAL OPPORTUNITIES ILLIQUID INVESTMENTS SUB-MASTER LP

c/o Viking Global Investors LP

55 Railroad Avenue

Greenwich, CT 06830

Attention: General Counsel

E-mail: legalnotices@vikingglobal.com

JANUS HENDERSON GLOBAL LIFE SCIENCES FUND

c/o Janus Capital Management LLC

151 Detroit Street

Denver, CO 80206

Email: VCPIPE@janus.com

JANUS HENDERSON CAPITAL FUNDS PLC

c/o Janus Capital Management LLC

151 Detroit Street

Denver, CO 80206

Email: VCPIPE@janus.com

BIOTECHNOLOGY VALUE FUND, L.P.

44 Montgomery Street 40th Floor

San Francisco, CA 94104

Attention: James Kratky

Email: kratky@bvflp.com

with a copy (which shall not constitute notice) to:

Ryan A. Murr

Gibson, Dunn & Crutcher LLP

555 Mission Street

San Francisco, CA 94105-0921

rmurr@gibsondunn.com

BIOTECHNOLOGY VALUE FUND II, LP

44 Montgomery Street 40th Floor

San Francisco, CA 94104

Attention: James Kratky

Email: kratky@bvflp.com

with a copy (which shall not constitute notice) to:

Ryan A. Murr

Gibson, Dunn & Crutcher LLP

555 Mission Street

San Francisco, CA 94105-0921

rmurr@gibsondunn.com

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BIOTECHNOLOGY VALUE TRADING FUND OS, L.P.

PO Box 309 Ugland House,

Grand Cayman, KY1- 1104, Cayman Islands

Attention: James Kratky

Email: kratky@bvflp.com

with a copy (which shall not constitute notice) to:

Ryan A. Murr

Gibson, Dunn & Crutcher LLP

555 Mission Street

San Francisco, CA 94105-0921

rmurr@gibsondunn.com

INVESTMENT 10, L.L.C.

Address: 900 N Michigan Ave, Suite 1100 Chicago, IL 60611

Attention: James Kratky

Email: kratky@bvflp.com

with a copy (which shall not constitute notice) to:

Ryan A. Murr

Gibson, Dunn & Crutcher LLP

555 Mission Street

San Francisco, CA 94105-0921

rmurr@gibsondunn.com

MSI BVF SPV, L.L.C. c/o Magnitude Capital

200 Park Avenue, 56th Floor

New York, NY 10166

Attention: James Kratky

Email: kratky@bvflp.com

with a copy (which shall not constitute notice) to:

Ryan A. Murr

Gibson, Dunn & Crutcher LLP

555 Mission Street

San Francisco, CA 94105-0921

rmurr@gibsondunn.com

MERIDIAN SMALL CAP GROWTH FUND

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

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ARROWMARK LIFE SCIENCE FUND, LP

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

ARROWMARK FUNDAMENTAL OPPORTUNITY FUND, L.P.

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

LOOKFAR INVESTMENTS, LLC

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

CF ASCENT LLC

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

THB IRON ROSE LLC

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

IRON HORSE INVESTMENTS, LLC

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

THB IRON ROSE LLC, LIFE SCIENCE PORTFOLIO

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

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TONY YAO

c/o ArrowMark Colorado Holdings, LLC

100 Fillmore Street, Suite 325

Denver, CO 80206

Attn: Rick Grove

Email: rgrove@arrowmarkpartners.com

A.M. PAPPAS LIFE SCIENCE VENTURES V, LP

c/o Pappas Capital, LLC

2520 Meridian Parkway, Suite 400

Durham, NC 27713

Attn: Ford S. Worthy

Fax: 919-998-3301

Email: fworthy@pappasventures.com

PV V CEO FUND, LP

c/o Pappas Capital, LLC

2520 Meridian Parkway, Suite 400

Durham, NC 27713

Attn: Ford S. Worthy

Fax: 919-998-3301

Email: fworthy@pappasventures.com

CHIESI VENTURES, LP

c/o Pappas Capital, LLC

2520 Meridian Parkway, Suite 400

Durham, NC 27713

Attn: Ford S. Worthy

Fax: 919-998-3301

Email: fworthy@pappasventures.com

PFIZER INC.

230 East Grand

South San Francisco, CA 94080

Attention: Margi McLoughlin

Facsimile: 860-715-9727

Email: margi.mcLoughlin@pfizer.com

With a copy to:

Pfizer Inc.

235 E. 42nd Street

New York, NY 10017

Attention: Andrew J. Muratore, Esq.

Facsimile: 646-348-8162

Email: andrew.j.muratore@pfizer.com

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PERCEPTIVE LIFE SCIENCES MASTER FUND LTD

51 Astor Place 10th floor

New York NY 10003

Attention: Steve Berger

Email: Steve@perceptivelife.com

RIDGEBACK CAPITAL INVESTMENTS LP

75 Ninth Avenue, 5th Floor

New York, NY 10011

Attention: Christopher A. Nonas

Email: nonas@ridgebackcap.com

CUREDUCHENNE VENTURES

1400 Quail St. #110,

Newport Beach, CA 92660

Attention: Debra Miller

Facsimile: 949-872-2568

Email: debra@cureduchenne.org

Phone: 949-872-2552

BERKELEY CATALYST FUND I LP

19925 Stevens Creek Blvd., Suite 100

Cupertino, CA 95014

Attention: Laura Smoliar

Email: Laura@BerkeleyCatalystFund.com

Phone: (628) 400-3052)

C.P. PHARMACEUTICALS INTERNATIONAL C.V.

c/o its General Partners,

Pfizer Manufacturing LLC and Pfizer

Production LLC

235 East 42nd Street

New York, NY 10017

United States of America

Attention: Senior Vice President and

                 Associate General Counsel

                 Pfizer Legal Division

                 Business Transactions Group

Facsimile: 646-563-9611

With a copy to:

Pfizer Inc.

230 East Grand

South San Francisco, CA 94080

Attention: Margi McLoughlin

Facsimile: 860-715-9727

Email: margi.mcLoughlin@pfizer.com

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Pfizer Inc.

235 E. 42nd Street

New York, NY 10017

Attention: Andrew J. Muratore, Esq.

Facsimile: 646-348-8162

Email: andrew.j.muratore@pfizer.com

CHM VENTURE I, LLC

PO Box 5331

Johnson City, TN 37602-5331

Attn: Randy Wheelock

Facsimile: 423-282-0429

E-mail: randy@generabio.com

REPLEON, LLC

Attn: Greg A. Betterton, P.A. 735 E. Venice Avenue, Ste 200

Venice, FL 34285

Fax: 941-483-4992

Email: greg@bettertonlaw.com

MIRAEASSET-CELLTRION NEW GROWTH FUND I

2F, GlassTower Bldg, 534, Teheran-ro, Gangnam-gu, Seoul, 06181, Korea

Attention: SungWon Song

Facsimile: +82-2-2051-5853

Email: SungWon.Song@miraeasset.com

MIRAEASSET CAPITAL CO., LTD

2F, GlassTower Bldg, 534, Teheran-ro, Gangnam-gu, Seoul, 06181, Korea

Attention: SungWon Song

Facsimile: +82-2-2051-5853

Email: SungWon.Song@miraeasset.com

MIRAEASSET-NAVER NEW GROWTH FUND I

2F, GlassTower Bldg, 534, Teheran-ro, Gangnam-gu, Seoul, 06181, Korea

Attention: SungWon Song

Facsimile: +82-2-2051-5853

Email: SungWon.Song@miraeasset.com

MIRAE ASSET HI-TECH FRONTIER INVESTMENT FUND

Mirae Asset Venture Tower

B1F20, Pangyoyeok-ro 241 beongil, Bundang-gu, Seongnam-si, Gyeonggi-do,

13494, Republic of Korea

Attention: Gil Tae, Wie

Facsimile: 82-2-6205-2680

Email: gtwie@miraeasset.com

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MIRAE ASSET GOOD COMPANY SECONDARY FUND #18-1

Mirae Asset Venture Tower

B1F20, Pangyoyeok-ro 241 beongil, Bundang-gu, Seongnam-si, Gyeonggi-do,

13494, Republic of Korea

Attention: Gil Tae, Wie

Facsimile: 82-2-6205-2680

Email: gtwie@miraeasset.com

MIRAEASSET VENTURE INVESTMENT, CO, LTD

Mirae Asset Venture Tower

B1F20, Pangyoyeok-ro 241 beongil, Bundang-gu, Seongnam-si, Gyeonggi-do,

13494, Republic of Korea

Attention: Gil Tae, Wie

Facsimile: 82-2-6205-2680

Email: gtwie@miraeasset.com

CYSTIC FIBROSIS FOUNDATION

CASDIN PARTNERS MASTER FUND, L.P.

1350 Avenue of the Americas, Suite 2600

New York, NY 10019

Email: FundAcct@casdinCapital.com

LONGEVITY VISION FUND I LP

555 Madison Avenue, 5th Floor

New York, NY 10022

With a mandatory copy (essential to constitute a valid notice) to: notices@lvf.vc

NH INVESTMENT & SECURITIES CO., LTD.

c/o QUAD HEALTHCARE MULTI-STRATEGY 5 FUND

c/o QUAD Investment Management

Address: 29/F, Three IFC, 10 Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul, 07326, Korea

Attention: Sunwoo Kim

Email: sw.kim2@quadim.com

SAMSUNG SECURITIES CO., LTD.

c/o QUAD HEALTHCARE MULTI-STRATEGY 8 FUND

c/o QUAD Investment Management

Address: 29/F, Three IFC, 10 Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul, 07326, Korea

Attention: Sunwoo Kim

Email: sw.kim2@quadim.com

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OCTAGON INVESTMENTS MASTER FUND LP

c/o Octagon Capital Advisors LP

Address: 654 Madison Avenue, 16th Floor, New York, NY 10065

Attention: Justin Hirsch

Email: justin.hirsch@octagoninvest.com

AMZAK HEALTH INVESTORS, LLC

Address: 295 Madison Avenue, 32nd Floor, New York, NY 10017

Attention: Joyce Erony and Scott Weiner

Email: joyce@majalincapital.com;

           scott@majalincpaital.com

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SCHEDULE 2

KEY HOLDERS

David Kirn

[***]

Schaffer-Hinh Family Trust

[***]

Theresa Janke

[***]

Melissa Kotterman

[***]

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EXHIBIT A

ADOPTION AGREEMENT

This Adoption Agreement (“Adoption Agreement”) is executed on ___________________, 20__, by the undersigned (the “Holder”) pursuant to the terms of that certain Third Amended and Restated Investors’ Rights Agreement dated as of April 29, 2020 (the “Agreement”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

1.1 Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”), for one of the following reasons (Check the correct box):

 

☐

As a transferee of Shares from a party in such party’s capacity as an “Investor” bound by the Agreement, and after such transfer, Holder shall be considered an “Investor” and a “Stockholder” for all purposes of the Agreement.

 

☐

As a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.

 

☐

As a new Investor in accordance with Subsection 8.13(a) of the Agreement, in which case Holder will be an “Investor” and a “Stockholder” for all purposes of the Agreement.

 

☐

In accordance with Subsection 8.13(b) of the Agreement, as a new party who is not a new Investor, in which case Holder will be a “Stockholder” for all purposes of the Agreement.

1.2 Agreement. Holder hereby (a) agrees that the Stock, and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

1.3 Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address or facsimile number listed below Holder’s signature hereto.

 

HOLDER:				ACCEPTED AND AGREED:
By:				4D MOLECULAR THERAPEUTICS, INC.
Name and Title of Signatory
Address:				By:
				Title:
Facsimile Number:

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EXHIBIT B

CONSENT OF SPOUSE

I, [____________________], spouse of [______________], acknowledge that I have read that certain Third Amended and Restated Investors’ Rights Agreement, dated as of April 29, 2020, by and among the Company and certain of its Stockholders (as defined therein), as may be amended from time to time, to which this Consent is attached as Exhibit B (the “Agreement”), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of shares of capital stock of the Company that my spouse may own, including any interest I might have therein.

I hereby agree that my interest, if any, in any shares of capital stock of the Company subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such shares of capital stock of the Company shall be similarly bound by the Agreement.

I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.

 

Dated:
				[Name of Key Holder’s Spouse]

Exhibit 10.1(a)

4D MOLECULAR THERAPEUTICS, INC.

2015 EQUITY INCENTIVE PLAN

Adopted by Board and Stockholders on March 20, 2015, as amended on March 10, 2016, August 27, 2018, September 25, 2019, April 29, 2020 and November 9, 2020

Termination Date: March 20, 2025

1. Purposes of the Plan. The purposes of the Plan are:

 

•

to attract and retain the best available personnel for positions of substantial responsibility;

 

•

to provide incentives that align the interests of Employees, Directors and Consultants with those of the Company’s stockholders; and

 

•

to promote the success of the Company’s business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock and Restricted Stock Units.

2. Definitions. As used herein, the following definitions will apply:

(a) “Administrator” means the Committee; provided, however, that “Administrator” means the Board if (i) no Committee is appointed by the Board or (ii) the Board terminates the Committee’s responsibilities hereunder and revests in the Board the administration of the Plan; provided, further, that “Administrator” may be comprised of different Committees with respect to different groups of Service Providers.

(b) “Affiliate” means a parent corporation (or other entity) of the Company, a majority-owned subsidiary of the Company or a majority-owned subsidiary of the Company’s parent corporation (or other entity).

(c) “Applicable Laws” means the requirements related to or implicated by the administration of the Plan under U.S. state corporate laws, U.S. federal and state securities laws, the Code, state and local tax laws, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are granted.

(d) “Award” means any right granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Stock Appreciation Right, Restricted Stock or a Restricted Stock Unit.

(e) “Award Agreement” means a written or electronic agreement, contract, certificate or other instrument or document setting forth the terms and conditions applicable to an Award. Each Award Agreement will be subject to the terms and conditions of the Plan.

(f) “Board” means the board of directors of the Company.

 

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(g) “Certificate of Incorporation” means the Company’s Certificate of Incorporation, as may be amended from time to time.

(h) “Change in Control” means the occurrence of either of the following events:

(i) a merger or consolidation in which the Company is a constituent party (or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation), except any such merger or consolidation (A) effected exclusively for the purpose of changing the Company’s domicile or (B) involving the Company (or a subsidiary of the Company) in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (x) the surviving or resulting corporation or (y) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

(ii) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company (or any subsidiary of the Company) of all or substantially all of the assets of the Company and its subsidiaries taken as a whole or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company;

provided, however, that any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or indebtedness of the Company is cancelled or converted (or a combination thereof) will not be deemed to be a Change in Control.

(i) “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code will be deemed to include a reference to any regulations and Internal Revenue Service guidance promulgated thereunder.

(j) “Committee” means the compensation committee of the Board or other committee of one or more Directors appointed by the Board to administer the Plan in accordance with Section 4.

(k) “Common Stock” means the common stock, par value $0.0001 per share, of the Company.

(l) “Company” means 4D Molecular Therapeutics, Inc., a Delaware corporation, and any successor thereto.

 

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(m) “Consultant” means any Person (i) engaged by the Company or any Affiliate to render consulting or advisory services to such entity and who is compensated for such services or (ii) serving as a member of the board of directors of any Affiliate and who is compensated for such services; provided, however, that the term “Consultant” will not include Directors who are not compensated by the Company for their services as Directors, and the payment of a director’s fee by the Company for services as a Director will not cause a Director to be considered a “Consultant” for purposes of the Plan.

(n) “Director” means a member of the Board.

(o) “Disability” has the meaning ascribed to that term under Section 22(e)(3) of the Code; provided, however, that, in the case of Awards other than Incentive Stock Options or Awards subject to Section 409A of the Code, the Administrator, in its sole discretion, may determine whether a Disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

(p) “Employee” means any individual, including an officer or director, employed by the Company or any Affiliate; provided, however, that, for purposes of determining eligibility to receive Incentive Stock Options, “Employee” means an employee of the Company or a parent or subsidiary corporation within the meaning of Section 424 of the Code. Neither service as a Director nor payment of a director’s fee by the Company for such service or for service as a member of the board of directors of any Affiliate will be sufficient to constitute “employment” by the Company or any Affiliate.

(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(r) “Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for cash, Awards of the same type (which may have higher or lower purchase, exercise or base prices and different terms) or Awards of a different type, and/or (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other Person selected by the Administrator, and/or (iii) the purchase, exercise or base price of an outstanding Award is reduced or increased.

(s) “Fair Market Value” means, as of any date, the value of the Common Stock determined in good faith by the Administrator and in a manner consistent with Section 260.140.50 of Title 10 of the California Code of Regulations and, with respect to Nonstatutory Stock Options and Stock Appreciation Rights, in compliance with Section 409A of the Code.

(t) “Incentive Stock Option” means a stock option granted pursuant to the Plan that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(u) “Nonstatutory Stock Option” means a stock option granted pursuant to the Plan that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

(v) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option.

(w) “Participant” means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.

 

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(x) “Period of Restriction” means the period during which the transfer of Restricted Stock is subject to restrictions and, therefore, the Restricted Stock is subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance or the occurrence of other events as determined by the Administrator.

(y) “Person” means any individual, firm, corporation, association, partnership, limited liability company, trust, joint venture, governmental entity or other entity.

(z) “Plan” means this 2015 Equity Incentive Plan, as amended from time to time in accordance herewith.

(aa) “Restricted Stock” means Shares issued pursuant to an Award granted under Section 8 or issued pursuant to the early exercise of an Option.

(bb) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share granted under Section 9 and payable in cash, in Shares or in a combination thereof, as specified in the applicable Award Agreement. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

(cc) “Securities Act” means Securities Act of 1933, as amended.

(dd) “Service Provider” means an Employee, Director or Consultant.

(ee) “Share” means a share of the Common Stock, as adjusted in accordance with Section 13.

(ff) “Stock Appreciation Right” means the right pursuant to an Award granted under Section 7 to receive, upon exercise, payment from the Company (in cash, in Shares or in a combination thereof, as specified in the applicable Award Agreement) in an amount determined by multiplying (i) the difference between the Fair Market Value of a Share on the date of exercise over the base price by (ii) the number of Shares with respect to which the Stock Appreciation Right is exercised.

(gg) “Stock Sale” means a change in ownership of the Company, other than a Change in Control, that occurs when one Person, or more than one Person acting as a group, acquires ownership of stock of the Company, in a stock sale or exchange, that, together with the stock held by such Person or group, constitutes more than 50% of the total voting power of the stock of the Company; provided, however, that a Stock Sale will not occur if any Person, or more than one Person acting as a group, owns more than 50% of the total voting power of the stock of the Company and acquires additional stock of the Company; provided, further, that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the Board will not be considered a Stock Sale.

 

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3. Shares Subject to the Plan.

(a) Share Reserve; Source of Shares. Subject to adjustment as provided in Section 13, the maximum aggregate number of Shares that are available for all Awards is Four Million One Hundred Eighty-Nine Thousand Twenty-Eight (4,189,028) Shares. During the term of the Awards, the Company shall at all times reserve and keep available such number of Shares as will be sufficient to satisfy such Awards. The Shares may be authorized but unissued Shares, reacquired Shares or a combination thereof.

(b) Reversion of Shares to the Share Reserve. If Shares subject to an outstanding Award are not issued or delivered or are returned to the Company by reason of (i) the expiration, termination, cancellation or forfeiture of such Award, (ii) the settlement of such Award in cash, or (iii) the delivery or withholding of Shares to pay all or a portion of the exercise price of an Award, if any, or to satisfy all or a portion of the tax withholding obligations relating to an Award, then such Shares will revert to and again become available for issuance under the Plan. If the exercise price of any Award is satisfied by tendering Shares held by the Participant, then the number of such tendered Shares will revert to and again become available for issuance under the Plan. With respect to Stock Appreciation Rights, only Shares actually issued pursuant to a Stock Appreciation Right will cease to be available under the Plan; all remaining Shares under Stock Appreciation Rights will remain available for future grant or sale under the Plan. Shares that have actually been issued under any Award will not be returned to the Plan and will not again become available for Awards; provided, however, that if Shares issued pursuant to Awards of Restricted Stock or Restricted Stock Units are repurchased by, or forfeited to, the Company due to the failure to vest, such Shares will become available for future grant under the Plan.

(c) Other Limits. Subject to adjustment as provided in Section 13, the maximum aggregate number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a) plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan pursuant to Section 3(b) by reason of the expiration, termination, cancellation or forfeiture of an Award.

4. Administration of the Plan.

(a) Procedure. The Plan shall be administered by the Administrator. The Board may terminate the Committee’s responsibilities hereunder at any time and revest in the Board the administration of the Plan. The members of the Committee will be appointed by, and serve at the pleasure of, the Board. From time to time, the Board may increase or decrease the size of the Committee and add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor and fill vacancies, however caused, in the Committee. The Committee will act pursuant to a vote (or written consent) of the majority of its members or, if the Committee is comprised of only two members, the unanimous vote (or written consent) of its members, whether present or not. Minutes will be kept of all of meetings of the Committee, and copies thereof will be provided to the Board.

(b) Powers of the Administrator. Subject to the provisions of the Plan and Applicable Laws and, if applicable, specific duties delegated by the Board to the relevant Committee, the Administrator will have the authority:

(i) to determine the Fair Market Value;

 

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(ii) to select the Service Providers to whom Awards will be granted and the type of Award that will be granted;

(iii) to determine when Awards are to be granted, the applicable grant date and the number of Shares to be covered by each Award;

(iv) to approve forms of Award Agreements for use under the Plan;

(v) to determine the terms and conditions of any Award, including the purchase, exercise or base price, the time or times when Awards may be exercised (which may be based on performance criteria), any forfeiture events, any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator determines;

(vi) to institute and determine the terms and conditions of any Exchange Program;

(vii) to construe and interpret the terms of the Plan and Awards;

(viii) to establish sub-plans under the Plan, containing such limitations and other terms and conditions as the Administrator determines are necessary or desirable, for the purpose of satisfying blue sky, securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards or qualifying for favorable tax treatment under applicable foreign laws;

(ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans;

(x) to correct any defect, omission or inconsistency in the Plan or any Award Agreement, in a manner and to the extent it deems necessary or advisable to make the Plan fully effective;

(xi) to amend any outstanding Award, including the discretionary authority to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan or to extend the post-termination exercisability period of Awards (subject to Section 409A of the Code) and to extend the maximum term of an Option;

(xii) to allow Participants to satisfy tax withholding obligations in a manner prescribed by Section 14;

(xiii) to authorize any individual to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;

(xiv) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that otherwise would be due to such Participant under an Award (subject to Section 409A of the Code); and

 

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(xv) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision. Subject to Section 4(a), the Administrator’s decisions, determinations and interpretations will be final, binding and conclusive on all Persons.

5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock and Restricted Stock Units may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6. Stock Options.

(a) Grant of Options. Subject to the terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Options in such amounts as the Administrator, in its sole discretion, will determine.

(b) Option Agreement. Each Award of an Option will be evidenced by an Award Agreement that will specify the exercise price, the term of the Option, the number of Shares subject to the Option, the exercise restrictions, if any, applicable to the Option, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(c) Limitations. Each Option will be designated in the applicable Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. Notwithstanding such designation, however, to the extent that the aggregate Fair Market Value (determined at the time of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any Affiliate) exceeds $100,000, such Options or portions thereof that exceed such limit (according to the order in which they were granted) will be treated as Nonstatutory Stock Options. For purposes of this Section 6(c), calculations will be performed in accordance with Section 422 of the Code.

(d) Term of Option. The term of each Option will be stated in the applicable Award Agreement; provided, however, that the term will be no more than ten years from the date of grant thereof; provided, further, that, in the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns (or, pursuant to Section 424(d) of the Code, is deemed to own) stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate, the term of the Incentive Stock Option will be five years from the date of grant thereof or such shorter term as may be provided in the applicable Award Agreement.

(e) Exercise Price and Consideration.

(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option will be determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns (or, pursuant to Section 424(d) of the Code, is deemed to own) stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

 

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(ii) Waiting Period and Exercise Dates. The period during which an Option may be exercised will be determined by the Administrator at the time such Option is granted; provided, however, that no Option may be exercised after the expiration of its term. The Administrator may, in its sole discretion, determine any other conditions that must be satisfied before an Option may be exercised.

(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. To the extent permitted by Applicable Laws, such consideration, in the Administrator’s sole discretion, may consist entirely of: (1) cash; (2) check; (3) promissory note; (4) other Shares owned by the Participant free and clear of any liens, claims, encumbrances or security interests, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company under a cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan; (6) a net exercise; (7) such other consideration and method of payment for the issuance of Shares; or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator will consider if acceptance of such consideration may be reasonably expected to benefit the Company.

(f) Exercise of Option.

(i) Procedure for Exercise. Any Option will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the applicable Award Agreement.

An Option will be deemed exercised when the Company receives: (1) a notice of exercise (in such form as the Administrator may specify from time to time) from the person entitled to exercise the Option; and (2) full payment for the Shares with respect to which the Option is exercised (together with applicable tax withholding). Full payment will consist of any consideration and method of payment authorized by the Administrator and permitted by the applicable Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. The Company will issue (or cause to be issued) such Shares as soon as practicable after the Option is exercised.

Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

 

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(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of his or her death or Disability, the Participant may exercise his or her Option, to the extent it is vested on the date of termination, within 30 days following termination or such longer period of time as is specified in the applicable Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the applicable Award Agreement). If, after such termination, the Participant does not exercise his or her Option within the time specified in the preceding sentence, the Option will terminate and the Shares covered by such Option will revert to the Plan. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan.

(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of his or her Disability, the Participant may exercise his or her Option, to the extent it is vested on the date of termination, within six months following termination or such longer period of time as is specified in the applicable Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the applicable Award Agreement). If, after such termination, the Participant does not exercise his or her Option within the time specified in the preceding sentence, the Option will terminate and the Shares covered by such Option will revert to the Plan. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan.

(iv) Death of Participant. If a Participant dies while he or she is a Service Provider, the Participant’s designated beneficiary (provided such beneficiary has been designated, in a form acceptable to the Administrator, prior to the Participant’s death) may exercise the Participant’s Option, to the extent it is vested on the date of death, within six months following the Participant’s death or such longer period of time as is specified in the applicable Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the applicable Award Agreement). If no such beneficiary was designated by the Participant prior to his or her death, then the Participant’s Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. If, after death, the Participant’s Option is not so exercised within the time specified in this Section 6(f)(iv), the Option will terminate and the Shares covered by such Option will revert to the Plan. Unless otherwise provided by the Administrator, if at the time of death the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan.

7. Stock Appreciation Rights.

(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Stock Appreciation Rights in such amounts as the Administrator, in its sole discretion, will determine.

 

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(b) Stock Appreciation Rights Agreement. Each Award of a Stock Appreciation Right will be evidenced by an Award Agreement that will specify the base price, the term of the Stock Appreciation Right, the number of Shares subject to the Award, the conditions of exercise (including vesting criteria), whether the Award is settled in cash, in Shares or in a combination thereof, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(c) Term and Exercise of Stock Appreciation Rights. The term of each Stock Appreciation Right will be stated in the applicable Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) relating to the maximum term of an Option and Section 6(f) relating to the exercise of Options also will apply to Stock Appreciation Rights.

(d) Base Price. The per Share base price for the Shares that will determine the amount of the payment to be received upon exercise of a Stock Appreciation Right as set forth in Section 7(e) will be determined by the Administrator at the time of grant of the Stock Appreciation Right, but will be no less than 100% of the Fair Market Value per Share on the date of grant.

(e) Payment of Stock Appreciation Right Amount. Upon a Participant’s exercise of a Stock Appreciation Right in accordance with the applicable Award Agreement, the Participant will be entitled to receive payment from the Company in an amount determined by multiplying:

(i) the difference between the Fair Market Value of a Share on the date of exercise over the per Share base price determined by the Administrator in accordance with Section 7(d); by

(ii) the number of vested Shares with respect to which the Stock Appreciation Right is exercised.

The payment upon exercise of a Stock Appreciation Right may, in the Administrator’s sole discretion, be in cash, in Shares of equivalent value or in some combination thereof, as set forth in the applicable Award Agreement.

8. Restricted Stock.

(a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Restricted Stock in such amounts as the Administrator, in its sole discretion, will determine.

(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, as set forth in the applicable Award Agreement, the Company will hold Restricted Stock, as escrow agent, until the restrictions on such Shares have lapsed.

(c) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares covered by each grant of Restricted Stock will be released from escrow as soon as practicable after the last day of the applicable Period of Restriction or at such other time as the Administrator may determine. The Administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed.

 

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(d) Return of Restricted Stock to Company. On the date set forth in the applicable Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and will again become available for grant under the Plan.

9. Restricted Stock Units.

(a) Grant of Restricted Stock Units. Subject to the terms and conditions of the Plan, the Administrator, at any time and from time to time, may grant Restricted Stock Units in such amounts as the Administrator, in its sole discretion, will determine. No Shares will be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside a fund for the payment of any such Award.

(b) Restricted Stock Unit Agreement. Each Award of a Restricted Stock Unit will be evidenced by an Award Agreement that will specify the number of Shares subject to the Award, the vesting criteria, whether the Award is settled in cash, in Shares or in a combination thereof, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(c) Vesting Criteria. The Administrator, in its sole discretion, will set vesting criteria which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator, in its sole discretion, may set vesting criteria based upon the achievement of Company-wide, business unit or individual goals (including continued employment or service), or any other basis determined by the Administrator.

(d) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of a Restricted Stock Unit, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.

(e) Timing and Form of Payment. Payment of earned Restricted Stock Units will be made at the time, and in the form, set forth in the applicable Award Agreement, but in no event later than the 15^th day of the third month following the end of the calendar year in which such Restricted Stock Units became vested, except to the extent payment is deferred under an arrangement approved by the Administrator, in accordance with Section 409A of the Code. Settlement of earned Restricted Stock Units may, in the Administrator’s sole discretion, be in cash, in Shares or in some combination thereof.

(f) Return of Restricted Stock Units to Company. On the date set forth in the applicable Award Agreement, all unearned Restricted Stock Units will revert to the Company and will again become available for grant under the Plan.

10. Compliance With Section 409A of the Code. Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Plan and each Award Agreement are intended to meet the requirements of Section 409A of the Code and will be construed and interpreted in accordance with such intent, except as otherwise determined in the Administrator’s sole discretion.

 

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11. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise, vesting of a Participant’s Awards will be suspended during his or her unpaid leave of absence from the Company or any Affiliate. A Participant will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company and any Affiliate. For purposes of Incentive Stock Options, no such leave of absence may exceed three months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six months following the 1^st day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

12. Limited Transferability of Awards. Unless determined otherwise by the Administrator, (i) Awards (and, in the case of Options, the Shares subject to such Options prior to exercise) may not be sold, pledged, assigned, hypothecated or otherwise transferred in any manner, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b), respectively, of the Exchange Act), whether by operation of law or otherwise, other than by will or by the laws of descent and distribution, and may be exercised, during the lifetime of the Participant, only by the Participant and (ii) Restricted Stock may not be sold, pledged, assigned, hypothecated or otherwise transferred in any manner until the end of the applicable Period of Restriction. If the Administrator makes an Award transferable, such Award may only be transferred (1) by will, (2) by the laws of descent and distribution, (3) to a revocable trust, or (4) as permitted by Rule 701 of the Securities Act. The terms of the Plan will be binding upon the executors, administrators, heirs, successors and assigns of the Participants. Notwithstanding the foregoing, the Administrator, in its sole discretion, may determine to permit transfers to the Company or in connection with a Change in Control, a Stock Sale or other acquisition transaction involving the Company.

13. Adjustments; Dissolution or Liquidation; Merger, Change in Control or Stock Sale.

(a) Adjustments. In the event of any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, reincorporation, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, reclassification, repurchase or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will appropriately adjust the number and class of Shares available under the Plan and the number, class and price of Shares subject to each outstanding Award; provided, however, that (i) the Administrator will make such adjustments to an Award required by Section 25102(o) of the California Corporations Code to the extent the Company is relying upon the exemption afforded thereby with respect to the Award and (ii) in the case of outstanding Awards consisting of Options and Stock Appreciation Rights, the Administrator will make such adjustments in accordance with Section 409A of the Code.

 

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(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, the Administrator may cause an Award to terminate immediately prior to the consummation of such proposed dissolution or liquidation of the Company.

(c) Merger, Change in Control or Stock Sale. In the event of a merger involving the Company, a Change in Control or a Stock Sale, each outstanding Award will be treated as the Administrator (as constituted prior to such merger, Change in Control or Stock Sale) may determine without the Participant’s consent, subject to such Participant’s Award Agreement. Without limiting the generality of the foregoing sentence, in the event of a merger involving the Company, a Change in Control or a Stock Sale, the Administrator may, in its sole discretion but subject to such Participant’s Award Agreement, provide that:

(i) Awards will be assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding entity (or any affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices;

(ii) all outstanding Awards, in whole or in part, will be surrendered to the Company by the holder thereof and immediately cancelled by the Company, with the holder thereof receiving (A) an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of such merger, Change in Control or Stock Sale (and, for the avoidance of doubt, if as of the date of the occurrence of such merger, Change in Control or Stock Sale the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment), (B) such other rights or property selected by the Administrator in its sole discretion, or (C) a combination of (A) and (B);

(iii) all outstanding Options and Stock Appreciation Rights will immediately vest and become exercisable, in whole or in part, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards subject to performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target level (or such other level specified by the Administrator) and all other terms and conditions met, in whole or in part, prior to or upon consummation of such merger, Change in Control or Stock Sale; and/or

(iv) any combination of the foregoing.

In taking any of the actions permitted under this Section 13(c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.

Notwithstanding anything in this Section 13(c) to the contrary, if a payment under an Award Agreement is subject to Section 409A of the Code and if the Change in Control or Stock Sale does not constitute a “change in control event” as defined in Section 409A of the Code, then any payment of an amount that is otherwise accelerated under this Section 13(c) will be delayed until the earliest time that such payment would be permissible under Section 409A of the Code without triggering any penalties applicable under Section 409A of the Code.

 

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14. Tax Withholding.

(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).

(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy the tax withholding obligations described in Section 14(a), in whole or in part, by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, (iii) delivering to the Company previously owned and unencumbered Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, provided the delivery of such Shares will not result in any adverse accounting consequences to the Company, as determined by the Administrator in its sole discretion, or (iv) selling a sufficient number of otherwise deliverable Shares through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the minimum statutory amount required to be withheld. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld. Any fraction of a Share that would be required to satisfy such an obligation will be disregarded, and the remaining amount due will be paid in cash by the Participant.

15. No Effect on Employment or Service. Nothing in the Plan or any instrument executed, or Award granted, pursuant to the Plan, including any Award Agreement, will confer upon any Participant any right with respect to continuing his or her relationship as a Service Provider, nor will they interfere in any way with the Participant’s or the Company’s right to terminate such relationship at any time, with or without cause or notice, to the extent permitted by Applicable Laws.

16. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to the Participant within a reasonable time after the date of his or her grant.

17. Term of Plan. Subject to Section 21, the Plan will become effective upon its adoption by the Board. Unless sooner terminated under Section 18, the Plan will continue in effect for a term of ten years from the date the Plan is adopted or the date the Plan is approved by the Company’s stockholders, whichever is earlier. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

18. Amendment and Termination of the Plan.

(a) Amendment and Termination. Subject to Section 18(b), the Board may at any time amend, alter, suspend or terminate the Plan.

 

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(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination. Unless the Participant and the Administrator mutually agree otherwise in a written agreement signed by the Participant and the Company, no amendment, alteration, suspension or termination of the Plan will impair the Participant’s rights under his or her Award. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted prior to the date of such termination.

19. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of the Company’s counsel with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of the Company’s counsel, such a representation is required.

20. Inability to Obtain Authority. The Company’s inability to obtain, after reasonable efforts, authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary for the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability for failure to issue or sell such Shares as to which such requisite authority has not been obtained. The Company will not be required to register under the Securities Act the Plan, any Award or any Share issued or issuable pursuant to any Award.

21. Stockholder Approval of Plan. The Plan must be approved by a majority of the outstanding securities entitled to vote by the later of (i) within 12 months before or after the date the Plan is adopted by the Board or (ii) prior to or within 12 months of the granting of any Option or issuance of any Share under the Plan in the State of California. Such stockholder approval will be obtained in the manner, and to the degree, required under Applicable Laws.

22. Miscellaneous.

(a) Stockholder Rights; Voting Rights. Except as otherwise provided in the Plan or the applicable Award Agreement, no Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to his or her Award unless and until the Shares underlying the Award are actually issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) notwithstanding the exercise of the Award. During the Period of Restriction, Participants holding Restricted Stock may exercise full voting rights with respect to such Shares, unless the Administrator, in its sole discretion, determines otherwise. A Participant will have no voting rights with respect to any Restricted Stock Units.

 

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(b) Dividends and Other Distributions. Unless and until the Shares underlying an Award are actually issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to receive dividends or other distributions will exist with respect to the Shares underlying such Award, notwithstanding the exercise of the Award. During the Period of Restriction, Participants holding Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator, in its sole discretion, determines otherwise. If any such dividends or distributions are paid in Shares, such Shares will be subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid.

(c) No Fractional Shares. No fractional Shares will be issued or delivered pursuant to the Plan. Except as otherwise provided in the Plan or applicable Award Agreement, the Administrator will determine whether cash, additional Awards or other securities or property will be issued or paid in lieu of fractional Shares or whether any fractional Shares should be rounded, forfeited or otherwise eliminated.

(d) Severability. If any provision of the Plan is held to be invalid, illegal or unenforceable, in whole or in part, such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions will not be affected thereby.

(e) Headings. The headings contained herein are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.

(f) Non-Uniform Treatment. The Administrator’s determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Administrator will be entitled to make non-uniform and selective determinations, amendments and adjustments and to enter into non-uniform and selective Award Agreements.

(g) Governing Law. The laws of the State of California will govern all questions concerning the construction, validity and interpretation of the Plan, without regard to such state’s conflict of law rules.

 

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Exhibit 10.1(b)

4D MOLECULAR THERAPEUTICS, INC.

2015 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

This Stock Option Agreement (this “Agreement”) is made and entered into as of «Date_of_Grant» by and between 4D Molecular Therapeutics, Inc., a Delaware corporation (the “Company”), and «Participant» (“Participant”). Unless otherwise defined herein, capitalized terms used herein shall have the same defined meanings as set forth in the 4D Molecular Therapeutics, Inc. 2015 Equity Incentive Plan attached hereto as Exhibit A (the “Plan”).

 

I.	NOTICE OF STOCK OPTION GRANT

Participant has been granted an option to purchase Common Stock, subject to the terms and conditions of the Plan and this Agreement, as follows:

 

Participant: Address:				«Participant» «Address»
				«City»
Grant Number:				«Grant_Number»
Grant Date:				«Date_of_Grant»
Vesting Commencement Date:				«Vesting_Commencement_Date»
Exercise Price per Share:				$«Exercise_Price_per_Share»
Number of Shares Subject to Option:				«Total_Shares»
Total Exercise Price:				$«Total_Exercise_Price»
Type of Option:				☐ ISO ☐ NSO
Term/Expiration Date:				«Expiration_Date», or earlier as provided in the Plan or this Agreement

Vesting Schedule:

This Option shall become vested and exercisable, in whole or in part, according to the following vesting schedule:

25% of the Shares subject to this Option on the Grant Date shall vest on the one-year anniversary of the Vesting Commencement Date, and 1/48^th of the Shares subject to this Option on the Grant Date shall vest each month thereafter on the same day of the month as the Vesting Commencement Date (or if there is no corresponding day, on the last day of such month), subject to Participant continuing to be a Service Provider through each such date.

Termination Period:

This Option shall be exercisable for three months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option shall be exercisable for 12 months after Participant ceases to be a Service Provider. Notwithstanding the foregoing sentence, in no event may this Option be exercised after the Term/Expiration Date as provided above, and this Option may be subject to earlier termination as provided in the Plan.

 

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II.

AGREEMENT

1. Grant of Option. In consideration of the services to be rendered by Participant to the Company or any Affiliate and subject to the terms and conditions of the Plan and this Agreement, the Administrator hereby grants to Participant an option (this “Option”) to purchase the number of Shares set forth in the Notice of Stock Option Grant in Part I of this Agreement, at the Exercise Price per Share set forth in the Notice of Stock Option Grant in Part I of this Agreement (the “Exercise Price”).

If designated as an ISO in the Notice of Stock Option Grant in Part I of this Agreement, this Option is intended to qualify as an Incentive Stock Option; provided, however, that, to the extent that the aggregate Fair Market Value (determined at the time of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by Participant during any calendar year (under all plans of the Company and any Affiliate) exceeds $100,000, such Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options. Further, if for any reason this Option (or portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, this Option (or portion thereof) shall be regarded as a Nonstatutory Stock Option. In no event shall the Administrator, the Company or any Affiliate, or any of their respective employees or directors, have any liability to Participant (or any other Person) due to the failure of this Option (or portion thereof) to qualify for any reason as an Incentive Stock Option.

2. Exercise of Option.

(a) Right to Exercise. This Option shall be exercisable during its term in accordance with (i) the Vesting Schedule set out in the Notice of Stock Option Grant in Part I of this Agreement and (ii) the applicable provisions of the Plan and this Agreement. This Option may not be exercised for a fraction of a Share.

(b) Method of Exercise. This Option shall be exercisable by delivery of an option exercise notice in the form attached hereto as Exhibit B (the “Option Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise this Option, the whole number of Shares with respect to which this Option is being exercised, and such other representations and agreements as may be required by the Company. If someone other than Participant exercises this Option, as permitted by the Plan, then such Person must submit documentation reasonably acceptable to the Company verifying that such Person has the legal right to exercise this Option. The Option Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Option Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable tax withholding.

3. Participant’s Representations. If the Common Stock has not been registered under the Securities Act at the time this Option is exercised, Participant shall concurrently with the exercise of all or any portion of this Option, if required by the Company, deliver to the Company Participant’s Investment Representation Statement in the form attached hereto as Exhibit C.

 

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4. Lock-Up Period. Participant will not, during the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act on a Form S-1 (excluding a registration relating solely to employee benefit plans on Form S-1) or Form S-3 and ending on the date specified by the Company and the underwriter(s) (such period not to exceed 180 days in the case of the Company’s IPO or 90 days in the case of any registration other than the Company’s IPO, or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4) (or any successor provisions or amendments thereto), as applicable), (A) sell, dispose of, make any short sale of, offer, hypothecate, pledge, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, grant any right or warrant to purchase, lend or otherwise transfer or encumber, directly or indirectly, any Shares or other securities convertible into or exercisable or exchangeable (directly or indirectly) for shares of Common Stock (whether such Shares or other securities are then held by Participant or thereafter acquired) (such Shares and other securities, the “Lock-Up Shares”) or (B) enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Lock-Up Shares. The foregoing provisions of this Section II.4 shall not prevent the exercise of any repurchase option in favor of the Company or apply to the sale of any Lock-Up Shares to an underwriter pursuant to an underwriting agreement or to the Transfer (as defined in Section II.7) of any Lock-Up Shares by Participant to any trust for the direct or indirect benefit of Participant or an Immediate Family Member (as defined in the Option Exercise Notice) of Participant (provided that the trustee of the trust agrees, in writing, to be bound by the restrictions set forth herein and provided further that any such Transfer (as defined in Section II.7) does not involve a disposition for value). Participant shall execute such documents as may be reasonably requested by the Company or the underwriters in connection with any registered offering described in this Section II.4 and that are consistent with this Section II.4 or necessary to give further effect thereto.

5. Method of Payment. To the extent permitted by Applicable Laws, payment of the aggregate Exercise Price as to all exercised Shares shall be by any of the following methods, or a combination thereof, at Participant’s election:

(a) cash;

(b) check;

(c) surrender of other Shares which (i) shall be valued at their Fair Market Value on the date of exercise and (ii) must be owned by Participant free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the Administrator’s sole discretion, will not result in any adverse accounting consequences to the Company; or

 

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(d) consideration received by the Company under a cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan.

Any fraction of a Share which would be required to pay such aggregate Exercise Price shall be disregarded, and the remaining amount due shall be paid in cash by Participant.

6. Restrictions on Exercise. This Option may not be exercised unless the issuance of Shares upon such exercise, or the method of payment of consideration for such Shares, complies with Applicable Laws. Assuming such compliance, Shares shall be considered transferred to Participant, for income tax purposes, on the date on which this Option is exercised with respect to such Shares.

7. Non-Transferability of Option. This Option (or, prior to exercise, the Shares subject to this Option) may not be sold, pledged, assigned, hypothecated or otherwise transferred in any manner, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b), respectively, of the Exchange Act), whether by operation of law or otherwise (“Transfer”), other than by will or by the laws of descent and distribution, and may be exercised, during the lifetime of Participant, only by Participant. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.

8. Term of Option. This Option may be exercised only (i) within the term set out in the Notice of Stock Option Grant in Part I of this Agreement and (ii) in accordance with the terms and conditions of the Plan and this Agreement.

9. Tax Obligations.

(a) Tax Withholding. Participant agrees to make appropriate arrangements satisfactory to the Company to pay or provide for the satisfaction of all federal, state, local, foreign and other taxes (including Participant’s FICA obligation) required to be withheld with respect to the exercise of this Option. Participant acknowledges and agrees that the Company may refuse to honor the exercise of this Option, and refuse to deliver the Shares, if such withholding amounts are not delivered by Participant at the time of exercise.

(b) Notice of Disqualifying Disposition of ISO Shares. If this Option is an Incentive Stock Option, and if Participant makes a “disposition” (as defined in Section 424 of the Code) of all or any portion of the Shares acquired upon exercise of this Option within two years from the Grant Date set out in the Notice of Stock Option Grant in Part I of this Agreement or within one year after issuance of the Shares acquired upon exercise of this Option, then Participant shall immediately notify the Company in writing as to the occurrence of, and the price realized upon, such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.

(c) Section 409A of the Code. Under Section 409A of the Code, an Option that was granted with a per Share exercise price that is determined by the U.S. Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “discount option”) may be considered “deferred compensation.” An Option that is a “discount option” may result in (i) income recognition by Participant prior to the exercise of this Option,

 

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(ii) an additional 20% federal income tax, (iii) potential penalty and interest charges, and (iv) additional state income, penalty and interest tax to Participant (collectively, “409A Penalties”). Participant acknowledges that the Company cannot guarantee, and has not guaranteed, that the IRS will agree, in a later examination, that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant. Participant agrees that, if the IRS determines that this Option is a “discount option,” Participant shall be solely responsible for Participant’s costs related to such a determination, including any 409A Penalties.

10. Agreement to Participate.

(a) Each Holder (as defined in the Option Exercise Notice) agrees that, in the event a Change in Control or Stock Sale is approved by the Board (if required) and the requisite vote of the Company’s stockholders, and upon receipt from the Company of a Participation Notice (as defined below), such Holder shall (1) vote (in person, by proxy or by written consent, as applicable) all securities of the Company the holders of which are entitled to vote for members of the Board, including securities of the Company acquired upon exercise or conversion of any options (including this Option), warrants or other convertible securities, owned by such Holder, or over which such Holder has voting control, in favor of such Change in Control or Stock Sale (together with any related amendment to the Certificate of Incorporation required in order to implement such Change in Control or Stock Sale) and in opposition to any and all other proposals that could delay or impair the ability of the Company or its stockholders to consummate such Change in Control or Stock Sale and (2) sell or exchange all securities of the Company, including securities of the Company acquired upon exercise or conversion of any options (including this Option), warrants or other convertible securities (collectively, “Subject Shares”), that such Holder then beneficially holds pursuant to the terms and conditions of such Change in Control or, in the case of a Stock Sale, sell or otherwise transfer to the acquiring Person all Subject Shares that such Holder then beneficially holds (or in the event that the Company’s stockholders that approved such Stock Sale are selling fewer than all of their Subject Shares, shares in the same proportion as such stockholders are selling to the acquiring Person) for the same per share consideration in accordance with the provisions of the Certificate of Incorporation, and on the same terms and conditions (except as otherwise permitted by this Section II.10(a)), as such stockholders, subject to the following conditions:

(i) such Holder shall not be required in his or her capacity as a stockholder to make any representation or warranty in connection with such Change in Control or Stock Sale, other than as to such Holder’s ownership and authority to sell, exchange or otherwise transfer such Holder’s Subject Shares in such Change in Control or Stock Sale, free and clear of all claims, rights, obligations, liens and encumbrances of any nature whatsoever;

(ii) such Holder shall not be liable for the inaccuracy of any representation or warranty made by any other Person in connection with such Change in Control or Stock Sale, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders);

 

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(iii) the liability for indemnification, if any, of such Holder in such Change in Control or Stock Sale, and for the inaccuracy of any representations and warranties made by the Company or its stockholders in connection with such Change in Control or Stock Sale, shall be several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders) and, subject to any provisions of the Certificate of Incorporation relating to the allocation of the escrow, shall be pro rata in proportion to, and shall not exceed, the amount of consideration paid to such Holder in connection with such Change in Control or Stock Sale;

(iv) liability shall be limited to such Holder’s applicable share (determined based on the respective proceeds payable to each stockholder of the Company in connection with such Change in Control or Stock Sale in accordance with the Certificate of Incorporation) of a negotiated aggregate indemnification amount that applies equally to all stockholders of the Company but that in no event exceeds the amount of consideration otherwise payable to such Holder in connection with such Change in Control or Stock Sale, except with respect to claims related to fraud by such Holder, the liability for which need not be limited as to such Holder;

(v) as a result of such Change in Control or Stock Sale, (A) each holder of each class or series of capital stock of the Company shall be entitled to receive the same form of consideration (and be subject to the same indemnity and escrow provisions) for their shares of such class or series as is received by other holders with respect to their shares of such same class or series of stock, (B) each holder of a series of Preferred Stock of the Company shall receive the same amount of consideration per share of such series of Preferred Stock of the Company as is received by other holders with respect to their shares of such same series, (C) each holder of Common Stock shall receive the same amount of consideration per share of Common Stock as is received by other holders with respect to their shares of Common Stock, and (D) unless the holders of each series of Preferred Stock of the Company agree otherwise by legally sufficient amendment or waiver of the provisions of the Certificate of Incorporation then in effect, the aggregate consideration receivable by all holders of Common Stock and Preferred Stock of the Company shall be allocated among the holders of Common Stock and Preferred Stock of the Company on the basis of the relative liquidation preferences to which the holders of each respective series of Preferred Stock of the Company and the holders of Common Stock are entitled in a Deemed Liquidation Event (assuming for this purpose that such Change in Control or Stock Sale is a Deemed Liquidation Event (as defined in the Certificate of Incorporation)) in accordance with the Certificate of Incorporation in effect immediately prior to such Change in Control or Stock Sale; provided, however, that, notwithstanding the foregoing, if the consideration to be paid in exchange for the Subject Shares pursuant to such Change in Control or Stock Sale includes any securities and due receipt thereof by such Holder would require, under applicable law, (x) the registration or qualification of such securities or of any Person as a broker, dealer or agent with respect to such securities or (y) the provision to such Holder of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, then the Company may cause to be paid to such Holder, in lieu of such securities, against surrender of the Subject Shares which would have otherwise been sold by such Holder, an amount in cash equal to the fair market value (as determined in good faith by the Company) of the securities that such Holder would otherwise receive as of the date of issuance of such securities in exchange for such Holder’s Subject Shares; and

 

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(vi) subject to clause (v) above requiring the same form of consideration to be available to the holders of any single class or series of capital stock, if any holders of any capital stock of the Company are given an option as to the form and amount of consideration to be received as a result of such Change in Control or Stock Sale, all holders of such capital stock shall be given the same option; provided, however, that nothing in this Section II.10(a)(vi) shall entitle any holder to receive any form of consideration that such holder would be ineligible to receive as a result of such holder’s failure to satisfy any condition, requirement or limitation that is generally applicable to the Company’s stockholders.

The provisions of this Section II.10 shall not be deemed to require any Holder to approve any amendment or waiver of any provision of the Certificate of Incorporation or otherwise approve a Change in Control or Stock Sale that would not allocate the consideration in accordance with the Certificate of Incorporation.

“Participation Notice” means a written notice from the Company to such Holder, which notice includes: (x) a summary of the material terms of the proposed Change in Control or Stock Sale; (y) information relating to any stockholder meeting or action by written consent and instructions with respect to the voting of such Holder’s Subject Shares as required by this Section II.10(a); and (z) such other information as the Board shall determine is necessary or appropriate.

(b) Each Holder further agrees, with respect to any Change in Control or Stock Sale approved in accordance with Section II.10(a), to (i) refrain from exercising any dissenters’ rights or rights of appraisal under applicable law (if any), (ii) execute and deliver all related documentation and take such other actions as may be reasonably requested, in writing, by the Company or the acquiring Person in support of such Change in Control or Stock Sale, including executing and delivering instruments of conveyance and transfer, any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, governmental filing and share certificates duly endorsed for transfer (free and clear of impermissible liens, claims and encumbrances), and any similar or related documents, and (iii) refrain from entering into any agreement or understanding (including any proxy or voting trust) that would be inconsistent with, or violate, the provisions of this Section II.10, unless specifically requested to do so, in writing, by the acquiring Person in connection with such Change in Control or Stock Sale.

(c) In the event that a stockholder representative (the “Stockholder Representative”) is appointed with respect to matters affecting the Company’s stockholders under the applicable definitive transaction agreements relating to any Change in Control or Stock Sale approved in accordance with Section II.10(a), each Holder agrees (i) to consent to (x) the appointment of such Stockholder Representative, (y) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (z) the payment of such Holder’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all of such Stockholder Representative’s reasonable fees and expenses arising out of such Stockholder Representative’s services and duties as the representative of the

 

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Company’s stockholders in connection with such Change in Control or Stock Sale, and (ii) not to assert any claim, or commence any suit, against the Stockholder Representative or any other stockholder of the Company with respect to any action or inaction by the Stockholder Representative in connection with his or her service as the Stockholder Representative, absent fraud, gross negligence or willful misconduct.

(d) Participant hereby constitutes and appoints as his or her proxies, and hereby grants a power of attorney to, the Company’s President and Chief Executive Officer, and each of them, with full power of substitution, to represent and to vote or act by written consent with respect to all securities of the Company that Participant beneficially holds, either as of the date of this Agreement or at any time thereafter (collectively, the “Proxy Shares”), in accordance with this Section II.10, if and only if Participant or any transferee of any Proxy Shares (i) fails to vote all of the Proxy Shares in accordance with this Section II.10, (ii) attempts to vote any of the Proxy Shares (whether in person, by proxy or by written consent) in a manner that is inconsistent with this Section II.10, or (iii) fails to take any action necessary to effect the provisions of this Section II.10. This proxy and power of attorney is given to secure the performance of each Holder’s duties under this Section II.10, and each Holder shall take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy. This proxy and power of attorney is coupled with an interest, shall be irrevocable and shall be valid for so long as any of the Proxy Shares are outstanding until the closing date of the first sale of the Common Stock to the general public pursuant to a registration statement filed with and declared effective by the U.S. Securities and Exchange Commission under the Securities Act (the “Company IPO”). The authority vested in this proxy shall run with the Proxy Shares regardless of any change in legal ownership thereof. The power of attorney granted by Participant herein is a durable power of attorney and shall survive Participant’s bankruptcy, death or incapacity. Each party hereto hereby revokes any and all previous proxies and powers of attorney with respect to the Proxy Shares. Each party hereto and each Holder shall not hereafter or after consummation of the Transfer of Exercised Shares (as defined in the Option Exercise Notice) to such Holder in accordance with Section 5 of the Option Exercise Notice, as applicable, until the Company IPO, (x) purport to grant any other proxy or power of attorney with respect to any of the Proxy Shares, (y) deposit any of the Proxy Shares into a voting trust, or (z) enter into any agreement, arrangement or understanding with any Person (other than the Company), directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Proxy Shares, in each case, with respect to any of the matters set forth in this Section II.10

11. General Provisions.

(a) Power and Authority. Participant hereby represents to the Company that (i) Participant has full power and authority and legal capacity to enter into, execute and deliver this Agreement and to perform fully Participant’s obligations hereunder (including the proxy appointment described in Section II.10), (ii) the execution, delivery and performance of this Agreement by Participant does not conflict with, constitute a breach of or violate any arrangement, understanding or agreement to which Participant is a party or by which Participant is bound, and (iii) this Agreement has been duly and validly executed and delivered by Participant and constitutes the legal, valid and binding obligation of Participant, enforceable against Participant in accordance with its terms.

 

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(b) Survival. The representations, warranties, covenants and agreements made in or pursuant to this Agreement shall survive the execution and delivery hereof and shall not be affected by any investigation made by or on behalf of any party hereto.

(c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflict-of-law principles; provided, however, that Section II.10 shall be governed by the laws of the State of Delaware without regard to conflict-of-law principles.

(d) Entire Agreement. This Agreement, together with the attached Exhibits, sets forth the entire agreement and understanding between the parties hereto relating to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, discussions, representations and warranties, both written and oral, between the parties hereto, including any representations made during any interviews or relocation negotiations, with respect to such subject matter. In the event of a conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan shall prevail.

(e) Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered (i) when delivered personally, (ii) one business day after being deposited with an overnight courier service (costs prepaid), (iii) when sent by facsimile or e-mail if sent during normal business hours and on the next business day if sent after normal business hours, in each case with confirmation of transmission by the transmitting equipment, or (iv) when received or rejected by the addressee, if sent by certified mail, return receipt requested, postage prepaid, in each case to the addresses, facsimile numbers or e-mail addresses and marked to the attention of the persons designated (by name or title) on the signature page hereto, as applicable, or to such other address, facsimile number, e-mail address or person as such party may designate by a notice delivered to the other party hereto.

(f) Successors and Assigns; Transfers. The Company may assign this Agreement, and its rights and obligations hereunder, in whole or in part, to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, sale of assets or stock or otherwise). Except as set forth herein, (x) neither this Agreement nor any rights, duties and obligations hereunder shall be assigned, transferred, delegated or sublicensed by Participant without the Company’s prior written consent and (y) any attempt by Participant to assign, transfer, delegate or sublicense this Agreement or any rights, duties or obligations hereunder, without the Company’s prior written consent, shall be void. Subject to any restrictions on transfer set forth herein, this Agreement shall be binding upon, and enforceable against, (i) the Company and its successors and assigns and (ii) Participant and his or her heirs, executors, successors, assigns, administrators and other legal representatives. Except as set forth herein, any transfer in violation of any restriction upon transfer contained in any provision hereof shall be void, unless such restriction is waived in accordance with the terms hereof.

(g) Modification and Waiver. This Agreement may not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each party hereto. Any term or provision hereof may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver or extension shall be validly and sufficiently authorized for the purposes hereof if, as to any party, it

 

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is authorized in writing by an authorized representative of such party. The failure or delay of any party to enforce at any time any provision hereof shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach hereof shall be held to constitute a waiver of any other or subsequent breach.

(h) Further Assurances. Participant shall execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may reasonably be necessary or desirable in the view of the Company to carry out the purposes or intent hereof, including the applicable Exhibits attached hereto.

(i) Severability. Should any provision contained herein be held as invalid, illegal or unenforceable, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth herein.

(j) Interpretation. For purposes of this Agreement, (i) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation,” (ii) the word “or” is not exclusive, (iii) the words “herein,” “hereof,” “hereby,” “hereto,” “hereunder” and words of similar import refer to this Agreement as a whole, and (iv) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding.” Unless the context otherwise requires, references herein: (A) to a Section or an Exhibit mean a Section or an Exhibit of, or attached to, this Agreement; (B) to agreements, instruments and other documents shall be deemed to include all subsequent amendments, supplements and other modifications thereto; (C) to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to; (D) to any Person includes such Person’s successors and assigns, but, if applicable, only if such successors and assigns are not prohibited by this Agreement; and (E) to any gender includes each other gender. The Exhibits attached hereto shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein. The titles, captions and headings herein are for convenience of reference only and shall not affect the meaning or interpretation hereof. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

(k) Counterparts. This Agreement may be executed in counterparts, each of which shall be considered an original, but all of which, when taken together, shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each party hereto and delivered to the other party hereto. Delivery of an executed counterpart of a signature page to this Agreement shall be as effective as delivery of a manually executed counterpart of this Agreement. The exchange of copies of this Agreement and of signature pages hereto by facsimile transmission or e-mail shall constitute effective execution and delivery of this Agreement and may be used in lieu of the original Agreement for all purposes. Signatures transmitted by facsimile or e-mail shall be deemed to be original signatures for all purposes.

 

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(l) Service Relationship At Will. Participant acknowledges and agrees that the vesting of this Option pursuant hereto is earned only by his or her continuing service as a Service Provider at will (and not through the act of being hired, being granted this Option or acquiring Shares hereunder). Participant further acknowledges and agrees that this Agreement, the transactions contemplated hereby and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a Service Provider for the vesting period, or for any period at all, and shall not interfere with the right of either the Company or Participant to terminate Participant’s relationship as a Service Provider at any time, with or without cause or notice.

(m) Third Party Beneficiary Rights. No provisions hereof are intended, nor shall be interpreted, to provide or create any third party beneficiary rights or any other rights of any kind in any client, customer, affiliate, stockholder, partner or employee of any party hereto or any other Person, unless specifically provided otherwise herein; provided, however, that Section II.4 is intended to benefit the underwriters for any registered offering described in Section II.4, and such underwriters shall have the right, power and authority to enforce the provisions of Section II.4 as though they were parties hereto.

(n) Adjustments. In the event of any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, reincorporation, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, reclassification, repurchase or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares, the Administrator will appropriately adjust the number, class and price of Shares subject to this Option, with such adjustment to be made in accordance with Section 25102(o) of the California Corporations Code (to the extent the Company is relying upon the exemption afforded thereby with respect thereto) and Section 409A of the Code.

(o) No Impact on Other Benefits. The value of this Option is not part of Participant’s normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.

(p) Acceptance. Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof and hereby accepts this Option subject to all of the terms and provisions of the Plan and this Agreement (including all Exhibits attached hereto). Participant has reviewed, and fully understands all provisions of, the Plan and this Agreement in their entirety (including all Exhibits attached hereto) and has had an opportunity to obtain the advice of his or her own legal counsel, tax advisors and other advisors prior to executing this Agreement. Any questions or disputes regarding the interpretation of the Plan or this Agreement (including all Exhibits attached hereto), or arising hereunder or thereunder, shall be submitted by the Company or Participant to the Administrator, and Participant hereby agrees to accept as final, binding and conclusive all decisions, determinations and interpretations of the Administrator upon any such questions or disputes.

 

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(q) Equitable Relief. In the event of a breach or threatened breach by Participant of any provision hereof, Participant hereby consents and agrees that the Company may seek, in addition to other available remedies, injunctive or other equitable relief from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. Participant understands that any breach or threatened breach of this Agreement will cause irreparable injury and that money damages will not provide an adequate remedy therefor, and Participant hereby consents to the issuance of an injunction or other equitable relief. The aforementioned equitable relief shall be in addition to, and not in lieu of, legal remedies, monetary damages or other available forms of relief.

(signature page follows)

 

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IN WITNESS WHEREOF, the undersigned have executed this Stock Option Agreement as of the date first above written.

 

COMPANY
4D MOLECULAR THERAPEUTICS, INC.
By:
Name:		David Kirn
Title:		Chief Executive Officer

Notice Address:		5980 Horton Street
		Suite 460
		Emeryville, CA 94608
Facsimile:
E-mail:
Attention:		Chief Executive Officer
PARTICIPANT
«Participant»
Notice Address:

Facsimile:

E-mail:

Attention:

Exhibits:

A – 2015 Equity Incentive Plan

B – Option Exercise Notice

C – Investment Representation Statement

[Signature Page to Stock Option Agreement]

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EXHIBIT A

4D MOLECULAR THERAPEUTICS, INC.

2015 EQUITY INCENTIVE PLAN

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EXHIBIT B

OPTION EXERCISE NOTICE

4D Molecular Therapeutics, Inc.

5980 Horton Street, Suite 460

Emeryville, CA 94608

Attention: Secretary

1. Exercise of Option. Effective as of today,                     , the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase                      shares (the “Exercised Shares”) of the common stock of 4D Molecular Therapeutics, Inc., a Delaware corporation (the “Company”), under and pursuant to the Company’s 2015 Equity Incentive Plan (the “Plan”) and that certain Stock Option Agreement made and entered into as of «Date_of_Grant» by and between the Company and Participant (the “Option Agreement”).

2. Delivery of Payment. Participant herewith delivers to the Company the full exercise price of the Exercised Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.

3. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Option Agreement and agrees to abide, and be bound, by their terms and conditions.

4. Rights as Stockholder. Until the issuance of the Exercised Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or other distributions or any other rights as a stockholder shall exist with respect to the Exercised Shares, notwithstanding the exercise of the Option. The Exercised Shares shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or distribution or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan.

5. Company’s Right of First Refusal. Before any Exercised Shares (or any beneficial interest therein) may be Transferred by Participant or any subsequent transferee (each, a “Holder”), such Holder must first offer such Exercised Shares to the Company and/or its assignee(s) as follows:

(a) Notice of Proposed Transfer. The Holder shall deliver to the Company a written notice pursuant to Section II.11(e) of the Option Agreement (a “Transfer Notice”) stating: (i) the Holder’s bona fide intention to Transfer the Exercised Shares; (ii) the name and address of the proposed transferee; (iii) the number of Exercised Shares to be Transferred to the proposed transferee; (iv) the bona fide cash price or other consideration for which the Holder proposes to Transfer the Exercised Shares; and (v) that, by delivering the Transfer Notice, the Holder offers all such Exercised Shares to the Company and/or its assignee(s) pursuant to this Section 5 and on the same terms described in the Transfer Notice.

 

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(b) Exercise of Right of First Refusal. At any time within 30 days after receipt of a Transfer Notice, the Company and/or its assignee(s) may, by giving written notice pursuant to Section II.11(e) of the Option Agreement (the “Exercise Notice”) to the Holder, elect to purchase any or all of the Exercised Shares proposed to be Transferred to the proposed transferee, at the purchase price determined in accordance with Section 5(c).

(c) Purchase Price. The per share purchase price for any Exercised Shares purchased by the Company and/or its assignee(s) under this Section 5 (the “Company Shares”) shall be the per share price listed in the applicable Transfer Notice. If the price listed in such Transfer Notice includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board in its sole discretion.

(d) Payment. Payment of the purchase price for any Company Shares shall be made, at the option of the Company and/or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company and/or its assignee(s), or by any combination thereof, in any such case within ten days after delivery to the Holder of the applicable Exercise Notice and, at such time, if the Company Shares are certificated shares, the Holder shall deliver to the Company and/or its assignee(s) the certificate(s) representing the Company Shares, each certificate to be properly endorsed for transfer.

(e) Holder’s Right to Transfer. If the Company and/or its assignee(s) elects to purchase less than all of the Exercised Shares proposed in a Transfer Notice to be Transferred to a given proposed transferee, then the Holder (x) may Transfer to the proposed transferee any of such Exercised Shares that the Company and/or its assignee(s) elected not to purchase (the “Non-Company Shares”); provided, however, that: (i) the Transfer is made only on the terms provided for in the applicable Transfer Notice, with the exception of the purchase price, which may be either the price listed in such Transfer Notice or any higher price; (ii) the Transfer is consummated within 60 days after the date the applicable Transfer Notice was delivered to the Company; (iii) the Transfer is effected in accordance with any applicable securities laws and, if requested (in writing) by the Company, the Holder shall have delivered a written opinion of counsel acceptable to the Company to that effect; and (iv) the proposed transferee agrees in writing to receive and hold the Non-Company Shares so Transferred subject to all of the provisions hereof (including this Section 5) and of the Option Agreement (including Section II.4 and Section II.10 thereof), and there shall be no further Transfer of any Exercised Shares except in accordance with this Section 5, and (y) shall, in accordance with the other provisions of this Section 5, sell to the Company and/or its assignee(s) the portion of such Exercised Shares that the Company and/or its assignee(s) has elected to purchase. If any Non-Company Shares are not Transferred to the proposed transferee within the period provided in clause (ii) above, then, before any such shares may be Transferred, a new Transfer Notice shall be given to the Company, and the Company and/or its assignee(s) shall again be offered the right of first refusal described in this Section 5.

(f) Exception for Certain Family Transfers. Notwithstanding anything to the contrary contained elsewhere in this Section 5, the Transfer of any or all of the Exercised Shares during the Holder’s lifetime, or on the Holder’s death by will or intestacy, to the Holder’s spouse (or former spouse) or domestic partner, child or stepchild, grandchild, parent, stepparent, sibling, father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, grandparent, niece or nephew, including adoptive relationships (each such person, an “Immediate

 

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Family Member”), or to a trust or other similar estate planning vehicle for the benefit of the Holder or any such Immediate Family Member, shall be exempt from the provisions of this Section 5; provided, however, that, in each such case, the transferee agrees in writing to receive and hold the Exercised Shares so Transferred subject to all of the provisions hereof (including this Section 5) and of the Option Agreement (including Section II.4 and Section II.10 thereof), and there shall be no further Transfer of such Exercised Shares except in accordance with this Section 5; provided, further, that, without the Company’s prior written consent, which may be withheld in its sole discretion, no more than three Transfers may be made pursuant to this Section 5(f), including all Transfers by the Holder and all Transfers by any transferee. For purposes hereof, a person shall be deemed to be a “domestic partner” of another person if the two persons (i) reside in the same residence and plan to do so indefinitely, (ii) have resided together for at least one year, (iii) are each at least 18 years of age and mentally competent to consent to contract, (iv) are not blood relatives closer than would prohibit legal marriage in the state in which they reside, (v) are financially interdependent, as demonstrated to the Company’s reasonable satisfaction, and (vi) have each been the sole spousal equivalent of the other for the year prior to the Transfer and plan to remain so indefinitely; provided, however, that a person shall not be deemed to be a “domestic partner” if he or she is married to another person or has any other spousal equivalent.

(g) Termination of Right of First Refusal. The right of first refusal contained in this Section 5 shall terminate as to all Exercised Shares upon the earlier of: (i) the Company IPO; and (ii) the closing date of a Change in Control or Stock Sale pursuant to which the holders of the outstanding voting securities of the Company receive securities of a class registered pursuant to Section 12 of the Exchange Act.

6. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Exercised Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Exercised Shares and that Participant is not relying on the Company for any tax advice.

7. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. Participant understands and agrees that the Company shall cause the legends set forth below, or substantially equivalent legends, to be placed upon any certificate(s) evidencing ownership of the Exercised Shares, together with any other legends that may be required by the Company or by applicable federal or state securities laws:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

3

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AN AGREEMENT TO PARTICIPATE AND A LOCK-UP PERIOD IN THE EVENT OF A PUBLIC OFFERING AS SET FORTH IN AGREEMENTS BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH RESTRICTIONS ON TRANSFER, RIGHT OF FIRST REFUSAL, AGREEMENT TO PARTICIPATE AND LOCK-UP PERIOD ARE BINDING ON TRANSFEREES OF THESE SECURITIES.

(b) Stop-Transfer Notices. In order to ensure compliance with the restrictions referred to herein and in the Option Agreement, including the provisions of Section II.4 of the Option Agreement, the Company may issue appropriate stop-transfer instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required to transfer on its books any Exercised Shares that have been Transferred in violation of any provision hereof or to treat as owner of such Exercised Shares, or otherwise to accord voting or dividend rights to, any purchaser or other transferee to whom such Exercised Shares shall have been so Transferred. Any attempt to Transfer Exercised Shares in violation hereof shall be null and void and shall be disregarded by the Company.

8. Capitalized Terms. Unless otherwise defined herein, capitalized terms used herein shall have the same defined meanings as set forth in the Plan or, if not defined therein, in the Option Agreement.

9. Governing Law; Severability. This Option Exercise Notice shall be governed by and construed in accordance with the laws of the State of California without regard to conflict-of-law principles. Should any provision contained herein be held as invalid, illegal or unenforceable, such holding shall not affect the validity of the remainder of this Option Exercise Notice, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth herein.

10. Consent to Notices by Electronic Transmission. Upon becoming a stockholder of the Company and without limiting the manner by which notice otherwise may be given effectively to Participant, Participant hereby consents in accordance with Section 232 of the Delaware General Corporation Law to stockholder notices given by the Company to Participant by any of the following forms of electronic transmission: (i) by facsimile telecommunications to the facsimile number set forth on the signature page hereto or to such other facsimile number as Participant may designate by a written notice delivered to the Company; (ii) by electronic mail to the e-mail address set forth on the signature page hereto or to such other e-mail address as Participant may designate by a written notice delivered to the Company; (iii) by a posting on an electronic network together with separate notice to Participant of such specific posting; and (iv) by any other form of electronic transmission when directed to Participant.

 

4

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Submitted by:				Accepted by:
PARTICIPANT				COMPANY   4D MOLECULAR THERAPEUTICS, INC.
Signature				By:
				Name:
«Participant»				Title:
Print Name
				Date Received:

 

5

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EXHIBIT C

INVESTMENT REPRESENTATION STATEMENT

 

PARTICIPANT		:		«Participant» (“Participant”)
COMPANY		:		4D Molecular Therapeutics, Inc. (the “Company”)
SECURITY		:		COMMON STOCK
AMOUNT		:		_________________ shares (the “Shares”)
DATE		:		_________________

Unless otherwise defined in this Investment Representation Statement (this “Statement”), capitalized terms used herein shall have the same defined meanings as set forth in the 4D Molecular Therapeutics, Inc. 2015 Equity Incentive Plan or, if not defined therein, in that certain Stock Option Agreement made and entered into as of «Date_of_Stock_Option_Agreement» by and between the Company and Participant.

In connection with Participant’s purchase of the Shares, Participant hereby makes the following representations to the Company:

1. Investment Intent. Participant is purchasing the Shares solely for investment for his or her own account, not as a nominee or agent, and not with a view to the resale or distribution (within the meaning of the Securities Act) of any part thereof, except to the extent Participant intends to hold the Shares jointly with his or her spouse. Participant has no present intention of selling, transferring, granting any participation in, or otherwise distributing any Shares. Participant does not have, with respect to any of the Shares, any contract or other arrangement with any Person to sell, transfer, grant participations or otherwise distribute the same to such Person or to any third Person. Participant’s investment intent is not limited to Participant’s present intention to hold the Shares for the minimum capital gains period specified under any applicable tax law, for a deferred sale, for a specified increase or decrease in the market price of the Shares or for any other fixed period in the future.

2. Participant is Informed About the Company. Participant is sufficiently aware of the Company’s business affairs and financial condition, and has acquired sufficient information he or she considers necessary or appropriate, to make an informed and knowledgeable investment decision with respect to the Shares.

3. Participant Can Protect Participant’s Own Interests. Participant can properly evaluate the merits and risks of an investment in the Shares and can protect his or her own interests in this regard, whether by reason of Participant’s own business and financial expertise, the business and financial expertise of certain professional advisors unaffiliated with the Company (and not compensated by the Company, directly or indirectly) with whom Participant has consulted, or Participant’s preexisting business or personal relationship with the Company or any of its directors, officers or controlling persons. Participant acknowledges that the purchase of the Shares involves an extremely high degree of risk and that the Company’s future prospects are uncertain. Participant is able, without materially impairing his or her financial condition, to hold the Shares for an indefinite period of time and to suffer a complete loss of his or her entire investment. Participant’s purchase of the Shares was not accomplished by a general solicitation or general advertising.

---

4. Participant Knows the Shares are Restricted Securities. Participant understands that the Shares are “restricted securities” under applicable federal and state securities laws inasmuch as they have not been (i) registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed in this Statement or (ii) registered or qualified in any state in which they are offered. In this regard, Participant further understands and agrees that: (i) Participant must hold the Shares indefinitely unless they are registered with the U.S. Securities and Exchange Commission and qualified by state authorities or an exemption from such registration and qualification requirements is available; (ii) the Company has no obligation to register or qualify Shares for resale; and (iii) the certificate(s) evidencing the Shares, if certificated, will be imprinted with a legend which prohibits the transfer of the Shares unless the Shares are registered under the Securities Act and applicable state securities laws or such registration is not required in the written opinion of counsel for the Company.

5. Participant is Familiar With Rule 701 and Rule 144. Participant is familiar with Rule 701 and Rule 144, each promulgated under the Securities Act (“Rule 701” and “Rule 144”, respectively), which in some circumstances permit limited public resales of “restricted securities” like the Shares acquired from an issuer in a non-public offering. Rule 701 provides that if the issuer of the Shares qualifies under Rule 701 at the time of grant of the option to purchase the Shares (the “Option”), the exercise of the Option will be exempt from registration under the Securities Act. If the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, 90 days thereafter (or such longer period as any market stand-off agreement may require) the Shares exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including, in the case of affiliates, (i) the availability of certain current public information about the Company, (ii) the amount of Shares being sold during any three-month period not exceeding specified limitations, (iii) the sale being made in an unsolicited “broker’s transaction,” transactions directly with a “market maker” or “riskless principal transactions,” as those terms are defined under the Exchange Act, and (iv) the timely filing of a notice of proposed sale on Form 144, if applicable. If the Company does not qualify under Rule 701 at the time of grant of the Option, then the Shares may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require, among other things, (i) the availability of certain current public information about the Company, (ii) the resale occurring more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Shares, and (iii) in the case of the sale of Shares by an affiliate, the satisfaction of the conditions set forth in clauses (ii), (iii) and (iv) of the preceding sentence. Participant understands that (x) current public information about the Company is not now available, and the Company has no present plans to make such information available, (y) the requirements of Rule 144 may never be met and the Shares may never be saleable under Rule 144, and (z) at the time Participant wishes to sell the Shares, there may be no public market for the Company’s stock upon which to make such a sale or the current public information requirements of Rule 144 may not be satisfied, any of which may preclude Participant from selling the Shares under Rule 144 even if the relevant holding period has been satisfied.

6. Participant Knows that Participant is Subject to Further Restrictions on Resale. Participant understands that, if Rule 701 or Rule 144 is not available, any future proposed disposition of any of the Shares will not be possible without prior registration under the Securities Act or compliance with some other registration exemption (which may or may not be available).

 

2

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Participant understands that, although Rule 701 and Rule 144 are not exclusive, the Staff of the U.S. Securities and Exchange Commission has stated that Persons proposing to sell private placement securities other than in a registered offering or pursuant to Rule 701 or Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales and that such Persons and their respective brokers who participate in such transactions do so at their own risk.

7. Address. The address of Participant’s principal residence is set forth on the signature page of this Statement. Participant shall promptly inform the Company, in writing, of any change in Participant’s principal residence.

By signing below, Participant acknowledges Participant’s agreement with each of the statements contained in this Statement as of the date first set forth above and Participant’s intent for the Company to rely on such statements in issuing the Shares to Participant.

 

Participant’s Address:
				Participant’s Signature
				«Participant»
				Print Name

 

3

Exhibit 10.5

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

Execution Copy

CONFIDENTIAL

Collaboration and License Agreement

This Agreement is entered into with effect as of the Effective Date (as defined below)

by and between

F. Hoffmann-La Roche Ltd

a corporation organized under the laws of Switzerland with an office and place of business at Grenzacherstrasse 124, 4070 Basel, Switzerland (“Roche Basel”)

and

Hoffmann-La Roche Inc.

a corporation organized under the laws of New Jersey with an office and place of business at 150 Clove Road, Suite 8, Little Falls, New Jersey 07424, U.S.A. (“Roche US”; Roche Basel and Roche US together referred to as “Roche”)

on the one hand

and

4D Molecular Therapeutics Inc.

a company organized under the laws of Delaware with an office and place of business at 5980 Horton Street, Suite 460, Emeryville, CA 94608, U.S.A. (“4DMT”)

on the other hand.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Table of Contents

 

1. Definitions					8
1.1		4DMT Know-How			8
1.2		4DMT Product Class Status Notice			8
1.3		AAV			9
1.4		Affiliate			9
1.5		Agreement			9
1.6		Agreement Term			9
1.7		Applicable Law			9
1.8		Available Product Class			9
1.9		Biosimilar Product			10
1.10		BLA			10
1.11		Calendar Quarter			10
1.12		Calendar Year			10
1.13		cGMP			10
1.14		Change of Control			10
1.15		Change of Control Group			10
1.16		Choroideremia			11
1.17		Choroideremia GMP Lot			11
1.18		Clinical Study			11
1.19		CMO			11
1.20		CMO/CRO			11
1.21		Collaboration			11
1.22		Collaboration Product Class			11
1.23		Collaboration Project			11
1.24		Combination Product			11
1.25		Commercially Reasonable Efforts			12
1.26		Companion Diagnostic			12
1.27		Completion			12
1.28		Compulsory Sublicense			12
1.29		Construct			13
1.30		Confidential Information			13
1.31		Continuation Election Notice			13
1.32		Control			14
1.33		Cover			14
1.34		Development Event			14
1.35		Effective Date			14
1.36		Enabled Product			14
1.37		EU			14
1.38		Excluded Construct			14
1.39		Excluded Product			14
1.40		Excluded Variant			14
1.41		Expert			15
1.42		FDA			15
1.43		FDCA			15

 

- ii -

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.44		Field			15
1.45		Filing			15
1.46		First Commercial Sale			15
1.47		FTE			16
1.48		FTE Rate			16
1.49		Full Range 4DMT Patent Right			16
1.50		Generic Product			16
1.51		GLP Tox Study			16
1.52		GMP Package Approval			16
1.53		Handle			17
1.54		Highest Priority Efforts			17
1.55		High Volume Roche Solo Scenario			17
1.56		IFRS			17
1.57		IND			17
1.58		Initiation			17
1.59		JOT			17
1.60		JSC			17
1.61		Know-How			17
1.62		Licensed Combination Product			18
1.63		Licensed Construct			18
1.64		Licensed Product			18
1.65		Like-Substance Product			18
1.66		NDA			18
1.67		Net Sales			18
1.68		Non-Optionable 4DMT Product Class			19
1.69		Non-Optionable Patent Right			19
1.70		Optionable 4DMT Product Class			19
1.71		Optionable Patent Right			19
1.72		Optionable Payload			19
1.73		Optionable Product Patent Right			19
1.74		Optionable Project Work			20
1.75		Optionable Variant			20
1.76		Optionable Variant Patent Right			20
1.77		Optioned Patent Right			20
1.78		Other Product Class			20
1.79		Party			20
1.80		Patent Right			20
1.81		Payload			20
1.82		Pharmacovigilance Agreement			21
1.83		Phase I/IIa Study			21
1.84		Phase II Study			21
1.85		Pivotal Study			21
1.86		Pre-Clinical Success Criteria			22
1.87		Preferred CMO			22
1.88		Product			22

 

- iii -

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.89		Product Class			22
1.90		Project Patent Right			22
1.91		Project Payload			22
1.92		Project Product Patent Right			22
1.93		Project Variant			22
1.94		Project Variant Patent Right			22
1.95		Regents License Agreement			23
1.96		Regents Patent Right			23
1.97		Regulatory Approval			23
1.98		Regulatory Authority			23
1.99		Retina Field			23
1.100		RFO Agreement			23
1.101		Roche Group			23
1.102		Roche Materials			24
1.103		Roche Patent Right			24
1.104		Roche Solo Product Class			24
1.105		Royalty Term			24
1.106		Sales			25
1.107		Shared Products			25
1.108		Start of GLP Tox Study			25
1.109		Sublicensee			26
1.110		Territory			26
1.111		Third Party			26
1.112		Third Party Supplier			26
1.113		US			26
1.114		US$			26
1.115		Valid Claim			26
1.116		Variant			26
1.117		XLRP			26
1.118		Additional Definitions			26
2. Product Classes					28
2.1		High-Level Overview			28
2.2		Roche Product Class			29
2.3		4DMT Product Class			31
2.4		Available Product Class			32
3. Research and Development Collaboration					33
3.1		Overview			33
3.2		Collaboration Product Class			33
3.3		Project Plans			33
3.4		4DMT Reporting			34
3.5		Project Plan Termination			34
3.6		Roche Materials			36
4. Grant of License					36
4.1		License			36
4.2		Sublicenses			37

 

- iv -

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

4.3		Research Cross License			37
4.4		Grant-Back License			38
5. Diligence					38
5.1		Collaboration			38
5.2		Roche Commercially Reasonable Efforts			38
5.3		4DMT Commercially Reasonable Efforts			38
5.4		Progression to IND Filing			39
5.5		Additional Development Progression			39
6. Program Transfer					41
6.1		IND and Regulatory			41
6.2		Other Program Transfer			41
7. Development and Regulatory Affairs					42
7.1		By 4DMT			42
7.2		By Roche			42
7.3		Shared Product			43
8. Manufacturing					43
9. Commercialization					44
10. Governance					44
10.1		Joint Steering Committee			44
10.2		Members			44
10.3		Responsibilities of the JSC			44
10.4		Meetings			45
10.5		Minutes			45
10.6		Progress Reports			45
10.7		Decisions			46
10.8		Alliance Director			46
10.9		Limitations of Authority			46
10.10		Expenses			46
10.11		Lifetime			47
11. Project Plan Payments to 4DMT					47
11.1		Collaboration Costs			47
11.2		Third Party Supplier and Third Party Expenses			47
11.3		Payment Schedule			47
11.4		Fair Market Value			48
11.5		Optionable 4DMT Product Class Work			48
12. Payment to 4DMT (other than Project Plan Payments)					48
12.1		Initiation Payment			48
12.2		Roche Product Class Initiation Payment (other than Optioned Product Class)			48
12.3		Option Exercise Fee			49
12.4		Development Event Payments			49
12.5		Sales Based Events			50
12.6		Royalty Payments			51
13. General Payment Provisions					53
13.1		Invoices			53
13.2		Late Payment			54

 

- v -

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

13.3		Disclosure of Payments			54
14. Royalty accounting and reporting					54
14.1		Timing of Payments			54
14.2		Method of Payment			54
14.3		Currency Conversion			54
14.4		Reporting			54
15. Taxes					55
16. Royalty Auditing					55
16.1		4DMT Right to Audit			55
16.2		Audit Reports			56
16.3		Over-or Underpayment			56
16.4		Duration of Audit Rights			56
17. Payments to Roche					56
18. Intellectual Property					57
18.1		Inventorship			57
18.2		Ownership			57
18.3		Patent Coordination Team			58
18.4		Prosecution			58
18.5		List of Licensed 4DMT Patent Rights			61
18.6		Infringement			61
18.7		Defense			63
18.8		Common Interest Disclosures			63
18.9		Patent Term Extensions			64
19. Representations and Warranties					64
19.1		By both Parties			64
19.2		By 4DMT			65
19.3		Disclaimer			66
20. Indemnification and Liability					66
20.4		Insurance			68
20.5		Disclaimer			68
21. Obligation Not to Disclose Confidential Information					68
21.1		Non-Use and Non-Disclosure			68
21.2		Permitted Disclosure			68
21.3		Press Releases			68
21.4		Commercial Considerations			69
21.5		4D Materials			69
22. Term and Termination					70
22.1		Commencement and Term			70
22.2		Termination			70
22.3		Consequences of Termination			70
22.4		Survival			75
23. Bankruptcy					75
24. Change of Control					75
25. Miscellaneous					76
25.1		Governing Law			76

 

- vi -

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

25.2		Disputes			76
25.3		Arbitration			76
25.4		Assignment			76
25.5		Debarment			77
25.6		Anti-Bribery			77
25.7		Product Class			77
25.8		Independent Contractor			78
25.9		Unenforceable Provisions and Severability			78
25.10		Waiver			78
25.11		Interpretation			78
25.12		Appendices			78
25.13		Entire Understanding			78
25.14		Amendments			78
25.15		Notice			79

 

 

- vii -

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

Collaboration and License Agreement

WHEREAS, 4DMT has expertise and technology in the field of adeno-associated virus vectors useful as a favored delivery vehicle for gene therapy in the human body using 4DMT’s therapeutic vector evolution technology and is pursuing research and development of such products;

WHEREAS, Roche has expertise in the research, development, manufacture and commercialization of pharmaceutical and diagnostic products; and

WHEREAS, 4DMT and Roche desire to collaborate on researching and developing certain ocular adeno-associated virus-based gene therapy products; and

WHEREAS, 4DMT is willing to grant to Roche rights to use certain of its intellectual property rights to make, use, offer for sale, sell and import and export certain such products, including options for Roche to license 4DMT’s rights to certain such products that will be developed by 4DMT.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows:

1. Definitions

As used in this Agreement, the following terms, whether used in the singular or plural, shall have the following meanings:

1.1 4DMT Know-How

The term “4DMT Know-How” shall mean the Know-How that 4DMT Controls at the Effective Date regarding any Construct or Product, or thereafter Controlled by 4DMT and necessary to develop, make, have made, use, or sell a Construct or Product in each case in the Field. For purposes of clarity, 4DMT shall not be obligated to provide Roche with Know-How that is none of the following:

 

a)

Controlled by 4DMT as of the Effective Date,

 

b)

used or created in the Collaboration, and

 

c)

used or created by 4DMT for Products associated with a 4DMT Product Class that becomes a Roche Product Class,

if the provision, license or sublicense of such Know-How to Roche would result in payment being due to a Third Party; in which case, so long as 4DMT does not provide Roche with such Know-How, then “4DMT Know-How” shall not include such Know-How.

1.2 4DMT Product Class Status Notice

The term “4DMT Product Class Status Notice” shall mean a written notice from 4DMT to Roche requesting the change of Status of a specified Available Product Class to a 4DMT Product Class in accordance with Section 2.3.2.

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.3 AAV

The term “AAV” shall mean adeno-associated virus.

1.4 Affiliate

The term “Affiliate” shall mean any individual, corporation, association or other business entity that directly or indirectly controls, is controlled by, or is under common control with the Party in question. As used in this definition of “Affiliate,” the term “control” shall mean the direct or indirect ownership of more than fifty percent (>50%) of the stock having the right to vote for directors thereof or the ability to otherwise control the management of the corporation or other business entity whether through the ownership of voting securities, by contract, resolution, regulation or otherwise. Anything to the contrary in this paragraph notwithstanding, [***] shall be deemed as Affiliates of Roche unless Roche provides written notice to 4DMT of its desire to include [***] as Affiliate(s) of Roche.

Upon the completion of a Change of Control, the Change of Control Group shall not be deemed as an Affiliate of 4DMT under this Agreement so long as such Change of Control Group and 4DMT have agreed to the restrictions specified in Article 24.

1.5 Agreement

The term “Agreement” shall mean this document including any and all appendices and amendments to it as may be added and/or amended from time to time in accordance with the provisions of this Agreement.

1.6 Agreement Term

The term “Agreement Term” shall mean the period of time commencing on the Effective Date and, unless this Agreement is terminated sooner as provided in Section 22.2, expiring on the later of (i) the date when no royalty or other payment obligations under this Agreement are or will become due or (ii) the date when there are no Product Classes with the status of either an Optionable 4DMT Product Class or a Roche Product Class.

1.7 Applicable Law

The term “Applicable Law” shall mean any law, statute, ordinance, code, rule or regulation that has been enacted by a government authority (including without limitation, any Regulatory Authority) and is in force as of the Effective Date or comes into force during the Agreement Term, in each case to the extent that the same is applicable to the performance by the Parties of their respective obligations under this Agreement.

1.8 Available Product Class

The term “Available Product Class” shall mean any Product Class other than a 4DMT Product Class or a Roche Product Class.

 

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1.9 Biosimilar Product

The term “Biosimilar Product” shall mean a Product that is not produced, licensed or owned by the Roche Group and is, according to the relevant Regulatory Authority for the given country or jurisdiction, highly similar with respect to a given Roche Group’s Product, notwithstanding minor differences in clinically inactive components, and with no clinically meaningful differences between the Biosimilar Product and the given Roche Group’s Product in terms of the safety, purity and potency of the product.

For countries or jurisdictions where no explicit biosimilar regulations exist, Biosimilar Product includes Products that (i) have been deemed to be a Biosimilar Product by a Regulatory Authority in another country or jurisdiction or (ii) have the same amino acid sequence.

1.10 BLA

The term “BLA” shall mean a Biologics License Application, or similar application for marketing approval of the Products for use in the Field submitted to the FDA, or a foreign equivalent of the FDA.

1.11 Calendar Quarter

The term “Calendar Quarter” shall mean each period of three (3) consecutive calendar months, ending March 31, June 30, September 30, and December 31.

1.12 Calendar Year

The term “Calendar Year” shall mean the period of time beginning on January 1 and ending December 31, except for the first year which shall begin on the Effective Date and end on December 31.

1.13 cGMP

The term “cGMP” shall mean the FDA Current Good Manufacturing Practice regulations and guidance documents, for example under 21 C.F.R. §210 and 211.

1.14 Change of Control

The term “Change of Control” shall mean: (a) the acquisition after the Effective Date by any Third Party of beneficial ownership of fifty percent (50%) or more of the then outstanding common shares or voting power of 4DMT, other than acquisitions by employee benefit plans sponsored or maintained by 4DMT; (b) the consummation of a business combination involving 4DMT, unless, following such business combination, the stockholders of 4DMT immediately prior to such business combination beneficially own directly or indirectly more than fifty percent (50%) of the then outstanding common shares or voting power of the entity resulting from such business combination; or (c) the sale of all or substantially all of 4DMT’s assets or business relating to the subject matter of the Agreement.

1.15 Change of Control Group

The term “Change of Control Group” shall mean the person or entity, or group of person or entities, that is the acquirer of, or a successor to, 4DMT in connection with a Change of Control, together with affiliates of such persons or entities that are not Affiliates of 4DMT immediately prior to the completion of such Change of Control.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.16 Choroideremia

The term “Choroideremia” shall mean a Product Class comprising the set of Products where the Payload is [***]. For clarity, [***].

1.17 Choroideremia GMP Lot

The term “Choroideremia GMP Lot” shall mean a Licensed Product associated with Choroideremia manufactured by a CMO on behalf of 4DMT according to cGMP, available in the amounts and to the specifications set forth in the Choroideremia Project Plan and released to conduct the first Phase I/IIa Study of such Licensed Product.

1.18 Clinical Study

The term “Clinical Study” shall mean a Phase I/IIa Study or Pivotal Study, as applicable.

1.19 CMO

The term “CMO” shall mean a contract manufacturing organization.

1.20 CMO/CRO

The term “CMO/CRO” shall mean a contract manufacturing organization or contract research organization, as applicable.

1.21 Collaboration

The term “Collaboration” shall mean the research and development collaboration described in Article 3. The Collaboration Projects collectively constitute the Collaboration. For clarity, the Collaboration does not include research and development work on 4DMT Product Classes, although JSC responsibilities include certain activities set forth in Article 10 with respect to a given Optionable 4DMT Product Class.

1.22 Collaboration Product Class

The term “Collaboration Product Class” shall mean a Roche Product Class that is designated as a Collaboration Product Class in accordance with Section 3.2.

1.23 Collaboration Project

The term “Collaboration Project” shall mean the research and development project for a given Collaboration Product Class, to be conducted under the corresponding Project Plan.

1.24 Combination Product

The term “Combination Product” shall mean

 

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a)	a single pharmaceutical formulation containing as its active ingredients both a Construct and one or more other therapeutically or prophylactically active ingredients,

 

b)	a combination therapy comprised of a Construct and one or more other therapeutically or prophylactically active products, priced and sold in a single package containing such multiple products or packaged separately but sold together for a single price, or

 

c)	a combination therapy comprised of a Construct and a Companion Diagnostic, priced and sold in a single package containing such multiple products or packaged separately but sold together for a single price,

in each case, including all dosage forms, formulations, presentations, line extensions, and package configurations. All references to Product in this Agreement shall be deemed to include Combination Product.

1.25 Commercially Reasonable Efforts

The term “Commercially Reasonable Efforts” shall mean such level of efforts required to carry out such obligation in sustained manner consistent with the efforts Roche or 4DMT, as applicable, devotes at the same stage of research, development or commercialization, as applicable, for its own internally developed pharmaceutical products in a similar area with similar market potential, at a similar stage of their product life taking into account the existence of other competitive products in the market place or under development, the proprietary position of the product, the regulatory structure involved, the anticipated profitability of the product, and other relevant factors. It is understood that such product potential may change from time to time based upon changing scientific, business and marketing and return on investment considerations.

[***].

1.26 Companion Diagnostic

The term “Companion Diagnostic” shall mean, with respect to a given Product, any product that is used for predicting and/or monitoring the response of a human being to treatment with a such Product (e.g. device, compound, kit, biomarker or service that contains a component that is used to detect or quantify the presence or amount of an analyte in body or tissue that affects the pathogens of the disease).

1.27 Completion

The term “Completion” shall mean the date that the final report for an associated Phase I/IIa Study is available. For clarity, as used in this agreement, to achieve Completion such Phase I/IIa Study must include minimum endpoints (“Endpoints”) that would be reasonably deemed as functional readouts of treatment efficacy and safety.

1.28 Compulsory Sublicense

The term “Compulsory Sublicense” shall mean a license or sublicense granted to a Third Party, through the order, decree or grant of a governmental authority having competent jurisdiction, authorizing such Third Party to manufacture, use, sell, offer for sale, import or export a Product in any country in the Territory.

 

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1.29 Construct

The term “Construct” shall mean any Variant carrying a Payload, but not (and specifically excluding) any Excluded Variant carrying a Payload. In addition to the applicable Variant and Payload, a Construct may contain a regulatory sequence or regulatory sequences that control the gene expression of the Payload, but a Construct shall not otherwise contain any other genetic material beyond the Variant, Payload and such regulatory sequence or regulatory sequences, or else it will fall outside this definition.

1.30 Confidential Information

The term “Confidential Information” shall mean any and all information, data or know-how (including Know-How), whether technical or non-technical, oral or written, that is disclosed by one Party or its Affiliates (“Disclosing Party”) to the other Party or its Affiliates (“Receiving Party”), whether under this Agreement or under the RFO Agreement, except that the results of the Collaboration are the Confidential Information of both Parties (to avoid doubt, subject to Roche’s right to use such results within the Field and 4DMT’s right to use such results outside the Field or inside the Field for Non-Optionable 4DMT Product Classes under the terms of this Agreement). Confidential Information shall not include any information, data or know-how that:

 

(i)

was generally available to the public at the time of disclosure, or becomes available to the public after disclosure by the Disclosing Party other than through fault (whether by action or inaction) of the Receiving Party or its Affiliates,

 

(ii)

can be evidenced by written records to have been already known to the Receiving Party or its Affiliates prior to its receipt from the Disclosing Party,

 

(iii)

is obtained at any time lawfully from a Third Party under circumstances permitting its use or disclosure,

 

(iv)

is developed independently by the Receiving Party or its Affiliates as evidenced by written records other than through knowledge or use of Confidential Information,

 

(v)

is required to be disclosed by the Receiving Party or its Affiliates to comply with a court or administrative order providing the Receiving Party or its Affiliates furnishes prompt notice (in no event less than [***] ([***]) days) to the Disclosing Party to enable it to resist such disclosure, or

 

(vi)

is approved in writing by the Disclosing Party for release by the Receiving Party.

The terms of this Agreement shall be considered Confidential Information of the Parties. Information disclosed under the RFO Agreement shall be deemed to be disclosed under this Agreement, however for clarity Confidential Information that was deemed as being 4DMT Confidential Information as a consequence of Roche’s failure to exercise the Option (as such term is defined in the RFO Agreement) shall remain as the Confidential Information of 4DMT.

1.31 Continuation Election Notice

The term “Continuation Election Notice” shall mean the notice 4DMT provides to Roche under Section 22.3.1 describing (i) 4DMT’s bona fide intentions to continue ongoing development and commercialization of Product(s) and, if applicable, (ii) 4DMT’s request for Roche’s continuation of activities during the termination period and/or transfer of the data, material and information relating to the Product(s) in accordance with Section 22.3.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.32 Control

The term “Control” shall mean (as an adjective or as a verb including conjugations and variations such as “Controls” “Controlled” or “Controlling”) (a) with respect to Patent Rights and/or Know-How, the possession by a Party of the ability to grant a license or sublicense of such Patent Rights and/or Know-How without violating the terms of any agreement or arrangement between such Party and any other party and (b) with respect to proprietary materials, the possession by a Party of the ability to supply such proprietary materials to the other Party as provided herein without violating the terms of any agreement or arrangement between such Party and any other party.

1.33 Cover

The term “Cover” shall mean, with respect to a particular item or product and a particular claim in a given Patent Right, that such claim covers (a) the composition of such item or product or any of its ingredients or formulations; (b) a method of making or using it or them; or (c) an item used or present in the manufacture of such item or product.

1.34 Development Event

The term “Development Event” shall mean a development event listed in the Section 12.4 table.

1.35 Effective Date

The term “Effective Date” shall mean November 16, 2017.

1.36 Enabled Product

The term “Enabled Product” shall mean a product for which 4DMT has provided a timely Continuation Election Notice under Section 22.3.1.

1.37 EU

The term “EU” shall mean the European Union and all its then-current member countries but including in any case [***] regardless of whether they are then-current member countries.

1.38 Excluded Construct

The term “Excluded Construct” shall mean any Excluded Variant carrying a Payload.

1.39 Excluded Product

The term “Excluded Product” shall mean any product containing an Excluded Construct.

1.40 Excluded Variant

The term “Excluded Variant” shall have the meaning set forth in the Memorandum of Understanding (“Memo”) between the Parties effective as of the Effective Date, as may be amended.

 

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1.41 Expert

The term “Expert” shall mean a person with no less than [***] years of pharmaceutical industry experience and expertise having occupied at least one senior position within a large biopharmaceutical company relating to product commercialization and/or licensing, but excluding any current or former employee or consultant of either Party. Such person shall be fluent in the English language.

1.42 FDA

The term “FDA” shall mean the Food and Drug Administration of the United States of America.

1.43 FDCA

The term “FDCA” shall mean the Food, Drug and Cosmetics Act.

1.44 Field

The term “Field” shall mean all biopharmaceutical and biomedical uses for delivery to the eye of any Product in order to treat ophthalmological diseases and disorders, but specifically excluding:

 

(a)	treatment or prevention of cancer (including pre-cancerous conditions),

 

(b)	treatment or prevention of diseases and conditions of the central nervous system (with the understanding that the central nervous system does not include retinal nerves), and

 

(c)	delivery of ddRNAi.

1.45 Filing

The term “Filing” shall mean the filing of an application by the FDA as defined in the FDCA and applicable regulations, or the equivalent application to the equivalent agency in any other country or group of countries, the official approval of which application is required before any lawful (a) commencement of clinical trials for with respect to INDs and (b) commercial sale or marketing with respect to BLAs or NDAs, of Licensed Products. To avoid doubt

 

(i)	with respect to INDs, “Filing” shall mean the IND going into effect in accordance with 21 C.F.R. 312.40(b); and

 

(ii)	with respect to BLAs or NDAs, “Filing” does not refer to such ultimate official approval, rather, it refers to the FDA or equivalent agency accepting the application as filed for review in order to determine whether or not to approve it.

1.46 First Commercial Sale

The term “First Commercial Sale” shall mean, on a country-by-country basis, the first invoiced sale of a Licensed Product to a Third Party by the Roche Group following the receipt of any Regulatory Approval required for the sale of such Licensed Product, or if no such Regulatory Approval is required, the date of the first invoiced sale of a Licensed Product to a Third Party by the Roche Group in such country.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.47 FTE

The term “FTE” shall mean a full-time equivalent person-year, based upon a total of no less than [***] working hours per year.

1.48 FTE Rate

The term “FTE Rate” shall mean the amount of [***] US Dollars (US$ [***]) per FTE, on a fully burdened cost basis.

1.49 Full Range 4DMT Patent Right

The term “Full Range 4DMT Patent Right” shall mean any Patent Right that 4DMT Controls as of the Effective Date and during the Agreement Term that (a) is not a Regents Patent Right and (b) Covers any Construct or Product in each case in the Field, including any of the foregoing Patent Rights that are Project Variant Patent Rights and Project Product Patent Rights (irrespective of the ownership of such Patent Rights).

A Full Range 4DMT Patent Right may be further subcategorized by Product Class Status, specifically as a Full Range 4DMT Patent Right that Covers any Product associated with a Product Class that has the following Status at the applicable time (and Constructs associated with such Products) as follows:

 

(i)	(x) a 4DMT Product Class that is an Optionable Product Class, (y) an Available Product Class or (z) a Roche Product Class (“Broad Range 4DMT Patent Right”);

 

(ii)	an Available Product Class or a Roche Product Class (“Mid Range 4DMT Patent Right”);

 

(iii)

a Roche Product Class (“Licensed 4DMT Patent Right”).

1.50 Generic Product

The term “Generic Product” shall mean a Product that is not produced, licensed or owned by the Roche Group that (i) contains a Construct that is the same as the Construct in the Roche Group’s Product and (ii) has the same or substantially the same labelling as the applicable Roche Group’s Product for at least one indication of such Roche Group’s Product.

1.51 GLP Tox Study

The term “GLP Tox Study” shall mean a toxicology study on a Licensed Product the outcome of which is expected (if successful) to provide data sufficient to support the filing of an IND covering such Licensed Product. Such toxicology study, however, need not actually be successful in order to qualify as a GLP Tox Study.

1.52 GMP Package Approval

The term “GMP Package Approval” shall mean, with respect to a Licensed Product associated with Choroideremia, the earlier to occur of

 

(i)	the first Filing of an IND with Choroideremia GMP Lot by or on behalf of 4DMT with no clinical hold due to such Choroideremia GMP Lot, and

 

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(ii)	the first Initiation by or on behalf of 4DMT of the first Phase I/IIa Study using Choroideremia GMP Lot.

1.53 Handle

The term “Handle” shall mean preparing, filing, prosecuting (including interference and opposition proceedings) and maintaining (including interferences, reissue, re-examination, post-grant reviews, inter-parties reviews, derivation proceedings and opposition proceedings).

1.54 Highest Priority Efforts

The term “Highest Priority Efforts” shall mean [***], in no event less than Commercially Reasonable Efforts.

1.55 High Volume Roche Solo Scenario

The term “High Volume Roche Solo Scenario” shall mean, with respect to a given Calendar Quarter, the existence of [***].

1.56 IFRS

The term “IFRS” shall mean International Financial Reporting Standards.

1.57 IND

The term “IND” shall mean an application as defined in the FDCA and applicable regulations promulgated by the FDA, or the equivalent application to the equivalent agency in any other country or group of countries, the filing of which is necessary to commence clinical testing of the Products in humans.

1.58 Initiation

The term “Initiation” shall mean the date that a human is first dosed with the applicable Product in the applicable Clinical Study approved or permitted (such as in the case of IND non-rejection) by the respective Regulatory Authority.

1.59 JOT

The term “JOT” shall mean a joint operating team that may be established by the JSC.

1.60 JSC

The term “JSC” shall mean the joint steering committee described in Article 10.

1.61 Know-How

The term “Know-How” shall mean data, knowledge and information, including materials, samples, chemical manufacturing data, toxicological data, pharmacological data, preclinical data, assays, platforms, formulations, specifications, quality control testing data, that are necessary or useful for the discovery, manufacture, development or commercialization of Products.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.62 Licensed Combination Product

The term “Licensed Combination Product” shall mean

 

d)	a single pharmaceutical formulation containing as its active ingredients both a Licensed Construct and one or more other therapeutically or prophylactically active ingredients,

 

e)	a combination therapy comprised of a Licensed Construct and one or more other therapeutically or prophylactically active products, priced and sold in a single package containing such multiple products or packaged separately but sold together for a single price, or

 

f)	a combination therapy comprised of a Licensed Construct and a Companion Diagnostic, priced and sold in a single package containing such multiple products or packaged separately but sold together for a single price,

in each case, including all dosage forms, formulations, presentations, line extensions, and package configurations. All references to Licensed Product in this Agreement shall be deemed to include Licensed Combination Product.

1.63 Licensed Construct

The term “Licensed Construct” shall mean a Construct associated with a given Licensed Product.

1.64 Licensed Product

The term “Licensed Product” shall mean a Product associated with a Product Class that has the Status of a Roche Product Class.

1.65 Like-Substance Product

The term “Like-Substance Product” shall mean a Generic Product or Biosimilar Product.

1.66 NDA

The term “NDA” shall mean a new drug application, including all necessary documents, data, and other information concerning a Product, required for Regulatory Approval of the Product as a pharmaceutical product by the FDA or an equivalent application to the equivalent agency in any other country or group of countries (e.g. the marketing authorization application (MAA) in the EU).

1.67 Net Sales

The term “Net Sales” shall mean, for a Licensed Product in a particular period, the amount calculated by subtracting from the Sales of such Licensed Product for such period: (i) a lump sum deduction of [***] percent ([***]%) of Sales in lieu of those deductions that are not accounted for on a Product-by-Product basis (e.g., freight, postage charges, transportation insurance, packing materials for dispatch of goods, custom duties); (ii) uncollectible amounts accrued during such period based on a proportional allocation of the total bad debts accrued during such period and not already taken as a gross-to-net deduction in accordance with the then currently used IFRS in the calculation of Sales of such Licensed Product for such period; (iii) credit card charges (including processing fees) accrued during such period on such Sales and not already taken as a gross-to-net deduction in accordance with the then currently used IFRS in the calculation of Sales of such Licensed Product for such period; and (iv) government mandated fees and taxes and other government charges accrued during such

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

period not already taken as a gross-to-net deduction in accordance with the then currently used IFRS in the calculation of Sales of such Licensed Product for such period, including, for example, any fees, taxes or other charges that become due in connection with any healthcare reform, change in government pricing or discounting schemes, or other action of a government or regulatory body.

1.68 Non-Optionable 4DMT Product Class

The term “Non-Optionable 4DMT Product Class” shall mean a Product Class that has the Status of a 4DMT Product Class and is further deemed as a Non-Optionable 4DMT Product Class. In accordance with this Agreement, a Non-Optionable 4DMT Product Class becomes deemed as such either by (i) Roche failing to provide a timely Clinical Stage Roche Product Class Conversion Notice for an Optioned Product Class under Section 2.3.3 or (ii) in connection with 4DMT providing a Continuation Election Notice under the terms of Section 22.3.1.

1.69 Non-Optionable Patent Right

The term “Non-Optionable Patent Right” shall mean a Patent Right that was an Optionable Patent Right, if, when and from the time that the Status of the applicable Product Class changes from being an Optionable Product Class to a 4DMT Product Class that is a Non-Optionable 4DMT Product Class or to an Available Product Class.

1.70 Optionable 4DMT Product Class

The term “Optionable 4DMT Product Class” shall mean any 4DMT Product Class that is not a Non-Optionable 4DMT Product Class.

1.71 Optionable Patent Right

The term “Optionable Patent Right” shall mean a Patent Right claiming inventions conceived or reduced to practice by or on behalf of 4DMT in the performance of Optionable Project Work. To the extent that a Patent Right is both an Optionable Patent Right and a Project Patent Right, the conditions of Handling shall be governed by the conditions for Handling the Project Patent Right.

1.72 Optionable Payload

The term “Optionable Payload” shall mean a Payload that, at the time of the applicable invention, was associated with an Optionable 4DMT Product Class.

1.73 Optionable Product Patent Right

The term “Optionable Product Patent Right” shall mean

 

(i)	an Optionable Patent Right the independent claims of which are directed specifically to the combination of specific Optionable Payloads with specific Optionable Variants, and

 

(ii)	an Optionable Product Dependent Claim.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.74 Optionable Project Work

The term “Optionable Project Work” shall mean work conducted by or on behalf of 4DMT on Product Classes that are Optionable 4DMT Product Classes at the time of such work, including for the XLRP 4DMT Product Class under the XLRP 4DMT Product Class Work Plan (and for clarity only such work as is conducted prior to such Optionable 4DMT Product Class becoming a Non-Optionable 4DMT Product Class or prior to the Status of such Product Class changing to a Roche Product Class or an Available Product Class).

1.75 Optionable Variant

The term “Optionable Variant” shall mean a Variant that has been identified through in vivo non-human animal testing, and/or in vitro testing, under Optionable Project Work.

1.76 Optionable Variant Patent Right

The term “Optionable Variant Patent Right” shall mean any Optionable Patent Right that Covers Optionable Variant(s) but does not explicitly claim (although it may more generically encompass) the combination of Optionable Variant(s) with specific Optionable Payload(s). For purposes of clarity, an Optionable Variant Patent Right may contain claims directed to the combination of Optionable Variant(s) and (i) generic payloads encompassing, but not specifically naming, Optionable Payload(s) or (ii) specific payloads other than Optionable Payload(s).

1.77 Optioned Patent Right

The term “Optioned Patent Right” shall mean an Optionable Patent Right if, when, and from the time that the Status of the applicable Product Class changes from an Optionable Product Class (under which the applicable work was done) to a Roche Product Class.

1.78 Other Product Class

The term “Other Product Class” shall mean a Roche Product Class that is not Choroideremia or an Optioned Product Class.

1.79 Party

The term “Party” shall mean 4DMT or Roche, as the case may be, and “Parties” shall mean 4DMT and Roche collectively.

1.80 Patent Right

The term “Patent Right” shall mean all rights under a given patent or patent application, in any country of the Territory, including any patent issuing on such patent application, and further including any substitution, extension or supplementary protection certificate, reissue, reexamination, renewal, division, continuation or continuation-in-part of any of the foregoing.

1.81 Payload

The term “Payload” shall mean

 

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(i)	any gene (including its variants) or functional fragment thereof, where a mutation to the gene (or its variants) results in an ophthalmological disease or disorder, or

 

(ii)	the nucleotide sequence encoding a protein, that when introduced into the retina, is expected to provide therapeutic benefit for an ophthalmological disease or disorder.

For purposes of this Agreement, a Payload consisting of a gene variant is deemed to be the same Payload as a Payload consisting of such gene or a Payload consisting of a second variant of such gene.

1.82 Pharmacovigilance Agreement

The term “Pharmacovigilance Agreement” shall mean an agreement entered into by the Parties to set forth the responsibilities and obligations of the Parties with respect to the procedures and timeframes for compliance with Applicable Laws pertaining to safety of a Shared Product and its related activities.

1.83 Phase I/IIa Study

The term “Phase I/IIa Study” shall mean for a Product associated with given Product Class the first to occur of the following:

 

(a)	a human clinical trial in any country that would satisfy the requirements of 21 C.F.R. § 312.21(a) (FDCA), as amended from time to time, and the foreign equivalent thereof or

 

(b)	the portion of a Phase II Study in which a human clinical trial is performed to estimate the biologic or clinical effect of a pharmaceutical product in a target population, and to support the design and execution of a subsequent Pivotal Study.

1.84 Phase II Study

The term “Phase II Study” shall mean a human clinical trial, for which the primary endpoints include a determination of dose ranges and/or a preliminary determination of efficacy in patients being studied as described in 21 C.F.R. § 312.21(b) (FDCA), as amended from time to time, and the foreign equivalent thereof.

1.85 Pivotal Study

The term “Pivotal Study” shall mean for a Product associated with a given Product Class the first to occur of the following:

 

(a)	the portion of a Phase II Study in which a placebo or active drug controlled, randomized human clinical trial performed to gain evidence of the efficacy of the Product in a target population, and/or to establish the optimal dosing regimen for such Product, or

 

(b)

a human clinical trial that is prospectively designed to demonstrate statistically whether a product is safe and effective for use in humans in a manner sufficient to obtain regulatory approval to market such product in patients having the disease or condition being studied as described in 21 C.F.R. § 312.21(c) (FDCA), as amended from time to time, and the foreign equivalent thereof.

 

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1.86 Pre-Clinical Success Criteria

The term “Pre-Clinical Success Criteria” shall mean a set of criteria to be achieved prior to conducting IND-enabling activities and to be included in a given Project Plan, the XLRP 4DMT Product Class Work Plan or a work plan for an Optionable Product Class that is not the XLRP 4DMT Product Class.

1.87 Preferred CMO

The term “Preferred CMO” shall mean [***].

1.88 Product

The term “Product” shall mean any product, including without limitation any Combination Product, containing a Construct, regardless of its finished form or formulation or dosage.

1.89 Product Class

The term “Product Class” shall mean a set of Products containing the same Payload.

1.90 Project Patent Right

The term “Project Patent Right” shall mean each of:

 

(i)	a Patent Right claiming inventions conceived or reduced to practice in the performance of a Collaboration Project and

 

(ii)	an Optioned Patent Right.

1.91 Project Payload

The term “Project Payload” shall mean a Payload associated with a given Collaboration Product Class.

1.92 Project Product Patent Right

The term “Project Product Patent Right” shall mean each of:

 

(i)	a Project Patent Right the independent claims of which are directed specifically to the combination of specific Project Payloads with specific Project Variants,

 

(ii)	a Product Dependent Claim and

 

(iii)

an Optioned Patent Right.

1.93 Project Variant

The term “Project Variant” shall mean a Variant that has been identified through in vivo non-human animal testing and/or in vitro testing under the RFO or a Collaboration Project.

1.94 Project Variant Patent Right

The term “Project Variant Patent Right” shall mean each of:

 

(a)

Any Project Patent Right that Covers Project Variants but does not explicitly claim (although it may more generically encompass) the combination of Project Variants with specific Project Payloads. For purposes of clarity, a Project Variant Patent Right may contain claims directed to the combination of Project Variants and (i) generic payloads encompassing, but not specifically naming, Project Payloads or (ii) specific payloads other than Project Payloads, and

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b)	Any Optionable Variant Patent Right that is an Optioned Patent Right.

1.95 Regents License Agreement

The term “Regents License Agreement” shall mean [***].

1.96 Regents Patent Right

The term “Regents Patent Right” shall mean [***] and all continuing applications thereof, including divisionals, substitutions, extensions and continuation-in-part applications (only to the extent, however, that claims in the continuation-in-part applications are entitled to the priority filing date of the parent patent application); any patents issuing on said application or continuing applications, including all reexaminations, reissues and extensions thereof; and any corresponding foreign patents or applications.

1.97 Regulatory Approval

The term “Regulatory Approval” shall mean any approvals, licenses, registrations or authorizations by Regulatory Authority, necessary for the sale of a Product in the Field in a regulatory jurisdiction in the Territory.

1.98 Regulatory Authority

The term “Regulatory Authority” shall mean any national, supranational (e.g., the European Commission, the Council of the European Union, the European Medicines Agency), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity including the FDA, in each country involved in the granting of Regulatory Approval for the Product.

1.99 Retina Field

The term “Retina Field” shall mean the Field where the ophthalmological disease or disorder treated is a disease or disorder of the retina.

1.100 RFO Agreement

The term “RFO Agreement” shall mean the Research Funding and Option Agreement between the Parties effective on February 16, 2015.

1.101 Roche Group

The term “Roche Group” shall mean collectively Roche, its Affiliates and its Sublicensees.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.102 Roche Materials

The term “Roche Materials” shall mean any chemical or biological substances including any: (i) organic or inorganic chemical or compound; (ii) gene; (iii) vector or construct, whether plasmid, phage, virus or any other type; (iv) host organism, including bacteria and eukaryotic cells; (v) eukaryotic or prokaryotic cell line or expression system; (vi) protein, including any peptide or amino acid sequence, enzyme, antibody or protein conferring targeting properties and any fragment of a protein or peptide or enzyme; (vii) genetic material, including any genetic control element (e.g., promoters); (viii) virus; or (ix) assay or reagent, all to the extent provided by Roche to 4DMT for use under a given Project Plan in the Collaboration.

1.103 Roche Patent Right

The term “Roche Patent Right” shall mean a Patent Right Controlled by Roche as of the date of any license grant to 4DMT that Covers the applicable Products in the Field and either (i) claims inventions made by or on behalf of Roche after the Effective Date in the course of researching, developing or commercializing Products in the Field, or (ii) Covers Products advanced by Roche into human clinical trials and without the grant of a license therewith, 4DMT, its Affiliates or sublicensees would be unable to develop or commercialize such Products using the formulations then in development or commercialized and the production methods then used to manufacture such Products. Irrespective of the foregoing, the Patent Rights identified in Appendix 1.103 (the “Excluded Patent Rights”) are specifically excluded from the Roche Patent Rights.

1.104 Roche Solo Product Class

The term “Roche Solo Product Class” shall mean a Roche Product Class that is not a Collaboration Product Class and for which an associated Licensed Product has yet to enter into human clinical trials.

1.105 Royalty Term

The term “Royalty Term” shall mean, with respect to a Licensed Product and for a given country, the period of time commencing on the date of First Commercial Sale of the Licensed Product in such country and ending on the later of the date that is

 

(a)	ten (10) years after the date of the First Commercial Sale of the Licensed Product in such country, or

 

(b)

the expiration of the last to expire Licensed 4DMT Patent Right in such country where the manufacture, use, import or offer for sale such Licensed Product or the Licensed Construct within it would have infringed a Valid Claim in the applicable Licensed 4DMT Patent Right in the absence of ownership of or a license under the Patent Right in which such Valid Claim resides, with the determination of whether the Licensed Product, Licensed Construct, process or use would have otherwise infringed a particular Valid Claim to be made on a country-by-country basis.

With regard to the calculation of the ten (10) year period, [***].

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.106 Sales

The term “Sales” shall mean, for a Licensed Product in a particular period, the sum of (i) and (ii):

 

(i)

the amount stated in the Roche Holding AG “Sales” line of its externally published audited consolidated financial statements with respect to such Licensed Product for such period (excluding sales to any Sublicensees that are not Affiliates of Roche). This amount reflects the gross invoice price at which such Licensed Product was sold or otherwise disposed of (other than for use as clinical supplies or free samples) by Roche and its Affiliates to such Third Parties (excluding sales to any Sublicensees that are not Affiliates of Roche) in such period reduced by gross-to-net deductions, if not previously deducted from such invoiced amount, taken in accordance with the then currently used IFRS.

By way of example, the gross-to-net deductions taken in accordance with IFRS as of the Effective Date include the following:

 

(a)

credits, reserves or allowances granted for (i) damaged, outdated, returned, rejected, withdrawn or recalled Licensed Product, (ii) wastage replacement and short-shipments; (iii) billing errors and (iv) indigent patient and similar programs (e.g., price capitation);

 

(b)

governmental price reductions and government mandated rebates;

 

(c)

chargebacks, including those granted to wholesalers, buying groups and retailers;

 

(d)

customer rebates, including cash sales incentives for prompt payment, cash and volume discounts; and

 

(e)

taxes, duties and any other governmental charges or levies imposed upon or measured by the import, export, use, manufacture or sale of a Licensed Product (excluding income or franchise taxes).

For purposes of clarity, sales by Roche and its Affiliates to any Sublicensee shall be excluded from “Sales”.

 

(ii)

for Sublicensees that are not Roche Affiliates (and excluding Compulsory Sublicensees), the sales amounts reported to Roche and its Affiliates in accordance with the sublicensee contractual terms and their then-currently used accounting standards. For the purpose of clarity, any such Sublicensee sales as reported to Roche in accordance with Compulsory Sublicense agreements shall be excluded from “Sales”.

1.107 Shared Products

The term “Shared Products” shall mean, on the one hand, a Licensed Product that is developed and/or commercialized by the Roche Group and, on the other hand, a related product that is sold by or on behalf of 4DMT, its Affiliates or sublicensees. Such a related product may, for example, contain the same Variant as the Licensed Product.

1.108 Start of GLP Tox Study

The term “Start of GLP Tox Study” shall mean the date that an animal is first dosed with the applicable Product in a GLP Tox Study.

 

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1.109 Sublicensee

The term “Sublicensee” shall mean an entity to which Roche has licensed rights (through one or multiple tiers), other than through a Compulsory Sublicense, pursuant to this Agreement.

1.110 Territory

The term “Territory” shall mean all countries of the world.

1.111 Third Party

The term “Third Party” shall mean a person or entity other than (i) 4DMT or any of its Affiliates or (ii) a member of the Roche Group.

1.112 Third Party Supplier

The term “Third Party Supplier” shall mean a Third Party (such as a CMO/CRO) that provides services and/or materials on behalf of 4DMT under a Project Plan.

1.113 US

The term “US” shall mean the United States of America and its territories and possessions.

1.114 US$

The term “US$” shall mean US dollars.

1.115 Valid Claim

The term “Valid Claim” shall mean a claim in (a) any unexpired and issued Licensed 4DMT Patent Right (or Project Product Patent Right where used in connection with an Enabled Product) that has not been disclaimed, revoked or held invalid by a final nonappealable decision of a court of competent jurisdiction or government agency, or (b) pending patent application within the Licensed 4DMT Patent Rights in any country that (i) is on file with the applicable patent office and has shown evidence of reasonably consistent activity to advance to issuance of a patent and (ii) which application has been on file with the applicable patent office for no more than [***] ([***]) years from the date to which the patent application claims its earliest priority.

1.116 Variant

The term “Variant” shall mean any adeno-associated virus capsid variant (regardless of whether or not the variant is naturally occurring).

1.117 XLRP

The term “XLRP” shall mean a Product Class comprising the set of Products where the Payload is (i) [***] or (ii) [***]. For clarity, [***].

1.118 Additional Definitions

Each of the following definitions is set forth in the Section of this Agreement indicated below:

 

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Definition		Section
4DMT Activities		3.3
4DMT Claims		20.1
4DMT [***] Year Anniversary		5.4.2
4DMT Indemnitees		20.1
4DMT Losses		20.1
4DMT-Originated Transfer Activities		22.3.4.3(e)
4DMT Product Class		2.1
4DMT [***] Year Anniversary		5.4.2
Accounting Period		14.1
Alliance Director		10.8
Available Product Class		2.1
Bankruptcy Code		23
Breaching Party		22.2.1
Broad Range 4DMT Patent Right		1.49
Chairperson		10.2
[***]		1.4
Claim		20.3
Clinical Stage Roche Product Class Conversion Notice		2.3.3
Compulsory Profit Share Percentage		12.6.6
Decision Period		18.6
Disclosing Party		1.30
Early Roche Product Class Conversion Notice		2.3.2
Endpoints		1.27
Excluded Patent Rights		1.103
Expert Committee		12.6.7
Extraneous Genetic Material		4.1
Fees		11.4
[***]		1.4
Indemnified Party		20.3
Indemnifying Party		20.3
Initiating Party		18.6
Key Primary Patent Right		18.6
Licensed 4DMT Patent Right		1.49
Members		10.2
Memo		1.40
Mid Range 4DMT Patent Right		1.49
Minimum Program Transfer		6.2
Minimum Transfer Payment		22.3.4.3(e)
Non-Breaching Party		22.2.1
Option Exercise Fee		2.3.3
Option Period		2.3.3
Optionable Primary Patent Right		18.4.1

 

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Definition		Section
Optionable Product Dependent Claim		18.4.1
Optioned Product Class		2.3.3
Patent Term Extensions		18.9
Payment Currency		14.2
Peremptory Notice Period		22.2.1
Primary Patent Right		18.4.2
Product Dependent Claim		18.4.2
Project Plan		3.1
Receiving Party		1.30
Relative Commercial Value		12.6.3
Roche Claims		20.2
Roche [***] Year Anniversary		5.4.1
Roche Indemnitees		20.2
Roche Losses		20.2
Roche Product Class		2.1
Roche Product Class Initiation Payment		12.2
Roche Transfer Activities		22.3.4.3(e)
Samples		22.3.4.3(b)
Sensitive Information		24(d)(v)
Settlement		18.6
Significant Change		3.3
SPCs		18.9
Status		2.1
Suit Notice		18.6
Third Party Expenses		11.1
Third Party Supplier Contract		11.2
Unviable		3.5.1(b)
XLRP 4DMT Product Class		2.3.1
XLRP 4DMT Product Class Work Plan		2.3.1

2. Product Classes

2.1 High-Level Overview

At any point in time during the Agreement Term, a given Product Class will have the status (“Status”) of one of the three following subcategories of Product Classes:

 

(a)	a “Roche Product Class” (for which the Roche Group generally has diligence obligations);

 

(b)	a “4DMT Product Class” (for which 4DMT generally has diligence obligations); and

 

(c)	an “Available Product Class” (for which neither Party has diligence obligations).

The Status of a given Product Class may change over time, in accordance with the provisions of this Agreement (as described in this Article 2). On the Effective Date, Choroideremia is a Roche Product Class, XLRP is a 4DMT Product Class (and specifically, the XLRP 4DMT Product Class) and all other Product Classes are Available Product Classes.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

2.1.1 Roche Product Class Subcategories

As further described and defined in this Agreement, in general the Roche Product Class may be further classified in two subcategory sets (that may overlap).

2.1.1.1 Subcategories generally applicable pre-Phase I/IIa Study

A Roche Product Class that has not yet entered into a clinical trial (or, as applicable, not yet Completed the applicable first Phase I/IIa Study) may be subcategorized as a Collaboration Product Class (where 4DMT is conducting work under an active Project Plan) or a Roche Solo Product Class (where there is not yet entry into a clinical trial and Roche is pursuing work independently). However for clarity, once a Collaboration Product Class has no active Project Plan and a Roche Solo Product Class has entered into the first clinical trial, the applicable subcategory no longer applies.

2.1.1.2 Financial subcategories

Particularly for purposes of development event, sales event and royalty payments under Article 12, the Roche Product Class has three subcategories:

 

(i)	Choroideremia (designated as a Roche Product Class as of the Effective Date),

 

(ii)	an Other Product Class, and

 

(iii)

an Optioned Product Class, which is a former 4DMT Product Class (specifically with the subcategory of Optionable 4DMT Product Class) whose Status was converted by Roche to a Roche Product Class upon Completion of the first associated Phase I/IIa Study.

2.1.2 4DMT Product Class Subcategories

As further described and defined in this Agreement, in general a 4DMT Product Class is subcategorized first as an Optionable 4DMT Product Class under which Roche has the right upon Completion of Phase I/IIa to convert the Status to a Roche Product Class. If Roche exercises such right, then the Status becomes a Roche Product Class, and is no longer a 4DMT Product Class. If Roche does not exercise such right, then the Status remains as a 4DMT Product Class, but is sub-categorized as a Non-Optionable 4DMT Product Class, unless and until the Status once again becomes an Available Product Class. (A Non-Optionable 4DMT Product Class may also be created by 4DMT’s submission of a Continuation Election Notice for a terminated Roche Product Class.)

In addition, as described in this Agreement, one Optionable 4DMT Product Class is designated as the XLRP 4DMT Product Class (for such time as its Status is an Optionable 4DMT Product Class).

2.2 Roche Product Class

2.2.1 Choroideremia

As of the Effective Date, Choroideremia is hereby designated as a Roche Product Class (and is further a Collaboration Product Class in accordance with Section 3.2.1).

 

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2.2.2 Prior to Initiation of the first Phase I/IIa Study

Prior to Initiation of the first Phase I/IIa Study to occur for the first Product associated with any Product Class, Roche may change the Status of any of up to [***] Available Product Classes to a Roche Product Class by providing written notice to 4DMT, and such Roche Product Class will then also be designated as a Collaboration Product Class in accordance with Section 3.2.2(i).

2.2.3 After Initiation of the first Phase I/IIa Study

After Initiation of such first Phase I/IIa Study and at any time thereafter during the Agreement Term, Roche may change the Status of any Available Product Class to a Roche Product Class (without the restrictions applicable under Section 2.2.2) by providing written notice to 4DMT.

 

(a)	Collaboration Product Class

Roche may designate any such Roche Product Class as a Collaboration Product Class in accordance with Section 3.2.2(ii)(b).

 

(b)	Roche Solo Product Class

Roche will not be required to designate such a Roche Product Class as a Collaboration Product Class. However prior to designating a Roche Solo Product Class that would place Roche in a High Volume Roche Solo Scenario, Roche shall provide 4DMT with written notice and a summary of all pre-clinical development conducted for the previous [***] Calendar Quarters on all Products associated with the current Roche Solo Product Classes. If at least one such Roche Solo Product Class did not have bona fide substantive development work during such previous [***] Calendar Quarter(s) in which it was a Roche Solo Product Class (which may include reasonable internal review periods not to extend beyond one such Calendar Quarter), then within [***] ([***]) days of 4DMT’s receipt of such written notice and development summaries, 4DMT may disallow Roche from designating such new Roche Solo Product Class (however in such case no Roche Product Class Initiation Payment will be due and 4DMT may not issue an invoice for such Roche Product Initiation Payment).

2.2.4 Additional Ways to Change Product Class Status to Roche Product Class

Roche may create a Roche Product Class in accordance with the Early Roche Product Class Conversion Notice described under Section 2.3.2 and the Clinical Stage Roche Product Class Conversion Notice described under Section 2.3.3.

2.2.5 Requesting the Other Program Transfer

Roche may request the Other Program Transfer set forth in Section 6.2 for any Roche Product Class.

2.2.6 HSR

As Roche may exercise rights under this Agreement to designate a new Roche Product Class, if needed each Party shall (i) cooperate with the other Party in the preparation, execution and filing of all documents that that may be required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act or any other Applicable Law, and (ii) observe all applicable waiting periods before changing the Status of a Product Class to a Roche Product Class. Each Party shall bear its own costs (including counsel or other expert fees) with respect to preparing, executing and filing such documents. Subject to the terms and conditions of this Agreement, each Party shall use all reasonable efforts to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all things necessary and appropriate to consummate the change of Status contemplated by this Section 2.2.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

2.3 4DMT Product Class

2.3.1 XLRP 4DMT Product Class

As of the Effective Date, XLRP is designated as a 4DMT Product Class, with a further designation as the “XLRP 4DMT Product Class”. 4DMT will develop at its own expense a Product associated with the XLRP 4DMT Product Class to the first Completion of a Phase I/IIa Study under a work plan (the “XLRP 4DMT Product Class Work Plan”). The initial XLRP 4DMT Product Class Work Plan is attached as Appendix 2.3.1.

4DMT will not modify the Pre-Clinical Success Criteria or the Endpoints without a consensus decision from the JSC. It is expected that updates and revisions may be needed over time to the XLRP 4DMT Product Class Work Plan. Without limiting 4DMT’s rights under Section 10.7.3(iii), the Parties shall work together in good faith to seek to mutually agree via the JSC in writing an update to such plan, and both Parties shall approach such discussions in good faith. 4DMT will in good faith seek to incorporate Roche’s input concerning such changes, including (i) a target product profile that accommodates Roche’s reasonable wishes, including Endpoints that Roche reasonably deems as functional readouts of treatment efficacy taking into account FDA guidelines as they evolve and (ii) resource investment by 4DMT and timelines reflective of Highest Priority Efforts. Without limiting 4DMT’s rights under Section 10.7.3(iii), so long as the Parties unanimously agree (including through the JSC) to such changes to the XLRP 4DMT Product Class Work Plan (without 4DMT exercising final decision-making authority regarding a dispute about changes to the XLRP 4DMT Product Class Work Plan) and the XLRP 4DMT Product Class Work Plan reflects 4DMT’s Highest Priority Efforts, then 4DMT will be considered to have devoted Highest Priority Efforts if it conducts its activities in accordance with the XLRP 4DMT Product Class Work Plan.

2.3.2 4DMT Product Class with Roche Early Conversion Right

In addition to the XLRP 4DMT Product Class under Section 2.3.1, during the Agreement Term but after Initiation of the first Phase I/IIa Study for the first Product for which this happens, and only when no 4DMT Product Class (including no XLRP 4DMT Product Class) has been designated in the previous [***] ([***]) month period, 4DMT may initiate a change of the Status of an Available Product Class to a 4DMT Product Class by providing a 4DMT Product Class Status Notice to Roche, including a proposed work plan that at a minimum describes the timelines, a target product profile, Pre-Clinical Success Criteria and Endpoints. However, Roche will then have the option to convert the Status of such Product Class to a Roche Product Class by providing written notice to 4DMT (“Early Roche Product Class Conversion Notice”) within [***] ([***]) weeks following the 4DMT Product Class Status Notice (which option Roche may also earlier waive in writing prior to expiration of the [***] ([***]) week period). Roche’s provision of the Early Roche Product Class Conversion Notice (i) will change the Status of the given Product Class from Available Product Class to Roche Product Class (so 4DMT’s submission of the 4DMT Product Class Status Notice will not count against 4DMT’s eligibility to submit a new 4DMT Product Class Status Notice for another Product Class in the same [***] ([***]) months) and (ii) any such Roche Product Class will also be designated as a Collaboration Product Class in accordance with Section 3.2.2(ii)(a). Except where Roche timely provides the Early Roche Product Class Conversion Notice, the Product Class Status will be deemed changed from Available Product Class to 4DMT Product Class (subject to Roche’s Option to Convert set forth in Section 2.3.3).

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

2.3.3 Option to Convert to Roche Product Class at Phase I/IIa Study Completion

For a given 4DMT Product Class (including the XLRP 4DMT Product Class), commencing upon the later of (i) the first Completion of the first Phase I/IIa Study for such 4DMT Product Class and (ii) 4DMT’s written notice to Roche of the Completion and provision of all relevant study reports related to such Phase I/IIa Study (and any earlier work) for such Product Class and ending [***] ([***]) days thereafter (the “Option Period”), Roche shall have the right to send a written notice to 4DMT (“Clinical Stage Roche Product Class Conversion Notice”) to convert the Status of the 4DMT Product Class to a Roche Product Class. During the Option Period, Roche shall have the right to perform reasonable due diligence by asking questions of and receiving answers from representatives of 4DMT pertinent to Roche’s decision to convert the Status. 4DMT shall respond to Roche’s inquiries in a reasonable and timely fashion and without delay and shall not withhold from Roche, in response to Roche’s inquiries, any material information in 4DMT’s possession and control related to Products associated with the Product Class. If requested by Roche as part of this due diligence, 4DMT shall provide the raw clinical trial data for Roche to conduct an independent reanalysis. Roche’s provision of the timely Clinical Stage Roche Product Class Conversion Notice (i) will change the Status of the given Product Class from 4DMT Product Class to Roche Product Class, and for so long as such Product Class is a Roche Product Class, will also be deemed as an “Optioned Product Class” and (ii) a fee set forth in Section 12.3 (“Option Exercise Fee”) will be due. If Roche does not provide a timely Clinical Stage Roche Product Class Conversion Notice, then the Status of the Product Class will remain as a 4DMT Product Class but will be deemed as a Non-Optionable 4DMT Product Class, and Roche shall have no further rights with respect to such Product Class (unless the Status returns to Available Product Class in accordance with Section 2.4).

2.3.4 Status Change through Termination

The Status of a Roche Product Class may be changed to a 4DMT Product Class as a consequence of certain termination provisions set forth in Section 22.3.1.

2.4 Available Product Class

At any time during the Agreement Term, Roche may change the Status of a Roche Product Class to an Available Product Class by providing notice of termination in accordance with Section 22.2.2 (unless 4DMT thereafter provides a Continuation Election Notice under Section 22.3.1).

At any time during the Agreement Term, 4DMT may change the Status of a 4DMT Product Class to an Available Product Class by providing written notice to Roche.

The Status of a Roche Product Class or a 4DMT Product Class may also be changed to an Available Product Class in accordance with Article 5 and/or Section 22.3.1.

 

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3. Research and Development Collaboration

3.1 Overview

Under the Collaboration, 4DMT and Roche will collaborate on at least one Collaboration Project associated with a Collaboration Product Class in the Field (and specifically in the Retina Field unless otherwise agreed to by the Parties) from pre-clinical research (or development as the case may be) through Completion of a Phase I/IIa Study according to an agreed project plan for each Collaboration Project (each, a “Project Plan”) executed by authorized representatives of both Parties (except for the initial Project Plan for the first Collaboration Project attached to this Agreement as per Section 3.2.1). The activities conducted in connection with the Collaboration will be overseen by the JSC. Each Party will use Commercially Reasonable Efforts to conduct their activities under a given Project Plan.

3.2 Collaboration Product Class

3.2.1 First Collaboration Product Class

Choroideremia is hereby designated as the first Collaboration Product Class. The initial Project Plan for Choroideremia is attached as Appendix 3.2.1.

3.2.2 Additional Collaboration Product Classes

In addition to the first Collaboration Product Class, and subject to any applicable Roche Product Class Initiation Payments set forth in Section 12.2,

 

(i)	prior to Initiation of the first Phase I/IIa Study to occur for the first Product associated with any Product Class, any Product Class designated as a Roche Product Class in accordance with Section 2.2.2 will also be designated as Collaboration Product Class;

 

(ii)	after Initiation of such first Phase I/IIa Study,

 

(a)

any Roche Product Class created by Roche’s submission of an Early Roche Product Class Conversion Notice will be designated as a Collaboration Product Class as of the date of such notice, and

 

(b)

Roche will have the right (but not the obligation) to designate any other Roche Product Class as a Collaboration Product Class by providing written notice to 4DMT.

After the designation of any such additional Collaboration Product Class, the Parties will promptly work together in good faith to create a Project Plan in accordance with Section 3.3 for such Collaboration Product Class.

3.3 Project Plans

Each Project Plan will set forth (i) the scope of the Collaboration with respect to the applicable Collaboration Product Class and the resources that will be dedicated to the activities contemplated within the scope of the Collaboration Project, including the responsibilities of each Party (in addition to those set forth in this Agreement) and particularly the responsibilities and activities to be performed by or on behalf of 4DMT (the “4DMT Activities”) (ii) specific objectives for each year, which objectives will be updated or amended, as appropriate, by the JSC as research and development progresses,

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) applicable deliverables and milestones and (iv) budgets for such activities (subject to Section 11.1). Each Project Plan shall be deemed to be incorporated into this Agreement by this reference and governed by the terms herein. If any provision in a Project Plan conflicts with the terms and conditions contained in the body of this Agreement, the language in the body of this Agreement shall prevail. Notwithstanding the foregoing, the Parties may agree to modify the terms and conditions of this Agreement with respect to a given Project Plan by setting forth such modifications in a Project Plan under a section entitled “Modifications to Agreement Terms and Conditions.” Except for the initial Project Plan for Choroideremia, each Project Plan shall conform in format substantially to the form of the Project Plan attached hereto as Appendix 3.3 and shall be executed by authorized representatives of both Parties.

The JSC shall review the Project Plans on an ongoing basis and may amend the Project Plans. Any such change with a significant budgetary or timeline impact (a “Significant Change”) shall be reflected in a written amendment to the Project Plans executed by authorized representatives of both Parties. For clarity, an increase or decrease of over [***] percent ([***]%) of the total cost of a given Project Plan under Section 11.1 will be deemed a Significant Change.

For purposes of executing or amending a Project Plan, Roche Basel will be authorized to execute on behalf of Roche (without need for execution by Roche US).

3.4 4DMT Reporting

4DMT shall provide a written progress report to Roche at the end of each [***] on the status of each Collaboration Project, including results achieved during the previous [***], associated data obtained and associated project intellectual property developed by 4DMT (but for clarity, written reports about project intellectual property will be activity-focused and not contain opinions or information that might be deemed privileged). Such reports shall be in the form mutually agreed between the Parties, but Roche may request, at a minimum, the following topics: (i) goals, (ii) achievements since last report including data generated, (iii) key issue(s), (iv) plans to solve key issue(s), (v) budget updates and (vi) next steps. 4DMT shall also keep Roche apprised through JSC meetings of significant developments with respect to the items above.

4DMT shall, upon Roche’s reasonable request, use reasonable efforts to make its management and scientists available at the premises of 4DMT to discuss scientific achievements relating to 4DMT (subject to the signature of non-disclosure agreements on customary terms).

3.5 Project Plan Termination

3.5.1 General

A Project Plan may be terminated as a result of a termination of the Agreement under Section 22.2. In addition:

 

(a)	Roche will have the right to terminate a Project Plan without cause upon ninety (90) days prior written notice to 4DMT.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b)	Either Party will have the right to terminate a Project Plan effective immediately upon written notice to the other Party in the event a Party reasonably determines that continuation of the Project Plan would be scientifically unviable, illegal, unethical or impossible (collectively, “Unviable”).

 

(c)	Roche may terminate a Project Plan effective immediately upon written notice to 4DMT in the event 4DMT has a Change of Control in accordance with Article 24.

 

(d)	Roche may terminate a Project Plan in the event of material breach by 4DMT with respect to such Project Plan with ninety (90) days’ notice (unless 4DMT cures such breach during such period).

3.5.2 Financial Consequences of Project Plan Termination

If a Project Plan is terminated, then Roche will be released from any obligation to make any payments which would otherwise have accrued after the effective date of termination for such Project Plan other than as set forth below.

If the Project Plan is terminated by termination of the Agreement by 4DMT for breach by Roche, or by termination of the Agreement as a whole or a given Project Plan by Roche either for being Unviable or without a cause, then Roche will:

 

(i)	reimburse 4DMT for up to [***] days of FTEs budgeted by 4DMT to the Collaboration Project to the extent that these employees – after good faith discussions between the Parties- cannot be reasonably allocated to other Product Classes (or other 4DMT projects outside the scope of this Agreement);

 

(ii)	provide funding to 4DMT for any non-cancellable commitments to outside Third Party Suppliers to the extent that such would have been otherwise reimbursable as Third Party Expenses under Sections 11.1 and 11.2; and

 

(iii)

reimburse 4DMT for a Collaboration Product Class that is Choroideremia, [***] percent ([***]%) of

 

(x)

the costs previously incurred by 4DMT and

 

(y)

4DMT’s non-cancellable costs

associated with process and formulation development and manufacture of Licensed Product used under the Project Plan (including the Choroideremia GMP Lot) under Section 8(a) (but for clarity, such payment will not be due or payable if prior to the date of termination the GMP Package Approval development event under Section 12.4 occurs and the corresponding payment is triggered).

3.5.3 Change of Status after Project Plan Termination

 

(a)	If Roche terminates a Project Plan for material breach by 4DMT, then Roche may convert such associated Roche Product Class to either a Roche Product Class that is not a Collaboration Product Class or an Available Project in conjunction with the written notice of breach.

 

(b)	If Roche terminates a Project Plan for Change of Control, then Article 24 will apply.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(c)

If either Party terminates a Project Plan as Unviable, then the Status of such Collaboration Product Class will convert to an Available Product Class. If Roche is the Party that so terminates, Roche will thereafter have no rights to convert such Product Class to a Roche Product Class. If 4DMT is the Party that so terminates, then 4DMT may not again propose such Product Class as a 4DMT Product Class.

 

(d)

If Roche terminates a Project Plan without cause, then 4DMT shall have the right to change the Status of such Product Class to either a Non-Optionable 4DMT Product Class or an Available Product Class, and if the latter, then Roche will have no right to thereafter change the Status to a Roche Product Class.

3.6 Roche Materials

Roche Materials will not be provided under the Collaboration unless specifically set forth in a given Project Plan. If so provided, 4DMT shall only use such Roche Materials as set forth in the Project Plan. Except as contemplated in the Project Plan, 4DMT shall not chemically or biologically modify, or take any actions to determine the chemical structure of, Roche’s Materials, without Roche’s prior written consent. 4DMT shall not transfer Roche Materials to a third party without Roche’s prior written consent. Upon completion of a given Project Plan, 4DMT shall either destroy or, at Roche’s written request, return all Roche Materials remaining in 4DMT’s possession, including any replications, progeny, derivatives, analogs or clones thereof.

4. Grant of License

4.1 License

4DMT hereby grants to Roche an exclusive (even as to 4DMT) right and license, including the right to sublicense, under 4DMT’s interest in any Mid Range 4DMT Patent Right and 4DMT Know-How to research, have researched, develop, have developed, register, have registered, make, have made, use, have used, import, have imported, export, have exported, market, have marketed, distribute, have distributed, sell and have sold Products associated with a Product Class that has the Status of an Available Product Class (subject to Section 4.1.1) or a Roche Product Class in the Field in the Territory, as well as the Constructs associated with such Products. For clarity, the license includes testing of Products outside the Field if needed (and only to the extent needed) for registration of Products within the Field.

For clarity, the licenses to Roche under the Agreement do not include Patent Rights and Know-How of any member of the Change of Control Group that is excluded from being an Affiliate of 4DMT pursuant to Section 1.4.

If Roche elects to use a Variant (other than an Excluded Variant) Covered by a Regents Patent Right, then the exclusive license grant shall as of the date of such election include a sublicense of the Regents License Agreement under the Regents Patent Right.

For clarity, to the extent a Product contains any genetic material other than a Construct (“Extraneous Genetic Material”), such as in the case that the other active pharmaceutical ingredient in a Combination Product consists of or contains genetic materials other than a Construct, then

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(a)	the 4DMT Know-How does not include Know-How related to the Extraneous Genetic Material, so long as 4DMT does not provide Roche with such Know-How, and

 

(b)	the Mid Range 4DMT Patent Rights (and, if applicable Regents Patent Rights) do not include Patent Rights that would be infringed by the making, using or selling of the Extraneous Genetic Material in the absence of the Construct.

4.1.1 Requirement for Roche Product Class Status

The Roche Group is granted no rights under 4DMT’s interest in any Mid Range 4DMT Patent Right and 4DMT Know-How to achieve any development event described in Section 12.4 or commercialize a Product associated with a Product Class that does not have the Status of a Roche Product Class at the time of the Roche Group’s achievement of such development event or commercialization (unless the license grant is fully paid up, irrevocable and royalty free in accordance with Section 12.6.1).

4.1.2 Covenant not to License

During the Agreement Term, 4DMT may not grant a license for Products in the Field to any Third Party under any Patent Right Controlled by 4DMT except for Products associated with a Non-Optionable 4DMT Product Class.

4.2 Sublicenses

Roche shall have the right to sublicense or subcontract (through multiple tiers) as follows:

4.2.1 Right to Sublicense to its Affiliates

Roche shall have the right to grant sublicenses to its Affiliates, and to [***] if [***] are, respectively, not an Affiliate under this Agreement, under its rights granted under Section 4.1, without prior approval of 4DMT or notice thereto. If Roche grants such a sublicense, Roche shall ensure that all of the applicable terms and conditions of this Agreement shall apply to the Affiliate to the same extent as they apply to Roche for all purposes. Roche assumes full responsibility for the performance of all obligations and observance of all terms so imposed on such Affiliate and shall itself account to 4DMT for all payments due under this Agreement by reason of such sublicense.

4.2.2 Right to Sublicense to Third Parties

Roche and its Affiliates shall have the right to grant written sublicenses to non-Affiliate entities under its rights granted under Section 4.1 without prior approval of 4DMT. Roche shall give prompt written notice to 4DMT of each sublicense that Roche grants under this Section 4.2.2. Roche shall provide 4DMT if 4DMT so requests in response to such notice a copy of the sublicense agreement; provided that it may be redacted to remove commercially sensitive information that is not required to be known in order to confirm consistency and compliance with this Agreement.

4.3 Research Cross License

While a given Project Plan is active, each Party grants to the other Party a non-exclusive right and license under Know-How and Patent Rights Controlled by such Party solely to enable the other Party to perform the activities contemplated under the Project Plan under this Agreement.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

4.4 Grant-Back License

Roche hereby grants to 4DMT an exclusive, worldwide right and license under Roche’s interest in any Project Product Patent Right to research, have researched, develop, have developed, register, have registered, make, have made, use, have used, import, have imported, export, have exported, market, have marketed, distribute, have distributed, sell and have sold Enabled Products outside the Field (including inside what was originally the Field for any Product Classes or countries no longer subject to the license under Section 4.1). Such right and license shall be exclusive even as to Roche, except the Roche Group shall retain a non-exclusive right to test Products outside the Field if needed for registration of Products within the Field. Such right and license shall include the right to sublicense, however any such sublicense may not include the right for such sublicensee to be consulted concerning the Handling of any Project Product Patent Right.

5. Diligence

5.1 Collaboration

Each Party will use Commercially Reasonable Efforts to conduct their respective activities under a given Project Plan.

5.2 Roche Commercially Reasonable Efforts

Roche agrees to use Commercially Reasonable Efforts to pursue development and commercialization of Licensed Products in the Field in the Territory. Roche shall be deemed to use Commercially Reasonable Efforts if it pursues development or commercialization of at least one Licensed Product at any given time during the term of the agreement; however subject to Section 5.4.1 and 5.5.

5.3 4DMT Commercially Reasonable Efforts

5.3.1 4DMT Product Class other than XLRP 4DMT Product Class

While a 4DMT Product Class is an Optionable 4DMT Product Class, 4DMT will use Commercially Reasonable Efforts to advance a Product associated with such 4DMT Product Class to Completion of Phase I/IIa.

5.3.2 XLRP 4DMT Product Class

While the XLRP 4DMT Product Class is an Optionable 4DMT Product Class, 4DMT will use Highest Priority Efforts to advance a Product associated with such XLRP 4DMT Product Class to Completion of Phase I/IIa.

If 4DMT fails to use such Highest Priority Efforts, then Roche may immediately send a notice to 4DMT and the following will occur:

 

(a)	the Status of the XLRP 4DMT Product Class will be changed to a Roche Product Class (however without the right for Roche to unilaterally designate such a Roche Product Class as a Collaboration Product Class);

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b)	the obligations of diligence in Article 5 for Roche Product Classes shall not apply to such Roche Product Class;

 

(c)

such Roche Product Class will be deemed as an Other Product Class, subject to the corresponding payment obligations in Sections 12.4 (but excluding Development Events 1 and 2), 12.5 and 12.6, and for clarity no further payments for an Optioned Product Class payment stream shall be due for such Roche Product Class; and

 

(d)	notwithstanding anything to the contrary in this Agreement, Roche may immediately request the Program Transfer set forth in Article 6.

5.4 Progression to IND Filing

5.4.1 Roche Progression

If Roche has not advanced a Licensed Product for a given Roche Solo Product Class to Filing of an IND within [***] ([***]) years after the date that such Product Class is designated as a Roche Product Class (the “Roche [***] Year Anniversary”), then the Status for such Roche Product Class will change to an Available Product Class effective on the applicable Roche [***] Year Anniversary.

Within [***] ([***]) days of a given Roche [***] Year Anniversary, Roche shall provide written notice to 4DMT indicating if the Status of the applicable Product Class has changed to an Available Product Class or remains as a Roche Product Class, and if the Status has changed, Roche will provide a notice of termination for such Product Class in accordance with Section 22.2.2.

5.4.2 4DMT Progression

In addition to 4DMT’s obligations under Section 5.3, if 4DMT has not advanced a Product for a given 4DMT Product Class to (i) Filing of an IND within [***] ([***]) years after the date that such Product Class is designated as a 4DMT Product Class (the “4DMT [***] Year Anniversary”) or (ii) Completion of a Phase I/IIa Study within [***] ([***]) years after the date that such Product Class is designated as a 4DMT Product Class (the “4DMT [***] Year Anniversary”), then the Status for such 4DMT Product Class will change to an Available Product Class effective on the applicable 4DMT [***] Year Anniversary or 4DMT [***] Year Anniversary.

Within [***] ([***]) days of a given 4DMT [***] Year Anniversary and 4DMT [***] Year Anniversary, 4DMT shall provide written notice to Roche indicating if the Status of the applicable Product Class has changed to an Available Product Class or remains as a 4DMT Product Class.

5.5 Additional Development Progression

5.5.1 Roche Progression

No more than [***] each Calendar Year, for Roche Product Classes that have not yet had a First Commercial Sale of an associated Product and are not the subject of an active Project Plan, if the high-level summary provided by Roche for such Product Class under Section 7.2(b) indicates that no bona fide substantive development work has occurred on a Product associated with such Roche Product Class in the previous [***], then 4DMT may request that Roche provide a notice of termination for such Product Class in accordance with Section 22.2.2, and unless Roche has a bona fide dispute about 4DMT’s conclusion, Roche will provide such termination notice.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

In any given [***] where there is a High Volume Roche Solo Scenario, Roche will provide for each Roche Solo Product Class a summary of all development work conducted. If at least one such Roche Solo Product Class has not had bona fide substantive development work during such [***] (which may include reasonable internal review periods not to extend beyond one such [***]), 4DMT may request that Roche provide a notice of termination of up to a maximum of the number such Roche Solo Product Classes for which Roche has not been diligent (however for clarity no more than the number that will take Roche out of the High Volume Roche Solo Scenario), and unless Roche has a bona fide dispute about 4DMT’s conclusion (which may include whether 4DMT in bad faith accepted a Roche Product Class Initiation Payment for the designation of a new Roche Product Class in a High Volume Roche Solo Scenario, rather than disallowing at the time of designation based on a similar standard of what constitutes substantive development work), Roche will provide such termination notice(s).

5.5.2 4DMT Progression

No more than [***] each Calendar Year, for 4DMT Product Classes that have not yet had a first commercial sale of an associated Product (but excluding Optionable 4DMT Product Classes if Roche is receiving regular progress updates through the JSC), Roche may provide written notice to 4DMT requesting an update of the Status of the applicable 4DMT Product Class. If 4DMT or its sublicensees have conducted no bona fide substantive development work on a Product associated with such 4DMT Product Class in the previous [***], then Roche may request that 4DMT provide a notice of change of Status for such Product Class, and unless 4DMT has a bona fide dispute about Roche’s conclusion, 4DMT will provide Roche with written notice of the change of the Status of such 4DMT Product Class to an Available Product Class.

5.5.3 Commercial Progression

For clarity,

 

(a)

upon the First Commercial Sale anywhere in the world by the Roche Group of a Licensed Product, Roche will have no further diligence obligations to 4DMT for Products specifically associated with the associated Roche Product Class and 4DMT may not request that Roche convert such Product Class to an Available Product Class, with the proviso that until the license associated with such Licensed Product is fully paid-up and irrevocable, then Roche must exercise Commercially Reasonable Efforts with respect to such Licensed Product unless Roche is using Commercially Reasonable Efforts to pursue development and commercialization of at least one other Licensed Product under Section 5.2, and

 

(b)

upon the first commercial sale anywhere in the world by 4DMT of a Product associated with a Non-Optionable 4DMT Product Class following the receipt of any applicable regulatory approval required by such sale, 4DMT will have no further diligence obligations to Roche for such Product Class and Roche may not request that 4DMT convert such Product Class to an Available Product Class.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

6. Program Transfer

6.1 IND and Regulatory

Except as otherwise agreed to by the Parties, for a given Roche Product Class and upon Roche’s request after

 

(i)	Completion of the Phase I/IIa work under a Project Plan for a Collaboration Product Class or

 

(ii)	Roche’s provision of a Clinical Stage Roche Product Class Conversion Notice,

4DMT shall promptly transfer sponsorship of any IND for the Licensed Product(s) associated with the given Roche Product Class to the Roche Affiliate designated by Roche and the Parties will cooperate to draft and execute the necessary documents required to effect such transfer. Prior to the transfer, 4DMT shall provide to Roche copies of all material correspondence with the Regulatory Authorities.

In addition, at a date defined by Roche, 4DMT shall transfer and assign to Roche any regulatory dossiers containing information necessary or useful to Roche in connection with its regulatory filings for all Products, including, but not limited to clinical trial dossiers, regulatory correspondence, Regulatory Authority meeting minutes and study reports from completed non-clinical and clinical studies. For all completed study reports, 4DMT shall provide necessary documentation to confirm data reliability, as required by Article 43 of the Japanese Pharmaceutical Affairs Law Enforcement Regulations and related notifications, including, but not limited to original author signatures, raw data lists, GLP and GCP compliance information. All documentation is to be provided in English.

Also at a date defined by Roche, 4DMT shall transfer to Roche all relevant historical clinical safety data. Safety information on serious adverse events shall be provided in CIOMS format and safety information on non-serious adverse events shall be provided in English Line Listing format.

6.2 Other Program Transfer

In addition to Section 6.1, upon Roche’s request, the Parties will work together to effect the transfer to Roche (or Roche’s designee) of the 4DMT Know-How, Licensed Constructs and Licensed Products applicable to a given Roche Product Class. 4DMT shall make its personnel (or cause its third party CMO/CRO to be) available as reasonably requested by Roche to complete such transfer. The transfer activities set forth in Appendix 6.2 (the “Minimum Program Transfer”) shall be provided [***]. If more than the Minimum Program Transfer is required, then 4DMT shall seek to reasonably accommodate Roche’s needs and Roche shall reimburse 4DMT the expenses of providing assistance to Roche, [***].

If instead of a transfer, Roche (at its discretion) elects to continue utilizing the services of a given 4MDT CMO/CRO under separate contract between a member of the Roche Group and such CMO/CRO, then 4DMT will cooperate with Roche to put in place such documents as are needed to (i) release the CMO/CRO of its obligations to 4DMT such that Roche may contract with the CMO/CRO for the relevant services and (i) confirm with the given CMO/CRO the license of rights to Roche and such transfer of title/rights of the relevant applicable Know-How and materials at a given CMO/CRO as appropriate under this Agreement. Such documents may include an assignment or novation of the relevant contract between 4DMT and such CMO/CRO, if agreed to by 4DMT, the CMO/CRO and Roche.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7. Development and Regulatory Affairs

7.1 By 4DMT

Except as otherwise agreed by the Parties:

 

(i)	4DMT shall be responsible for pursuing clinical development of Products associated with a Collaboration Product Class that is the subject of an active Project Plan in the Collaboration in accordance with the Project Plan.

 

(ii)	4DMT at its sole cost and discretion (but subject to the diligence obligations set forth in this Agreement), shall be responsible for pursuing clinical development of Products associated with a 4DMT Product Class (other than the XLRP 4DMT Product Class) that is an Optionable Product Class.

 

(iii)

Subject to the diligence and other obligations set forth in this Agreement, 4DMT shall be responsible for pursuing clinical development of Products associated with the XLRP 4DMT Product Class that is an Optionable Product Class, with such activities to be conducted in accordance with the XLRP 4DMT Product Class Work Plan.

 

(iv)	4DMT at its sole cost and discretion, shall as between the Parties have the sole right to pursue the clinical development of Products associated with a 4DMT Product Class that is a Non-Optionable 4DMT Product Class (but subject to Section 5.4.2 and 5.5.2).

Notwithstanding the foregoing, in each case above other than a 4DMT Product Class that is a Non-Optionable 4DMT Product Class, unless Roche requests otherwise, Roche will have the right to (a) receive copies of minutes and any other communications with applicable Regulatory Authorities concerning Products associated with such Collaboration Product Class and 4DMT Product Class, (ii) provide input into information to be submitted to a Regulatory Authority concerning such Products (which input 4DMT must reasonably implement for a Collaboration Product Class and must reasonably consider for the XLRP 4DMT Product Class) and (iii) participate in any meetings with an applicable Regulatory Authority concerning such Products.

7.2 By Roche

Except to the extent that Licensed Products are the subject of an active Project Plan in the Collaboration or as otherwise agreed to by the Parties:

 

(a)	Roche, at its sole cost and discretion, shall be responsible for pursuing clinical development of Licensed Products, including all regulatory matters connected therewith, and shall devote Commercially Reasonable Efforts to the foregoing.

 

(b)

Prior to the First Commercial Sale of a given Licensed Product, Roche shall provide an annual written report to 4DMT to update 4DMT with a high-level summary as to development progress for such Licensed Product, including all preclinical and clinical development activities. Thereafter, Roche will have no further obligation to provide development progress reports with respect to such Licensed Product.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7.3 Shared Product

7.3.1 Dossier Sharing

Notwithstanding anything express or implied, if there are regulatory dossiers or documentation that are used for Shared Products, the Parties shall reasonably cooperate with each other to share such dossiers or documents.

7.3.2 Pharmacovigilance Agreement

Where advisable or legally required, the Parties (or their applicable Affiliates and/or licensees) shall execute a separate Pharmacovigilance Agreement specifying the procedure for the information exchange of the adverse events that may occur with respect to Shared Products.

8. Manufacturing

Except as otherwise agreed to by the Parties:

 

(a)

4DMT shall be responsible for having clinical supplies of Licensed Products associated with a Collaboration Product Class manufactured by a Third Party CMO through Completion of the first Phase I/IIa Study in accordance with the Project Plan. Such Third Party CMO will be a Preferred CMO, unless otherwise agreed to by the Parties. For Choroideremia, Roche will [***], however upon 4DMT’s achievement of [***], 4DMT will be entitled to receive the applicable development event payment under Section 12.4.

 

(b)

Roche shall be responsible for all other manufacturing of all Licensed Products associated with a given Roche Product Class (e.g. for a Roche Solo Product Class, Pivotal Trials and commercial supplies). For Licensed Products associated with a Collaboration Product Class, prior to Completion of the Phase I/IIa Study, Roche will have the right (but not the obligation) to conduct manufacturing activities at Roche’s expense in preparation for the Pivotal Study, including contracting with any 4DMT CMO working on the manufacture and testing of Licensed Product for the Phase I/IIa Study.

 

(c)

4DMT shall be responsible for manufacturing of Products associated with a given 4DMT Product Class, however subject to what right Roche may have under this Agreement to provide input for Products associated with an Optionable 4DMT Product Class, particularly the XLRP 4DMT Product Class while it is an Optionable 4DMT Product Class. While a 4DMT Product Class is an Optionable 4DMT Product Class:

 

(i)

4DMT may not use a CMO other than a Preferred CMO to conduct work under the XLRP 4DMT Product Class Work Plan or a work plan for a 4DMT Product Class that is not the XLRP 4DMT Product Class without Roche’s consent.

 

(ii)

For the Product associated with an Optionable 4DMT Product Class, if Roche requests, the Parties will work together to enter into such side agreements as will allow Roche to conduct manufacturing activities [***] in preparation for a Pivotal Study, including contracting with any 4DMT CMO working on the manufacture and testing of the applicable Product for the Phase I/IIa Study. If and when such Optionable 4DMT Product Class becomes a Non-Optionable 4DMT Product Class, (x) 4DMT will receive the benefit of and ownership in

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Roche’s rights in any intellectual property for such testing and manufacturing, and (y) at 4DMT’s option, any Product made in preparation for the potential Pivotal Study will either be destroyed by Roche or the CMO in possession, or 4DMT may elect to acquire title to such Product if [***].

9. Commercialization

Roche, at its own expense, shall have sole responsibility and decision making authority for the marketing, promotion, sale and distribution of Licensed Products in the Field in the Territory. 4DMT, at its own expense, shall have sole responsibility and decision making authority for the marketing, promotion, sale and distribution of Products associated with a Non-Optionable 4DMT Product Class or Enabled Products in the Territory.

10. Governance

10.1 Joint Steering Committee

Within [***] ([***]) days after the Effective Date of this Agreement, the Parties shall establish a JSC to

 

(i)	oversee the Collaboration activities under this Agreement,

 

(ii)	provide input for the XLRP 4DMT Product Class, and

 

(iii)

monitor development progress of any Optionable 4DMT Product Classes.

10.2 Members

Except as otherwise agreed by the JSC, the JSC shall be composed of six (6) persons (“Members”). Roche and 4DMT each shall be entitled to appoint three (3) Members with appropriate seniority and functional expertise. Each Party may replace any of its Members and appoint a person to fill the vacancy arising from each such replacement. A Party that replaces a Member shall notify the other Party at least [***] days prior to the next scheduled meeting of the JSC (to the extent practicable). Both Parties shall use reasonable efforts to keep an appropriate level of continuity in representation. Both Parties may invite a reasonable number of additional experts and/or advisors to attend part or the whole JSC meeting with prior notification to the JSC. Members may be represented at any meeting by another person designated by the absent Member. The JSC shall be chaired by a [***] Member (“Chairperson”).

10.3 Responsibilities of the JSC

The JSC shall have the responsibility and authority to:

 

(a)	review and recommend for execution proposed Project Plans (and budgets);

 

(b)	review Project Plans (and budget) on an ongoing basis and amend Project Plans (with any Significant Change reflected in a written amendment to the Project Plan executed in accordance with Section 3.3);

 

(c)	create, oversee or disband JOTs, as appropriate;

 

(d)	approve amendments to the XLRP 4DMT Product Class Work Plan;

 

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(e)	review proposed work plans provided with a 4DMT Product Class Status Notice;

 

(f)	review changes to the work plans for any Optionable 4DMT Product Class that is not the XLRP 4DMT Product Class;

 

(g)	monitor the development of Optionable 4DMT Product Classes through regular progress report updates by 4DMT;

 

(h)	approve plans for a program transfer in accordance with Article 6; and

 

(i)	attempt to resolve any disputes on an informal basis by unanimous consensus on the JSC (with the JSC having no authority to resolve contractual disputes).

The JSC shall have no responsibility and authority other than that expressly set forth in this Section.

10.4 Meetings

The Chairperson or his/her delegate will be responsible for sending invitations and agendas for all JSC meetings to all Members at least [***] days before the next scheduled meeting of the JSC (or as soon as practicable). The venue for the meetings shall be agreed by the JSC. The JSC shall hold meetings at least [***] per calendar year, either in person or by tele-/video-conference, and in any case as frequently as the Members of the JSC may agree shall be necessary, but not more than [***] times a year.

10.5 Minutes

The Chairperson will be responsible for designating a Member to record in reasonable detail and circulate draft minutes of JSC meetings to all members of the JSC for comment and review within [***] days after the relevant meeting. The Members of the JSC shall have [***] days to provide comments. The Party preparing the minutes shall incorporate timely received comments and distribute finalized minutes to all Members of the JSC within [***] days of the relevant meeting. The Chairperson will approve the final version of the minutes before its distribution.

10.6 Progress Reports

4DMT shall prepare and provide Roche [***] written reports as outlined in Section 3.4. Promptly upon completion of any Project Plan, 4DMT shall provide a final written report summarizing its activities under the Project Plan and the results thereof. Upon the written request of Roche and not more than [***] in each Calendar Year, 4DMT shall permit Roche, [***], to have access during normal business hours to those records of 4DMT that may be necessary to verify the basis for any payments hereunder.

4DMT will also prepare and provide Roche on a [***] basis (or as otherwise agreed to by the Parties) written progress reports for any Optionable 4DMT Product Class, including the XLRP 4DMT Product Class.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

10.7 Decisions

10.7.1 Decision Making Authority

The JSC shall decide matters within its responsibilities set forth in Section 10.3 with each Party having one vote, irrespective of the number of participants present.

10.7.2 Consensus; Good Faith

The Members of the JSC shall act in good faith to cooperate with one another and seek agreement with respect to issues to be decided by the JSC. The Parties shall endeavor to make decisions by consensus.

10.7.3 Escalation

If the JSC is unable to decide a matter by consensus, then such matter shall be referred to [***] for 4DMT and [***] Roche pRED (or their designee), who together shall use reasonable and good faith efforts to reach a decision by consensus within [***] days after the date such matter is referred to them. If the Parties still fail to reach a decision within such [***] days, then

 

(i)	Roche shall have the final decision authority on any matter [***],

 

(ii)	Notwithstanding the above, with regards to Choroideremia, 4DMT shall have the final decision authority on [***],

 

(iii)

4DMT shall have the final decision making authority for [***],

which final decisions shall be exercised in good faith. No final decision may be exercised in conflict with the terms and conditions of this Agreement. No final decision shall amend or contradict this Agreement. No final decision shall resolve any dispute as to the interpretation or application of this Agreement. Any final decision in accordance with this Section 10.7 shall constitute a decision of the JSC.

10.8 Alliance Director

Each Party shall appoint one person to be its point of contact with responsibility for facilitating communication and collaboration between the Parties (each, an “Alliance Director”). The Alliance Directors shall be permanent participants of the JSC meetings and may attend JOT meetings as appropriate. The Alliance Directors shall facilitate resolution of potential and pending issues and potential disputes to enable the JSC to reach consensus and avert escalation of such issues or potential disputes.

10.9 Limitations of Authority

The JSC shall have no authority to amend or waive any terms of this Agreement nor to resolve contractual disputes.

10.10 Expenses

Each Party shall be responsible for its own expenses including travel and accommodation costs incurred in connection with the JSC.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

10.11 Lifetime

The JSC shall exist while at least one Project Plan is active.

11. Project Plan Payments to 4DMT

11.1 Collaboration Costs

Unless otherwise agreed to by the Parties, Roche shall (i) pay 4DMT at the FTE Rate for work performed by or on behalf of 4DMT under a given Project Plan and (ii) reimburse 4DMT for the expenses of a Third Party Supplier (“Third Party Expenses”) that 4DMT incurred under a given Project Plan as set forth in Section 11.2. Notwithstanding the foregoing, [***]. The number of FTEs per month that may not be exceeded without mutual agreement of the Parties will be included in each corresponding Project Plan. If the Parties mutually agree to conduct work in under a Project Plan in areas of the Field other than the [***] (for example in a Field [***]), it is expected that costs under the Project Plan will be [***].

11.2 Third Party Supplier and Third Party Expenses

For those Third Party Suppliers for which Roche will be responsible for reimbursing to 4DMT Third Party Expenses under a Project Plan, Roche will have the right (but not the obligation) to approve any proposed Third Party Suppliers performing under a Project Plan, and 4DMT will not use Third Party Suppliers to provide services or materials under a Project Plan if Roche has a reasonable basis to object to such Third Party Supplier. Contracts between 4DMT and a given Third Party Supplier for work to be performed under a given Project Plan (“Third Party Supplier Contract”) will contain appropriate clauses that apply responsibilities and obligations applicable to 4DMT under this Agreement, and Roche will have the right to receive a copy of the Third Party Supplier Contract. Roche may provide input into draft Third Party Supplier Contracts, which input 4DMT must reasonably consider.

 

The reimbursement made for Third Party Expenses may not exceed the amount estimated in the most up to date version of the Budget of the respective Project Plan, as revised and approved by the JSC in accordance with Section 10.3 (and subject to Significant Change provisions of Section 3.3).

11.3 Payment Schedule

Payments made for Project Plans will be made to 4DMT within [***] ([***]) days after Roche’s receipt of an undisputed invoice from 4DMT itemizing all amounts payable in respect of the 4DMT Activities and Third Party Expenses. 4DMT will invoice Roche on a [***] basis (or such other basis as may be set forth in the Project Plan) after the completion of 4DMT Activities for which amounts may be billed, however any individual Third Party Expenses over [***] US Dollars (US$ [***]) that 4DMT incurs within [***] months after the previous [***] invoice may be invoiced to Roche separately (i.e. without waiting for the next [***] invoicing period). Invoices must include detail supporting the amounts that are billed, [***].

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

11.4 Fair Market Value

The Parties acknowledge that the compensation to 4DMT and the pass-through expenses paid to any healthcare organization or healthcare professional (hereinafter collectively the “Fees”) set forth in a Project Plan shall be the fair market value of the 4DMT Activities provided by 4DMT and/or the healthcare organization or healthcare professional, as applicable and these Fees have not been determined in a manner which takes into account the volume or value of any referrals, purchases or business otherwise generated between 4DMT/healthcare organization or healthcare professional and Roche or any of their respective Affiliates and shall not obligate or influence 4DMT/healthcare organization or healthcare professional or any other person to purchase, use, recommend or arrange for the use of Roche’s products or those of any organization affiliated with Roche. Notwithstanding the above, no healthcare organization may pass through any Fees provided hereunder, directly or indirectly, to any customer of such healthcare organization as a price concession or otherwise.

11.5 Optionable 4DMT Product Class Work

For clarity, this Article 11 applies only to work performed under a Project Plan for a Collaboration Product Class (and excluding manufacturing work for Choroideremia in accordance with Section 8(a)). Work performed by or on behalf of 4DMT for Optionable 4DMT Product Classes will be done at 4DMT’s own expense.

12. Payment to 4DMT (other than Project Plan Payments)

12.1 Initiation Payment

Within [***] ([***]) days after the Effective Date and receipt of an invoice from 4DMT, Roche shall pay to 4DMT Twenty-One Million US Dollars (US$21,000,000). Such amount is non-refundable and non-creditable against any other payment due under this Agreement.

12.2 Roche Product Class Initiation Payment (other than Optioned Product Class)

This Section 12.2 applies only to Roche Product Classes that are either Collaboration Product Classes or Roche Solo Product Classes, i.e. is not an Optioned Product Class (in which case Section 12.3 applies).

The designation of the first [***] such Roche Product Classes under Section 2.2 (including Choroideremia) is included in the Initiation Payment set forth in Section 12.1.

For any such additional Roche Product Class designations beyond the first [***], Roche shall pay to 4DMT a payment (“Roche Product Class Initiation Payment”) of [***] US Dollars (US$[***]) for each such additional Roche Product Class designation within [***] ([***]) days of:

 

(i)	for a Roche Solo Product Class (that is not disallowed by 4DMT in a High Volume Roche Solo Scenario), the date that Roche provides notice changing the Status from an Available Product Class to a Roche Product Class, or

 

(ii)	for a Collaboration Product Class, the date that the associated Project Plan is executed by authorized representatives of both Parties (unless such Roche Product Class Initiation Payment was already made under (i) above)

and receipt by Roche of an invoice from 4DMT.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

12.3 Option Exercise Fee

Within [***] ([***]) days after Roche provides a Clinical Stage Roche Product Class Conversion Notice to 4DMT for a given 4DMT Product Class as described in Section 2.3.3 and Roche’s receipt of an invoice from 4DMT, Roche shall pay to 4DMT [***] US Dollars (US$[***]) [***].

12.4 Development Event Payments

Roche shall pay up to a total of

 

(i)	[***] US Dollars (US$ [***]) in relation to the achievements of development events by the first Licensed Product in Choroideremia to achieve the applicable event,

 

(ii)	[***] US Dollars (US$ [***]) in relation to the achievements of development events by the first Licensed Product in each Other Product Class to achieve the applicable event, and

 

(iii)

[***] US Dollars (US$ [***]) in relation to the achievements of development events by the first Licensed Product in each Optioned Product Class to achieve the applicable event.

The development event payments under this Section 12.4 shall be paid by Roche according to the following schedule of Development Events achieved by the Roche Group (or by 4DMT in accordance with an active Project Plan).

 

Development Event

Payments in Million US Dollars

Choroideremia

Other Product Class

Optioned Product Class

1. [***]

[***]

[***]

[***]

2. [***]

[***]

[***]

[***]

3. [***]

[***]

[***]

[***]

4. [***]

[***]

[***]

[***]

5. [***]

[***]

[***]

[***]

6. [***]

[***]

[***]

[***]

7. [***]

[***]

[***]

[***]

8. [***]

[***]

[***]

[***]

Each development event payment for a given Licensed Product shall be paid only once for a given Product Class, the first time a Licensed Product in a given Product Class reaches such Development Event, regardless of the number of times such events are reached for the given Licensed Product or other Licensed Products in the same Product Class.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

If any of the payment-resulting Development Events 3-8 are achieved for a given Licensed Product prior to any lower-numbered Development Event(s) for that Product Class having been achieved and paid for such Product Class, then Roche shall pay such earlier unpaid Development Event milestone(s) at the same time as the later achieved Development Event payment is due for such Licensed Product. Notwithstanding the foregoing, the Development Event 2 payment will only be due if achieved by 4DMT or on behalf of 4DMT by a Third Party.

For such development events listed in this Section 12.4 that are achieved by Roche or by a Third Party on behalf of Roche, Roche shall timely notify 4DMT (in any event within [***] ([***]) days). The development payments listed in this Section 12.4 shall be paid by Roche to 4DMT within [***] ([***]) days from occurrence of the applicable event and receipt of an invoice from 4DMT.

12.5 Sales Based Events

Roche shall pay up to a total of

 

(i)	[***] US Dollars (US$ [***]) based on Calendar Year Net Sales of Licensed Product(s) in Choroideremia in the Territory, and

 

(ii)	[***] Million US Dollars (US$ [***]) based on Calendar Year Net Sales of Licensed Product(s) in each Other Product Class in the Territory, and

 

(iii)

[***] Million US Dollars (US$ [***]) based on Calendar Year Net Sales of Licensed Product(s) in each Optioned Product Class in the Territory,

in accordance with the following Net Sales Thresholds:

 

Net Sales Threshold

Payments in Million US Dollars

Choroideremia

Other Product Class

Optioned Product Class

Calendar Year Net Sales in the Territory of a Licensed Product exceed US$ [***]

[***]

[***]

[***]

Calendar Year Net Sales in the Territory of a Licensed Product exceed US$ [***]

[***]

[***]

[***]

Calendar Year Net Sales in the Territory of a Licensed Product exceed US$ [***]

[***]

[***]

[***]

Calendar Year Net Sales in the Territory of a Licensed Product exceed US$ [***]

[***]

[***]

[***]

TOTAL

[***]

[***]

[***]

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Each of the sales based event payments shall be paid no more than once per each Product Class during the Agreement Term, at first occurrence of the event for the first Licensed Product in a given Product Class reaching the respective Net Sales Threshold, irrespective of whether or not the previous sales based event payment was triggered by the given Licensed Product or other Licensed Products in the same Product Class, and shall be non-refundable. Each sales based event payment shall be payable within [***] ([***]) days after the end of the Calendar Year in which the applicable Net Sales threshold was achieved and the receipt of an invoice from 4DMT.

12.6 Royalty Payments

12.6.1 General

Royalties shall be payable by Roche on Net Sales of Licensed Products on a Licensed Product-by Licensed Product basis until the expiry of the Royalty Term. Thereafter, the licenses granted to Roche shall be fully paid up, irrevocable and royalty free as to the particular Licensed Product in the particular country.

12.6.2 Royalty Rates

The following royalty rates shall apply to the respective tiers of aggregate Calendar Year Net Sales of a Licensed Product in the Territory, on an incremental basis, based on the indicated Product Class, as follows:

 

Tier of Calendar Year Net Sales in million US$

Choroideremia Percent (%) of Net Sales

Other Product Class Percent (%) of Net Sales

Optioned Product Class Percent (%) of Net Sales

[***]

[***]

%

[***]

%

[***]

%

[***]

[***]

%

[***]

%

[***]

%

[***]

[***]

%

[***]

%

[***]

%

[***]

[***]

%

[***]

%

[***]

%

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

For example, if Net Sales of a Licensed Product in Choroideremia for a given Calendar Year are US$ [***], then royalties owed to 4DMT on such Net Sales of such Licensed Product for that Calendar Year shall equal [***] US Dollars (US$ [***]) calculated as follows:

[***]

For the purpose of calculating royalties of a Licensed Product, Calendar Year Net Sales and the royalty rates shall be subject to the following adjustments, as applicable:

12.6.3 Licensed Combination Product

If Roche or its Affiliates intend to sell a Licensed Product that is a Licensed Combination Product, then the Parties shall meet approximately [***] prior to the anticipated First Commercial Sale of such Licensed Combination Product in the Territory to negotiate in good faith and agree to an appropriate adjustment to Net Sales to reflect the relative commercial value contributed by the components of the Licensed Combination Product (the “Relative Commercial Value”). If, after such good faith negotiations not to exceed [***] ([***]) days, the Parties cannot agree to an appropriate adjustment, the dispute shall be initially referred to the executive officers of the Parties in accordance with Section 25.2. Should the Parties fail to agree within [***] ([***]) days of such referral, then the Relative Commercial Value shall be determined by an Expert Committee under the procedures of Section 12.6.7.

12.6.4 No Valid Claim/Regulatory Exclusivity; Excluded Variant Competition; Generic Competition

For a given Licensed Product, if in a given country within the Territory there is:

 

(a)	no Valid Claim that Covers such Licensed Product and no applicable regulatory exclusivity for such Licensed Product remaining in such country;

 

(b)	entry of a Like-Substance Product has occurred; or

 

(c)	entry of a Third Party Excluded Product (other than a Like-Substance Product) containing an Excluded Construct that has an Excluded Variant carrying the same Payload as contained within the Licensed Product,

then the royalty payments due to 4DMT for such Licensed Product in such country shall be reduced by [***] percent ([***]%). If [***] have occurred, then the Royalty Term for such Licensed Product in such country shall end (unless the Royalty Term had expired prior to such time for a given Licensed Product in a given country), royalties shall no more be due by Roche in such country for such Licensed Product, and the license in that country for such Licensed Product shall be fully paid-up and irrevocable.

12.6.5 Third Party Payments

With the exception of any Regents Patent Rights, Roche shall be responsible for and pay or have paid any consideration owed to any Third Party in relation to Third Party intellectual property rights. Roche shall have the right to deduct a maximum of [***] percent ([***]%) of such consideration actually paid to a Third Party in respect of Patent Rights Covering a given Licensed Product from royalty payments otherwise due and payable by Roche to 4DMT under this Agreement with respect to such Licensed Product; provided that the royalty to 4DMT on such Licensed Product is not reduced in any [***] to less than [***] the royalty that would otherwise have been due but for this Section 12.6.5,

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

however for clarity, Roche may carry forward any amounts not utilized as a result of the maximum deduction cap in this Section 12.6.5 to future accounting periods until any amounts not utilized are fully deducted. Any such deduction shall be permitted on a Licensed Product-by-Licensed Product and country-by-country basis only.

12.6.6 Apportionment of Compulsory Sublicensee Consideration

Consideration, if any, paid by a Compulsory Sublicensee of the Licensed Product shall be shared between the Parties based on an equivalent profit share percentage (the “Compulsory Profit Share Percentage”). The Compulsory Profit Share Percentage shall be calculated for the respective Calendar Year to which the Compulsory Sublicensee payment relates to as follows:

 

(a)

royalties payable for the Licensed Product in the applicable Territory, divided by

 

(b)

the corresponding Net Sales related to the royalties payable for the Licensed Product in the applicable Territory, less all corresponding expenses that are allocable to the Licensed Product (e.g. cost of goods sold, royalty expenses, profit-share expenses, marketing and distribution expenses, general and administration expenses etc.), and which are in accordance with the then-currently used IFRS for such period.

The Parties shall negotiate in good faith and agree upon the Compulsory Profit Share Percentage to be used on a consistent basis to fairly share Compulsory Sublicensee payments between the Parties. For the purpose of clarity, any sales or payments by Compulsory Sublicensees under a Compulsory Sublicense shall not be considered as Net Sales and shall not give rise to any royalty payment under Section 12.6.2 of this Agreement.

12.6.7 Expert Committee

If the Parties are unable to agree on the Relative Commercial Value under Section 12.6.3 or the Compulsory Profit Share Percentage under Section 12.6.6, then Roche will select one (1) individual who would qualify as an Expert, 4DMT will select (1) individual who would qualify as an Expert, and those two (2) individuals shall select one (1) individual who would qualify as an Expert and who shall be chairman of a committee of the three Experts (the “Expert Committee”), each with a single deciding vote. The Expert Committee will promptly hold a meeting to review the issue under review, at which it will consider memoranda submitted by each Party at least [***] ([***]) days before the meeting, as well as reasonable presentations that each Party may present at the meeting. The determination of the Expert Committee as to the issue under review will be binding on both Parties. The Parties will [***] the costs of the Expert Committee. Unless otherwise agreed to by the Parties in writing, the Expert Committee may not decide on issues outside the scope mandated under terms of this Agreement. Neither Party shall engage in ex parte communications with the Expert Committee.

13. General Payment Provisions

13.1 Invoices

All invoices that are required or permitted under Articles 11 and 12 shall be in writing and sent by 4DMT to Roche at the following address or other address as Roche may later provide:

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

F. Hoffmann-La Roche Ltd

Kreditorenbuchhaltung

Grenzacherstrasse 124

4070 Basel

Switzerland

Attn: [***]

13.2 Late Payment

Any payment under this Agreement that is not paid on or before the date such payment is due shall bear interest, to the extent permitted by Applicable Law, at [***] ([***]) percentage points above the average one-month Euro Interbank Offered Rate (EURIBOR), as reported by Reuters from time to time, calculated on the number of days such payment is overdue.

13.3 Disclosure of Payments

4DMT acknowledges that Roche may be obligated to disclose this financial arrangement, including all fees, payments and transfers of value, as may be advisable or required under Applicable Law, including the US Sunshine Act.

14. Royalty accounting and reporting

14.1 Timing of Payments

Roche shall calculate royalties on Net Sales quarterly as of March 31, June 30, September 30 and December 31 (each being the last day of an “Accounting Period”) and shall pay royalties on Net Sales within the [***] ([***]) days after the end of each Accounting Period in which such Net Sales occur.

14.2 Method of Payment

Royalties on Net Sales and all other amounts payable by Roche hereunder shall be paid by Roche in US Dollars (the “Payment Currency”) to account(s) designated by 4DMT. 4DMT shall be entitled to require payment from Roche’s choice of either a U.S. or Swiss account.

14.3 Currency Conversion

When calculating the Sales of any royalty-bearing Licensed Product that occur in currencies other than the Payment Currency, Roche shall convert the amount of such sales [***] into the Payment Currency using Roche’s then-current internal foreign currency translation actually used on a consistent basis in preparing its audited financial statements (at the Effective Date, YTD average rate as reported by Reuters).

14.4 Reporting

With each payment Roche shall provide 4DMT in writing for the relevant Calendar Quarter on a Licensed Product-by-Licensed Product basis the following information:

(a) Sales in [***];

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b)	Net Sales in [***];

 

(c)	adjustments made pursuant to Sections 12.6.3-12.6.5;

 

(d)	Net Sales in [***] after adjustments made pursuant to Sections 12.6.3-12.6.5 in [***];

 

(e)	exchange rate used for the conversion of Net Sales from [***] to the Payment Currency pursuant to Section 14.3

 

(f)	Net Sales after adjustments made pursuant to Sections 12.6.3-12.6.5 in the Payment Currency;

 

(g)	royalty rate pursuant to Section 12.6.2; and

 

(h)	total royalty payable in the Payment Currency.

For illustrative purposes only, a sample royalty report template is attached as Appendix 14.4.

15. Taxes

4DMT shall pay all sales, turnover, income, revenue, value added, and other taxes levied on account of any payments accruing or made to 4DMT under this Agreement.

If provision is made in law or regulation of any country for withholding of taxes of any type, levies or other charges with respect to any royalty or other amounts payable under this Agreement to 4DMT, then Roche shall promptly pay such tax, levy or charge for and on behalf of 4DMT to the proper governmental authority, and shall promptly furnish 4DMT with receipt of payment. Roche shall be entitled to deduct any such tax, levy or charge actually paid from royalty or other payment due 4DMT or be promptly reimbursed by 4DMT if no further payments are due to 4DMT. Each Party agrees to reasonably assist the other Party in claiming exemption from such deductions or withholdings under double taxation or similar agreement or treaty from time to time in force and in minimizing the amount required to be so withheld or deducted.

16. Royalty Auditing

16.1 4DMT Right to Audit

Roche shall keep, and shall require its Affiliates and Sublicensees to keep, full, true and accurate books of account containing all particulars that may be necessary for the purpose of calculating all royalties payable under this Agreement. Such books of accounts shall be kept at their principal place of business. At the expense of 4DMT, 4DMT shall have the right to engage an independent public accountant reasonably acceptable to Roche to perform, on behalf of 4DMT an audit of such books and records of Roche and its Affiliates, its licensees and Sublicensees, that are deemed necessary by Roche’s independent public accountant to report on Net Sales of Licensed Product for the period or periods requested by 4DMT and the correctness of any financial report or payments made under this Agreement.

Upon timely request and at least [***] ([***]) working days’ prior written notice from 4DMT, such audit shall be conducted in the countries specifically requested by 4DMT, during regular business hours in such a manner as to not unnecessarily interfere with Roche’s normal business activities, and shall be limited to results in the [***] ([***]) calendar years prior to audit notification.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Such audit shall not be performed more frequently than [***] per Calendar Year nor more frequently than [***] with respect to records covering any specific period of time.

All information, data documents and abstracts herein referred to shall be used only for the purpose of verifying royalty statements, shall be treated as Roche’s Confidential Information subject to the obligations of this Agreement and need neither be retained more than [***] after completion of an audit hereof, if an audit has been requested; nor more than [***] from the end of the Calendar Year to which each shall pertain; nor more than [***] after the date of termination of this Agreement.

16.2 Audit Reports

The auditors shall only state factual findings in the audit reports and shall not interpret the agreement. The auditors shall share all draft audit reports with Roche before the draft report is shared with 4DMT and before the final document is issued. The final audit report shall be shared with Roche at the same time it is shared with 4DMT.

16.3 Over-or Underpayment

If the audit reveals an overpayment, Roche shall be entitled to credit the amount of the overpayment against subsequent royalty payments due hereunder until exhausted, or if no further royalty payments are owed by Roche, 4DMT shall reimburse Roche for the amount of the overpayment within [***] ([***]) days. If the audit reveals an underpayment, Roche shall make up such underpayment with the next royalty payment or, if no further royalty payments are owed by Roche, Roche shall reimburse 4DMT for the amount of the underpayment within [***] ([***]) days. Roche shall pay for the audit costs if the underpayment of Roche exceeds [***]% of the aggregate amount of royalty payments owed with regard to the royalty statements subject of the audit. Section 13.2 shall apply to this Section 16.3.

16.4 Duration of Audit Rights

The failure of 4DMT to request verification of any royalty calculation within the period during which corresponding records must be maintained under this Article 16 will be deemed to be acceptance of the royalty payments and reports absent non-de minimis fraud uncovered on a subsequent audit of another period.

17. Payments to Roche

For Enabled Products, 4DMT shall pay Roche a royalty on all net sales of such Product(s) by 4DMT, its Affiliates or licensees, with the royalty rate based on the stage of the Product effective date of such termination as follows:

 

Stage of Product at effective date of termination		Royalty rate
[***]			[***]	%
[***]			[***]	%
[***]			[***]	%
[***]			[***]	%

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

subject to the following:

 

(i)	net sales for this purpose shall have the same meaning given such term in this Agreement for Licensed Products applied mutatis mutandis to sales by 4DMT and its Affiliates and Sublicensees for Enabled Products;

 

(ii)

the life of the royalty obligation shall be the later of (x) [***] years from the First Commercial Sale (either by the Roche Group or First Commercial Sale applied for mutatis mutandis for sales by 4DMT and its Affiliates and Sublicensees) and (y) the life of the Valid Claims of the any Project Product Patent Right, each determined country-by-country and Enabled Product-by-Enabled Product; and

 

(iii)

such royalty shall be subject to adjustments equivalent to those in Sections 12.6.3, 12.6.4 (other than Excluded Variant Competition under 12.6.4(c)), 12.6.5 and 12.6.6 in this Agreement.

For clarity, the royalties in this Article 17 apply only to Products that do not require Initiation of a new Phase I/IIa Study.

Payments shall be made in a timely fashion as applicable to Roche. Article 16 for Licensed Products shall be applied for mutatis mutandis to Roche’s right to audit 4DMT for Enabled Products.

17.1 Enabled Products under the RFO Agreement

If an Enabled Product as defined under the RFO Agreement is a Licensed Product under this Agreement, then 4DMT will not owe payments to Roche under Section 3.4 of the RFO Agreement based on monies paid by Roche to 4DMT under Article 12 of this Agreement.

18. Intellectual Property

18.1 Inventorship

The determination of inventorship for inventions (i) conceived or reduced to practice in the performance of a Collaboration Project or (ii) conceived or reduced to practice by or on behalf of 4DMT for Optionable Project Work shall be in accordance with United States inventorship laws.

18.2 Ownership

Except as otherwise set forth in this Agreement, as between the Parties:

 

(i)	4DMT shall own any Optionable Variant Patent Right and Project Variant Patent Right at all times.

 

(ii)	4DMT and Roche shall jointly own any Project Product Patent Right at all times.

 

(iii)

4DMT shall own any Optionable Product Patent Right until the applicable 4DMT Product Class is no longer an Optionable Product Class, at which time

 

(a)

if the 4DMT Product Class is a Non-Optionable 4DMT Product Class or the Status of the 4DMT Product Class changes to an Available Product Class, then 4DMT’s ownership in such continue indefinitely, or

 

(b)

if the 4DMT Product Class changes to a Roche Product Class, then as between the Parties, 4DMT and Roche shall jointly own such Patent Right, and 4DMT shall, upon Roche’s expense and at Roche’s request, sign all such documentation as to effect the assignment of such Patent Right as a jointly-owned Patent Right.

 

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(iv)	Ownership of any other Project Patent Right and Optionable Patent Right shall follow inventorship.

Each Party hereby assigns to the other Party the assigning Party’s interest in such Project Patent Right as necessary to result in the Project Patent Right being owned as provided in this Section.

18.3 Patent Coordination Team

Where the Parties need to consult with each other on the Handling of Patent Rights, the Parties shall establish a patent coordination team and shall adopt procedures for interacting on patent matters.

18.4 Prosecution

18.4.1 Optionable Variant Patent Rights and Optionable Project Product Patent Rights

This Section 18.4.1 shall apply only until such time as an Optionable Variant Patent Right or an Optionable Project Product Patent Right becomes either an Optioned Patent Right or a Non-Optionable Patent Right (or Roche waives its right to be consulted for a given Patent Right). The Parties will consult with each other on the Handling of any Optionable Variant Patent Right and Optionable Product Patent Right through the patent coordination team. The Parties will attempt to use mutually-acceptable outside counsel (whether patent attorneys or patent agents) for the prosecution of the Optionable Variant Patent Right and Optionable Product Patent Right (i.e., they will discuss and attempt to reach consensus on the outside attorney or agent that will Handle the filings; each Party shall reasonably consider the other’s views, and seek in good faith to reach consensus, although the ultimate decision as to choice of counsel to represent each Party is reserved to that Party). Decisions that cannot be resolved by consensus of the patent coordination team shall, upon request of either party, be promptly escalated to the [***] (in the case of 4DMT) or to the [***] (in the case of Roche) or their designee. Prior to the first filings of the applicable Optionable Product Patent Right and Optionable Variant Patent Right, the patent coordination team, together with the Parties’ respective patent practitioners, shall discuss in good faith whether it is in the best interest of obtaining the best coverage to file dependent claims in the Optionable Variant Patent Right that explicitly claims the combination of Optionable Variants with specific Optionable Payloads (instead of merely generically encompassing the foregoing) (each an “Optionable Product Dependent Claim”) in an otherwise-Optionable Variant Patent Right (provided that the Parties would also discuss and agree on whether the Optionable Product Dependent Claim should be segregated through use of a divisional filing). Both Parties shall approach such discussion in good faith. Handling of an Optionable Variant Patent Right and Optionable Product Dependent Claim shall be [***], and Handling of an Optionable Product Patent Right other than a Product Dependent Claim shall be [***]. After consultation with Roche, decisions on the Handling of an Optionable Variant Patent Right shall be at the sole discretion of 4DMT, however reasonable consideration shall be given to Roche’s input if such Optionable Variant Patent Right is likely to be subject to Roche’s right to convert to an Optioned Product Class or the Handling could impact the validity or patentability of an Optionable Product Patent Right. If 4DMT’s Handling of an Optionable Variant Patent Right is contrary to Roche’s input (for instance if Roche does not give consent to file a Product Dependent Claim, but 4DMT chooses to file it anyway, as it is entitled to do in accordance with this Section) and the validity,

 

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scope or enforceability of the Optionable Product Patent Right is weakened as a result in comparison to the Optionable Variant Patent Right, or if the Product cannot be claimed in a separate Optionable Product Patent Right, then the Optionable Variant Patent Right Covering Products shall be deemed as an “Optionable Primary Patent Right”. Roche’s input into the Handling of an Optionable Primary Patent Right must be reasonably implemented. After consultation between the Parties, decisions on the Handling of an Optionable Product Patent Right shall be at the discretion of 4DMT with reasonable consideration to Roche’s input.

For clarity, at such time as an Optionable Variant Patent Right or an Optionable Project Product Patent Right becomes an Optioned Patent Right, then the applicable Optionable Variant Patent Right, Optionable Project Product Patent Right, Optionable Product Dependent Claim and Optionable Primary Patent Right shall be treated as, respectively, a Variant Patent Right, Project Product Patent Right, Product Dependent Claim and Primary Patent Right.

Also for clarity, at such time as an Optionable Variant Patent Right or an Optionable Project Product Patent Right becomes a Non-Optionable Patent Right, then Roche will have no further right to be consulted on the Handling or the applicable Optionable Variant Patent Right, Optionable Project Product Patent Right, Optionable Product Dependent Claim or Optionable Primary Patent Right.

18.4.2 Priority Filings for Variant Patent Rights and Project Product Patent Rights

This Section 18.4.2 applies to the Handling of a Variant Patent Right and Project Product Patent Right where the Handling is limited to the filing of priority patent applications. The Parties will consult with each other on such Handling of any Project Variant Patent Right and Project Product Patent Right through the patent coordination team. The Parties will attempt to use mutually-acceptable outside counsel (whether patent attorneys or patent agents) for the Handling of the Project Variant Patent Right and Project Product Patent Right (i.e., they will discuss and attempt to reach consensus on the outside attorney or agent that will Handle the filings; each Party shall reasonably consider the other’s views, and seek in good faith to reach consensus, although the ultimate decision as to choice of counsel to represent each Party is reserved to that Party). Decisions that cannot be resolved by consensus of the patent coordination team shall, upon request of either party, be promptly escalated to the [***] (in the case of 4DMT) or to the [***] (in the case of Roche) or their designee. Prior to the first filing of the applicable Project Product Patent Right and Project Variant Patent Right, the patent coordination team, together with the Parties’ respective patent practitioners, shall discuss in good faith whether it is in the best interest of obtaining the best coverage to file dependent claims in the Project Variant Patent Right that explicitly claim the combination of Project Variants with specific Project Payloads (instead of merely generically encompassing the foregoing) (each a “Product Dependent Claim”) in an otherwise-Project Variant Patent Right (provided that the Parties would also discuss and agree on whether the Product Dependent Claim should be segregated through use of a divisional filing). (For clarity, an Optionable Product Dependent Claim shall also be deemed as a Product Dependent Claim at such time, if any, as such Optionable Project Variant Patent Right becomes a Project Variant Patent Right). Both Parties shall approach such discussion in good faith. Handling of any Project Variant Patent Right and Product Dependent Claim shall be [***], and Handling of any Project Product Patent Right other than a Product Dependent Claim shall be [***]. After consultation with Roche, decisions on the Handling of a Project Variant Patent Right shall be at the sole discretion of 4DMT, however reasonable consideration shall be given to Roche’s input. If

 

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4DMT’s Handling of a Project Variant Patent Right is contrary to Roche’s input (for instance if Roche does not give consent to file a Product Dependent Claim, but 4DMT chooses to file it anyway, as it is entitled to do in accordance with this Section) and the validity, scope or enforceability of the Project Product Patent Right is weakened as a result in comparison to the Project Variant Patent Right, or if the Product cannot be claimed in a separate Project Product Patent Right, then the Project Variant Patent Right Covering Products shall be deemed as a “Primary Patent Right” (and for clarity, an Optionable Primary Patent Right shall also be deemed as a Primary Patent Right at such time, if any, as such Optionable Project Variant Patent Right becomes a Project Variant Patent Right). Roche’s input into the Handling of a Primary Patent Right must be reasonably implemented. After consultation with 4DMT, decisions on the Handling of any Project Product Patent Right shall be at the discretion of Roche with reasonable consideration to 4DMT’s input.

18.4.3 Project Product Patent Rights

After the filing of priority applications, Roche shall, at its own expense and discretion, (i) Handle any Project Product Patent Right (other than a Product Dependent Claim) that are at least jointly owned by Roche, (ii) consult with 4DMT as to the Handling of such a Patent Right, and (iii) furnish 4DMT copies of all documents relevant to any such Handling. Roche shall furnish such documents and consult with 4DMT in sufficient time before any action by Roche is due to allow 4DMT to provide comments thereon, which comments Roche shall consider if applicable to the Field. At Roche’s reasonable request, 4DMT shall cooperate in all reasonable ways with the Handling of any such Patent Right. If Roche elects not to Handle a such a given Patent Right in a given country, Roche shall give sufficient notice to 4DMT to allow 4DMT to assume, if it so desires, the Handling of such Patent Right at 4DMT’s expense and discretion.

4DMT shall, at its own expense but in coordination with Roche, Handle any Product Dependent Claim that is at least jointly owned by Roche.

4DMT shall, at its own expense and discretion, Handle any Project Product Patent Right that is not owned (even jointly) by Roche (for example after application of Section 22.3.1(d)).

18.4.4 Other 4DMT Patent Rights

This Section 18.4.4 applies only where not otherwise set forth in this Article 18 (for an Optionable Patent Right and for a Project Product Patent Right).

4DMT shall, at its own expense and discretion, (i) Handle any Full Range 4DMT Patent Right, (ii) consult with Roche as to the Handling of any Broad Range 4DMT Patent Right, and (iii) furnish Roche copies of all documents relevant to any such Handling of a Broad Range 4DMT Patent Right. 4DMT shall furnish such documents and consult with Roche in sufficient time before any action by Roche is due to allow Roche to provide comments thereon, which comments 4DMT shall consider. At 4DMT’s reasonable request, Roche shall cooperate in all reasonable ways with the Handling of any 4DMT Patent Right.

Notwithstanding anything to the contrary, Roche’s input into the Handling of any Primary Patent Right (if any) must be considered.

 

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If Roche requests 4DMT file and prosecute a Broad Scope 4DMT Patent Right in countries where 4DMT does not want to file, then Roche shall reimburse 4DMT for the costs of the Handling in such countries, and if 4DMT thereafter grants a license under such Patent Rights to Third Parties, then 4DMT shall assume responsibility for the expense of Handling such rights in the future.

If the Party responsible for the cost of Handling of a given Broad Scope 4DMT Patent Right in a given country no longer desires to pay for such Handling, it shall notify the other Party. The other Party may reply within [***] ([***]) days that it is willing to assume responsibility going forward for the costs associated with such Handling, or else the Party responsible for the Handling may allow the Patent Right to become abandoned.

18.5 List of Licensed 4DMT Patent Rights

Upon the written request of Roche (no more than [***] a year), 4DMT shall provide Roche an updated list (including anticipated or actual expiration dates) of any Licensed 4DMT Patent Right that Roche does not Handle. 4DMT shall prepare such lists in good faith but shall not be liable for any omissions provided that such omissions shall not deprive Roche of its license to the applicable Licensed 4DMT Patent Right in Section 4.1. Roche shall not be liable to 4DMT for any consequences resulting from Roche making over- or under-payment errors under Section 12 caused by reliance upon the information contained in such lists.

18.6 Infringement

Each Party shall promptly provide written notice to the other Party during the Agreement Term of any known infringement or suspected infringement by a Third Party of any Broad Range 4DMT Patent Right, and shall provide the other Party with all evidence in its possession supporting such infringement or unauthorized use or misappropriation.

Within [***] ([***]) days after Roche provides or receives such written notice (“Decision Period”), if the infringement is of a

 

a)	Project Product Patent Right, or

 

b)	a Primary Patent Right in a given country where either

 

1)

with respect to a given Primary Patent Right in a given country, there is no other product Covered by such Primary Patent Right that is on sale or in active clinical development by or on behalf of 4DMT, its Affiliates or their Third Party licensees or

 

2)

there are no Roche Patent Rights that Covers a Product

(such a Primary Patent Right, a “Key Primary Patent Right”),

then Roche, in its sole discretion, shall decide whether or not to initiate such suit or action and shall notify 4DMT in writing of its decision in writing (“Suit Notice”).

If Roche decides to bring a suit or take action on the infringement of a Project Product Patent Right or Key Primary Patent Right, once Roche provides Suit Notice, Roche may immediately commence such suit or take such action. In the event that Roche (i) does not in writing advise 4DMT within the Decision Period that Roche will commence suit or take action, or (ii) fails to commence suit or take action within a reasonable time after providing Suit Notice, 4DMT shall thereafter have the right (subject to Roche’s written consent, not to be unreasonably withheld) to commence suit or take action and shall provide written notice to Roche of any such suit commenced or action taken by 4DMT.

 

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Other than any Project Product Patent Rights and Key Primary Patent Rights, 4DMT shall have the right to enforce all other Full Range 4DMT Patent Rights against infringement, provided that for any Broad Range 4DMT Patent Right (a) 4DMT shall not do so against infringement in the Field without Roche’s advance written consent and (b) for any Licensed 4DMT Patent Right, 4DMT shall reasonably consider allowing Roche to bring the enforcement action if there is no Project Product Patent Right, Key Primary Patent Right or other Roche Group-controlled Patent Right that can be asserted against the infringement in the Field.

With respect to any Broad Range 4DMT Patent Right, upon written request, the Party bringing suit or taking action (“Initiating Party”) shall keep the other Party informed of the status of any such suit or action and shall provide the other Party with copies, to the extent the Initiating Party is lawfully permitted to do so, of all substantive documents or communications filed in such suit or action. In addition, (i) if the Project Product Patent Right or Key Primary Patent Right being asserted claims priority to any other Full Range 4DMT Patent Right that is not a Project Product Patent Right, then Roche must confer with 4DMT as to strategy in advance (through counsel in such a manner as to maintain privilege) and reasonably consider 4DMT’s comments, and (ii) if the Broad Range 4DMT Patent Right (other than the Project Product Patent Right or Key Primary Patent Right) claims priority to any Project Product Patent Right or Primary Patent Right, then 4DMT must confer with Roche as to strategy in advance (through counsel in such a manner as to maintain privilege) and reasonably consider Roche’s comments. The Initiating Party shall have the sole and exclusive right to select counsel for any such suit or action.

The Initiating Party shall, except as provided below, pay all expenses of the suit or action, including the Initiating Party’s attorneys’ fees and court costs and the other Party’s reasonable costs associated with any assistance that they provide in the case. Any damages, settlement fees or other consideration received as a result of such suit or action shall be allocated as follows:

 

(a)	First, to reimburse the Initiating Party for its costs and, if any remains, to the other Party for any advisory counsel fees and costs that were not previously required to be reimbursed by the Initiating Party as provided for above in this Section; and

 

(b)	Second, the balance, if any, shall be allocated as follows:

 

(i)

where 4DMT is the Initiating Party by virtue of Roche declining to bring a suit or take action, [***] percent ([***]%) to 4DMT, and [***] percent ([***]%) to Roche, otherwise

 

(ii)

[***] percent ([***]%) to Roche, and [***] percent ([***]%) to 4DMT.

If the Initiating Party believes it is reasonably necessary or desirable to obtain an effective remedy, upon written request the other Party agrees to be joined as a party to the suit or action but shall be under no obligation to participate except to the extent that such participation is required as the result of its being a named party to the suit or action. At the Initiating Party’s written request, the other Party shall offer reasonable assistance to the Initiating Party in connection therewith [***] to the Initiating Party except for [***]. The other Party shall have the right to participate and be represented in any such suit or action by its own counsel [***]. All expenses of the non-Initiating Party under this paragraph shall be [***].

 

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The Initiating Party may settle, consent judgment or otherwise voluntarily dispose of the suit or action (“Settlement”) without the written consent of the other Party but only if such Settlement can be achieved without adversely affecting the other Party (including any of its Patent Rights). If a Settlement could adversely affect the other Party, then the written consent of the other Party would be required, which consent shall not be unreasonably withheld.

18.7 Defense

If an action for infringement is commenced against either Party, its licensees or its sublicensees related to the discovery, development, manufacture, use or sale of a Product, then Roche shall have the right (but not the obligation) to defend such action at its own expense, and 4DMT shall assist and cooperate with Roche, at Roche’s expense, to the extent necessary in the defense of such suit. Roche shall have the right to settle the suit or consent to an adverse judgment thereto, in its sole discretion, so long as such settlement or adverse judgment does not adversely affect the rights of 4DMT and its Affiliates (including any patent rights Controlled by any of them). Roche shall assume full responsibility for the payment of any award for damages, or any amount due pursuant to any settlement entered into by it with such Third Party.

If the manufacture, use, importation, offer for sale or sale of any Product pursuant to this Agreement results in any claim, suit or proceeding alleging patent infringement or trade secret misappropriation against 4DMT or a member of the Roche Group, then such Party shall promptly notify the other Party hereto. The Parties shall cooperate with each other in connection with any such claim, suit or proceeding and shall keep each other reasonably informed of all material developments in connection with any such claim, suit or proceeding.

If a Third Party asserts that a Patent Right owned by or licensed to it is infringed by the development, manufacture, use, importation, offer for sale or sale of Products by a member of the Roche Group, or that its trade secrets were misappropriated in connection with such activity, then Roche shall have the exclusive right and responsibility to resolve any such claim, whether by obtaining a license from such Third Party, by defending against such Third Party’s claims or otherwise, and shall be solely responsible for the defense of any such action, any and all costs incurred in connection with such action (including, without limitation, attorneys’ and expert fees) and all liabilities incurred in connection therewith. Notwithstanding the above, Roche shall not enter into any settlement of any such claim without the prior written consent of 4DMT if such settlement would require 4DMT to be subject to an injunction or to make any monetary payment to Roche or any Third Party, or admit any wrongful conduct by 4DMT or its Affiliates, or would limit or restrict the claims of or admit any invalidity and/or unenforceability of any Patent Right Controlled by 4DMT, or have any impact on activities outside the Field.

18.8 Common Interest Disclosures

With regard to any information or opinions disclosed pursuant to this Agreement by one Party to each other regarding intellectual property and/or technology owned by Third Parties, the Parties agree that

 

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they have a common legal interest in determining whether, and to what extent, Third Party intellectual property rights may affect Products, and have a further common legal interest in defending against any actual or prospective Third Party claims based on allegations of misuse or infringement of intellectual property rights relating to Products. Accordingly, the Parties agree that all such information and materials obtained by 4DMT and Roche from each other will be used solely for purposes of the Parties’ common legal interests with respect to the conduct of the Agreement. All information and materials will be treated as protected by the attorney-client privilege, the work product privilege, and any other privilege or immunity that may otherwise be applicable. By sharing any such information and materials, neither Party intends to waive or limit any privilege or immunity that may apply to the shared information and materials. Neither Party shall have the authority to waive any privilege or immunity on behalf of the other Party without such other Party’s prior written consent, nor shall the waiver of privilege or immunity resulting from the conduct of one Party be deemed to apply against any other Party.

18.9 Patent Term Extensions

The Parties shall use Commercially Reasonable Efforts to obtain all available patent term extensions, adjustments or restorations, or supplementary protection certificates (“SPCs”, and together with patent term extensions, adjustments and restorations, “Patent Term Extensions”) with regards to any Project Product Patent Right (or, as may be applicable, any Primary Patent Right). 4DMT shall execute such authorizations and other documents and take such other actions as may be reasonably requested by Roche to obtain such Patent Term Extensions, including designating Roche as its agent for such purpose as provided in 35 USC § 156. All filings for such Patent Term Extensions shall be made by [***]; provided, that in the event that [***] elects not to file for a Patent Term Extension, [***] shall (a) promptly inform [***] of its intention not to file and (b) grant [***] the right to file for such Patent Term Extension. Each Party shall execute such authorizations and other documents and take such other actions as may be reasonably requested by the other Party to obtain such extensions. The Parties shall cooperate with each other in gaining patent term restorations, extensions and/or SPCs wherever applicable to such Project Product Patent Right and Primary Patent Right. Notwithstanding the foregoing, if the applicable Project Product Patent Right claims priority to a Project Variant Patent, then 4DMT shall not be required to allow such Project Product Patent Right to be extended, but only if (a) Roche provides its consent or (b) the length of commercial exclusivity for the applicable Product is not reduced.

19. Representations and Warranties

19.1 By both Parties

19.1.1 Authorization

Each Party hereby warrants and represents to the other that:

 

(a)	it has full legal power and corporate authority to enter into this Agreement and perform its obligations hereunder and has taken all corporate action required to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby;

 

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(b)	the execution, delivery and performance of this Agreement shall, upon the Effective Date, constitute a valid, legal and binding agreement of such Party (assuming it constitutes a legal, valid and binding agreement of each other Party), enforceable against it in accordance with its terms;

 

(c)

it is not a party to any contract, commitment or agreement, nor any of its properties and assets subject to or bound or affected by any charter, by-law or other corporate restriction, or any order, judgment, decree, law, statute, ordinance, rule, regulation or other restriction of any kind or character, which would prevent it from entering into this Agreement or from consummating the transactions contemplated hereby, and it shall not enter into any agreement with a Third Party that it knows will prevent or materially impede it from performing its obligations hereunder; and

 

(d)

the execution and delivery of this Agreement by it and the consummation of the transactions contemplated hereby will not, currently or with the passage of time, (i) violate, or result in a default under any note, agreement, contract, understanding, arrangement, restriction or other instrument or obligation to which it is a party or by which it may be bound; (ii) violate any order, award, injunction, judgment or decree to which it is subject; or (iii) infringe the contractual rights of any Third Party or cause it to be in breach of any undertakings to a Third Party.

19.2 By 4DMT

19.2.1 Work Performed

All work conducted pursuant to a Project Plan or the XLRP 4DMT Product Class Work Plan shall be performed by qualified personnel and in compliance with applicable law.

19.2.2 Safety Data

With respect to Products tested in the course of the Collaboration, Products associated with an Optionable 4DMT Product Class or Product associated with a Roche Product Class under development by Roche (to the extent known by 4DMT), 4DMT has disclosed to Roche and will continue to disclose to Roche (i) the results of all preclinical testing and human clinical testing in its possession or control and (ii) all information in its possession or control concerning side effects, injury, toxicity or sensitivity reaction and incidents or severity thereof with respect to such Products.

19.2.3 Grants

To the best of 4DMT’s knowledge and belief as of the Effective Date, 4DMT has the lawful right to grant Roche and its Affiliates the rights and licenses described in this Agreement, and no Third Party has any rights that would interfere with, conflict or limit 4DMT’s performance of any Collaboration Project.

19.2.4 Ownership and Validity of Know-How

The 4DMT Know-How is legitimately in the possession of 4DMT and has not been misappropriated from any Third Party. 4DMT has taken reasonable measures to protect the confidentiality of the 4DMT Know-How. For any know-how or materials originating outside of 4DMT that 4DMT utilizes in performance of a Project Plan or the XLRP 4DMT Product Class Work Plan, 4DMT has full rights to so utilize.

 

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19.2.5 No Claims

As of the Effective Date, there are no claims or investigations, pending or to 4DMT’s knowledge threatened against 4DMT or any of its Affiliates, at law or in equity, or before or by any governmental authority relating to the matters contemplated under this Agreement.

19.2.6 No Conflict

Neither 4DMT nor any of its Affiliates is or will be under any obligation to any person, contractual or otherwise, that is conflicting with the terms of this Agreement or that would impede the fulfillment of 4DMT’s obligations hereunder. As of the Effective Date, 4DMT has granted no rights to any Third Party (i) in the Field for Products or (i) to treat the conditions known as choroideremia or X-linked retinitis pigmentosa, and shall not do so except for 4DMT Product Classes that are Non-Optionable 4DMT Product Classes.

19.2.7 Excluded Variant Availability

4DMT will not grant any new rights or options (except as such rights and options exist on the Effective Date) to any person, contractual or otherwise, to Excluded Constructs and Excluded Products in the Field. Any Excluded Variant and the associated Excluded Construct and Excluded Product that becomes no longer subject to Third Party rights or obligations in the Field after the Effective Date will be included in the rights and licenses as for Constructs and Products under this Agreement.

19.3 Disclaimer

ROCHE AND 4DMT SPECIFICALLY DISCLAIM ANY GUARANTEE THAT A COLLABORATION PROJECT OR WORK CONDUCTED UNDER THE XLRP 4DMT PRODUCT CLASS WORK PLAN WILL BE SUCCESSFUL, IN WHOLE OR IN PART. THE FAILURE OF THE PARTIES TO SUCCESSFULLY COMPLETE THE OBJECTIVES AND MILESTONES OF THE COLLABORATION PROJECTS OTHER THAN IN BREACH OF THE TERMS HEREOF WILL NOT CONSTITUTE A BREACH OF ANY REPRESENTATION OR WARRANTY OR OTHER OBLIGATION UNDER THIS AGREEMENT. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, ROCHE AND THE COMPANY MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS OR INFORMATION DISCLOSED HEREUNDER, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PATENTED OR UNPATENTED RIGHTS, OR NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

20. Indemnification and Liability

20.1 Indemnification by Roche

Roche shall indemnify, hold harmless and defend 4DMT and its directors, officers, employees and agents (“4DMT Indemnitees”) from and against any and all losses, expenses, cost of defense (including without limitation attorneys’ fees, witness fees, damages, judgments, fines and amounts paid in settlement) and any amounts 4DMT or any 4DMT Indemnitee becomes legally obligated to pay (“4DMT Losses”) because of any action, actions, demand, demands, judgment, judgments, claim or claims against it by a Third Party or Third Parties (“4DMT Claims”) to the extent that such 4DMT Claim(s) arise out of (a) Roche’s breach of this Agreement; and/or (b) activities related to the

 

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Licensed Products (for non-limiting examples, product liability claims and claims for liability arising out of clinical trials) conducted by or on behalf of the Roche Group, including the research, development, manufacture, use, storage, shipment, distribution, marketing, promotion, or sale of Construct or Product by the Roche Group; except to the extent such 4DMT Losses are due to the gross negligence, willful misconduct, failure to act or breach by 4DMT of this Agreement, or to the extent such Losses relate to the research, development, manufacture, use, storage, shipment, distribution, marketing, promotion, or sale of Construct or Product by 4DMT, its Affiliates and sublicensees.

20.2 Indemnification by 4DMT

4DMT shall indemnify, hold harmless and defend the Roche Group and their directors, officers, employees and agents (“Roche Indemnitees”) from and against any and all losses, expenses, cost of defense (including without limitation attorneys’ fees, witness fees, damages, judgments, fines and amounts paid in settlement) and any amounts Roche or any Roche Indemnitee becomes legally obligated to pay (‘Roche Losses”) because of any action, actions, demand, demands, judgment, judgments, claim or claims against it by a Third Party or Third Parties (“Roche Claims”) to the extent that such Roche Claim(s) arise out of (a) the breach by 4DMT of this Agreement (including any breach of a representation or warranty), (b) activities related to Products for work conducted by or on behalf of 4DMT under a Project Plan while such Product was associated with a Collaboration Product Class or for work conducted by 4DMT while such a Product was associated with an Optionable 4DMT Product Class, (c) activities related to Products in Non-Optionable 4DMT Product Classes (for non-limiting examples, product liability claims and claims for liability arising out of clinical trials) conducted by or on behalf of 4DMT or (d) the research, development, manufacture, use, storage, shipment, distribution, marketing, promotion, or sale of Construct or Product outside the Field by 4DMT or its collaborators or sublicensees, except to the extent such Roche Losses are due to the gross negligence or willful misconduct or failure to act of Roche or the breach by Roche of this Agreement or to the extent such Losses relate to the research, development, manufacture, use, storage, shipment, distribution, marketing, promotion, or sale of Construct or Product by Roche, its Affiliates and sublicensees.

20.3 Procedure

In the event of a 4DMT Claim or a Roche Claim (each a “Claim”) against a Party (or its related Indemnitee) entitled to indemnification under this Agreement (“Indemnified Party”), the Indemnified Party shall promptly notify the other Party (“Indemnifying Party”) in writing of the Claim and the Indemnifying Party shall undertake and solely manage and control, at its sole expense, the defense of the Claim and its settlement. The Indemnified Party shall cooperate with the Indemnifying Party and may, at its option and expense, be represented in any such action or proceeding by counsel of its choice at its own expense. The Indemnifying Party shall not be liable for any litigation costs or expenses incurred by the Indemnified Party (or its related Indemnitee) without the Indemnifying Party’s written consent. The Indemnifying Party shall not settle any such claim unless such settlement fully and unconditionally releases the Indemnified Party from all liability relating thereto (or the Indemnifying Party pays the liability not released), unless the Indemnified Party otherwise agrees in writing.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

20.4 Insurance

For as long as there is a Collaboration Product Class or an Optionable 4DMT Product Class, and for [***] thereafter, 4DMT will secure and maintain insurance of commercial general liability with limits of at least [***] U.S. dollars ($[***]) per occurrence and [***] U.S. dollars ($[***]) in the aggregate, plus an umbrella policy for [***] U.S. dollars ($[***]) per occurrence and in the aggregate, workers’ compensation insurance as required by law, and employers’ liability insurance with limits of at least [***] U.S. dollars ($[***]) per accident and a [***] U.S. dollars ($[***]) disease policy limit, and shall provide a certificate evidencing such insurance upon the request of Roche (which may not be made more than [***] per year).

20.5 Disclaimer

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED WITH RESPECT TO THIS AGREEMENT. NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER.

21. Obligation Not to Disclose Confidential Information

21.1 Non-Use and Non-Disclosure

During the Agreement Term and for [***] ([***]) years thereafter, a Receiving Party shall (i) treat Confidential Information provided by Disclosing Party as it would treat its own information of a similar nature, (ii) take all reasonable precautions not to disclose such Confidential Information to Third Parties, without the Disclosing Party’s prior written consent, and (iii) not use such Confidential Information other than for fulfilling its obligations under this Agreement.

21.2 Permitted Disclosure

Notwithstanding the obligation of non-use and non-disclosure set forth in Section 21.1, the Parties recognize the need for certain exceptions to this obligation, specifically set forth below, with respect to press releases, patent rights, publications, and certain commercial considerations.

21.3 Press Releases

Prior to the first Initiation of a Phase I/IIa Study, neither Party shall issue a press release announcing the existence of this Agreement without written consent of the other Party. Thereafter:

 

(a)

Roche shall issue press releases in accordance with its internal policy that typically does not issue a press release until [***]. Roche shall provide 4DMT with a copy of any draft press release related to the activities contemplated by this Agreement at least [***] ([***]) weeks prior to its intended publication for 4DMT’s review. 4DMT may provide Roche with suggested modification to the draft press release. Roche shall consider 4DMT’s suggestions in issuing its press release, and if requested by 4DMT, shall remove any 4DMT Confidential Information.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b)

4DMT shall only issue press releases related to the activities contemplated by this Agreement that have either (i) been approved by Roche or (ii) are required to be issued by 4DMT as a matter of law and 4DMT has a competent legal opinion to that effect. In all circumstances, 4DMT shall provide Roche with a draft press release at least [***] ([***]) weeks prior to its intended publication for Roche’s review. During such period, Roche shall (i) approve the draft press release and permit 4DMT to issue the press release, (ii) contact 4DMT to discuss modification to the draft press release, or (iii) contact 4DMT and disapprove the press release. If Roche asks for modification, then 4DMT shall either make such modification or work with Roche to arrive at a press release that Roche approves. If 4DMT issues a press release without Roche’s approval, then 4DMT must obtain a competent legal opinion that the release was required to be issued by 4DMT as a matter of law.

21.4 Commercial Considerations

Nothing in this Agreement shall prevent Roche or its Affiliates from disclosing Confidential Information of 4DMT to (i) governmental agencies to the extent required or desirable to secure government approval for the development, manufacture or sale of Licensed Products in the Field, (ii) Third Parties acting on behalf of Roche, to the extent reasonably necessary for the development, manufacture or sale of Licensed Products in the Field, (iii) Third Parties requesting clinical trial data information (in accordance with Roche’s then-current data sharing policy) or (iv) Third Parties to the extent reasonably necessary to market Licensed Products in the Field or by 4DMT to Third Parties in furtherance of 4DMT’s activities and retained rights outside the Field and retained rights for Non-Optionable 4DMT Product Classes within the Field. The Receiving Party may disclose Confidential Information of the Disclosing Party to the extent that such Confidential Information is required to be disclosed by the Receiving Party to comply with Applicable Law, to defend or prosecute litigation or to comply with governmental regulations, provided that the Receiving Party provides prior written notice of such disclosure to the Disclosing Party and, to the extent practicable, takes reasonable and lawful actions to minimize the degree of such disclosure.

4DMT may disclose the results of the Collaboration as follows:

 

(a)

subject to Roche’s prior written approval which shall not unreasonably be withheld, in presentations prepared for investors and/or prospective investors, 4DMT may disclose de-identified data (including de-identified results generated under the Collaboration with regard to Variants identified or tested under the Collaboration), and

 

(b)	to Third Parties in furtherance of 4DMT’s activities and retained rights outside the Field and retained rights for Non-Optionable 4DMT Product Classes within the Field.

21.5 4D Materials

The Roche Group shall use any and all biological materials received from 4DMT under the RFO Agreement or this Agreement, and any progeny and derivatives thereof, solely within the scope of its licenses in Article 4, and shall only transfer them to Third Parties as necessary for the research, development, manufacture, and commercialization of Licensed Constructs and Licensed Products for the Field and subject to reasonable obligations of confidentiality and limited use (limited to Licensed Constructs and Licensed Products for the Field).

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

22. Term and Termination

22.1 Commencement and Term

This Agreement shall commence upon the Effective Date and continue for the Agreement Term.

22.2 Termination

22.2.1 Termination for Breach

A Party (“Non-Breaching Party”) shall have the right to terminate this Agreement in its entirety or on a country-by-country basis in the event the other Party (“Breaching Party”) is in breach of any of its material obligations under this Agreement. The non-Breaching Party shall provide written notice to the Breaching Party, which notice shall identify the breach and the countries in which the Non-Breaching Party intends to have this Agreement terminate. The Breaching Party shall have a period of ninety (90) days after such written notice is provided (“Peremptory Notice Period”) to cure such breach. If the Breaching Party has a bona fide dispute as to whether such breach occurred or has been cured, it will so notify the Non-Breaching Party, and the expiration of the Peremptory Notice Period shall be tolled until such dispute is resolved pursuant to Section 25.2. Upon a determination of breach or failure to cure, the Breaching Party may have the remainder of the Peremptory Notice Period to cure such breach. If such breach is not cured within the Peremptory Notice Period, then absent withdrawal of the Non-Breaching Party’s request for termination, this Agreement shall terminate in its entirety or such identified countries effective as of the expiration of the Peremptory Notice Period.

22.2.2 Termination by Roche without a Cause

Roche shall have the right to terminate this Agreement at any time, in whole or on a Licensed Product-by-Licensed Product, Product Class-by-Product Class or country-by-country basis upon ninety (90) days prior written notice. The effective date of termination under this Section 22.2.2 shall be the date the date ninety (90) days after Roche provides such written notice to 4DMT.

22.3 Consequences of Termination

22.3.1 Termination by 4DMT for Breach by Roche, by Roche without a Cause or under Sections 5.4 or 5.5

Upon any termination by 4DMT for breach by Roche, by Roche without a cause, or in accordance with Sections 5.4 or 5.5, the rights and licenses granted by 4DMT to Roche under this Agreement (except any that are fully paid-up and royalty free) shall terminate in their entirety or on a country-by-country, Licensed Product-by-Licensed Product or Product Class-by-Product Class basis, as applicable, on the effective date of termination. If the Agreement is being terminated as a whole, then Status of any Roche Product Class (except where licenses are fully paid-up and royalty free) will change to a 4DMT Product Class and 4DMT will have no diligence obligations to Roche for Products associated with a 4DMT Product Class. If the Agreement is being terminated on a Product Class-by-Product Class basis, then the Status of the Product Class associated with such Product Class will be deemed as an Available Product Class, however subject to additional change of Status in the case of a Continuation Election Notice in accordance with (f) below. If the Agreement is being terminated

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

on a country-by-country or Licensed Product-by-Licensed Product basis, then the Parties will work in good faith to agree how to equitably apportion the Status of any applicable Product Class associated with the Continuation Election Notice as between a Roche Product Class and Available Product Class, subject to additional change of Status in the case of a Continuation Election Notice in accordance with (f) below.

If 4DMT desires to continue development and/or commercialization of such terminated (or soon-to-be terminated, as applicable) Licensed Product(s), 4DMT shall give a Continuation Election Notice to Roche within [***] ([***]) days of 4DMT’s notice of termination for breach by Roche, within [***] ([***]) days of receipt of Roche’s notice of termination for Cause, or within [***] ([***]) days of the effective date of termination of rights under Sections 5.4 or 5.5. If Roche receives such a timely Continuation Election Notice, and (i) subject to the payments under Article 17 and (ii) to the extent reasonably requested by 4DMT for Product(s) no longer subject to the license grant under Section 4.1:

 

(a)

After the effective date of termination Roche shall, to the extent Roche has the right to do so, and 4DMT does not decline — after being queried and allowed a reasonable opportunity to review the future obligations associated with the following items — to accept in writing the assignment or transfer: assign and transfer to 4DMT all regulatory filings and approvals, all final pre-clinical and clinical study reports and clinical study protocols, and all test data, including clinical data, in Roche’s possession and control for such Product(s) in the country necessary for 4DMT to continue to develop and commercialize the Product(s). All data shall be transferred in the form and format in which it is maintained by Roche. Original paper copies shall only be transferred if legally required. Roche shall not be required to prepare or finalize any new data, reports or information solely for purposes of transfer to 4DMT.

 

(b)

With respect to a given clinical trial agreement that has not been cancelled and is assignable without Roche paying any consideration or commencing litigation in order to effect an assignment thereof, 4DMT may request (within [***] ([***]) days after receipt of a copy thereof) that such agreement be assigned to 4DMT and Roche shall take such actions necessary to effect such assignment. To the extent not assignable, Roche shall be under no obligation to continue ongoing clinical trials unless 4DMT agrees in writing to reimburse Roche’s expenses for such; and irrespective of the foregoing, Roche shall be under no obligation to continue ongoing clinical trials if Roche deems they should be discontinued for safety or efficacy reasons, and Roche shall be under no obligation to recruit or enroll new patients after the effective date of termination.

 

(c)

4DMT shall, upon transfer, have the right to disclose such filings, approvals and data to (i) governmental agencies of the country to the extent required or desirable to secure government approval for the development, manufacturing or sale of Product(s) in the country, (ii) Third Parties acting on behalf of 4DMT, its Affiliates or licensees, to the extent reasonably necessary for the development, manufacture, or sale of Product(s) in the country, and (iii) Third Parties to the extent reasonably necessary to market Product(s) in the country.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(d)

4DMT shall own, and Roche shall assign ([***]), and effective upon the applicable termination hereby assigns, its ownership rights in and under, any Project Product Patent Right that no longer Covers Product Classes that are still subject to the license grant under Section 4.1, except that Roche shall be under no obligation to make such assignment if the Project Product Patent Right shares priority with a Project Product Patent Right that Covers Product Classes still subject to the license grant under Section 4.1 (however Section 4.4 shall apply). For such assignment, Roche agrees to execute and deliver all documents and instruments reasonably requested 4DMT to evidence or record such assignment or to file, prosecute, enforce, or extend the assigned rights, and appoints 4DMT as attorney-in-fact to execute and deliver the foregoing if 4DMT is unable to obtain the foregoing after making reasonable inquiry.

 

(e)

Roche shall grant 4DMT a non-exclusive, sublicensable, royalty-bearing license under any Roche Patent Right and such Know-How as Roche provides, under this Section 22.3.1 solely to the extent necessary to allow 4DMT, its Affiliates or licensees to develop, manufacture, have manufactured, use, offer to sell, sell, promote, export and import the applicable Product(s) in the Field in the applicable country(ies). For clarity, the license under this Section 22.3.1(e) shall not include any licenses that Roche has with a Third Party for which such grant would be prohibited or under which a member of the Roche Group would incur financial or legal liability obligations to such Third Party.

 

(f)

If the Agreement is being terminated on a Product Class-by-Product Class basis, then the Status of the Product Class associated with the Continuation Election Notice will be deemed as a 4DMT Product Class that is a Non-Optionable 4DMT Product Class. If the Agreement is being terminated on a country-by-country or Licensed Product-by-Licensed Product basis, then the Parties will work in good faith to agree how to equitably apportion the Status of the applicable Product Class associated with the Continuation Election Notice.

22.3.2 Termination by Roche for Breach by 4DMT

Upon any termination by Roche for breach by 4DMT, Roche and its Affiliates may upon notice retain all rights and licenses granted to Roche by 4DMT under this Agreement; provided that Roche’s payment obligations shall survive, and Roche’s diligence obligations within the scope of the termination shall not survive, and the Parties will agree upon an appropriate reduction (if any) in payments otherwise due under Article 12 commensurate with the scope and nature of the breach.

22.3.3 Direct License

Irrespective of anything to the contrary in this Agreement, any existing, permitted sublicense granted by Roche under Section 4.2 of this Agreement (and any further sublicenses thereunder) shall, upon the written request of Roche, remain in full force and effect, provided that (i) such Sublicensee is not then in breach of its sublicense agreement (and, in the case of termination by 4DMT for breach by Roche, that such Sublicensee and any further sublicensees did not cause the breach that gave rise to the termination by 4DMT); and (ii) and such Sublicensee agrees to be bound to 4DMT under the terms and conditions of such sublicense agreement; and (iii) such terms and conditions of such sublicense agreement impose no greater obligation on 4DMT than this Agreement.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

22.3.4 Other Obligations

22.3.4.1 Obligations Related to Ongoing Activities

After the effective date of termination, Roche shall have the right to complete any on-going studies that are non-cancellable for contractual or patient safety reasons.

22.3.4.2 Obligations Related to Manufacturing

In the case of termination by 4DMT for breach by Roche or by Roche without a cause, if 4DMT elects to develop the applicable terminated (or soon-to-be terminated) Licensed Product(s) inside the Field, the following shall apply with respect to the applicable Product(s):

 

a)	Clinical Supplies

If requested by 4DMT prior to [***] after the effective date of termination, Roche will notify 4DMT of the amount of all existing and available clinical material under its Control and Roche’s fully burdened manufacturing cost for such material. If 4DMT notifies Roche within [***] thereafter that it is willing to reimburse Roche for such costs, then Roche shall transfer such materials to 4DMT and 4DMT shall assume all liability for the use of such material. Roche shall have no obligation to perform any additional activities concerning the clinical supplies (e.g. retesting, analyses).

 

b)	Commercial Supplies

If a Product is marketed by Roche or Roche’s Affiliates in any country on the date of the notice of termination of this Agreement, upon the request of 4DMT, Roche shall manufacture and supply such Product to 4DMT for a period that shall not exceed [***] from the effective date of the termination of this Agreement at a price to be agreed by the Parties in good faith. 4DMT shall use Commercially Reasonable Efforts to take over the manufacturing as soon as possible after the effective date of termination.

If, however, Roche elects not to provide the Know-How described in Section 22.3.4.3(c) and such Know-How is critical to the manufacture of commercialized Product(s), then Roche shall continue to supply 4DMT (i) indefinitely (on terms to be negotiated) or (ii) until such time as Roche can transfer the process to a third party CMO acceptable to both Parties.

22.3.4.3 Limitations on Grant-Backs; Transfer Expenses

For purposes of clarity, irrespective of anything to the contrary in this Agreement:

 

(a)

All transfers and licenses from Roche to 4DMT or other obligations of Roche under Section 22.3 are solely with respect to Product(s) that are not Licensed Combination Product(s), and are solely for the use in the Field. Such transfers, licenses and obligations do not extend to other therapeutically active ingredients or products, even if physically mixed, combined or packaged together with a Product, and even if a Product is intended (according to the investigation plan, proposed labeling or actual labeling, as applicable) for use with such other therapeutically active ingredients or products.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b)

In connection with research studies or clinical trials, Roche may have collected human samples and related clinical information for additional limited research and development programs (“Samples”). Legal and contractual restrictions may apply to such Samples, in particular as Samples may qualify as personal identifiable information. 4DMT acknowledges and accepts that notwithstanding anything herein, Roche shall not be obliged to transfer any such Samples to 4DMT.

 

(c)

With respect to Product(s) that are biologics, Roche shall be under no obligation to provide proprietary cell lines, growth media, culture media, or disclose proprietary technical development/manufacturing know-how; provided that if such Know-How is necessary to continue the development or commercialization of the applicable Product, then Roche shall provide such services for 4DMT on reasonable terms to be negotiated between the Parties (not to exceed Roche’s fully burdened manufacturing costs (calculated on a basis consistent with how the Roche was determining these fully burdened manufacturing costs prior to provision of the notice of termination) for the Product plus [***] percent ([***]%) plus any incremental costs incurred which are not reflected in the fully burdened manufacturing costs for changing to 4DMT specifications) or shall enable a third party contracting organization acceptable to both Parties to perform such activities.

 

(d)	Nothing in this Agreement shall be construed as granting 4DMT any license under the Excluded Patent Rights.

 

(e)

Except if the termination results from a Roche uncured material breach of this Agreement: [***] for transfer activities from Roche to 4DMT under Sections 22.3.1 and 22.3.4 (“Roche Transfer Activities”); however transfer activities corresponding to the return of material remains, data, reports, records, documents, Regulatory Filings and Regulatory Approvals originally provided by 4DMT to Roche no less than [***] from the effective date of termination (“4DMT-Originated Transfer Activities”) shall be [***]. If 4DMT desires Roche Transfer Activities other than 4DMT-Originated Transfer Activities, 4DMT shall make a payment to Roche of [***] US Dollars (US$ [***]) (“Minimum Transfer Payment”). The Minimum Transfer Payment shall be non-refundable, but shall be fully creditable against 4DMT’s reimbursement for the Roche Transfer Activities. Roche shall be under no obligation to provide Roche Transfer Activities (beyond than 4DMT-Originated Transfer Activities) prior to receipt of the Minimum Transfer Payment or if the Minimum Transfer Payment is received later than [***] ([***]) days after the effective date of the termination.

22.3.4.4 Royalty and Payment Obligations (including early termination of a Project Plan)

Termination of this Agreement by a Party, for any reason, shall not release Roche from any obligation to pay royalties or make any payments to 4DMT that are payable prior to the effective date of termination. Termination of this Agreement by a Party, for any reason, will release Roche from any obligation to pay royalties or make any payments to 4DMT that would otherwise become payable on or after the effective date of termination. Notwithstanding the foregoing, if termination of this Agreement results in early termination of an ongoing Project Plan, then Section 3.4 applies.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

22.4 Survival

Article 17 (Payments to Roche), Article 20 (Indemnification and Liability), Article 21 (Obligation Not to Disclose Confidential Information), Article 22 (Term and Termination), Section 25.1 (Governing Law) and Section 25.3 (Arbitration) shall survive any expiration or termination of this Agreement for any reason.

23. Bankruptcy

All licenses (and to the extent applicable rights) granted under or pursuant to this Agreement by 4DMT to Roche are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11, US Code (the “Bankruptcy Code”) licenses of rights to “intellectual property” as defined under Section 101(60) of the Bankruptcy Code. Unless Roche elects to terminate this Agreement, the Parties agree that Roche, as a licensee or sublicensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code, subject to the continued performance of its obligations under this Agreement.

24. Change of Control

In the event that there is a Change of Control then the following provisions shall apply and be in full force and effect.

 

(a)	4DMT shall provide written notice to Roche at least [***] ([***]) days prior to the completion of such Change of Control, subject to any confidentiality obligations of 4DMT then in effect (but in such even shall so notify Roche within [***] ([***]) days after completion of such Change of Control).

 

(b)

The Change of Control Group in connection with such Change of Control (for clarity, other than 4DMT and its Affiliates in existence prior to the effectuation of such Change of Control) shall agree in writing with Roche that it will not utilize any 4DMT Know-How or Patent Rights during the Agreement Term for the research, development or commercialization of any Product in the Field.

 

(c)

If the Change of Control Group had collective worldwide sales of pharmaceutical products in the Calendar Year that preceded the year in which the Change of Control was completed of [***] US Dollars (US$ [***]) or more, 4DMT may not designate a Product Class as a 4DMT Product Class without the written consent of Roche.

 

(d)	Roche shall have the right in its sole discretion, at Roche’s election exercised within [***] ([***]) months following the Change of Control to unilaterally implement some or all of the following:

 

(i)

terminate any or all Collaboration Projects effective immediately without obligation to pay 4DMT for FTEs budgeted by 4DMT, or non-cancellable commitments to outside vendors, that become due after the termination date (and if the Collaboration Project is Choroideremia, without the requirement to reimburse 4DMT for costs associated with process and formulation development and manufacture of Licensed Product used under the Project Plan (including the Choroideremia GMP Lot) under Section 8(a)), and either change the Status of such associated Collaboration Product Class to a Roche Product Class that is not a Collaboration Product Class or to an Available Product Class.

 

(ii)

change the Status of any Optionable 4DMT Product Class to a Roche Product Class that is not a Collaboration Product Class effective immediately upon written notice;

 

(iii)

terminate and/or restrict 4DMT’s participation on the JSC, including any rights 4DMT may have in future decision making with respect thereto;

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iv)

limit 4DMT’s and/or the Change of Control Group’s rights to receive any Roche information with respect to the development or commercialization of Licensed Products under this Agreement, including royalty reports, to period high level summary reports that may only be shared at a senior level within 4DMT or such Change of Control Group, and

 

(v)

require 4DMT and the Change of Control Group, following consummation of such Change of Control transaction, to adopt reasonable procedures to be agreed upon in writing with Roche to prevent the disclosure of all Confidential Information disclosed by Roche including information about the development or commercialization of Licensed Products by Roche (“Sensitive Information”) beyond 4DMT personnel having access to and knowledge of Sensitive Information prior to the Change of Control and to control the dissemination of Sensitive Information disclosed after the Change of Control within the Change of Control Group. The purposes of such procedures shall be to strictly limit such disclosures to only those personnel having a need to know Sensitive Information in order for 4DMT (and the Change of Control Group) to perform its obligations under the Agreement and to prohibit the use of Sensitive Information for competitive reasons that would be detrimental to Roche’s interests under the Agreement and/or Licensed Products, including without limitation, the use of Sensitive Information for the development or commercialization of products in the Field by the Change of Control Group.

25. Miscellaneous

25.1 Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the state of California, without reference to its conflict of laws principles.

25.2 Disputes

Unless otherwise set forth in this Agreement, in the event of any dispute in connection with this Agreement, such dispute shall be referred to the respective executive officers of the Parties designated below or their designees, for good faith negotiations attempting to resolve the dispute. The designated executive officers are as follows:

For 4DMT: [***]

For Roche: [***]

25.3 Arbitration

Should the Parties fail to agree within [***] after such dispute has first arisen, it shall be finally settled by arbitration in accordance with the Rules of American Arbitration Association (AAA) as in force at the time when initiating the arbitration. The tribunal shall consist of three arbitrators. The place of arbitration shall be San Francisco, California. The language to be used shall be English.

25.4 Assignment

Neither Party may assign its rights or obligations under this Agreement absent the prior written consent of the other Party, except to any of its Affiliates or in the context of a merger, acquisition, sale or other transaction involving all or substantially all of the assets of the Party seeking to assign,

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

in which case such Party in its sole discretion may assign its rights and obligations under this Agreement. In addition, 4DMT may assign its rights to receive payments under Article 12 of this Agreement in whole or in part to another entity, provided that 4DMT provides Roche a copy of such assignment and remains responsible and liable for all obligations under this Agreement. Any permitted assignment shall be binding on the successors of the assigning Party.

25.5 Debarment

4DMT represents and warrants that neither 4DMT nor 4DMT’s employees have ever been debarred under 21 U.S.C. §335a, disqualified under 21 C.F.R. §312.70 or §812.119, sanctioned by a Federal Health Care Program (as defined in 42 U.S.C §1320 a-7b(f)), including without limitation the federal Medicare or a state Medicaid program, or debarred, suspended, excluded or otherwise declared ineligible from any other similar Federal or state agency or program. In the event 4DMT or an employee of 4DMT receives notice of debarment, suspension, sanction, exclusion, ineligibility or disqualification under the above-referenced statutes, 4DMT shall immediately notify Roche in writing and Roche shall have the right, but not the obligation, to terminate this Agreement for breach, effective, at Roche’s option, immediately or at a specified future date.

25.6 Anti-Bribery

4DMT shall procure that its officers, workers, agents and any other persons who perform activities for or on behalf of it in connection with this Agreement shall:

 

(a)	not commit any act or omission which causes or could cause it or Roche or any member of the Roche Group to breach, or commit an offence under, any laws relating to anti-bribery and/or anti-corruption;

 

(b)	keep accurate and up to date records showing all payments made and received and all other advantages given and received by it in connection with this Agreement and the steps it takes to comply with this Section and permit Roche or any member of the Roche Group to inspect those records as required;

 

(c)

promptly notify Roche of: (i) any request or demand for any financial or other advantage received by it; and (ii) any financial or other advantage it gives or intends to give whether directly or indirectly in connection with this Agreement; and (iii) promptly notify Roche of any breach of this clause.

Roche may terminate this Agreement immediately by giving written notice to that effect to the 4DMT if the 4DMT is in breach of this Section.

25.7 Product Class

Expect as specifically indicated to the contrary, wherever this Agreement refers to conditions applicable to a Product Class with a given Status (i.e. Roche Product Class, 4DMT Product Class and Available Product Class) and a further subcategory of a Status (e.g. Optionable 4DMT Product Class, Collaboration Product Class, Optioned Product Class), such conditions apply only while such Product Class maintains such Status or the subcategory of a Status.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

25.8 Independent Contractor

No employee or representative of either Party shall have any authority to bind or obligate the other Party to this Agreement for any sum or in any manner whatsoever or to create or impose any contractual or other liability on the other Party without said Party’s prior written approval. For all purposes, and not- withstanding any other provision of this Agreement to the contrary, 4DMT legal relationship to Roche under this Agreement shall be that of independent contractor.

25.9 Unenforceable Provisions and Severability

If any of the provisions of this Agreement are held to be void or unenforceable, then such void or unenforceable provisions shall be replaced by valid and enforceable provisions that will achieve as far as possible the economic business intentions of the Parties. However the remainder of this Agreement will remain in full force and effect, provided that the material interests of the Parties are not affected, i.e. the Parties would presumably have concluded this Agreement without the unenforceable provisions.

25.10 Waiver

The failure by either Party to require strict performance and/or observance of any obligation, term, provision or condition under this Agreement will neither constitute a waiver thereof nor affect in any way the right of the respective Party to require such performance and/or observance. The waiver by either Party of a breach of any obligation, term, provision or condition hereunder shall not constitute a waiver of any subsequent breach thereof or of any other obligation, term, provision or condition.

25.11 Interpretation

As used in this Agreement, “include,” “includes,” “including,” and all other conjugations of the verb “to include” shall be deemed followed by “without limitation.”

25.12 Appendices

All Appendices to this Agreement shall form an integral part to this Agreement.

25.13 Entire Understanding

This Agreement, the Memo and the RFO Agreement contains the entire understanding between the Parties hereto with respect to the within subject matter and supersedes any and all prior agreements, understandings and arrangements, whether written or oral. Any payments potentially due from 4DMT to Roche under the RFO Agreement (for example, for Enabled Products as such term is defined therein) are no longer required and will not be made.

25.14 Amendments

No amendments of the terms and conditions of this Agreement shall be binding upon either Party hereto unless in writing and signed by both Parties.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

25.15 Notice

All notices that are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (to Roche) or by email (to 4DMT) (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

if to 4DMT, to:		4D Molecular Therapeutics Inc. 5980 Horton Street, Suite 460 Emeryville, California 94608 USA Attn: [***] Email: [***]
if to Roche, to:		F. Hoffmann-La Roche Ltd Grenzacherstrasse 124 4070 Basel Switzerland Attn: Legal Department Facsimile No.: [***]
and:		Hoffmann-La Roche Inc. 150 Clove Road Suite 8 Little Falls, New Jersey 07424 U.S.A. Attn. Corporate Secretary Facsimile No.: [***]

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith.

[Signature Page Follows]

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the Effective Date.

 

4D Molecular Therapeutics Inc.

/s/ David Kirn

Name: David Kirn

Title: CEO

 

F. Hoffmann-La Roche Ltd
/s/ Dr. Andreas Hohn				/s/ Dr. Melanie Wick
Name: Dr. Andreas Hohn				Name: Dr. Melanie Wick
Title: Vice Director				Title: Authorized Signatory

 

Hoffmann-La Roche Inc.

/s/ John P. Parise

Name: John P. Parise

Title: Authorized Signatory

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Appendix 1.103

Excluded Patent Rights

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Appendix 2.3.1

Initial XLRP 4DMT Product Class Work Plan

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Appendix 3.2.1

Initial Project Plan for Choroideremia

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Appendix 3.3

Project Plan Template

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Project Plan Attachment 1

Collaboration Project Activities

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Project Plan Attachment 2

Timelines

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Project Plan Attachment 3

Budget

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Appendix 6.2

Minimum Program Transfer

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Appendix 14.4

Sample Royalty Report Template

Omitted pursuant to Regulation S-K, Item 601(a)(5).

Exhibit 10.6

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

Execution Copy

8-6-2019

CONFIDENTIAL

AMENDED AND RESTATED

COLLABORATION AND LICENSE AGREEMENT

BY AND BETWEEN

4D MOLECULAR THERAPEUTICS, INC

AND

UNIQURE BIOPHARMA B.V.

August 6, 2019

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

AMENDED AND RESTATED

COLLABORATION AND LICENSE AGREEMENT

This Amended and Restated Collaboration and License Agreement (this “Agreement”) is entered into on and has an effective date of August 6, 2019, (the “Amended CLA Effective Date”) and amends and restates the original Collaboration and License Agreement (the “Original Agreement”), dated January 17, 2014 (the “Original CLA Effective Date” or “Effective Date”), by and between 4D Molecular Therapeutics, Inc, a corporation organized and existing under the laws of the State of Delaware and having a principal office located at 5858 Horton St, Emerystation North, Suite 460, Emeryville, CA 94608 (“4DMT”) (the original 4DMT party to the Agreement was 4D Molecular Therapeutics, LLC, a Delaware limited liability corporation that is now the entity defined as 4DMT in the foregoing), and uniQure biopharma B.V., a corporation organized and existing under the laws of The Netherlands and having a principal office located at Paasheuvelweg 25a, 1105 BP Amsterdam, The Netherlands (“uniQure”). The Original Agreement shall govern the rights between the parties for the period from the Original CLA Effective Date to, but excluding, the Amended CLA Effective Date, subject to any releases or other retrospective rights or obligations expressly provided in this Agreement.

INTRODUCTION

1. 4DMT is a biopharmaceutical company focused on research, development, manufacturing and marketing of novel adeno-associated viral vectors for delivery of nucleic acids to target cells.

2. uniQure is a biopharmaceutical company focused on the research, development, manufacturing and marketing of gene therapy based biopharmaceutical products.

3. 4DMT and uniQure desire to conduct a research collaboration to identify improved AAV Capsid Variants (as defined below).

4. 4DMT and uniQure now desire to amend, modify and restate the Original Agreement in its entirety via this Agreement, and 4DMT and uniQure are entering into a new Collaboration and License Agreement to be effective of even date herewith (the “New CLA”), pursuant to which, 4DMT and uniQure will pursue a new collaboration in which 4D will take the lead for the identification of novel AAV Capsid Variants for development and commercialization as therapeutic products in the Field and pursuant to the terms and conditions thereunder, and, through the execution of this Agreement and the New CLA, the Parties have resolved the matters that were referred to and described in correspondence between the Parties dated February 28, 2019 with respect to the Original Agreement.

5. uniQure desires to receive from 4DMT exclusive rights under 4DMT’s intellectual property rights to research (subject to 4DMT’s retained rights to conduct research under the Research Program), Develop, manufacture and Commercialize Selected Capsid Variants, Royalty Bearing Compounds and Royalty Bearing Products in the Field (each as defined below) pursuant to this Agreement, subject to 4D’s non-exclusive rights with respect thereto as described next.

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

6. 4DMT desires to receive from uniQure non-exclusive rights under uniQure’s intellectual property rights (including uniQure’s rights in intellectual property generated by 4D under this Agreement) to research, Develop, manufacture and Commercialize 4DMT Proposed Products as Royalty Bearing Compounds and Royalty Bearing Products in the Field (each as defined below) pursuant to this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, 4DMT and uniQure agree as follows effective as of the Effective Date:

ARTICLE I

DEFINITIONS

Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:

1.1 “4DMT AAV Capsid Variant”. 4DMT Capsid Variant means any AAV Capsid Variant that does not carry a Gene Therapy Construct contained in a Royalty Bearing Compound or Royalty Bearing Product.

1.2 “4DMT AAV Capsid Variant Library”. 4DMT AAV Capsid Variant Library means any AAV Capsid Variant Library constructed by or licensed to 4DMT, including all AAV Capsid Variant Libraries provided to 4DMT pursuant to the UCB Agreements.

1.3 “4DMT Intellectual Property”. 4DMT Intellectual Property means the 4DMT Know-How and the 4DMT Patent Rights.

1.4 “4DMT Know-How”. 4DMT Know-How means Know-How that is (a) Controlled by 4DMT or its Affiliates as of the Effective Date or during the Research Term, and (b) necessary or useful to conduct the Research Program or to research, Develop, make and have made, use or Commercialize the relevant Selected Capsid Variant, or a Royalty Bearing Compound or Royalty Bearing Product due to the presence of such Selected Capsid Variant therein. 4DMT Know-How includes Core 4DMT Know-How but does not include Joint Know-How.

1.5 “4DMT Patent Right”. 4DMT Patent Right means any Patent Right Controlled by 4DMT or its Affiliates as of the Effective Date or during the Term that Covers 4DMT Know-How. Schedule 1.5 lists the 4DMT Patent Rights existing as of the Effective Date. 4DMT Patent Rights include Core 4DMT Patent Rights but do not include Joint Patent Rights.

1.6 “AAV”. AAV means adeno-associated virus.

1.7 “AAV Capsid Variant”. AAV Capsid Variant means an AAV capsid that is modified as compared to the wild type sequence.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.8 “AAV Capsid Variant Library”. AAV Capsid Variant Library means a collection of variant AAV capsid open reading frames inserted into an AAV genome in a manner that renders such variants genome replication-competent with the appropriate helper virus functions and capable of being selected and evolved to optimize their ability to deliver nucleic acid sequences to human or animal cells.

1.9 “Accounting Standards”. Accounting Standards means, with respect to uniQure and its Affiliates, International Financial Reporting Standards (“IFRS”) or, to the extent applicable, generally accepted accounting principles as practiced in the United States (“GAAP”), and with respect to 4DMT and its Affiliates, GAAP, in each case as they exist from time to time, consistently applied.

1.10 “Affiliate”. Affiliate means, with respect to a Party, any entity that directly or indirectly controls, is controlled by, or is under common control with such Party. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership of voting securities, by contract or otherwise. For purposes of this definition, “control” shall be presumed to exist if one of the following conditions are met: (a) in the case of corporate entities, direct or indirect ownership of more than fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of more than fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities.

1.11 “Animal POC”. Animal POC means gene expression and/or gene function, in an animal model, of the transgene cassette that defines the relevant potential Product.

1.12 “Business Day”. Business Day means a day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York, USA or Amsterdam, The Netherlands are authorized by Law to remain closed.

1.13 “Calendar Quarter”. Calendar Quarter means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31; provided, however, that the first Calendar Quarter hereunder shall commence on the Effective Date and the final Calendar Quarter hereunder shall end on the effective date of termination or expiration of this Agreement.

1.14 “Calendar Year”. Calendar Year means each successive period of twelve (12) months commencing on January 1 and ending on December 31; provided, however, that the first Calendar Year hereunder shall commence on the Effective Date and the final Calendar Quarter hereunder shall end on the effective date of termination or expiration of this Agreement.

1.15 “Candidate Success Criteria”. Candidate Success Criteria means the criteria that an AAV Capsid Variant identified through a Research Selection Process (or any Research Compound containing such AAV Capsid Variant) must meet before it progresses to the next stage of the Research Program, as determined and approved by the JRSC, and as further described in Section 3.3(a).

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.16 “CEO”. CEO means the Chief Executive Officer of a Party or, if there is no Chief Executive Officer of a Party, the Board Chairperson or senior-most executive officer or equivalent of such Party.

1.17 “Clinical Trial(s)”. Clinical Trial(s) means a Phase I Study, a Phase II clinical study, a Pivotal Study or a Phase III Study.

1.18 “Clinical POC”. Clinical POC means demonstration of safety and a Pre-agreed level of therapeutic efficacy, including a change in the levels of a Pre-agreed disease relevant biomarker in some cases as a substitute for therapeutic efficacy, in a Pre-agreed number of human patients.

1.19 “Commercially Reasonable Efforts”. Commercially Reasonable Efforts means, with respect to a Party, the efforts required in order to carry out a task in a diligent and sustained manner without undue interruption or delay, which level is at least commensurate with the level of effort that a similarly situated Third Party would devote to a product of similar market potential and having similar commercial and scientific advantages and disadvantages resulting from its own research efforts or to which it has rights, taking into account its safety and efficacy, regulatory status, the competitiveness of the marketplace, its proprietary position, pricing, reimbursement, launching strategy and other market-specific factors, and all other relevant factors.

1.20 “Commercialization” or “Commercialize”. Commercialization or Commercialize means any activity directed to obtaining pricing or reimbursement approvals, marketing, promoting, distributing, importing, exporting, offering to sell or selling a product, or to have any such activity performed. When used as a verb, “Commercialize” means to engage in Commercialization.

1.21 “Compound”. Compound means an AAV Capsid Variant carrying a Gene Therapy Construct.

1.22 “Confidential Information”. Confidential Information means any and all information and data, including all uniQure Know-How, 4DMT Know-How and Joint Know-How, and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data, whether communicated in writing or orally or by any other method, which is provided by one Party to the other Party in connection with this Agreement or the Prior Confidentiality Agreement. All Core uniQure Know-How shall be considered the Confidential Information of uniQure, with respect to which: (a) uniQure shall be considered the disclosing Party, (b) 4DMT shall be considered the receiving Party, and (c) clauses (b) and (e) of Section 8.2 shall not apply. All Core 4DMT Know-How shall be considered the Confidential Information of 4DMT, with respect to which: (i) 4DMT shall be considered the disclosing Party, (ii) uniQure shall be considered the receiving Party, and (iii) clauses (b) and (e) of Section 8.2 shall not apply.

1.23 “Control”. Control means, with respect to any item of or right under Patent Rights or Know-How, the possession (whether by ownership or license, other than a license pursuant to this Agreement) of the ability of a Party or, as applicable, its Affiliate (subject to Section 12.7), to grant access to, or a license or sublicense of, such items or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing at the time such Party would be required hereunder to grant the other Party such access or license or sublicense.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.24 “Core 4DMT Intellectual Property”. Core 4DMT Intellectual Property means Core 4DMT Know-How and Core 4DMT Patent Rights.

1.25 “Core 4DMT Know-How”. Core 4DMT Know-How means [***].

1.26 “Core 4DMT Patent Right”. Core 4DMT Patent Right means any Patent Right that Covers the Core 4DMT Know-How.

1.27 “Core uniQure Intellectual Property”. Core uniQure Intellectual Property means Core uniQure Know-How and Core uniQure Patent Rights.

1.28 “Core uniQure Know-How”. Core uniQure Know-How means [***].

1.29 “Core uniQure Patent Right”. Core uniQure Patent Right means any Patent Right that Covers the Core uniQure Know-How.

1.30 “Cover”, “Covering” or “Covered”. Cover, Covering or Covered means, with respect to a product, technology, process or method that, in the absence of ownership of or a license granted under a Valid Claim, the manufacture, use, offer for sale, sale or importation of such product or the practice of such technology, process or method would infringe such Valid Claim (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if it were to issue).

1.31 “Default”. Default means with respect to a Party that (a) any representation or warranty of such Party set forth herein shall have been untrue in any material respect when made or (b) such Party shall have failed to perform any material obligation set forth in this Agreement.

1.32 “Delivery Success Criteria”. Delivery Success Criteria means the following criteria that determines whether an AAV Capsid Variant demonstrates improved delivery or function of a Gene Therapy Construct: [***].

1.33 “Development” or “Develop”. Development or Develop means pre-clinical and clinical drug development activities, including: test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, development-stage manufacturing, quality assurance/quality control procedure development and performance with respect to clinical materials, statistical analysis and report writing and clinical studies, regulatory affairs, and all other pre-Regulatory Approval activities. When used as a verb, “Develop” means to engage in Development.

1.34 “EMA”. EMA means the European Medicines Agency, or any successor agency.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.35 “European Union” or “EU”. European Union or EU means the countries that are members of the European Union, as redefined from time to time.

1.36 “FDA” or “Food and Drug Administration”. FDA or Food and Drug Administration means the United States Food and Drug Administration, or any successor agency.

1.37 “Field”. Field means the delivery of Gene Therapy Constructs to cells in (a) the central nervous system (“CNS”) or (b) the liver, in each case where such delivery is for the purpose of effecting expression of the applicable RNA or amino acid sequence in the targeted cells and is potentially useful for the diagnosis, treatment, palliation or prevention of a disease or medical condition in humans or animals, irrespective of the administration site or mode of administration (e.g., intravenous, direct injection, subcutaneous or intrathecal) of the Compound used to effect delivery. For clarity, intravenous administration of any Compound targeted to cells in other organs (i.e., not specifically targeted to liver or CNS tissues), including for treatment of neoplastic and eye disorders, is excluded from the Field.

1.38 “First Commercial Sale”. First Commercial Sale means, with respect to any Royalty Bearing Product and a country, the first sale for end use or consumption of such Royalty Bearing Product in such country after all required approvals, including Regulatory Approval, have been granted by the Regulatory Authority of such country. For clarity, sales for test marketing, sampling and promotional uses, clinical trials purposes or compassionate use shall not constitute a First Commercial Sale.

1.39 “FTE”. FTE means [***] ([***]) hours of work devoted to or in support directly of the Research Program that is carried out by one or more qualified scientific or technical employees of 4DMT or its Affiliates, measured in accordance with 4DMT’s normal time allocation practices from time to time. Overtime, and work on weekends, holidays and the like, shall not be counted with any multiplier (e.g., time-and-a-half or double time) toward the number of hours that are used to calculate the FTE contribution. The portion of an FTE billable for one (1) individual during a Calendar Quarter shall be determined by dividing the number of hours worked directly by said individual on the Research Program during such Calendar Quarter by [***] ([***]) hours.

1.40 “FTE Costs”. FTE Costs means, for any Calendar Quarter, the number of FTEs multiplied by the FTE Rate.

1.41 “FTE Rate”. FTE Rate means the amount for each FTE as set forth in Schedule 1.41.

1.42 “Fully Burdened Manufacturing Cost”. Fully Burdened Manufacturing Cost means, as applicable to a Royalty Bearing Product, the cost of manufacturing such Royalty Bearing Product, which is equal to the sum of (a) for such Royalty Bearing Product (or components thereof), the costs of all direct material, direct labor and allocable manufacturing overhead consumed, provided, or procured by a Party, in each case for the manufacture of such Royalty Bearing Product, and (b) for such Royalty Bearing Product (or components thereof) made by a Third Party, the out-of-pocket costs paid to such Third Party by a Party; in each case (a) and (b) to the extent such costs are incurred by a Party or its Affiliates and to the extent such costs are reasonably allocable to the manufacture of such Royalty Bearing Product. For clarity, Fully Burdened Manufacturing Cost excludes costs of excess capacity. Fully Burdened Manufacturing Cost shall be calculated in a manner consistent with Accounting Standards.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.43 “Gene Therapy Construct”. Gene Therapy Construct means any nucleic acid sequence that encodes an RNA or an amino acid sequence that is intended to be delivered to a targeted tissue to treat, prevent or ameliorate a disease or condition.

1.44 “GLP Tox Compound”. GLP Tox Compound means a Research Compound that uniQure, in its sole discretion, elects to progress to GLP Tox Studies to be conducted by or on behalf of uniQure in accordance with Section 3.3(a).

1.45 “GLP Tox Study”. GLP Tox Study means a formal toxicology study of a Research Compound conducted under Good Laboratory Practices that is required to obtain approval from a regulatory authority, whether the FDA or otherwise, to begin conducting Clinical Trials.

1.46 “Good Laboratory Practices”. Good Laboratory Practices means the then-current good laboratory practice standards promulgated or endorsed by the FDA, as defined in 21 C.F.R. Part 58 (or such other comparable regulatory standards in jurisdictions outside the U.S. to the extent applicable to the relevant study, as they may be updated from time to time).

1.47 “Governmental Authority”. Governmental Authority means any United States federal, state or local or any foreign government, or political subdivision thereof, or any multinational organization or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any governmental arbitrator or arbitral body.

1.48 “Grant Letter”. Grant Letter means each of the Option Agreements, dated as of even date herewith, by and between uniQure’s Affiliate, uniQure B.V., and (a) in the first case, Dr. David Schaffer and (b) in the second case, Dr. David Kirn.

1.49 “IGT”. IGT means Integrative Gene Therapeutics, Inc., a California corporation, which jointly owns with UC certain of the UC Patent Rights.

1.50 “Indication”. Indication means any disease, condition or syndrome.

1.51 “Initial Research Term”. Initial Research Term means the period commencing on the Effective Date and ending on [***].

1.52 “Initiation”. Initiation means, with respect to a Clinical Trial, the first dosing of a participant in such Clinical Trial.

1.53 “Invention”. Invention means any new and useful process, article of manufacture, compound, composition of matter, formulation or apparatus, or any improvement thereof, discovery or finding, which is patentable.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.54 “Invoice”. Invoice means an original invoice sent by 4DMT to uniQure with respect to any payment due hereunder substantially in the form attached hereto as Schedule 1.54.

1.55 “Know-How”. Know-How means (a) any scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, that is not in the public domain, including databases, practices, methods, techniques, specifications, formulations, formulae, protein sequences, nucleic acid sequences, AAV Capsid Variants, AAV Capsid Variant Libraries, Gene Therapy Constructs, Compounds, knowledge, know-how, trade secrets, skill, experience, test data including pharmacological, medicinal chemistry, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data, stability data, studies and procedures, and manufacturing process and development information, results and data, and (b) any biological, chemical, or physical material or composition of matter that is not in the public domain or otherwise generally available to the public.

1.56 “Law”. Law means all laws, statutes, rules, codes, regulations, orders, judgments or ordinances applicable to a Party, this Agreement or the activities contemplated hereunder.

1.57 “Lead Optimization”. Lead Optimization means the discovery phase dedicated to the evaluation of new AAV Capsid Variants derived from an AAV Capsid Variant Library following a Research Selection Process to identify one or more Research Compounds that meet Delivery Success Criteria.

1.58 “Licensed IP”. Licensed IP means the 4DMT Intellectual Property, Core uniQure Intellectual Property, and Joint Intellectual Property.

1.59 “Materials”. Materials means any tangible chemical or biological research materials that are provided or otherwise made available by one Party to the other Party under the terms of Section 3.4 for use in performance of the Research Program; provided, however, that Materials will not include any AAV Capsid Variants or AAV Capsid Variant Libraries.

1.60 “NDA”. NDA means a New Drug Application or Biologics License Application filed with the FDA or any other application required for the purpose of marketing or selling or commercially using a therapeutic or prophylactic product to be filed with a Regulatory Authority in a non-U.S. country or group of countries, including a Product License Application or Marketing Authorization Application (“MAA”) in the European Union or Japan.

1.61 “Net Sales”. Net Sales means, with respect to a Royalty Bearing Product, the gross amount of sales of such Royalty Bearing Product invoiced by uniQure or its Affiliates to Third Parties, less the following to the extent related to such Royalty Bearing Product and incurred by such uniQure or its Affiliates and invoiced to the Third Party:

(a) sales returns and allowances actually paid, granted or accrued, including trade, quantity and cash discounts and any other adjustments, including those granted on account of price adjustments or billing errors;

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b) rejected goods, damaged or defective goods, recalls, returns;

(c) rebates, chargeback rebates, compulsory rebates, reimbursements or similar payments granted or given to wholesalers or other distributors, buying groups or health care insurance carriers;

(d) non-collectable receivables;

(e) customs or excise duties, sales tax, consumption tax, value added tax, and other taxes (except income taxes); or

(f) charges for packing, freight, shipping and insurance.

Each of the foregoing deductions shall be determined as incurred in the ordinary course of business in type and amount consistent with good industry practice and in accordance with Accounting Standards on a basis consistent with uniQure’s audited consolidated financial statements. For clarity, sales by uniQure or its Affiliates of a Royalty Bearing Product to a Third Party Distributor of such Royalty Bearing Product in a given country shall be considered a sale to a Third Party customer. All such discounts, allowances, credits, rebates, and other deductions shall be fairly and equitably allocated to the Royalty Bearing Products and other products of uniQure and its Affiliates such that the Royalty Bearing Product does not bear a disproportionate portion of such deductions.

In the event any Royalty Bearing Product is sold for consideration other than cash, Net Sales for such sale shall be the average price of such Royalty Bearing Product sold for cash during the relevant period in the relevant country.

In the event that any discount, reduction, payment or rebate is offered for a Royalty Bearing Product where such Royalty Bearing Product is sold to a Third Party customer as part of a grouped set of products, the applicable discount, reduction, payment or rebate for such Royalty Bearing Product in such arrangement shall be based on the weighted average discount, reduction, payment or rebate of such grouped set of products.

Any Royalty Bearing Products used for promotional or advertising purposes (in reasonable and customary amounts) or used for Clinical Trials or other research purposes shall not be included in Net Sales. Donations for charity reasons or compassionate use shall also not be included in Net Sales.

1.62 “Net Sales by 4D” has the same meaning as given in the definition of “Net Sales,” but substituting “4DMT” for “uniQure” in each instance where “uniQure” appears in such definition.

1.63 “Party” and “Parties”. Party means uniQure or 4DMT individually, and Parties means uniQure and 4DMT collectively.

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.64 “Patent Rights”. Patent Rights means patents, patent applications or provisional patent applications, utility models and utility model applications, petty patents, innovation patents, patents of addition, divisionals, continuations, continuation-in-part applications, continued prosecution applications, requests for continued examinations, reissues, renewals, reexaminations and extensions and supplementary protection certificates granted in relation thereto, in any country of the world. For clarity, Patent Rights shall include any Patent Right that claims priority to or common priority with such Patent Rights.

1.65 “Phase I Study”. A Phase I Study is a human clinical trial conducted in any country that meets the requirements of 21 CFR §312.21(a). By way of example and not limitation, a Phase I Study is usually performed as a single or multiple dose clinical study in healthy volunteers or patients to assess specific administration, distribution, metabolism, excretion (ADME), safety and tolerability, bioavailability/bioequivalence or exploratory efficacy (in the sense of demonstrating “proof-of-principle”) of an investigational drug, and the emphasis in Phase I is usually on safety and tolerability and it is typically used to plan patient dosing in Phase II clinical studies. For clarity, a Phase I Study may also represent the initial phase of a combined Phase Ib/II clinical study.

1.66 “Phase III Study”. A Phase III Study is a human clinical trial conducted in any country that meets the requirements of 21 CFR §312.21(c). By way of example and not limitation, a Phase III Study is a large scale clinical study (usually several hundreds of patients) performed after preliminary evidence suggesting effectiveness of the drug has been obtained in Phase II clinical studies, and it is intended to gather the pivotal information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and, along with earlier Clinical Trials, to provide an adequate basis for Regulatory Approval. For clarity, a Phase III Study may also represent the second part of a combined Phase II/III clinical study.

1.67 “Pivotal Study”. A Pivotal Study is a human clinical trial conducted in any country, the principal purpose of which is to establish safety and efficacy of a Royalty Bearing Product in patients with the applicable Indication and to gather the pivotal information about such safety and effectiveness that is needed to evaluate the overall benefit-risk relationship of the drug and, along with earlier Clinical Trials, to provide an adequate basis for Regulatory Approval. A Pivotal Study includes any human clinical trial intended as a pivotal study of such Royalty Bearing Product regarding such Indication, such as a phase II/III or phase IIb clinical trial, whether or not such study is a traditional Phase III Study.

1.68 “Pre-agreed”. Pre-agreed means on terms that are determined by the JRSC in accordance with Section 2.5.

1.69 “Prior Confidentiality Agreement”. Prior Confidentiality Agreement means the Two Way Confidentiality Disclosure Agreement between uniQure and 4DMT, dated August 26, 2013.

1.70 “Product”. Product means any preparation in final form, either for sale by prescription, over-the-counter or any other method, or for administration to human patients in Clinical Trials, for any and all uses, and in any and all formulations and combinations, which preparation contains a Compound.

 

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1.71 “Project Team”. Project Team means the 4DMT and uniQure personnel involved in the Research Program, including the Project Leaders.

1.72 “Prosecution and Maintenance”. Prosecution and Maintenance means, with respect to a Patent Right, the preparation, filing, prosecution and maintenance of such Patent Right, as well as reexaminations, reissues and the like with respect to such Patent Right, together with the conduct of interferences, the defense of oppositions and other similar proceedings with respect to the particular Patent Right; and “Prosecute and Maintain” shall have the correlative meaning.

1.73 “Regulatory Approval”. Regulatory Approval means the technical, medical and scientific licenses, registrations, authorizations and approvals (including approvals of NDAs and labeling approvals) of any Regulatory Authority necessary for the distribution, marketing, promotion, offer for sale, use, import, export or sale of a Royalty Bearing Product in a regulatory jurisdiction.

1.74 “Regulatory Authority”. Regulatory Authority means any applicable Governmental Authority involved in granting approvals for the manufacturing, marketing, reimbursement or pricing of a Royalty Bearing Product in the Territory or any portion thereof, including the FDA and EMA (as applicable), and any successor Governmental Authority having substantially the same function.

1.75 “Research Compound”. Research Compound means a Compound containing a Designated Capsid Variant that is the subject of activities under the Research Program.

1.76 “Research Plan”. Research Plan means the research plan developed by the Parties that sets forth the activities to be undertaken during the Research Term with respect to the Research Program and the budget for such activities. The initial outline of the Research Plan is attached as Schedule 1.76.

1.77 “Research Program”. Research Program means a program of collaborative research to be undertaken by the Parties pursuant to the Research Plan to identify optimized AAV Capsid Variants for use in the Field that demonstrate improved expression of the delivered Gene Therapy Construct in the targeted tissue as compared to currently available AAV Capsid Variants.

1.78 “Research Selection Process”. Research Selection Process means the iterative evolution or isolation of lead AAV Capsid Variants from one or more 4DMT AAV Capsid Variant Libraries in cells (cultured or primary) in vitro or in animals in vivo intended to result in the identification of AAV Capsid Variants demonstrating Pre-agreed properties suitable to proceed into Lead Optimization using a Pre-agreed evaluation methodology and that are targeted to a specified target tissue. A given Research Selection Process is different from another Research Selection Process if such Research Selection Process was conducted to identify AAV Capsid Variants that specifically target a different tissue or are delivered by means of a different mode of administration (e.g., such process was conducted to identify AAV Capsid Variants useful for intravenous, direct injection, subcutaneous or intrathecal delivery means).

 

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1.79 “Research Term”. Research Term means the Initial Research Term and, if applicable, the Extended Research Term.

1.80 “Research Year”. Research Year means a twelve (12) month period beginning on the Effective Date or on any anniversary thereof.

1.81 “Royalty Bearing Compound”. Royalty Bearing Compound means a Compound containing a Selected Capsid Variant.

1.82 “Royalty Bearing Product”. Royalty Bearing Product means a Product containing a Royalty Bearing Compound.

1.83 “Royalty Term”. Royalty Term means, with respect to a Royalty Bearing Product, on a Royalty Bearing Product-by-Royalty Bearing Product and a country-by-country basis, the period beginning on the First Commercial Sale of such Royalty Bearing Product in such country by uniQure or any of its Affiliates or Sublicensees, and ending on latest of: (a) the expiration of the last Valid Claim within the Licensed IP Covering such Royalty Bearing Product in such country, (b) the expiration of any applicable exclusivity, including orphan drug status or data exclusivity, and any extension thereto, granted by a Regulatory Authority in such country with respect to such Royalty Bearing Product, or (c) the tenth (10^th) anniversary of the date of the First Commercial Sale by uniQure or any of its Affiliates or Sublicensees of such Royalty Bearing Product in such country.

1.84 “Selected Capsid Variant”. Selected Capsid Variant means (a) an AAV Capsid Variant selected by uniQure in accordance with Section 3.4 (as provided in Schedule 1.83), (b) an AAV Capsid Variant resulting from a modification by uniQure or by 4DMT (or by any Third Party licensed pursuant to this Agreement) to an AAV Capsid Variant described in subsection (a), or (c) an AAV Capsid Variant resulting from a modification by uniQure or by 4DMT (or by any Third Party licensed pursuant to this Agreement) to any AAV capsid to contain a sequence conferring the properties that were the subject of the Research Selection Process for an AAV Capsid Variant described in subsection (a); provided that the resulting Know-How with respect to the modified AAV Capsid Variants shall be Core uniQure Know-How. Notwithstanding anything express or implied in this Agreement: (i) uniQure and those deriving rights from uniQure shall have no right under this Agreement (but shall have the right under the New CLA) to modify a Selected Capsid Variant of clause (a) or (b) with or to include any motif, mutation, or substitution identified under the New CLA, (ii) any such modified AAV Capsid Variant — other than an AAV Capsid Variant of clause (a) (i.e., any of the precise AAV Capsid Variants set forth in Schedule 1.83 with no further modifications) — that includes any such motif, mutation, or substitution shall be deemed not to be a Selected Capsid Variant under this Agreement but rather to be a New Capsid Variant under the New CLA, (iii) the activities to so modify a Selected Capsid Variant shall be deemed to have occurred under the New CLA, and (iv) the Know-How and Patent Rights related to such modifications and resulting New Capsid Variants shall be deemed to arise under the New CLA and be owned by 4DMT as New Variant Patents and the Know-How that is the subject matter of New Variant Patents. For clarity, except as stated in the preceding sentence, all AAV Capsid Variants described in clauses (b) and (c) are Selected Capsid Variants for purposes of this Agreement, are subject to being potentially included in Proposed Products under Section 4.4, and are subject to Vector Characterization Data sharing under Section 4.3.

 

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1.85 “Selection Process”. Selection Process means the iterative evolution or isolation of lead AAV Capsid Variants from one or more AAV Capsid Variant Libraries in cells (cultured or primary) in vitro or in animals in vivo intended to result in the identification of AAV Capsid Variants demonstrating properties suitable to a specified target tissue. For clarity, a Selection Process can be one that is performed by 4DMT or its Affiliate either for itself or for, with or by any Third Party under rights granted by 4DMT to such Third Party, and need not be one that is conducted under the Research Program of this Agreement or designed for the same type of tissue in order to qualify under this definition.

1.86 “Sublicensee”. Sublicensee means, with respect to uniQure, a Third Party to whom uniQure (or its Affiliate or another of its Sublicensees) has granted a license or sublicense under the Licensed IP to Develop, make and have made, use or Commercialize a Royalty Bearing Product; provided, however, that a Sublicensee shall not include any Third Party Distributor.

1.87 “Territory”. Territory means all countries and territories in the world.

1.88 “Third Party”. Third Party means an entity other than uniQure, 4DMT and their respective Affiliates.

1.89 “Third Party Distributor”. Third Party Distributor means any Third Party that provides (but does not Develop) Royalty Bearing Products directly to customers under agreement with uniQure, its Affiliates or Sublicensees.

1.90 “UC AAV Capsid Variant”. UC AAV Capsid Variant means any AAV Capsid Variant provided to 4DMT pursuant to the UCB Agreements.

1.91 “UC Patent Right”. UC Patent Right means any Patent Right licensed to 4DMT pursuant to the UCB Agreements.

1.92 “UC Product”. UC Product means a Royalty Bearing Product that is Covered by a UC Patent Right.

1.93 “UCB Agreements”. UCB Agreements means (a) the Exclusive License and Bailment Agreement between 4DMT and the Regents of the University of California (“UC”), Agreement Control No. 2014-03-0089, dated December 19, 2013; (b) the Exclusive License and Bailment Agreement between 4DMT and UC, Agreement Control No. 2014-03-0090, dated December 19, 2013; and (c) the Agreement for Use of Certain Biological Materials between 4DMT and UC, Agreement Control No. 2014-30-0088, dated December 19, 2013, in each case in the form provided to uniQure by 4DMT as of the Effective Date.

1.94 “uniQure Intellectual Property”. uniQure Intellectual Property means uniQure Know-How and uniQure Patent Rights.

 

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1.95 “uniQure Know-How”. uniQure Know-How means Know-How that is (a) Controlled by uniQure or its Affiliates as of the Effective Date or during the Research Term, and (b) necessary or useful to conduct the Research Program or to research, Develop, make and have made, use or Commercialize the relevant Selected Capsid Variant, or a Royalty Bearing Compound or Royalty Bearing Product due to the presence of such Selected Capsid Variant therein. uniQure Know-How includes Core uniQure Know-How but does not include Joint Know-How.

1.96 “uniQure Patent Right”. uniQure Patent Right means any Patent Right Controlled by uniQure or its Affiliates as of the Effective Date or during the Term that Covers uniQure Know-How. uniQure Patent Rights include Core uniQure Patent Rights but do not include Joint Patent Rights.

1.97 “Valid Claim”. Valid Claim means (a) a claim of an issued patent that has not expired or been abandoned, or been revoked, held invalid or unenforceable by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period), or (b) a claim within a patent application which application has not been pending for more than [***] ([***]) years from the date of its priority filing date and which claim has not been irretrievably revoked, irretrievably cancelled, irretrievably withdrawn, held invalid or abandoned by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period), or finally determined to be unallowable in a decision from which an appeal cannot or can no longer be taken; provided, however, that with respect to [***].

1.98 “Vector Characterization Data” means any and all data, results and other Know-How that is generated either by or on behalf of a Party or its Affiliate, whether alone or together with, by or for any of its Third Party licensees, contractors or collaborators either under this Agreement or outside of this Agreement, with respect to any Selected Capsid Variant, in regards to any of the following with respect to such Selected Capsid Variant: [***]

1.99 Additional Definitions. Each of the following definitions is set forth in the section of this Agreement indicated below:

 

Definition:		Section:
4DMT		Preamble
4DMT Indemnitees		9.5
Acquiring/Acquired Party		5.6(c)
Additional Cure Period		10.2(a)
Agreement		Preamble
Audited Party		6.7
Auditing Party		6.7
Bankruptcy Code		5.5
CNS		1.37
CREATE Act		7.10

 

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Definition:		Section:
Damages		9.5
Defaulting Party		10.2(a)
Designated Capsid Variant		3.4(a)
Dispute		11.1
Effective Date		Preamble
Equipment Payment		6.2(c)
Excluded Claim		11.2
Executives		2.5(b)
Extended Research Term		3.1(c)
Failure to Amend		4.4(d)
Fair Market Value		6.5(b)(iii)
GAAP		1.9
GLP Tox Candidate Review Period		3.3(a)
IFRS		1.9
Initiating Party		7.6(d)
Joint Counsel		7.5
Joint Intellectual Property		7.2(a)
Joint Know-How		7.2(a)
Joint Patent Rights		7.2(a)
JRSC		2.2(a)
M&A Event		12.7
MAA		1.60
Non-Defaulting Party		10.2(a)
Orange Book		7.9(a)
Paragraph IV Certification		7.9(b)
Paragraph IV Proceeding		7.9(b)(ii)
Project Leader		2.1
Records		3.7(a)(i)
SEC Filing		8.5(c)
Sublicense Consideration		6.5(b)
Sublicense Income Sharing Percentages		6.5(a)
Term		10.1
Third Party Claim		9.5
Third Party Competitive Product		4.4(a)
Third Party Proposal		4.4(a)
Third Party Proposed Products		4.4(a)
Third Party Proposer		4.4(a)
Trade Secret Election		7.3(b)
USPTO		7.10
UC		1.89
uniQure		Preamble
uniQure Indemnitees		9.6

 

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ARTICLE II

GOVERNANCE

2.1 Project Leaders. Within [***] ([***]) Business Days after the Effective Date, each Party will appoint (and provide written notice to the other Party of the identity of) a senior representative having a general understanding of pharmaceutical discovery and development issues to act as its project leader under this Agreement (each, a “Project Leader”). The Project Leaders will serve as the contact point between the Parties with respect to the Research Program, and will be primarily responsible for: (a) facilitating the flow of information and otherwise promoting communication, coordination of the day-to-day work and collaboration between the Parties; (b) providing single point communication for seeking consensus internally within the respective Party’s organization; and (c) raising cross-Party or cross-functional disputes in a timely manner. The Project Leaders shall conduct regular telephone conferences as deemed necessary or appropriate, to exchange informal information regarding the progress of the Research Program. Each Party may change its designated Project Leaders from time to time upon prior written notice to the other Party. Each Project Leader may designate a substitute to temporarily perform the functions of that Project Leader by prior written notice to the other Party.

2.2 Joint Research Steering Committee.

(a) Composition. Promptly after the Effective Date, the Parties shall establish a joint research steering committee (the “JRSC”). The JRSC shall be comprised of at least [***] ([***]) named representatives of uniQure and at least [***] ([***]) named representatives of 4DMT, one of whom shall be [***] (unless due to his death, illness or disability), or such other numbers as the Parties may agree in writing. As soon as practicable after the Effective Date (but in no event more than [***] ([***]) Business Days after the Effective Date), each Party shall designate by written notice to the other Party its initial representatives on the JRSC. Each Party may replace one or more of its non-mandatory representatives, in its sole discretion, effective upon written notice to the other Party of such change. These representatives shall have appropriate technical credentials, experience and knowledge, and ongoing familiarity with the Research Program. The JRSC shall be disbanded upon expiration of the Research Term.

(b) Function and Powers of the JRSC. During the Research Term, the JRSC’s responsibilities shall include: (i) approving the initial Research Plan and any amendment thereto, including allocation of tasks and resources; (ii) developing and approving the Candidate Success Criteria; (iii) developing and approving parameters for Animal POC; (iv) developing and approving parameters for Clinical POC; (v) determining the frequency of meetings of the Project Team, or subgroups of the Project Team, and the members of the Project Team to attend such meetings, which meetings are expected to occur at least [***], with such meetings expected to occur in person at least [***]; (vi) reviewing, approving procedures, and making recommendations regarding Lead Optimization; (vii) determining whether a Research Compound achieves the relevant Delivery Success Criteria; (viii) proposing Research Compounds that have achieved the Delivery Success Criteria for uniQure’s acceptance as GLP Tox Compounds; (ix) providing a forum for discussion of the Research Plan, the status of the Research Program, and relevant data; (x) serving as a forum for informal resolution of disagreements that may arise in the relation to the

 

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Parties’ activities under the Research Program, including any disagreement within any subcommittee; (xi) determining and approving the overall strategy for publications and presentations pursuant to Section 8.4; and (xii) considering and acting upon such other matters as may be specified in this Agreement. Any decision made by the JRSC under this Section 2.2(b) shall be deemed a decision of the JRSC, as applicable, for purposes of this Agreement.

2.3 Subcommittees. The JRSC may establish and disband such subcommittees as deemed necessary by the JRSC. Each such subcommittee shall consist of the same number of representatives designated by each Party, which number shall be mutually agreed by the Parties. Each Party shall be free to change its representatives on written notice to the other Party or to send a substitute representative to any subcommittee meeting. Each Party’s representatives and any substitute for a representative shall be bound by a written agreement with confidentiality obligations substantially the same as those set forth in ARTICLE VIII. The rules for the conduct of each subcommittee, and the scope of its responsibilities, shall be determined by the JRSC, provided that no subcommittee shall have the authority to bind the Parties hereunder, and each subcommittee shall report to the JRSC.

2.4 Meetings. The JRSC shall each hold at least [***] per Calendar Quarter. Upon necessity, either Party shall be entitled to request additional meetings of the JRSC. Meetings of the JRSC shall be effective only if at least [***] ([***]) representatives of each Party are present or participating. The location of meetings shall be as agreed by the Parties, and may be held in person, alternating locations between the Parties, or by telephone conference call or by videoconference; provided, however, that at least [***] ([***]) meetings of the JRSC each Calendar Year are held in person. 4DMT’s costs and expenses incurred in connection with preparing for and participating in all such meetings shall be paid for by uniQure in accordance with the budget for the Research Plan. Either Party may, from time to time, invite additional representatives or consultants to attend JRSC meetings; provided that at least [***] ([***]) Business Days’ prior written notice is given of a Party’s intention to invite such other representatives or consultants and providing full details about the name, employer and professional background of such other representatives or consultants. Each representative and consultant participating in or attending a JRSC meeting shall be bound by a written agreement with confidentiality obligations substantially the same as those set forth in ARTICLE VIII. The JRSC shall be co-chaired by a representative from each Party. The chairpersons shall set the agendas for the JRSC meeting in advance. Within [***] ([***]) Business Days prior to each scheduled meeting, each Party shall, in accordance with Section 3.7(b), provide a report to the JRSC detailing its progress with respect to the Research Program. The Parties will rotate the responsibility for recording, preparing and issuing minutes for each JRSC meeting, to be circulated within [***] ([***]) Business Days after each meeting.

2.5 Decision-making.

(a) Initial Dispute Resolution Procedures. Subject to the provisions of this Section 2.5, actions to be taken by the JRSC shall be taken only following a unanimous vote, with each Party, through its representatives, having one (1) vote. If any subcommittee fails to reach unanimous agreement (with each Party, through its representatives, having one (1) vote) for a period in excess of [***] ([***]) Business Days, the matter shall be referred to the JRSC.

 

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(b) Referral of Unresolved Matters to Executives. If, in accordance with Section 2.5(a), the JRSC does not resolve any matter considered by it within [***] ([***]) Business Days after the matter is first considered by it, the matter may be referred by either Party to the CEO of 4DMT and CEO of uniQure (the “Executives”) to be resolved by negotiation in good faith as soon as practicable, but in no event later than [***] ([***]) Business Days after referral. Such resolution, if any, of a referred issue by the Executives shall be final and binding on the Parties. Any decision made by the Executives under this Section 2.5(b) shall be deemed a decision of the JRSC for purposes of this Agreement.

(c) Final Decision-Making. If a dispute referred to the Executives pursuant to Section 2.5(b) has not been resolved in accordance with Section 2.5(b), then, subject to Section 2.5(d), uniQure shall have the final decision-making authority. Any decision made by uniQure pursuant to this Section 2.5(c) shall be deemed a decision of the JRSC for purposes of this Agreement.

(d) Exceptions. Notwithstanding Section 2.5(c), uniQure shall not have the right to exercise such decision-making authority (i) in a manner that excuses uniQure from any of its obligations specifically enumerated under this Agreement; (ii) in a manner that negates any consent rights or other rights specifically allocated to 4DMT under this Agreement; (iii) [intentionally omitted]; (iv) in a manner that would require 4DMT to perform activities (A) for which uniQure will not reimburse 4DMT’s costs (except as expressly set forth in this Agreement), (B) that 4DMT has not agreed to perform as set forth in this Agreement or the Research Plan, or as otherwise agreed in writing by 4DMT, or (C) that require 4DMT to use any Know-How or other technology not contemplated in the Research Plan and that is not developed internally by 4DMT and with respect to the use of which 4DMT would owe a royalty or other payment; (v) in a manner that would change the total number of 4DMT FTEs or the allocation among the various technical disciplines as set forth in the Research Plan; (vi) in a manner that would reduce payments committed to 4DMT pursuant to this Agreement or take away 4DMT’s right to perform activities that 4DMT has previously agreed to perform as set forth in the Research Plan; (vii) in a manner that would require 4DMT to perform any act that it reasonably believes to be inconsistent with any Law or any approval, order, policy, guidelines of a Regulatory Authority or ethical requirements or ethical guidelines; (viii) to determine that uniQure has fulfilled any obligation under this Agreement or that 4DMT has breached any obligation under this Agreement; or (ix) to amend the relevant Delivery Success Criteria. In the event that any matter set forth in the preceding clauses (i)-(ix) is unresolved through the JRSC and subsequently such dispute cannot be resolved by the Executives in accordance with Section 2.5(b), then either (A) for all such matters set forth in the preceding clauses (iv)-(vi), there shall be no change in the Research Plan or associated budget unless the Parties otherwise mutually agree in writing, (B) for all such matters set forth in the preceding clauses (i), (ii), (vii) and (viii), either Party may require the specific issue to be referred to binding arbitration pursuant to Section 11.2, or (C) for all such matters set forth in the preceding clauses (iii) and (ix), either Party may require the specific issue to be submitted to a panel of external scientific experts to review the dispute pursuant to the remainder of this Section 2.5(d). Each Party shall select, upon either Party’s request, one (1) external scientific expert within [***] ([***]) Business Days after such request, and the two (2) so selected shall choose a third (3rd) external scientific expert within an additional [***] ([***]) Business Days to resolve the dispute, and all three (3) shall serve as neutrals. Each expert must be free of any conflict of interest with

 

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respect to either or both Parties and their Affiliates and shall have expertise in the matters concerning the unresolved dispute. The decision of the external scientific expert panel shall be issued within [***] ([***]) Business Days after nomination of the third external expert and shall be final and binding on the Parties. The Parties agree to share equally the cost of the proceedings, including fees of the panel members; provided, that each Party shall bear its own attorneys’ fees and associated costs and expenses.

2.6 Limitations on JRSC Authority. The JRSC and any subcommittee shall have only the powers assigned expressly to it in this ARTICLE II and elsewhere in this Agreement, and shall not have any power to amend, modify or waive compliance with this Agreement. In furtherance thereof, each Party shall retain the rights, powers and discretion granted to it under this Agreement and no such rights, powers or discretion shall be delegated or vested in the JRSC or any subcommittee unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing.

ARTICLE III

RESEARCH PROGRAM

3.1 General.

(a) Objectives. The objectives of the Research Program are to (i) identify and characterize AAV Capsid Variants and Research Compounds, (ii) optimize such AAV Capsid Variants and Research Compounds and (iii) conduct other research activities with respect to Research Compounds containing Gene Therapy Constructs of interest in place of marker or other proof-of-principle genes with which screening and AAV Capsid Variant optimization may have been performed, in each case to identify Research Compounds that meet the Delivery Success Criteria, with the objective of having such Research Compounds accepted by uniQure for Animal POC and subsequently as GLP Tox Compounds, consistent with the Candidate Success Criteria.

(b) Research Plan. The Parties shall agree to the Research Plan and shall conduct the Research Program in accordance with the Research Plan. The JRSC shall endeavor to approve the initial Research Plan (including its associated budget) within [***] ([***]) days after the Effective Date, which initial Research Plan shall set forth the tasks to be undertaken by the Parties (including relevant technology to be used and Materials to be provided) under the Research Program.

(c) Extended Research Term. In the event that uniQure reasonably believes that the Parties will not complete the activities under the Research Plan during the Initial Research Term, then uniQure, at its sole discretion, may extend the Research Term to complete the goals of such Research Plan as then in effect for an additional [***] ([***]) month period from the expiration of the Initial Research Term (the “Extended Research Term”). uniQure may so extend the Research Term by giving written notice to 4DMT at least [***] ([***]) months prior to the expiration of the Initial Research Term. The Parties shall mutually agree upon the number of FTEs at 4DMT needed to perform the research during the Extended Research Term, as well as out-of-pocket costs, and uniQure shall provide funding for such FTEs and out-of-pocket costs in

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

accordance with Section 6.2(a) and, if the Parties are unable to agree on such matters prior to the expiration of the Initial Research Term, then the Research Term shall expire at the end of the Initial Research Term. The Parties may further extend the Extended Research Term by mutual written agreement.

3.2 Conduct of the Research Program.

(a) 4DMT and uniQure shall each use Commercially Reasonable Efforts to conduct the Research Program in accordance with the Research Plan. In addition, uniQure shall use Commercially Reasonable Efforts to assess reasonably promptly whether each Designated Capsid Variant provided to uniQure in connection with assessing the Delivery Success Criteria can be manufactured in insect cells.

(b) Either Party shall have the right to utilize the services of any Third Party to perform its obligations under the Research Plan to the extent that such Third Party is specifically approved in the Research Plan or otherwise approved by the JRSC, provided that any permitted Third Party must have entered into a written agreement with such Party that includes terms and conditions (i) protecting and limiting use and disclosure of Confidential Information at least to the same extent as under ARTICLE VIII, and (ii) requiring the Third Party and its personnel to assign to such Party all right, title and interest in and to any intellectual property (and intellectual property rights) created or conceived in connection with performance of subcontracted activities. Each Party shall remain at all times fully liable for its responsibilities under this Agreement.

(c) 4DMT and uniQure shall conduct the Research Program in accordance with all applicable Laws, including, if and as applicable, Good Laboratory Practices. Each Party hereby certifies that it will not employ or otherwise use in any capacity in performing any activity hereunder the services of any person or entity known to it to be debarred under 21 USC §335a.

(d) If the JRSC determines that it is desirable to transfer the AAV Capsid Variant Libraries into baculovirus, then prior to such transfer, the Parties will negotiate in good faith an amendment to this Agreement specifying the allocation of ownership of Materials, Know-How, and Patent Rights. Except as otherwise agreed by the Parties in writing, in no event shall 4DMT transfer the 4DMT AAV Capsid Variant Libraries to uniQure, and in no event shall uniQure transfer its baculovirus insect cell manufacturing Know-How to 4DMT.

3.3 Candidate Success Criteria.

(a) Within [***] ([***]) days following the date on which the Research Plan is approved by the JRSC, the JRSC shall determine and approve the minimum Candidate Success Criteria applicable to each class or series of Research Compounds. For clarity, the Candidate Success Criteria shall include [***]. The objectives of the Research Program will always be to identify the best possible AAV Capsid Variants for delivery of Gene Therapy Constructs to target cells, rather than to identify AAV Capsid Variants that merely meet the minimum Candidate Success Criteria specified in the Research Plan. Subsequently in the Research Program (i.e., when AAV Capsid Variants have been accepted by uniQure as being ready for Animal POC testing or in parallel with the identification with lead AAV Capsid Variants for Lead

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Optimization), the JRSC will (i) agree on disease models for testing Gene Therapy Constructs of interest for efficacy against particular target diseases, (ii) agree on procedures for testing in these animal disease models and the Candidate Success Criteria in these models intending to result in data sufficient for submission to regulatory authorities, and (iii) recommend that Research Compounds meeting these criteria should proceed to GLP Tox Studies. The Candidate Success Criteria shall in all of cases (i)-(iii) be expected to be able to be met only using Research Compound stocks that have been prepared by uniQure in insect cells using standard uniQure SOPs in comparison to reference vectors also prepared by uniQure in the same way. Notwithstanding the foregoing, the Candidate Success Criteria shall be deemed to have been met for any Research Compound that uniQure advances into GLP Tox Studies.

(b) The JRSC may, from time to time during the Research Term, nominate a Research Compound that has achieved the Candidate Success Criteria for Animal POC (provided, however, that the JRSC may, as appropriate, nominate a Research Compound that has not achieved all the Candidate Success Criteria) for consideration as a GLP Tox Compound. uniQure will consider all data relating to the nominated Research Compound for designation as a GLP Tox Compound, including data generated by either uniQure or 4DMT pursuant to this Agreement. Such data shall include the results from all tests and other measures included in the Candidate Success Criteria and such other information and results as uniQure reasonably requests from 4DMT. Within [***] ([***]) days after delivery to uniQure of such data (the applicable “GLP Tox Candidate Review Period”), uniQure shall provide 4DMT written notice whether uniQure accepts such nominated Research Compound as a GLP Tox Compound and intends to Develop and Commercialize such nominated Research Compound in accordance with the terms of this Agreement. Notwithstanding the foregoing, uniQure shall be deemed to have accepted as a GLP Tox Compound any Research Compound that it advances into pre-clinical Development conducted under Good Laboratory Practices.

3.4 Selection of AAV Capsid Variants.

(a) Within [***] ([***]) days after 4DMT provides uniQure with the list of AAV Capsid Variant sequences arising from each Research Selection Process and all other data arising from or relating to such Research Selection Process, uniQure shall submit by written notice to 4DMT a list specifying up to [***] ([***]) AAV Capsid Variants from each such Research Selection Process (the “Designated Capsid Variants”). If uniQure has not provided such written notice to 4DMT within [***] ([***]) days, 4DMT shall provide written notice to uniQure of the date that the foregoing [***] ([***]) day period will expire, and the Parties will have the option to agree an extension by mutual consent, not to be unreasonably withheld.

(b) Prior to the [***] of the expiration of the Research Term, uniQure shall submit by written notice to 4DMT a list specifying up to [***] ([***]) AAV Capsid Variants from the list of Designated Capsid Variants for each Research Selection Process. All AAV Capsid Variants included in such list shall be included as “Selected Capsid Variants,” subject to the terms and conditions of this Agreement. For clarity, all modifications by uniQure to the Selected Capsid Variants and other modifications set forth in Section 1.84 shall also be deemed “Selected Capsid Variants” for purposes of the payment obligations under this Agreement. 4DMT shall provide written notice to uniQure if uniQure has not provided such list to 4DMT by the date that is [***] ([***]) days prior to the [***] of the expiration of the Research Term.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(c) For clarity, the subset of Designated Capsid Variants not subsequently selected as Selected Capsid Variants may be used and licensed by 4DMT to Third Parties outside the Field, but only if they also arise from a Selection Process conducted outside the Field. Unless such subset of Designated Capsid Variants also arise from a Selection Process conducted outside the Field, 4DMT may not conduct any research using such subset of Designated Capsid Variants unless otherwise agreed under the Research Plan. For further clarity, Selected Capsid Variants may not be used, or licensed to Third Parties, by 4DMT or its Affiliates outside the Field.

3.5 Materials and Know-How Transfer/Use of Compounds.

(a) In order to facilitate the Research Program, each Party shall, as set forth in the Research Plan, provide to the other Party certain Materials and, subject to Section 3.6, Know-How Controlled by the supplying Party for use by the other Party in furtherance of the Research Program. In addition, 4DMT shall transfer to uniQure such quantities of Designated Capsid Variants as the JRSC may reasonably request from time to time during the Research Term to exercise its rights hereunder. All Materials and Know-How provided by one Party to the other Party remain the sole property of the supplying Party.

(b) All Materials transferred pursuant to the Research Program shall be used (i) only for the specific purpose provided for in the Research Plan, and (ii) solely under the control of the receiving Party. The Materials may not be used or delivered to or for the benefit of any Third Party without the prior written consent of the supplying Party, and shall not be used in research or testing involving human subjects, except as expressly contemplated in the Research Plan or in accordance with this Agreement. All Materials shall be returned to the supplying Party or destroyed (at the election of the supplying Party) promptly after completion of the use permitted under this Agreement.

(c) THE MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY.

(d) At the end of the Research Term, upon request by uniQure, 4DMT shall promptly provide to uniQure all quantities of the Royalty Bearing Compounds in 4DMT’s possession and shall promptly destroy other Research Compounds.

3.6 Third Party Intellectual Property. The conduct of activities under the Research Plan will use Patent Rights or Know-How licensed by 4DMT pursuant to the UCB Agreements, subject to the terms and conditions of the UCB Agreements. 4DMT shall be solely responsible for all obligations under the UCB Agreements, including any and all payments and royalties due thereunder. In developing the Research Plan, the Parties shall discuss whether any

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Third Party Patent Rights or Know-How, other than Patent Rights or Know-How licensed by 4DMT pursuant to the UCB Agreements, will be utilized in the conduct of activities under the Research Plan. 4DMT shall disclose to uniQure the details of any restrictions on use or payment obligations of which it is aware that would be triggered by such use of Third Party Patent Rights or Know-How in the Research Program. If the Parties mutually agree to use any inventions claimed in any Patent Right or use any Know-How that is licensed to or has been acquired by 4DMT other than pursuant to the UCB Agreements, and if such use would require the payment of additional consideration to the Third Party from which the Patent Rights or Know-How was licensed or acquired, then such Patent Right or Know-How shall be deemed under the Control of 4DMT, provided that uniQure expressly agrees in writing to bear any such additional consideration actually to be paid by 4DMT to the Third Party (which amounts uniQure may offset pursuant to Section 6.4(c)(ii)) with respect to the Development, manufacture or Commercialization of Royalty Bearing Compounds or Royalty Bearing Products. For clarity, nothing in this Section 3.6 shall limit uniQure’s rights to obtain from a Third Party, independent of 4DMT, a license or other right with respect to such Third Party’s Patent Rights or Know-How.

3.7 Records and Reports.

(a) Records.

(i) 4DMT shall maintain records, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall fully and properly reflect all work done and results achieved in the performance of the Research Program by or on behalf of 4DMT (the “Records”), including the procedures, techniques and methodologies used, the progress made, and any Invention conceived or reduced to practice or otherwise made within the scope of or in connection with the Research Program. As part of keeping the Records, 4DMT shall ensure that all of its personnel, and all of its agents that are involved in the Research Program, will keep accurate laboratory notebooks, which laboratory notebooks: (A) shall be duly signed, dated and witnessed; and (B) shall be created and maintained in accordance with its standard operating procedures that would be sufficient to allow for said laboratory notebooks to be used in any proceeding before the United States Patent and Trademark Office or United States courts, in order to establish the date of invention for any Invention in accordance with the United States patent laws. During the Term, 4DMT shall, upon written request by uniQure, which shall not be unreasonably made: (1) make all Records available for inspection and review by uniQure during normal business hours in a timely manner; and (2) provide copies of the Records or any part thereof to uniQure, as reasonably requested by uniQure.

(ii) After a Research Compound has been accepted by uniQure as a GLP Tox Compound, uniQure shall have the right to request that a copy of the relevant portions of the laboratory notebooks relating to all stages of the generation of such GLP Tox Compound be provided by 4DMT to uniQure. After such request by uniQure, 4DMT shall provide such copies of the laboratory notebooks promptly to uniQure, which shall be maintained by uniQure as 4DMT’s Confidential Information.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b) Reports to the JRSC. Between [***] ([***]) and [***] ([***]) Business Days prior to each scheduled JRSC meeting, the Parties shall provide to the JRSC a written report on the progress of the Research Program, summarizing the work performed under the Research Program and evaluating the work performed in relation to the goals of the Research Program. Each Party shall provide such other information required by the Research Program or reasonably requested by the other Party and reasonably available, relating to the progress of the goals or performance of the Research Program.

ARTICLE IV

DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS; DILIGENCE

4.1 Responsibility. uniQure shall have full responsibility, [***], for the worldwide research, Development, manufacturing and Commercialization of Compounds and Products in the Field, subject to the payment obligations and other relevant terms and conditions of this Agreement.

4.2 Diligence. The Parties will have no rights or obligations pursuant to this Section of the Original Agreement.

4.3 Obligation to Share Vector Characterization Data for Selected Capsid Variants.

(a) Commencing on the Amended CLA Effective Date and continuing until the termination or expiration of this Agreement, uniQure shall provide, within [***] ([***]) days after each January 31^st and July 31^st of each Calendar Year, a written report to 4DMT that summarizes the Vector Characterization Data generated by or on behalf of uniQure or its Affiliate or Sublicensee with respect to each Selected Capsid Variant for which any research or Development activities were conducted by or on behalf of uniQure or its Affiliate or Sublicensee during the [***] ([***]) months that ended on the immediately prior [***] as applicable.

(b) Commencing on the Amended CLA Effective Date and continuing until the termination or expiration of this Agreement, 4DMT shall provide, within [***] ([***]) days after each January 31^st and July 31^st of each Calendar Year, a written report to uniQure that summarizes the Vector Characterization Data generated by or on behalf of uniQure or its Affiliate or Sublicensee with respect to each Selected Capsid Variant for which any research or Development activities were conducted by or on behalf of 4DMT or its Affiliate or Sublicensee during the [***] ([***]) months that ended on the immediately prior [***] as applicable.

(c) Either Party may terminate its obligation to provide written reports pursuant to this Section 4.3 of the Agreement, if it ceases all research, development, commercialization or other activities that would result in the generation of any further unreported Vector Characterization Data with respect to Selected Capsid Variants, and the Party provides written notice to the other Party so stating and also certifying that all Vector Characterization Data that is required to be reported with respect to Selected Capsid Variants has been so reported and that the party provides notice that it has given up all of its rights associated with any such Selected Capsid Variants.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

4.4 Proposed Products in the Field.

(a) If, at any time after the Amended CLA Effective Date, a Third Party makes a bona fide proposal to 4DMT for Developing and Commercializing a Product in the Field based on a Selected Capsid Variant (a “Third Party Proposed Product”) using 4DMT Know-How or Joint Know-How, or the making, using or selling of which in the absence of an appropriate license would infringe a Valid Claim under the 4DMT Patent Rights or Joint Patent Rights, then 4DMT promptly shall notify uniQure of the proposal of such Third Party (“Third Party Proposer”) and shall provide uniQure with such information regarding such Third Party proposal, including a development plan and a plan to finance such activities (“Third Party Proposal”) as uniQure may reasonably request to evaluate such Third Party Proposal and its potential conflict with the ongoing efforts and future plans of uniQure. At any time after the Research Term, 4DMT may make a bona fide proposal to uniQure for Developing and Commercializing a Product in the Field based on a Selected Capsid Variant (a “4DMT Proposed Product”), including a development plan and a plan to finance such activities. Within [***] ([***]) days after receipt of a notice from 4DMT of a Third Party Proposal or 4DMT Proposed Product, uniQure shall notify 4DMT whether uniQure is conducting or is interested in conducting research or Development of such Third Party Proposed Product, 4DMT Proposed Product, or a Product that uniQure believes in good faith is or would be competitive with such Third Party Proposed Product or 4DMT Proposed Product (a “Competitive Product”). 4DMT shall have the right to make a maximum total of [***] ([***]) proposals per calendar year on a non-exclusive basis for Developing and Commercializing a Collaboration Proposed Product (as defined below) in the Field under this Section 4.4 and under Section 4.4 of the New CLA, such calendar year total to be determined in the aggregate under this Agreement and the New CLA, taken collectively. 4DMT shall have no other right to make a proposal for Developing or Commercializing a Product, or to otherwise develop or commercialize any product, in the Field using a Selected Capsid Variant, except as is expressly provided herein. “Collaboration Proposed Products” means, collectively or separately, Third Party Proposed Products, 4DMT Proposed Products and New CLA Proposed Products (as that term is defined in the New CLA). An “SCV Proposed Product” means, collectively or separately, 4DMT Proposed Products and Third Party Proposed Products.

(b) If uniQure notifies 4DMT that uniQure is conducting or is interested in conducting research or Development of such Third Party Proposed Product, 4DMT Proposed Product or Competitive Product, uniQure shall, within [***] ([***]) months after such notice, deliver to 4DMT a plan (including projected timelines) for the research and Development thereof on a timeline consistent with the application of Commercially Reasonable Efforts, and, thereafter, shall use Commercially Reasonable Efforts to research, Develop, manufacture and Commercialize such Third Party Proposed Product, 4DMT Proposed Product or Competitive Product in accordance with such plan. uniQure shall provide progress reports to 4DMT in conjunction with the reports of Vector Characterization Data under Section 4.3 from and after the date of uniQure’s notice under this Section 4.4(b), and such reports shall contain a summary of the activities undertaken and the status of uniQure’s research and Development efforts with respect to such Third Party Proposed Product, 4DMT Proposed Product, or Competitive Product during the [***] ([***]) months that ended on the immediately prior [***] as applicable.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(c) If uniQure notifies 4DMT that uniQure is not conducting and is not interested in conducting research or Development of such Third Party Proposed Product, 4DMT Proposed Product, or Competitive Product:

(i) and the applicable Proposed Product was a Third Party Proposed Product, then the Parties shall meet to discuss the grant of an appropriate license by uniQure to the Third Party Proposer. If 4DMT determines after such meeting and due consideration that the grant of a license to such Third Party Proposer is necessary or appropriate, uniQure shall have [***] ([***]) months after the date of receipt of written notice of such determination (or such longer time as shall be agreed to by the Parties in writing) to negotiate and enter into a non-exclusive sublicense under any relevant 4DMT Patent Rights and any relevant Patent Rights of uniQure (including uniQure Core Patent Rights generated under this Agreement) that are relevant due to the presence of the applicable Selected Capsid Variant therein, to provide such Third Party Proposer with sufficient rights under such 4DMT Patent Rights and uniQure Core Patent Rights (and no other intellectual property rights of any kind or Controlled by any person or entity), to research, Develop, manufacture and Commercialize the Third Party Proposed Product in the Field on commercially reasonable terms to be agreed by uniQure and such Third Party Proposer (such financial terms shall be equal to or greater than the amounts as set forth in Sections 6.3(b), 6.4 and 6.5). uniQure and such Third Party Proposer shall define and agree on the uniQure Know-How and uniQure Patent Rights that are relevant due to the presence of the applicable Selected Capsid Variant therein, to the extent necessary to Develop or Commercialize AAV Capsid Variants to be licensed in such non-exclusive sublicense or amendment, as applicable.

(ii) and the applicable Proposed Product was a 4DMT Proposed Product, then [***] uniQure hereby grants to 4DMT (who accepts such license) a non-exclusive sublicense under 4DMT Patent Rights and a non-exclusive license under the uniQure Intellectual Property that is necessary or useful due to the presence of the applicable Selected Capsid Variant therein, and all Vector Characterization Data reported by uniQure to 4DMT under this Agreement, to research, Develop, manufacture and Commercialize the 4DMT Proposed Product in the Field on the financial terms and conditions provided for in this Agreement. Such license shall be sublicensable through one (1) or more tiers or layers of sublicensees without the need to obtain consent from uniQure.

(d) In the case of a Third Party Proposer, if uniQure fails to enter into such a non-exclusive sublicense and license agreement within such [***] ([***]) month period, uniQure shall promptly (but in any event within [***] ([***]) days after the end of such period) provide 4DMT in writing an explanation for such failure along with the proposed terms offered by uniQure to such Third Party Proposer. If 4DMT determines in its good faith judgment based on reasonable inquiry that the terms offered by uniQure to such Third Party Proposer were not commercially reasonable, 4DMT shall notify uniQure of such determination and provide uniQure with an additional [***] ([***]) days to enter into a sublicense with such Third Party Proposer. If uniQure fails to enter into an agreement with such Third Party Proposer [***], then 4DMT shall be free to dispute pursuant to ARTICLE XI whether uniQure has complied with its obligations under this Section 4.4.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

4.5 Pharmacovigilance. Within [***] ([***]) months after the Amended CLA Effective Date, the Parties shall enter into an agreement governing the exchange of adverse event safety data (including post-marketing spontaneous reports) received by a Party and its Affiliates, including such data received from, in the case of uniQure, its Sublicensees or, in the case of 4DMT, its licensees, relating to any AAV Capsid Variant provided to uniQure by 4DMT hereunder in order to monitor the safety of all Compounds and Products and to meet reporting requirements with any applicable Regulatory Authority. Such data sharing agreement shall not require the sharing of data that would disclose confidential know-how or trade secrets of a Party or its Affiliates, or in the case of uniQure, its Sublicensees or, in the case of 4DMT, its licensees, if such data may be cross-referenced, such as through a Drug Master File, to satisfy the requirements of Law and any applicable Regulatory Authority.

4.6 Marking. Prior to the issuance in the United States of Patent Rights included in the UC Patent Rights, uniQure agrees to mark Royalty Bearing Product(s) Covered by any UC Patent Right (or their containers or labels) sold in the United States under the licenses granted in this Agreement with the words “Patent Pending,” and following the issuance in the United States of one or more Patent Rights included in the UC Patent Rights, with the patent numbers of the UC Patent Right(s) Covering such Royalty Bearing Product. All Royalty Bearing Products Covered by any UC Patent Right sold in other countries will be marked in such manner as to conform with the patent Laws and practice of such countries.

ARTICLE V

GRANTS OF RIGHTS

5.1 Licenses to uniQure.

(a) Research License to uniQure. Subject to the terms and conditions of this Agreement, 4DMT hereby grants to uniQure, and uniQure hereby accepts, during the Research Term and any applicable GLP Tox Candidate Review Period in effect as of the end of the Research Term, an exclusive (but not as to 4DMT), worldwide, royalty-free, non-sublicenseable license under the 4DMT Intellectual Property and 4DMT’s interest in the Joint Intellectual Property, solely to (i) conduct activities assigned to uniQure under the Research Plan, (ii) evaluate Research Compounds, or (iii) evaluate the data developed in the conduct of activities under the Research Plan during the Research Term.

(b) Development and Commercialization License to uniQure. Subject to the terms and conditions of this Agreement, and subject to any non-exclusive license granted to 4DMT under Section 5.2(c) with respect to any SCV Proposed Products, 4DMT hereby grants to uniQure, and uniQure hereby accepts, an exclusive (even as to 4DMT), worldwide, milestone- and royalty-bearing license, including the right to grant sublicenses in accordance with Section 5.3, under the 4DMT Intellectual Property and 4DMT’s interest in the Joint Intellectual Property, and any Vector Characterization Data reported by 4DMT to uniQure under this Agreement, to research (subject to 4DMT’s retained rights to conduct research under the Research Program), Develop, make and have made, use and Commercialize Selected Capsid Variants, Royalty Bearing Compounds, and Royalty Bearing Products in the Field.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(c) Recordation. Following the Effective Date or at any time during the Term, 4DMT at the request and expense of uniQure shall promptly register or record the licenses granted to uniQure under this Agreement with the appropriate patent offices in all applicable countries of the Territory; provided that such registration or recordation specifies the applicable limitations of such license, and provided further that such registration shall have no effect on the allocation of Prosecution and Maintenance rights and obligations set forth in ARTICLE VII. In the event any of the licenses granted to uniQure under this Agreement are terminated in accordance with the terms of this Agreement, uniQure shall promptly take such actions and execute such documents as are reasonably requested by 4DMT to cancel such registration(s) or recordation(s) in the applicable countries with respect to the terminated license grants.

(d) Grant-Back License to uniQure. 4DMT hereby grants to uniQure, and uniQure hereby accepts, a non-exclusive, worldwide, royalty-free license, including the right to grant sublicenses through multiple tiers, under the 4DMT Patent Rights and 4DMT Know-How that (i) arise from activities that are conducted under this Agreement in connection with Royalty Bearing Compounds and Royalty Bearing Products in the course of making modifications to Selected Capsid Variants and (ii) claim or cover compositions of matter or general methods of use of Selected Capsid Variants (for clarity, including such Patent Rights and Know-How claiming or covering compositions combining Gene Therapy Constructs in general and AAV Capsid Variants in general or general methods of making or using such combinations of Gene Therapy Constructs and AAV Capsid Variants), to research, Develop, make and have made, use and Commercialize Selected Capsid Variants, and Products containing Selected Capsid Variants.

5.2 Licenses to 4DMT.

(a) Research License to 4DMT. Subject to the terms and conditions of this Agreement, uniQure hereby grants to 4DMT, and 4DMT hereby accepts, during the Research Term and any applicable GLP Tox Candidate Review Period in effect as of the end of the Research Term, a non-exclusive, worldwide, royalty-free, non-sublicenseable license under the uniQure Intellectual Property, solely to the extent necessary to conduct activities assigned to 4DMT under the Research Plan.

(b) Grant-Back License to 4DMT Outside the Field. uniQure hereby grants to 4DMT, and 4DMT hereby accepts, a non-exclusive, worldwide, royalty-free license, including the right to grant sublicenses through multiple tiers, under all Vector Characterization Data reported from uniQure to 4DMT under this Agreement and the Patent Rights and Know-How Controlled by uniQure that is relevant due to the presence of the applicable Selected Capsid Variant therein, that (i) arise from activities that are conducted under this Agreement in connection with Royalty Bearing Compounds and Royalty Bearing Products in the course of making modifications to Selected Capsid Variants and (ii) claim or cover compositions of matter or general methods of use of Selected Capsid Variants that are applicable outside the Field (for clarity, excluding Patent Rights and Know-How claiming or covering (A) insect cell manufacturing technology, including technology or sequence modifications for adapting AAV Capsid Variants to insect cells or insect cell expression vectors and systems, or (B) compositions, methods of manufacture, or methods of use of Gene Therapy Constructs, but for further clarity, including such Patent Rights and Know-How that is necessary or useful due to the presence of the applicable

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Selected Capsid Variant therein, claiming or covering compositions combining Gene Therapy Constructs in general and AAV Capsid Variants in general or general methods of making or using such combinations of Gene Therapy Constructs and AAV Capsid Variants), to research, Develop, make and have made, use and Commercialize 4DMT AAV Capsid Variants (excluding Selected Capsid Variants), and Products containing such 4DMT AAV Capsid Variants, in all cases outside the Field. For the avoidance of doubt, 4DMT’s practice of the foregoing license shall be subject to its obligations set forth in Section 5.6. If any Patent Rights or Know-how subject to the foregoing license are subject to agreements between uniQure and a Third Party that require payments to be made to the Third Party by reason of the practice of the rights granted to 4DMT under this Section 5.2(b), such Patent Rights and Know-How shall only be deemed Controlled by uniQure if 4DMT agrees in writing to pay to uniQure the portion of the amounts due to such Third Party that is reasonably attributable to the practice of such rights.

(c) Non-Exclusive License for SCV Proposed Products under Section 4.4. uniQure grants 4DMT the sublicenses and licenses provided for in Section 4.4(c)(ii) effective upon the time set forth therein, and 4DMT accepts such sublicense and license effective as of such time. In association with any license agreement pursuant to Section 4.4(c) with a Third Party related to a Third Party Proposed Product and subject to the terms and conditions of this Agreement, uniQure shall grant to the Third Party Proposer as applicable, and the Third Party Proposer shall accept, a non-exclusive, worldwide, milestone- and royalty-bearing license, including the right to grant sublicenses in accordance with Section 5.3, under the relevant uniQure Intellectual Property and uniQure’s interest in the relevant Joint Intellectual Property, in each case that is necessary or useful due to the presence of the applicable Selected Capsid Variant therein, to research, Develop, make and have made, use and Commercialize that Third Party’s Third Party Proposed Products in the Field.

(d) Any licenses granted to 4DMT under the uniQure Intellectual Property (including any subset or aspect of the uniQure Intellectual Property) pursuant to this Agreement, including, without limitation, pursuant to Sections 4.4 and 5.2, are limited to only uniQure Intellectual Property that specifically relates to Selected Capsid Variants (including patent claims specifying a Selected Capsid Variant or specifically claiming any methods of use or making any Selected Capsid Variants, and excluding all other uniQure Intellectual Property (e.g., without limitation, compositions of matter or methods of making compositions of matter and methods of manufacturing Products (but not the Selected Capsid Variant therein) pursuant to this Agreement).

5.3 Sublicenses. uniQure shall have the right to grant sublicenses under the license granted to it under Section 5.1(a) to Affiliates of uniQure and Third Parties; provided that any sublicense granted to a Third Party under this Agreement shall be pursuant to a written agreement that subjects such Sublicensee to all relevant restrictions and limitations set forth in this Agreement. uniQure shall provide 4DMT with the name and address of each Sublicensee of its rights under this ARTICLE V, the date of the grant of the sublicense and a description of the rights granted promptly after the execution and delivery of the sublicense agreement. uniQure shall remain responsible for the performance of its Sublicensees, and shall ensure that each Sublicensee complies with the applicable terms and conditions of this Agreement.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

5.4 Rights Retained by the Parties. Except as expressly set forth in this Agreement, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, in any Confidential Information of the other Party or under any Patent Right or Know-How in which such other Party or its Affiliates has rights. Without limiting the generality of the foregoing, any of 4DMT’s rights to 4DMT Intellectual Property not specifically licensed to uniQure shall be retained by 4DMT, and any of uniQure’s rights to uniQure Intellectual Property not specifically licensed to 4DMT shall be retained by uniQure.

5.5 Section 365(n) of the Bankruptcy Code. All rights and licenses granted under or pursuant to any section of this Agreement are and will otherwise be deemed to be for purposes of Section 365(n) of the United States Bankruptcy Code (Title 11, U.S. Code), as amended or any comparable Law outside the United States (the “Bankruptcy Code”), licenses of rights to “intellectual property” as defined in Section 101(35A) of the Bankruptcy Code. The Parties will retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code. Each Party agrees that the other Party, as licensee of such rights under this Agreement, will retain and may fully exercise all of its rights and elections under the Bankruptcy Code or any other provisions of applicable Law outside the United States that provide similar protection for “intellectual property.” The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the Bankruptcy Code or analogous provisions of applicable Law outside the United States, the other Party will be entitled to a complete duplicate of (or complete access to, as appropriate) the intellectual property licensed to such other Party and all embodiments of such intellectual property, to the extent necessary for such other Party to practice the licenses granted to it pursuant to this Agreement under such intellectual property, which, if not already in such other Party’s possession, will be promptly delivered to it upon such other Party’s written request thereof. Any agreement supplemental hereto will be deemed to be “agreements supplementary to” this Agreement for purposes of Section 365(n) of the Bankruptcy Code.

5.6 Exclusivity.

(a) Original Exclusivity Removed. The Parties will have no rights or obligations pursuant to Sections 5.6(a) and (b) of the Original Agreement. As of the Amended CLA Effective Date and with respect to the entire Agreement, the parties have only those rights expressly provided in this Agreement.

(b) Of 4DMT. The Parties acknowledge that as of the Amended CLA Effective Date, without otherwise detracting from the license and intellectual property ownership rights expressly granted to uniQure hereunder (including, without limitation, with respect to uniQure’s exclusive rights to any Selected Capsid Variants in the Field (recognizing however that uniQure’s rights to Selected Capsid Variants may be partially non-exclusive due to any non-exclusive rights granted 4DMT under Section 4.4)), 4DMT or its Affiliates or licensees or sublicensees shall have the right to conduct pre-clinical research activities in the Field using Selected Capsid Variants and such activities shall not be deemed to violate the terms of this Section

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

5.6(b). For any and all such pre-clinical research activities in and outside of the Field using or related to any Selected Capsid Variants, Royalty Bearing Compounds or Royalty Bearing Products, 4DMT shall be obligated to provide to uniQure the Vector Characterization Data in accordance with the provisions of Section 4.3. 4DMT, its Affiliates, licensees and sublicensees shall have no right to conduct any other activities, including any development, manufacturing, commercialization or other use of Selected Capsid Variants, except pursuant to any rights pursuant to Section 4.4 of this Agreement or as otherwise expressly provided in this Agreement. Moreover, apart from any obligations of 4DMT related to the Selected Capsid Variants explicitly set forth in this Agreement, neither Party (including its Affiliates, licensees and sublicensees) shall have any exclusivity obligations to the other Party or its Affiliates whatsoever under this Agreement with respect to other AAV Capsid Variants (i.e., other than Selected Capsid Variants) for the Field.

(c) uniQure Independent Activities. The Parties acknowledge and agree that uniQure will conduct research, Development, manufacturing and Commercialization activities independently of this Agreement, inside and outside of the Field, including with respect to AAV Capsid Variants, AAV Capsid Variant Libraries, Gene Therapy Constructs, Compounds and Products, and no provision of this Agreement shall apply to any such activity.

5.7 UCB Agreement Pass-Through Provisions. uniQure acknowledges that 4DMT has provided it with a copy of the executed UCB Agreements, and agrees that this Agreement is subject in all respects to the terms and conditions of the UCB Agreements. Notwithstanding the generality of the foregoing:

(a) uniQure acknowledges that UC (and, to the extent applicable, IGT) may publish any and all technical data resulting from any research performed by UC (and, to the extent applicable, IGT) relating to the inventions disclosed in the UC Patent Rights, and UC (and, to the extent applicable, IGT) expressly reserves the right to use such inventions, UC AAV Capsid Variants and related technology for its educational and research purposes, to disseminate the UC AAV Capsid Variants and other tangible materials associated with, or required to practice such inventions or the UC Patent Rights to researchers at nonprofit institutions for their educational and research purposes, and to permit other nonprofit institutions to use the UC AAV Capsid Variants to practice the UC Patent Rights for education and research purposes.

(b) uniQure shall keep 4DMT informed of its large/small entity status, as defined in 15 U.S.C. 632.

(c) uniQure acknowledges that certain of the inventions disclosed in the UC Patent Rights were funded in part by the U.S. Government, and agrees that in accordance with 35 U.S.C. 204, to the extent required by Law, any products covered by the UC Patent Rights and sold in the United States will be substantially manufactured in the United States.

(d) uniQure acknowledges that 4DMT’s exclusive rights, privileges, and licenses under the UCB Agreements will expire on the date of the last-to-expire Valid Claim under the UC Patent Rights covered in each agreement, respectively, unless earlier terminated.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(e) For any sublicense under the UC Patent Rights that uniQure grants under Section 5.3, uniQure shall ensure that (i) such further sublicense is subject to a written sublicense agreement and is bound by all of the applicable terms, conditions, obligations, restrictions and other covenants of the UCB Agreements that protect or benefit UC’s (and, if applicable, the U.S. Government’s) rights and interests to the same extent that this Agreement does, and (ii) it or the Sublicensee shall, within [***] ([***]) days after executing such sublicense agreement, furnish to 4DMT for delivery to UC, subject to any confidentiality provisions, all material terms of such sublicense pertaining to UC’s interests, including the Sublicensee’s name and address, and indemnification of UC as provided in this Agreement.

(f) The Parties acknowledge and agree that upon termination of the UCB Agreements for any reason, uniQure’s sublicenses under the UC Patent Rights under this Agreement will remain in effect and will be assigned to UC, except that UC will not be bound to perform any duties or obligations set forth herein that extend beyond the duties and obligations of UC set forth in the UCB Agreements.

(g) uniQure acknowledges that nothing contained in this Agreement will be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trademark, trade name, or other designation of UC (including any contraction, abbreviation, or simulation of any of the foregoing), and that unless required by Law, regulation, or rules of a securities exchange, or consented to in writing by UC, the use by uniQure of the name “The Regents of the University of California” or the name of any University of California campus in advertising, publicity or other promotional activities is expressly prohibited.

ARTICLE VI

PAYMENTS; ROYALTIES AND REPORTS

6.1 Initial License Payment. In consideration of the rights to 4DMT Intellectual Property granted herein, uniQure shall pay to 4DMT non-creditable and non-refundable sums of: (a) One Hundred Thousand Dollars ($100,000) within [***] ([***]) Business Days after the later of (i) the Effective Date and (ii) receipt of an Invoice for such amount and a duly signed original of this Agreement and, thereafter, (b) One Hundred Thousand Dollars ($100,000) within [***] ([***]) Business Days after the later of (i) the JRSC’s approval of the initial Research Plan (including its associated budget) and (ii) receipt of an Invoice for such amount.

6.2 Research Program Funding.

(a) Out-of-Pocket Costs. Following approval of the Research Plan (including its associated budget), uniQure shall fund all out-of-pocket costs to be incurred by 4DMT as specifically contemplated in the Research Plan, in accordance with the agreed-upon budget for such costs set forth in the Research Plan or as otherwise agreed to by uniQure. On or before the first date of each Calendar Quarter during the Research Term, uniQure shall pay 4DMT for such out-of-pocket costs to be incurred by 4DMT during such Calendar Quarter. Within [***] ([***]) days after the end of each Calendar Quarter during the Research Term, 4DMT shall provide uniQure with a statement identifying such out-of-pocket costs incurred by 4DMT and paid to Third Parties in connection with the Research Program during such Calendar Quarter, in reasonable detail and with appropriate supporting documentation. If the supporting documentation shows that uniQure has overpaid or underpaid the out-of-pocket costs for such Calendar Quarter, 4DMT will,

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

together with the supporting documentation, (i) send uniQure a credit note for the amount overpaid, upon which uniQure may credit the amount overpaid against any other payment due by uniQure under this Agreement, or if no other payment is due under this Agreement, 4DMT shall within [***] ([***]) days refund the amount overpaid to uniQure, or (ii) send uniQure an Invoice for the amount underpaid, which uniQure shall pay within [***] ([***]) days after uniQure’s receipt of such Invoice. For clarity, no out-of-pocket costs will be paid by uniQure unless covered by an agreed-upon budget for such expenses set forth in the Research Plan or as otherwise agreed to by uniQure.

(b) 4DMT Committed FTEs. It is the Parties’ intent that the Research Program will support the number of 4DMT FTEs in the performance of the activities under the Research Plan during the Research Term, as specified in the Research Plan and approved by the JRSC. Following approval of the Research Plan (including its associated budget), on or before the first day of each Calendar Quarter during the Research Term, uniQure shall pay 4DMT the FTE Costs for FTEs in the then-current Research Plan for such Calendar Quarter; provided that such payment may be prorated in the first and last Calendar Quarters of the Research Term. Within [***] ([***]) days after the end of each Calendar Quarter during the Research Term, 4DMT shall provide supporting documentation for the purpose of verifying the calculation of the FTE charges paid by uniQure for such Calendar Quarter. If the supporting documentation shows that uniQure has overpaid or underpaid the FTE payments for such Calendar Quarter, 4DMT will, together with the supporting documentation, (i) send uniQure a credit note for the amount overpaid, upon which uniQure may credit the amount overpaid against any FTE or other payment due by uniQure under this Agreement, or if no other payment is due under this Agreement, 4DMT shall within [***] ([***]) days refund the amount overpaid to uniQure, or (ii) send uniQure an Invoice for the amount underpaid, which uniQure shall pay within [***] ([***]) days after uniQure’s receipt of such Invoice. For clarity, no FTE Costs will be paid by uniQure unless covered by an agreed-upon budget for such FTEs set forth in the Research Plan or as otherwise agreed to by uniQure.

(c) Equipment Payment Reimbursement. Any amount paid by uniQure pursuant to Section 6.2(a) for the purchase of equipment (“Equipment Payment”) shall be subject to partial reimbursement by 4DMT in accordance with this Section 6.2(c). For each of the first [***] ([***]) Third Party collaborations 4DMT enters into after the Effective Date, 4DMT shall reimburse uniQure for a pro rata portion of the Equipment Payment based on the following formula: [***]. For example, if 4DMT conducts [***] ([***]) Research Selection Processes hereunder and [***] ([***]) Selection Processes for the first such Third Party collaboration in which such equipment was actually used, 4DMT shall reimburse uniQure for [***] percent ([***]%) of the Equipment Payments. If 4DMT subsequently conducts another [***] ([***]) Selection Processes for the second Third Party collaboration in which such equipment was actually used, 4DMT shall reimburse uniQure for a further [***] percent ([***]%) of Equipment Payments, since the [***] ([***]) Research Selection Processes it conducted for uniQure represents [***] of the aggregate Selection Processes conducted by 4DMT for uniQure and for the first [***] ([***]) Third Party collaborations 4DMT entered into after the Effective Date. 4DMT shall pay uniQure any such amount payable under this Section 6.2(c) within [***] ([***]) days after the end of the Calendar Quarter during which 4DMT conducted any Selection Process for either of the first [***] ([***]) Third Party collaborations 4DMT enters into after the Effective Date in which such equipment was actually used, and shall contemporaneously provide uniQure with a written report detailing the calculation of such amount.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

6.3 DELETED.

6.4 Royalties.

On a Royalty Bearing Product-by-Royalty Bearing Product basis, uniQure shall pay to 4DMT royalties on worldwide Net Sales as provided in this Section 6.4:

(a) Royalty Rate. uniQure shall pay to 4DMT royalties on Net Sales of each Royalty Bearing Product by uniQure and its Affiliates equal to [***] percent ([***]%) of all such Net Sales of such Royalty Bearing Product achieved during the applicable Calendar Year.

(b) Royalty Term. uniQure’s royalty obligations to 4DMT under this Section 6.4 shall be in effect on a country-by-country and Royalty Bearing Product-by-Royalty Bearing Product basis during the relevant Royalty Term. Upon expiration of the Royalty Term for a Royalty Bearing Product in a country, the license under Section 5.1(a) shall be fully paid-up, irrevocable, perpetual and exclusive under the relevant Licensed IP for such Royalty Bearing Product in such country.

(c) Royalty Adjustments.

(i) Non-Patented Product. If a Royalty Bearing Product is sold in a country and the composition of matter, formulation, or method of use of such Royalty Bearing Product is not Covered by a Valid Claim within the Licensed IP in such country at the time of sale, then the royalty rate for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the applicable rate determined pursuant to Section 6.4(a), unless such Royalty Bearing Product embodies an Invention with respect to which uniQure made a Trade Secret Election, in which case no such reduction shall apply.

(ii) Third Party Offset. If uniQure is required, in order to avoid infringement of any Patent Right not licensed hereunder that Covers the composition of matter, formulation, or method of use of a Royalty Bearing Product, to obtain a license from a Third Party in order to Develop, make, have made, use or Commercialize such Royalty Bearing Product in a country in the Territory and to pay a royalty or other consideration under such license (including in connection with the settlement of a patent infringement claim), then the royalty payments due under Section 6.4(a) with respect to Net Sales for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the amounts payable by uniQure to such Third Party for such license that are reasonably and appropriately allocable to such Royalty Bearing Product in such country, provided that in no event shall the foregoing reduce the amount of royalties payable to 4DMT in any [***] by more than [***] percent ([***]%) of the amount determined pursuant to Section 6.4(a), as adjusted by application of the terms of Section 6.4(c)(i).

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) Limits on Deductions. Except as expressly provided in this Section 6.4, there shall not be any offset to or deduction from the royalties payable pursuant to this Section 6.4. Notwithstanding Sections 6.4(c)(i) and (ii) to the contrary, in no event shall the cumulative effect of the deductions in Sections 6.4(c)(i) and (ii) reduce the royalties to less than [***] percent ([***]%) of the amounts determined pursuant to Section 6.4(a).

On a Royalty Bearing Product-by-Royalty Bearing Product basis, for each 4DMT Proposed Product commercialized by 4DMT and its Affiliates pursuant to Section 4.4, 4DMT shall pay to uniQure royalties on worldwide 4DMT Net Sales as provided in this Section 6.4:

(d) Royalty Rate. 4DMT shall pay to uniQure royalties on 4DMT Net Sales of each Royalty Bearing Product by 4DMT and its Affiliates equal to [***] percent ([***]%) of all such 4DMT Net Sales of such Royalty Bearing Product achieved during the applicable Calendar Year.

(e) Royalty Term. 4DMT’s royalty obligations to uniQure under this Section 6.4 shall be in effect on a country-by-country and Royalty Bearing Product-by-Royalty Bearing Product basis during the relevant Royalty Term. Upon expiration of the Royalty Term for a Royalty Bearing Product in a country, the license under Section 4.4(c) shall be fully paid-up, irrevocable, perpetual and non-exclusive under the relevant Licensed IP for such Royalty Bearing Product in such country.

(f) Royalty Adjustments.

(i) Non-Patented Product. If a Royalty Bearing Product is sold in a country and the composition of matter, formulation, or method of use of such Royalty Bearing Product is not Covered by a Valid Claim within the Patent Rights sublicensed and licensed from uniQure to 4DMT in such country at the time of sale, then the royalty rate for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the applicable rate determined pursuant to Section 6.4(a), unless such Royalty Bearing Product embodies an Invention with respect to which 4DMT made a Trade Secret Election, in which case no such reduction shall apply.

(ii) Third Party Offset. If 4DMT is required, in order to avoid infringement of any Patent Right not licensed hereunder that Covers the composition of matter, formulation, or method of use of a Royalty Bearing Product, to obtain a license from a Third Party in order to Develop, make, have made, use or Commercialize such Royalty Bearing Product in a country in the Territory and to pay a royalty or other consideration under such license (including in connection with the settlement of a patent infringement claim), then the royalty payments due under Section 6.4(a) with respect to 4DMT Net Sales for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the amounts payable by 4DMT to such Third Party for such license that are reasonably and appropriately allocable to such Royalty Bearing Product in such country, provided that in no event shall the foregoing reduce the amount of royalties payable to uniQure in any Calendar Quarter by more than [***] percent ([***]%) of the amount determined pursuant to Section 6.4(a), as adjusted by application of the terms of Section 6.4(c)(i).

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) Limits on Deductions. Except as expressly provided in this Section 6.4, there shall not be any offset to or deduction from the royalties payable pursuant to this Section 6.4. Notwithstanding Sections 6.4(c)(i) and (ii) to the contrary, in no event shall the cumulative effect of the deductions in Sections 6.4(c)(i) and (ii) reduce the royalties to less than [***] percent ([***]%) of the amounts determined pursuant to Section 6.4(a).

6.5 Sublicense Consideration.

(a) uniQure shall pay to 4DMT the following percentages (“Sublicense Income Sharing Percentages”) of Sublicense Consideration received by uniQure for sublicenses under the Licensed IP under this Agreement:

(i) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Compound or Product that is subject of the sublicense and (B) does not require uniQure to manufacture any such Compound or Product for Clinical Trial or commercial purposes;

(ii) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Compound or Product that is subject of the sublicense and (B) requires uniQure to manufacture any such Compound or Product for Clinical Trial or commercial purposes;

(iii) [***] percent ([***]%) for any sublicense that does not meet the criteria set forth in Section 6.5(a)(i) or Section 6.5(a)(ii) above;

provided, however, that none of subsections (i), (ii) or (iii) shall result in uniQure paying to 4DMT under this Section 6.5 a percentage of any Sublicense Consideration consisting of royalties from Sublicensees on sales of UC Products during the applicable Royalty Term that is less than [***] percent ([***]%) of 4DMT Net Sales by such Sublicensee of such UC Products.

(b) The term “Sublicense Consideration” shall mean consideration of any kind received by uniQure from a Sublicensee for the grant of a sublicense under this Agreement, such as upfront fees, royalties or milestone fees and including any premium paid by the Sublicensee over the Fair Market Value (as defined below) for stock of uniQure in consideration for such sublicense; provided, however, the following are not included in Sublicense Consideration:

(i) Support for activities of uniQure relating to the research, Development, manufacturing or Commercialization of Royalty Bearing Products, which shall not exceed the fully burdened cost (and in the case of manufacturing costs, the Fully Burdened Manufacturing Cost) for undertaking such activities performed by or for uniQure (including Third Parties on uniQure’s behalf) by more than [***] percent ([***]%);

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(ii) Proceeds derived from debt financing and any loans to uniQure by the Sublicensee;

(iii) Consideration received for the purchase of stock in uniQure or its Affiliate to the extent that the price per share for such equity does not exceed the Fair Market Value of such stock. The term “Fair Market Value” shall mean the average price at which the stock in question is publicly trading at for [***] ([***]) days prior to the earlier of (A) the date of the announcement of its purchase by the Sublicensee or (B) the date of its purchase by the Sublicensee, or if the stock is not publicly traded, the value of such stock as determined in good faith by the Board of Directors of uniQure or its applicable Affiliate as of the time of receipt of payment; and

(iv) Reimbursement of uniQure’s patent costs related to Patent Rights.

(c) 4DMT shall pay to uniQure the following percentages (“4D Sublicense Income Sharing Percentages”) of 4D Sublicense Consideration received by 4DMT for sublicenses under the Licensed IP under this Agreement:

(i) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Compound or Product that is subject of the sublicense and (B) does not require 4DMT to manufacture any such Compound or Product for Clinical Trial or commercial purposes;

(ii) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Compound or Product that is subject of the sublicense and (B) requires 4DMT to manufacture any such Compound or Product for Clinical Trial or commercial purposes;

(iii) [***] percent ([***]%) for any sublicense that does not meet the criteria set forth in Section 6.5(a)(i) or Section 6.5(a)(ii) above;

provided, however, that none of subsections (i), (ii) or (iii) shall result in 4DMT paying to uniQure under this Section 6.5 a percentage of any 4D Sublicense Consideration consisting of royalties from Sublicensees on sales of UC Products during the applicable Royalty Term that is less than [***] percent ([***]%) of Net Sales by such Sublicensee of such UC Products.

(d) The term “4D Sublicense Consideration” shall mean consideration of any kind received by 4DMT from a Sublicensee for the grant of a sublicense under this Agreement, such as upfront fees, royalties or milestone fees and including any premium paid by the Sublicensee over the Fair Market Value (as defined below) for stock of 4DMT in consideration for such sublicense; provided, however, the following are not included in 4D Sublicense Consideration:

(i) Support for activities of 4DMT relating to the research, Development, manufacturing or Commercialization of Royalty Bearing Products, which shall not exceed the fully burdened cost (and in the case of manufacturing costs, the Fully Burdened Manufacturing Cost) for undertaking such activities performed by or for 4DMT (including Third Parties on 4DMT’s behalf) by more than [***] percent ([***]%);

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(ii) Proceeds derived from debt financing and any loans to 4DMT by the Sublicensee;

(iii) Consideration received for the purchase of stock in 4DMT or its Affiliate to the extent that the price per share for such equity does not exceed the Fair Market Value of such stock. The term “Fair Market Value” shall mean the average price at which the stock in question is publicly trading at for [***] ([***]) days prior to the earlier of (A) the date of the announcement of its purchase by the Sublicensee or (B) the date of its purchase by the Sublicensee, or if the stock is not publicly traded, the value of such stock as determined in good faith by the Board of Directors of 4DMT or its applicable Affiliate as of the time of receipt of payment; and

(iv) Reimbursement of 4DMT’s patent costs related to Patent Rights.

(e) For purposes of this Article 6, “Sublicense Consideration received by uniQure” shall include Sublicense Consideration received by uniQure’s Affiliates (applying the definition of Sublicense Consideration mutatis mutandis to such Affiliates) and “4D Sublicense Consideration received by 4D” shall include 4D Sublicense Consideration received by 4DMT’s Affiliates (applying the definition of Sublicense Consideration mutatis mutandis to such Affiliates).

6.6 Reports; Payments. Within [***] ([***]) days after the end of each Calendar Quarter during which there are Net Sales or 4DMT Net Sales giving rise to a payment obligation under Section 6.4 or uniQure or 4DMT (as applicable) received Sublicense Consideration or 4D Sublicense Consideration giving rise to a payment obligation under Section 6.5, (a) uniQure or 4DMT (as applicable) shall submit to 4DMT or uniQure (as applicable) a report (i) identifying for each Royalty Bearing Product the Net Sales or 4DMT Net Sales for such Royalty Bearing Product for each country for such Calendar Quarter, the calculation of royalties (including gross sales and all deductions taken from gross sales and all reductions pursuant to Section 6.4(c)), and the royalties payable to 4DMT or uniQure (as applicable) and (ii) identifying the Sublicense Consideration or 4D Sublicense Consideration received by uniQure or 4DMT (as applicable) in such Calendar Quarter and the one or more Sublicense Income Sharing Percentages or 4D Sublicense Income Sharing Percentages applicable to such Sublicense Consideration, and (b) uniQure or 4DMT (as applicable) shall pay to 4DMT or uniQure (as applicable) all royalties payable under Section 6.4 and portions of Sublicense Consideration or 4D Sublicense Consideration payable under Section 6.5.

6.7 Books and Records; Audit Rights. Each Party (the “Audited Party”) shall keep (and shall cause its Affiliates and Sublicensees to keep) complete, true and accurate books and records in accordance with its Accounting Standards in sufficient detail for the other Party (the “Auditing Party”) to determine the payments due and costs incurred under this Agreement. Each Auditing Party shall have the right, [***] at its own expense, to have an independent, certified

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

public accounting firm of nationally recognized standing, selected by the Auditing Party and reasonably acceptable to the Audited Party, review any such records of the Audited Party in the location(s) where such records are maintained by the Audited Party upon reasonable notice (which shall be no less than [***] ([***]) days prior notice) and during regular business hours and under obligations of strict confidence, for the sole purpose of verifying the accuracy of the amounts paid under this Agreement within a [***] Calendar Year period preceding the date of the request for review. The report of such accounting firm shall be limited to a certificate stating whether any report made or invoice or payment submitted by the Audited Party during such period is accurate or inaccurate, the actual amounts of 4DMT or uniQure (as applicable) out-of-pocket expenses under Section 6.2(a), FTE Costs under Section 6.2(b), Equipment Payment reimbursements under Section 6.2(c), and any payments under Section 3.6, and the amount of any Net Sales, milestone, royalty or other payment discrepancy. No other information shall be provided to the Auditing Party. The Audited Party shall receive a copy of each such report concurrently with receipt by the Auditing Party. Should such inspection lead to the discovery of a discrepancy to the Auditing Party’s detriment, the Audited Party shall pay the amount of the discrepancy within [***] ([***]) days after its receipt from the accounting firm of the certificate showing the amount of the discrepancy. The Auditing Party shall pay the full cost of the review unless (a) uniQure or 4DMT (as applicable) was the Audited Party and the audited determined an underpayment of milestones or royalties which is greater than [***] percent ([***]%) of the amount due for the applicable period, in which case uniQure or 4DMT (as applicable) shall pay the reasonable costs charged by such accounting firm for such review, or (b) 4DMT or uniQure (as applicable) was the Audited Party and the audit determined an overpayment of 4DMT or uniQure (as applicable) out-of-pocket expenses under Section 6.2(a) or FTE Costs under Section 6.2(b), or underpayment of Equipment Payment reimbursements under Section 6.2(c), which is greater than [***] percent ([***]%) of the amount due for the applicable period, in which case 4DMT or uniQure (as applicable) shall pay the reasonable costs charged by such accounting firm for such review. Any overpayment of royalties by uniQure (or 4DMT, as applicable) revealed by an inspection shall be fully creditable against future royalty payments under Section 6.4. As of the Amended CLA Effective Date, notwithstanding anything express or implied, the Parties agree that there shall be no audits under this Section 6.7 as to accounting records for any time period prior to [***] before the Amended CLA Effective Date.

6.8 Withholding Taxes. (a) Subject to the provisions of Section 12.7, if Laws require withholding by uniQure of taxes imposed upon 4DMT on account of any royalty or other payment paid under this Agreement, such taxes shall be deducted by uniQure as required by Law from such remittable royalty or other payment and shall be paid by uniQure to the proper tax authorities; provided that before making any such deduction or withholding, uniQure shall give 4DMT notice of the intention to make such deduction or withholding, which notice shall include the authority, basis and method of calculation for the proposed deduction or withholding, and shall be provided to the extent practicable at least a reasonable period of time before such deduction or withholding is required, in order for 4DMT to obtain reduction of or relief from such deduction or withholding. Official receipts of payment of withholding taxes shall be secured and sent to 4DMT as evidence of such payment. The Parties shall exercise their best efforts to ensure that any withholding tax imposed is reduced as far as possible under the provisions of any relevant tax treaty.

 

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(b) Subject to the provisions of Section 12.7, if Laws require withholding by 4DMT of taxes imposed upon uniQure on account of any royalty or other payment paid under this Agreement, such taxes shall be deducted by 4DMT as required by Law from such remittable royalty or other payment and shall be paid by 4DMT to the proper tax authorities; provided that before making any such deduction or withholding, 4DMT shall give uniQure notice of the intention to make such deduction or withholding, which notice shall include the authority, basis and method of calculation for the proposed deduction or withholding, and shall be provided to the extent practicable at least a reasonable period of time before such deduction or withholding is required, in order for uniQure to obtain reduction of or relief from such deduction or withholding. Official receipts of payment of withholding taxes shall be secured and sent to uniQure as evidence of such payment. The Parties shall exercise their best efforts to ensure that any withholding tax imposed is reduced as far as possible under the provisions of any relevant tax treaty.

6.9 United States Dollars. All dollar ($) amounts specified in this Agreement are United States dollar amounts.

6.10 Payment Method and Currency Conversion. Except as otherwise provided herein, all payments due to a Party hereunder shall be due and payable within [***] ([***]) days after receipt of an invoice from the other Party and shall be paid via a bank wire transfer to such bank account as such Party shall designate. For the purposes of determining the amount of any payment due hereunder for the relevant Calendar Quarter under Section 6.4 or Section 6.5, amounts received by a Party in any foreign currency shall be converted into United States dollars in accordance with the normal business practice of such Party, as applied consistently across its business.

6.11 Blocked Payments.

(a) If, by reason of applicable Laws in any country in the Territory, it becomes impossible or illegal for uniQure or any of its Affiliates or Sublicensees to transfer, or have transferred on its behalf, royalties or other payments to 4DMT, uniQure shall promptly notify 4DMT of the conditions preventing such transfer and such royalties or other payments shall be deposited in local currency in the relevant country to the credit of 4DMT in a recognized banking institution with a good creditworthiness, such banking institution to be designated by 4DMT or, if none is designated by 4DMT within [***] ([***]) days, in a recognized banking institution selected by uniQure or its Affiliate or Sublicensee, as the case may be, and identified in a written notice given to 4DMT. If so deposited in a foreign country, uniQure shall provide, or cause its Affiliate or Sublicensee to provide, reasonable cooperation to 4DMT so as to allow 4DMT to assume control over such deposit as promptly as practicable.

(b) If, by reason of applicable Laws in any country in the Territory, it becomes impossible or illegal for 4DMT or any of its Affiliates or Sublicensees to transfer, or have transferred on its behalf, royalties or other payments to uniQure, 4DMT shall promptly notify uniQure of the conditions preventing such transfer and such royalties or other payments shall be deposited in local currency in the relevant country to the credit of uniQure in a recognized banking institution with a good creditworthiness, such banking institution to be designated by uniQure or, if none is designated by uniQure within [***] ([***]) days, in a recognized banking institution selected by

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

4DMT or its Affiliate or Sublicensee, as the case may be, and identified in a written notice given to uniQure. If so deposited in a foreign country, 4DMT shall provide, or cause its Affiliate or Sublicensee to provide, reasonable cooperation to uniQure so as to allow uniQure to assume control over such deposit as promptly as practicable.

6.12 Late Payments. Any payment not made within [***] ([***]) Business Days after the due date for such payment pursuant to the terms of this Agreement shall bear interest at a rate of the thirty-day U.S. dollar LIBOR rate effective for the date that payment was due (as published in The Wall Street Journal, Eastern Edition) plus [***]. Calculation of interest will be made for the exact number of days the payment was past due based on a year of 360 days (actual days/360).

ARTICLE VII

PATENTS

7.1 Disclosure. Each Party shall promptly disclose to the other Party any Inventions that it or its Affiliates or Sublicensees or their employees, independent contractors, or agents solely or jointly make, conceive, reduce to practice, or otherwise discover under this Agreement, and each Party shall maintain and make available to the other Party records regarding any Inventions that it has an obligation to assign under Section 7.2(a).

7.2 Ownership.

(a) uniQure shall solely own all Core uniQure Intellectual Property, and 4DMT shall solely own all Core 4MDT Intellectual Property. Without additional consideration, each Party shall assign and hereby does assign to the other Party such of its right, title, and interest in and to such Patent Rights (and shall require its Affiliates and Sublicensees, and all employees, independent contractors and their employees, and agents of such Party and its Affiliates and Sublicensees to so assign to the other Party such of their right, title, and interest) as is necessary to effectuate the allocation of right, title, and interest as set forth in this Section 7.2(a).

(b) Except as set forth in Section 7.2(a), as between the Parties, (i) each Party shall solely own all Know-How and Inventions invented solely by employees, agents and consultants of such Party or its Affiliates, and any Patent Right related thereto, subject to the licenses granted under ARTICLE V, and (ii) Know-How and Inventions invented jointly by employees, agents, or consultants of the Parties or their Affiliates (“Joint Intellectual Property”, which includes any Patent Right Covering such Know-How and Inventions (“Joint Patent Rights”) and any Know-How included in such Joint Intellectual Property (“Joint Know-How”)) shall be jointly owned, subject to the licenses granted under ARTICLE V. Inventorship shall be determined in accordance with U.S. patent Laws for purposes of determining ownership in accordance with the foregoing.

(c) Except as expressly provided in this Agreement, and subject to any restriction herein (including the licenses and exclusivity granted under ARTICLE V), (i) each joint owner may engage in research, Development, manufacturing and Commercialization activities relating to Joint Intellectual Property, and (ii) each may assign, license, sell or otherwise encumber or transfer any such interest without the prior written approval of the other Party and without obligation to account or provide compensation to the other Party.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7.3 uniQure Prosecution and Maintenance of Patent Rights.

(a) uniQure shall be solely responsible for the Prosecution and Maintenance of the uniQure Patent Rights, including the Core uniQure Patent Rights, at its sole expense and its sole discretion. uniQure shall give 4DMT an opportunity to review the text of each application, office action response or other substantive document for a Core uniQure Patent Right specifically relating to [***] (but not any other uniQure Patent Right) before filing with any patent office in the Territory, shall consider 4DMT’s reasonable comments with respect thereto, and shall supply 4DMT with a copy of each such application, office action response or other substantive document as filed, together with notice of its filing date and serial number.

(b) uniQure shall have the sole right to determine whether any patent application is filed with respect to any Core uniQure Know-How and whether to maintain any Invention included in the Core uniQure Know-How as a trade secret. uniQure shall provide 4DMT with written notice if uniQure elects not to file a patent application claiming any particular Invention included in the Core uniQure Know-How specifically relating to compositions of matter of, methods of use of, or methods of making any Selected Capsid Variant because uniQure prefers to maintain such Invention as a trade secret (each, a “Trade Secret Election”).

(c) uniQure shall notify 4DMT at least [***] ([***]) days in advance of any applicable deadline if (i) uniQure decides that it does not wish to continue the Prosecution and Maintenance of a [***] for which no substitute has been filed, or (ii) uniQure decides that it intends to abandon claim scope in a [***], which claim scope is intended to be maintained by 4DMT, in which case, with respect to this clause (ii), 4DMT may assume responsibility for such claim scope by filing a divisional application restricted to such claim scope. In such cases (i) or (ii), uniQure shall allow 4DMT to assume responsibility for Prosecution and Maintenance of such Core uniQure Patent Right or divisional application at 4DMT’s expense. If 4DMT assumes such responsibility, then 4DMT may designate any counsel of its choice reasonably acceptable to uniQure to handle the Prosecution and Maintenance of such Core uniQure Patent Right or divisional application (which shall otherwise continue to be part of the Core uniQure Patent Rights).

7.4 4DMT Prosecution and Maintenance of Patent Rights. 4DMT shall be solely responsible for the Prosecution and Maintenance of the 4DMT Patent Rights, including the Core 4DMT Patent Rights, at its sole expense and its sole discretion. 4DMT will reasonably inform uniQure regarding the Prosecution and Maintenance of 4DMT Patent Rights (including in any case, an update at least [***]). Notwithstanding the foregoing, the Parties acknowledge that UC will handle the Prosecution and Maintenance of the UC Patent Rights in accordance with the terms of the UCB Agreements.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7.5 Prosecution and Maintenance of Joint Patent Rights. The Prosecution and Maintenance of any Joint Patent Right shall be through a mutually selected patent counsel. Within [***] ([***]) days following the Effective Date, the Parties shall agree on a patent counsel (“Joint Counsel”) who shall be engaged by both Parties for the Prosecution and Maintenance of all such Joint Patent Rights. The following terms shall apply to each Joint Patent Right:

(a) The Parties shall instruct Joint Counsel to conduct its activities as follows: The Joint Counsel shall give uniQure and 4DMT (or each Party’s designee) an opportunity to review the text of each application, office action response or other substantive document for a Joint Patent Right before filing with any patent office in the Territory, shall incorporate uniQure’s and 4DMT’s (or each Party’s designee) reasonable comments with respect thereto, and shall supply uniQure and 4DMT (or each Party’s designee) with a copy of each such application, office action response or other substantive document as filed, together with notice of its filing date and serial number. In the event that 4DMT and uniQure provide Joint Counsel with conflicting instructions regarding the Prosecution and Maintenance of a Joint Patent Right, Joint Counsel shall make the Parties aware of such conflicting instructions and, if the Parties are not able to resolve such conflict within a reasonable time prior to the applicable filing deadline, the Joint Counsel shall take such action as would reasonably be expected to maximize the scope, extent and coverage of such Joint Patent Right.

(b) Both Parties shall cooperate with Joint Counsel in Prosecution and Maintenance of patent applications for Joint Patent Rights, including providing Joint Counsel with data and other information as appropriate with respect thereto.

(c) Joint Counsel shall keep uniQure and 4DMT advised of the status of the Prosecution and Maintenance of Joint Patent Rights, including actual and prospective patent filings for Joint Patent Rights, and shall provide each Party with advance copies of any and all papers related thereto. Joint Counsel shall promptly give notice to uniQure and 4DMT of the grant, lapse, revocation, surrender, invalidation or abandonment of any Joint Patent Right.

(d) The Parties shall equally share all fees and costs charged by Joint Counsel with respect to the Prosecution and Maintenance of Joint Patent Rights and all other mutually agreed and approved out-of-pocket costs and expenses incurred by either Party in connection with such Prosecution and Maintenance of Joint Patent Rights.

(e) uniQure shall notify 4DMT and Joint Counsel at least [***] ([***]) days in advance of the next deadline if (A) uniQure decides that it does not wish to continue paying for the Prosecution and Maintenance of a particular Joint Patent Right for which no substitute has been filed, or (B) uniQure decides that it intends to abandon claim scope in a Joint Patent Right which claim scope is intended to be maintained by 4DMT, in which case, with respect to this clause (B), 4DMT may assume responsibility for such claim scope by filing a divisional application restricted to such claim scope. In such cases (A) or (B), uniQure shall allow 4DMT to assume responsibility for Prosecution and Maintenance of the respective Patent Rights, including payments incurred after [***] ([***]) days after receipt of uniQure’s notice. If 4DMT assumes such responsibility, then: (i) 4DMT may designate any counsel of its choice to handle the Prosecution and Maintenance of such Joint Patent Right or of the divisional application and it shall cease to be a part of the Joint Patent Rights; (ii) uniQure shall lose its licenses to such former Joint Patent Right or divisional application under ARTICLE V and such former Joint Patent Right or divisional application shall be deemed a 4DMT Patent Right; and (iii) uniQure shall and hereby

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

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does transfer and assign all right, title and interest in said former Joint Patent Right or of the divisional application to 4DMT as the sole owner. If 4DMT decides not to assume such responsibility, then it shall instruct Joint Counsel to abandon the Prosecution and Maintenance of such Joint Patent Right or not to file such divisional application.

(f) 4DMT shall notify uniQure and Joint Counsel at least [***] ([***]) days in advance of the next deadline if (A) 4DMT decides that it does not wish to continue paying for the Prosecution and Maintenance of a particular Joint Patent Right for which no substitute has been filed, or (B) 4DMT decides that it intends to abandon claim scope in a Joint Patent Right which claim scope is intended to be maintained by uniQure, in which case, with respect to this clause (B), uniQure may assume responsibility for such claim scope by filing a divisional application restricted to such claim scope. In such cases (A) or (B), 4DMT shall allow uniQure to assume responsibility for Prosecution and Maintenance of the respective Patent Rights, including payments incurred after [***] ([***]) days after receipt of 4DMT’s notice. If uniQure assumes such responsibility, then: (i) uniQure may designate any counsel of its choice to handle the Prosecution and Maintenance of such Joint Patent Right or of the divisional application and it shall cease to be a part of the Joint Patent Rights and no further uniQure royalty obligations shall exist under this Agreement with respect thereto; (ii) 4DMT shall lose its licenses to such former Joint Patent Right or divisional application under ARTICLE V and such former Joint Patent Right or divisional application shall be deemed a uniQure Patent Right; and (iii) 4DMT shall and hereby does transfer and assign all right, title and interest in said former Joint Patent Right or of the divisional application to uniQure as the sole owner. If uniQure decides not to assume such responsibility, then it shall instruct Joint Counsel to abandon the Prosecution and Maintenance of such Joint Patent Right or not to file such divisional application.

7.6 Third Party Infringement.

(a) Notice. Each Party shall promptly report in writing to the other Party any known or suspected (i) infringement of any of the 4DMT Patent Rights, uniQure Patent Rights or Joint Patent Rights, or (ii) unauthorized use or misappropriation of any of the 4DMT Know-How, uniQure Know-How or Joint Know-How, of which such Party becomes aware and shall provide the other Party with all available evidence regarding such known or suspected infringement or unauthorized use.

(b) Enforcement of Solely Owned Patent Rights. uniQure shall have the sole right to enforce the uniQure Patent Rights, including the Core uniQure Patent Rights. Subject to UC’s rights under the UCB Agreements with respect to any UC Patent Right included in the 4DMT Patent Rights, 4DMT shall have the sole right to enforce any 4DMT Patent Right, including the Core 4DMT Patent Rights. Each Party shall cooperate in the prosecution of any such suit brought by the enforcing Party as may be reasonably requested by the enforcing Party; provided that the enforcing Party shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by the non-enforcing Party in connection with such cooperation.

 

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(c) Enforcement of Joint Patent Rights.

(i) In the Field. uniQure shall have the first right, but not the obligation, to initiate a lawsuit or take other reasonable action to enforce the Joint Patent Rights against any infringement in the Field. 4DMT shall cooperate in the prosecution of any such suit as may be reasonably requested by uniQure, including joining any action as party-plaintiff at uniQure’s sole discretion; provided that uniQure shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by 4DMT in connection with such cooperation.

(ii) Outside the Field. 4DMT shall retain any and all rights to initiate a lawsuit or take other reasonable action to enforce the Joint Patent Rights against any infringement outside the Field. uniQure shall cooperate in the prosecution of any such suit as may be reasonably requested by 4DMT, including joining any action as party-plaintiff at 4DMT’s sole discretion; provided that 4DMT shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by uniQure in connection with such cooperation.

(iii) Step-In Right. If either Party does not initiate a lawsuit or take other reasonable action pursuant to this Section 7.6(c) (the “Non-Enforcing Party”), then the other Party (the “Enforcing Party”) shall have the right, but not the obligation, to initiate such lawsuit or take such other action, after providing [***] ([***]) days’ notice to the Non-Enforcing Party and giving good faith consideration to the Non-Enforcing Party’s reason(s) for not initiating a lawsuit or taking other action. For this purpose, the Non-Enforcing Party shall cooperate in the prosecution of any such suit as may be reasonably requested by the Enforcing Party, including joining any action as party-plaintiff at the Non-Enforcing Party’s sole discretion; provided, that the Enforcing Party shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by the Non-Enforcing Party in connection with such cooperation.

(d) Conduct of Certain Actions; Costs. The Party initiating legal action shall have the sole and exclusive right to select counsel for any suit initiated by it pursuant to Section 7.6(b) or 7.6(c) (the “Initiating Party”). The Initiating Party shall bear its own out-of-pocket costs incurred in any such legal action, including the fees and expenses of the counsel selected by it. The other Party shall have the right to participate and be represented in any such legal action (in cases where such other Party has standing) by its own counsel at its own expense. The Initiating Party shall have the final say about the strategy and decisions in the suit and any settlement.

(e) Recoveries. Any amount recovered in any action or settlement of any such action shall be allocated first to equally reimburse each Party’s actual out-of-pocket costs (including reasonable attorneys’ fees and expenses) incurred in such action and any amount remaining shall be allocated to the Initiating Party; provided that if uniQure is the Initiating Party with respect to any such suit to enforce any Patent Right included in the Licensed IP in the Field, then, with respect to any remaining portion of such recovery, (i) any amount that reflects punitive or exemplary damages shall be allocated [***] percent ([***]%) to uniQure and [***] ([***]%) to 4DMT, and (ii) any other amounts shall be treated as Net Sales and subject to payment of royalties under Section 6.4(a); and provided further that if uniQure is the Initiating Party with respect to any such suit to enforce any Joint Patent Right outside the Field, or if 4DMT is the Initiating Party with respect to any such suit to enforce any Joint Patent Right in the Field, any amount remaining shall be allocated [***].

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7.7 Patent Invalidity Claim. Each Party shall promptly notify the other in the event of any legal or administrative action by any Third Party against a 4DMT Patent Right, uniQure Patent Right or Joint Patent Right of which it becomes aware, including any nullity, revocation, reexamination or compulsory license proceeding. To the extent such action is in connection with an enforcement of such Patent Right under Section 7.6, the Parties’ rights with respect to defending any such Patent Right in any such proceeding shall correspond to those set forth in Section 7.6.

7.8 Patent Term Extensions.

(a) uniQure shall have full and exclusive right to determine and control all filings of requests for any patent term extension or supplemental patent certificate or their equivalents in any country in the Territory for any uniQure Patent Right, including any Core uniQure Patent Right, and all costs and expenses relating thereto shall be paid by uniQure.

(b) 4DMT shall have full and exclusive right to determine and control all filings of requests for any patent term extension or supplemental patent certificate or their equivalents in any country in the Territory for any 4DMT Patent Right, including any Core 4DMT Patent Right, and all costs and expenses relating thereto shall be paid by 4DMT.

(c) The Parties shall jointly determine how to defend any such action relating to any Joint Patent Right.

(d) The Parties shall reasonably cooperate with each other in obtaining patent term extensions or supplemental protection certificates or their equivalents in any country in the Territory.

7.9 Orange Book; Paragraph IV Certification.

(a) uniQure shall have the right, but not the obligation, to list any uniQure Patent Rights in the then-current edition of the FDA publication “Approved Drug Products With Therapeutic Equivalence Evaluations” (the “Orange Book”), or equivalent patent listings in other countries.

(b) With respect to any notification provided by a Third Party to uniQure or 4DMT under 21 U.S.C. § 355(j)(2)(B) making a certification described in 21 U.S.C. § 355(j)(2)(A)(vii)(IV) with respect to any uniQure Patent Right that is listed for a Royalty Bearing Product in the Orange Book, or equivalent actions in other countries, (each a “Paragraph IV Certification”), the following shall apply notwithstanding Sections 7.6 and 7.7:

(i) Without any avoidable delay, however at the latest within [***] ([***]) Business Days after receipt of any notification of a Paragraph IV Certification, such Party shall notify the other Party in writing and attach of copy of such notification. uniQure and 4DMT shall thereafter consult and cooperate fully to determine a course of action with respect to any such proceeding, including the negotiation of the offer of confidential access.

 

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(ii) With respect to any uniQure Patent Right, uniQure shall have the sole right to initiate any infringement proceeding as a result of such Paragraph IV Certification (a “Paragraph IV Proceeding”) with respect to a Royalty Bearing Product, including by commencing a patent infringement action under 35 U.S.C. § 271(e)(2)(A), and shall bear the expense of any such Paragraph IV Proceeding and, if legally required, may commence such action in 4DMT’s or the relevant 4DMT Affiliate’s name and on 4DMT’s or the relevant 4DMT Affiliate’s behalf.

(iii) Section 7.6(e) shall apply if any amount is recovered in any Paragraph IV Proceeding or settlement of any Paragraph IV Proceeding under this Section 7.9(b).

7.10 CREATE Act. Each Party acknowledges and agrees that this Agreement is a “joint research agreement” as contemplated by 35 U.S.C. § 102(c), and that all Inventions are intended to have the benefit of the rights and protections conferred by the Cooperative Research and Enhancement Act of 2004 (the “CREATE Act”). In the event that a Party seeks to rely on the foregoing and to invoke the CREATE Act with respect to any Invention, such Party will give prior written notice to the other Party of its intent to invoke the CREATE Act and of each submission or disclosure such Party intends to make to the United States Patent and Trademark Office (the “USPTO”) pursuant to the CREATE Act, including: (a) any disclosure of the existence or contents of this Agreement to the USPTO, (b) the disclosure of any “subject matter developed by the other Party” (as such term is used in the CREATE Act) in an information disclosure statement or otherwise, or (c) the filing of any terminal disclaimer over the intellectual property of the other Party, it being agreed that no such submission, disclosure or filing shall be made by such Party without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed, except that no such consent shall be required to disclose to the USPTO, through an information disclosure statement or otherwise, any “subject matter developed by the other Party” that was previously published or included in a published patent application by the other Party. The other Party will provide reasonable cooperation to such Party in connection with such Party’s efforts to invoke and rely on the CREATE Act.

ARTICLE VIII

CONFIDENTIALITY AND PUBLICATION

8.1 Confidentiality Obligations. Each Party shall (a) maintain in confidence the Confidential Information of the other Party to the same extent such Party maintains its own confidential information, (b) not disclose such Confidential Information to any Third Party without the prior written consent of the other Party, and (c) not use such Confidential Information for any purpose except those permitted by this Agreement. Such obligations shall survive for a period of [***] ([***]) years after termination or expiration of this Agreement, except that such obligations shall survive with respect to any Confidential Information identified by the disclosing Party as a trade secret for so long as such Confidential Information remains a trade secret.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

8.2 Exceptions to Confidentiality. Notwithstanding the foregoing, the obligations of confidentiality set forth in Section 8.1 shall not apply to information that, in each case as demonstrated by competent written documentation:

(a) is publicly disclosed or made generally available to the public by the disclosing Party, either before or after it becomes known to the receiving Party;

(b) was known to the receiving Party, without any obligation to keep it confidential, prior to the date of first disclosure by the disclosing Party to the receiving Party, as shown by the receiving Party’s files and records;

(c) is subsequently disclosed to the receiving Party by a Third Party lawfully in possession thereof without obligation to keep it confidential and without a breach of such Third Party’s obligations of confidentiality;

(d) has been publicly disclosed or made generally available to the public other than through any act or omission of the receiving Party or its Affiliates in breach of this Agreement; or

(e) has been independently developed by the receiving Party without the aid, application or use of the disclosing Party’s Confidential Information (the competent written proof of which must be contemporaneous with such independent development).

8.3 Authorized Disclosure. Notwithstanding Section 8.1, a Party may disclose Confidential Information of the other Party to the extent such disclosure is reasonably necessary in the following instances:

(a) Prosecuting and Maintaining Patent Rights in accordance with this Agreement;

(b) making filings with Regulatory Authorities in accordance with this Agreement;

(c) complying with applicable Laws or submitting information to tax or other Governmental Authorities; provided that if a Party is required by Law to make any public disclosure of Confidential Information of the other Party, to the extent it may legally do so, it will give reasonable advance notice to the other Party of such disclosure and will use its reasonable efforts to secure confidential treatment of such Confidential Information prior to its disclosure (whether through protective orders or otherwise);

(d) to its Affiliates, and to prospective and actual acquirers, licensees, sublicensees, employees, consultants, agents, accountants, lawyers, advisors, investors and underwriters, on a need to know basis, each of whom prior to disclosure must be bound by written or professional ethical obligations of confidentiality and non-use equivalent in scope to those set forth in this ARTICLE VIII and that are of reasonable duration in view of the circumstances of the disclosure; or

(e) to the extent mutually agreed to in writing by the Parties.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

8.4 Scientific Publications. During the Research Term, neither Party shall first publish or first present in a public forum the scientific or technical results of any activity performed pursuant to this Agreement without the opportunity for prior review and comment by the other Party. Each Party agrees to provide the other Party with the opportunity to review any proposed abstract, manuscript or scientific presentation (including any verbal presentation) that relates to its activities performed pursuant to this Agreement during the Research Term, at least [***] ([***]) days prior to its intended submission for publication and agrees, upon request, not to submit any such abstract or manuscript for publication until the other Party is given a reasonable period of time up to [***] ([***]) months to secure patent protection for any material in such publication that it believes to be patentable. Both Parties understand that a reasonable commercial strategy may require delay of publication of information or filing of patent applications first with respect to activities performed or results obtained pursuant to this Agreement during the Research Term, or not to publish at all if necessary to preserve trade secrets. The Parties agree to review and decide whether to delay publication of such information to permit filing of patent applications. Neither Party shall have the right to publish or present any Confidential Information of the other Party, except as provided in Section 8.3. After the Research Term, each Party and its Affiliates may publish or present results, data or scientific findings of any of their activities performed after the Research Term without the prior review of the other Party, provided that such publication or presentation does not disclose any of the other Party’s Confidential Information. After the Research Term, neither Party nor its Affiliates may publish or present any of the results, data or scientific findings of any activity performed by the other Party or its Affiliates pursuant to this Agreement without prior review and prior written consent of such other Party. Nothing contained in this Section 8.4 shall prohibit the inclusion of information necessary for a patent application; provided that the non-filing Party is given a reasonable opportunity to review the information to be included prior to submission of such patent application. For clarity, any publication under this Section 8.4 shall be consistent with uniQure’s internal publication strategy, which shall be made available to 4DMT upon request. Nothing contained in this Section 8.4 shall prohibit either Party from disclosing the results, data or scientific findings of any activity performed by the other Party or its Affiliates pursuant to this Agreement without prior review and prior written consent of the other Party, where required, as reasonably determined by the disclosing Party’s legal counsel, by applicable Law; provided that if a Party is required by Law to make any such disclosure, to the extent it may legally do so, it will give reasonable advance notice to the other Party of such disclosure and will use its reasonable efforts to secure confidential treatment of such information prior to its disclosure (whether through protective orders or otherwise).

8.5 Press Releases and Other Permitted Disclosures.

(a) 4DMT and uniQure each agree not to disclose any of the terms and conditions of this Agreement to any Third Party, except as described below in this Section 8.5. The Parties will cooperate in the release of a mutually agreed upon press release announcing the collaboration contemplated by this Agreement as soon as practicable after the Effective Date. Subject to the other provisions of this Agreement, no other press release, public statement or public disclosure concerning the existence or terms of this Agreement shall be made, either directly or indirectly, by either Party, without first obtaining the written approval of the other Party, which

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

such approval shall not be unreasonably withheld or delayed beyond [***] ([***]) Business Days (or [***] ([***]) Business Days if the Party wishing to make such disclosure or any of its controlling Affiliates is then a public company) following submission to the approving Party of a draft of the respective press release, public statement or public disclosure. In no event shall any such subsequent press release, public statement or public disclosure by 4DMT disclose, if previously undisclosed, the identity of any Compound or Product or the stage of development of any Compound or Product that uniQure is researching, Developing, manufacturing, or Commercializing; provided that for clarity, uniQure may disclose, without the written approval of 4DMT, the identity of any Compound or Product or the stage of development of any Compound or Product that uniQure is researching, Developing, manufacturing, or Commercializing. In no event shall any such subsequent press release, public statement or public disclosure by a Party disclose, if previously undisclosed, the financial terms of this Agreement; provided that 4DMT may disclose the receipt of, and uniQure may disclose the payment of, any milestone payment but not the amount of such milestone payment; provided, further, however, that if disclosure of the amount of a milestone payment is required by applicable Law, by applicable stock exchange regulation, or by order or other ruling of a competent court, as set forth in Section 8.5(c), then 4DMT or uniQure, as the case may be, may also disclose such amount in a public statement or disclosure. Once any public statement or public disclosure has been approved in accordance with this Section 8.5, then either Party may appropriately communicate information contained in such permitted statement or disclosure.

(b) Either Party may disclose the existence and terms of this Agreement in confidence to its attorneys, to UC, and to each of the following, under an agreement with terms of confidentiality and non-use no less rigorous than the terms contained in this Agreement and, as applicable, to use such information solely for the purpose permitted pursuant to the applicable subsection of this Section 8.5(b):

(i) professional accountants, consultants, or auditors;

(ii) bankers or other financial advisors, in connection with an initial public offering, private financing or other strategic transaction, or corporate valuation for internal purposes;

(iii) potential acquirers (and their respective attorneys and professional advisors), in connection with a potential merger, acquisition or reorganization; provided that the Party making the disclosure has a bona fide offer (e.g., a signed term sheet or letter of intent, even if non-binding) from such Third Party for such a transaction;

(iv) to actual or potential investors, lenders or permitted assignees of such Party (and their respective attorneys and professional advisors); or

(v) to actual or potential licensees or sublicensees of such Party (and their respective attorneys and professional advisors); provided that such disclosure in the case of 4DMT shall not include any financial terms, the Candidate Success Criteria, the Delivery Success Criteria, or Schedule 1.76.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(c) Notwithstanding the foregoing provisions of this ARTICLE VIII, a Party may disclose the existence and terms of this Agreement, however excluding, as far as legally possible, Schedule 1.76, or the Parties’ activities under this Agreement, where required, as reasonably determined by the legal counsel of the disclosing Party, by applicable Law, by applicable stock exchange regulation or by order or other ruling of a competent court, although, to the extent practicable, the other Party shall be given [***] ([***]) Business Days advance notice of any such legally required disclosure to comment and reasonably consider such comments provided by such other Party on the proposed disclosure. In case either Party is obliged to publish this Agreement as a “material agreement” in accordance with the U.S. stock exchange regulations (“SEC Filing”), this Agreement shall be redacted by the filing Party as far as legally possible, and the filing Party shall cooperate with the other Party reasonably in advance to such SEC Filing to enable the other Party to review and comment on the scope of such redaction.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

9.1 Representations and Warranties of the Parties. uniQure and 4DMT each represent, warrant and covenant to the other that:

(a) as of the Effective Date, it has the authority and right to enter into and perform this Agreement and grant the rights embodied herein, and it is not aware of any legal impediment that could inhibit its ability to perform its obligations under this Agreement;

(b) as of the Effective Date, its execution, delivery and performance of this Agreement does not conflict with, or constitute a breach of, any order, judgment, agreement or instrument to which it is a party or is otherwise bound;

(c) it shall comply in all material respects with all Laws applicable to its actions under this Agreement; and

(d) as of the Effective Date, no consent of any Third Party is required for such Party to grant the licenses and rights granted to the other Party under this Agreement or to perform its obligations hereunder.

9.2 Representations and Warranties of 4DMT. 4DMT represents, warrants and covenants to uniQure that:

(a) as of the Effective Date, Schedule 1.5 is compiled accurately and, to the extent set forth in Section 1.5, is complete regarding the subject matter set forth therein;

(b) as of the Effective Date, 4DMT has not previously assigned, transferred, conveyed or otherwise encumbered its right, title and interest in 4DMT Intellectual Property in a manner inconsistent with the terms hereof;

(c) as of the Effective Date, 4DMT has valid and existing licenses, free and clear of all liens, charges and encumbrances, to the 4DMT Patent Rights not owned by 4DMT;

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(d) as of the Effective Date, to 4DMT’s knowledge, the conception, development and reduction to practice of the 4DMT Intellectual Property has not constituted or involved the misappropriation of trade secrets of any Third Party or the infringement of issued Patent Rights of any Third Party;

(e) as of the Effective Date, 4DMT has not received any written notice of any unauthorized use, infringement, or misappropriation by any person or entity, including any current or former employee or consultant of 4DMT, of any 4DMT Intellectual Property;

(f) as of the Effective Date, to 4DMT’s knowledge, there are no claims, judgments, settlements pending or any action with respect to the 4DMT Intellectual Property;

(g) as of the Effective Date, to 4DMT’s knowledge, uniQure’s use of the 4DMT Intellectual Property, as reasonably anticipated to be used in the conduct of the Research Program, will not infringe any valid Patent Right existing as of the Effective Date and owned by any Third Party;

(h) all of 4DMT’s personnel and employees, and Third Parties, including agents and consultants, hired by 4DMT and involved in the Research Program are, or when hired will be, under a written obligation to assign to 4DMT any right they may have in any Invention first invented, discovered, made, conceived or reduced to practice in the conduct of activities pursuant to the Research Program, and all intellectual property rights therein;

(i) it will not, after the Effective Date, enter into any written or oral contractual obligation with any Third Party that would be inconsistent with the obligations that arise on its part out of this Agreement or that would deprive uniQure of the benefits of or rights granted under this Agreement;

(j) as of the Effective Date, each of the UCB Agreements is in full force and effect, and 4DMT will not, after the Effective Date, terminate, amend or otherwise modify any of the terms thereof without prior written consent from uniQure, or take any action or refrain from taking any action that would permit UC to terminate any UCB Agreement (it being recognized that if the Selected Capsid Variants are not UC AAV Capsid Variants, and UC terminates any UCB Agreement, 4DMT shall not be deemed to be in breach of the foregoing), and 4DMT shall promptly provide uniQure with a copy of each notice it receives from UC under any UCB Agreement; and

(k) if, during the Term, 4DMT has reason to believe that it or any of its employees, officers, subcontractors, or consultants rendering services hereunder (i) is or shall be debarred or convicted of a crime under 21 U.S.C. Section 335a, or (ii) is or shall be under indictment under said Section 335a, then 4DMT shall immediately notify uniQure in writing.

For purposes of this Section 9.2, “knowledge” shall mean the actual knowledge of 4DMT, including [***].

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

9.3 Representations and Warranties of uniQure. uniQure represents, warrants and covenants to 4DMT that:

(a) all of uniQure’s personnel and employees, and Third Parties, including agents and consultants, hired by uniQure and involved in the Research Program are, or when hired will be, under a written obligation to assign to uniQure any right they may have in any Invention first invented, discovered, made, conceived or reduced to practice in the conduct of activities pursuant to the Research Program, and all intellectual property rights therein;

(b) it will not, after the Effective Date, enter into any written or oral contractual obligation with any Third Party that would be inconsistent with the obligations that arise on its part out of this Agreement or that would deprive 4DMT of the benefits of or rights granted under this Agreement;

(c) if, during the Term, uniQure has reason to believe that it or any of its employees, officers, subcontractors, or consultants rendering services hereunder (i) is or shall be debarred or convicted of a crime under 21 U.S.C. Section 335a, or (ii) is or shall be under indictment under said Section 335a, then uniQure shall immediately notify 4DMT in writing.

9.4 No Other Warranties.

(a) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY THAT PRODUCT(S) WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF PRODUCT(S) ARE DEVELOPED, WITH RESPECT TO SUCH PRODUCT(S), THE PARTIES DISCLAIM ALL IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

(b) uniQure acknowledges that UC has not warranted to 4DMT under the UCB Agreements as to the validity of any Patent Rights or that practice under such Patent Rights shall be free of infringement. UNIQURE, ITS AFFILIATES AND ITS SUBLICENSEE(S) AGREE THAT (I) THE LICENSES GRANTED PURSUANT TO THE UCB AGREEMENTS, THE UC AAV CAPSID VARIANTS, AND THE ASSOCIATED INVENTIONS ARE PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESSED OR IMPLIED; (II) UC MAKES NO REPRESENTATION OR WARRANTY THAT ANY INVENTION CLAIMED BY THE UC PATENT RIGHTS, THE UC AAV CAPSID VARIANTS, THE UC PATENT RIGHTS, OR THE UC PRODUCTS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT; AND (III) IN NO EVENT WILL UC BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THE LICENSES GRANTED PURSUANT TO THE UCB AGREEMENTS OR THE USE OF ANY INVENTION CLAIMED BY THE UC PATENT RIGHTS, THE UC AAV CAPSID VARIANTS, THE UC PATENT RIGHTS, OR THE UC PRODUCTS.

9.5 Indemnification by uniQure. uniQure shall indemnify, hold harmless and defend 4DMT, its Affiliates and all of their respective officers, directors, employees, agents and shareholders (collectively, the “4DMT Indemnitees”) from and against any and all losses, damages, liabilities, judgments, fines, amounts paid in settlement, expenses and costs of defense

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(including reasonable attorneys’ fees and witness fees) (collectively, “Damages”) resulting from any demand, claim, action or proceeding brought or initiated by a Third Party (each a “Third Party Claim”) against any 4DMT Indemnitee to the extent arising out of: (a) a Default by uniQure; (b) the negligence or willful misconduct of a uniQure Indemnitee; or (c) the use, Development, Commercialization, storage or other exploitation of any Compound or Product by uniQure, its Affiliates, Sublicensees, Third Party Distributors, or Third Party independent contractors; provided that (i) the 4DMT Indemnitees shall comply with the procedures set forth in Section 9.7(a); and (ii) such indemnity shall not apply to the extent such Third Party Claim is subject to indemnification by 4DMT under Section 9.6.

9.6 Indemnification by 4DMT. 4DMT shall indemnify, hold harmless and defend uniQure, its Affiliates and all of their respective officers, directors, employees, agents, and shareholders (collectively, the “uniQure Indemnitees”) from and against any and all Damages resulting from any Third Party Claim against any uniQure Indemnitee to the extent arising out of: (a) a Default by 4DMT; (b) the negligence or willful misconduct of a 4DMT Indemnitee; or (c) the use, Development, Commercialization, storage or other exploitation of any 4DMT AAV Capsid Vector, Compound, Product (other than a Royalty Bearing Compound or Royalty Bearing Product), or 4DMT Product with which 4DMT proceeds under Section 4.4, in each case by 4DMT, its Affiliates, sublicensees or Third Party independent contractors; provided that (i) the uniQure Indemnitees shall comply with the procedures set forth in Section 9.7(b); and (ii) such indemnity shall not apply to the extent such Third Party Claim is subject to indemnification by uniQure under Section 9.5.

9.7 Procedure.

(a) To be eligible for the 4DMT Indemnitees to be indemnified hereunder, 4DMT shall provide uniQure with prompt notice of the Third Party Claim giving rise to the indemnification obligation under Section 9.5 and the exclusive ability to defend or settle any such claim; provided however that uniQure shall not enter into any settlement for damages, or that imposes upon 4DMT any obligation or liability, without 4DMT’s prior written consent, such consent not to be unreasonably withheld, delayed or conditioned. 4DMT shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by uniQure.

(b) To be eligible for the uniQure Indemnitees to be indemnified hereunder, uniQure shall provide 4DMT with prompt notice of the Third Party Claim giving rise to the indemnification obligation under Section 9.6 and the exclusive ability to defend or settle any such claim; provided however that 4DMT shall not enter into any settlement for damages, or that imposes upon uniQure any obligation or liability, without uniQure’s prior written consent, such consent not to be unreasonably withheld, delayed or conditioned. uniQure shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by 4DMT.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

9.8 uniQure Indemnity to UC. uniQure shall, and shall require its Sublicensees to, indemnify, defend, and hold harmless UC and IGT, and their officers, employees, and agents; sponsor(s) of the research that led to the inventions disclosed in the UC Patent Rights and the UC AAV Capsid Variants; and the inventors of any UC Patent Rights and their employers against any and all losses, damages, costs, fees, and expenses resulting from Third Party claims and suits arising out of uniQure’s activities under this Agreement or of any Sublicensee activities under any sublicense agreement granting rights under the UC Patent Rights or the UC AAV Capsid Variants, or any use or possession of the UC AAV Capsid Variants resulting from uniQure’s exploitation of its rights thereto. This indemnification will include any product liability claims. uniQure will keep UC informed of its defense of any claims pursuant to this Section 9.8, and UC will cooperate reasonably in any such suit. If UC invokes the provisions of this Section 9.8, UC will not make any admissions or take any actions in such claim or suit that may prejudice or impair uniQure’s ability to defend such claim or suit without uniQure’s prior written consent, and uniQure will not admit liability or wrongdoing on behalf of UC without UC’s prior written consent.

9.9 Insurance. Each Party shall procure and maintain insurance or self-insurance, including general liability insurance and product liability insurance, adequate to cover its obligations hereunder and that are consistent with normal business practices of prudent companies similarly situated, at all times during which any Research Compound, Royalty Bearing Compound, or Royalty Bearing Product is being Developed, clinically tested in human subjects or Commercialized by or on behalf of such Party, its Affiliates or sublicensees, including, in the case of uniQure, its Sublicensees. It is understood that any such insurance or self-insurance shall not be construed to create a limit of a Party’s liability with respect to its indemnification obligations under this ARTICLE IX. Each Party shall provide the other Party with written evidence of such insurance or self-insurance upon request. Each Party shall provide the other Party with written notice at least [***] ([***]) days prior to the cancellation, non-renewal or material change in such insurance or self-insurance which could adversely affect rights hereunder. Without limiting the generality of the foregoing:

(a) uniQure, at its sole cost and expense, will ensure that the applicable entity performing activities in connection with any work performed hereunder, whether uniQure, an Affiliate, or a Sublicensee, will obtain, keep in force, and maintain the following insurance:

(i) prior to the start of Clinical Trials of a UC Product, commercial form general liability insurance (contractual liability included) with limits as follows:

 

Each Occurrence		$[***]
Products/Completed Operations Aggregate		$[***]
Personal and Advertising Injury		$[***]
General Aggregate		$[***]

(ii) Upon the start of any Clinical Trials of a UC Product, commercial form general liability insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence		$[***]
Products/Completed Operations Aggregate		$[***]
Personal and Advertising Injury		$[***]
General Aggregate		$[***]

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) upon the First Commercial Sale of a UC Product, commercial form general liability insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence		$[***]
Products/Completed Operations Aggregate		$[***]
Personal and Advertising Injury		$[***]
General Aggregate		$[***]

If the above insurance is written on a claims-made form, it shall continue for [***] ([***]) years following termination or expiration of this Agreement.

(iv) worker’s compensation as legally required in the jurisdiction in which uniQure, an Affiliate, or a Sublicensee, as applicable, is doing business.

uniQure will promptly notify UC of any material reduction in the insurance coverages below the amounts required hereunder.

(b) Within [***] ([***]) days after the Effective Date, uniQure will furnish 4DMT with certificates of insurance evidencing compliance with all requirements. Such certificates will:

(i) where possible, provide for [***] ([***]) days’ ([***] ([***]) days for non-payment of premium) advance written notice to 4DMT and UC of any cancellation of insurance coverages described above in Section 9.9(a);

(ii) indicate that 4DMT and UC have been endorsed as additional insureds under the coverage described above in Section 9.9(a); and

(iii) include a provision that the coverages described above in Section 9.9(a) will be primary and will not participate with, nor will be excess over, any valid and collectable insurance or program of self-insurance maintained by 4DMT or UC.

9.10 No Consequential or Punitive Damages. EXCEPT WITH RESPECT TO (a) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDER THIS AGREEMENT WITH RESPECT TO THIRD PARTY CLAIMS, (b) A BREACH OF THE CONFIDENTIALITY OBLIGATIONS OF ARTICLE VIII, (c) A BREACH OF SECTION 5.6, OR (d) A PARTY’S WILLFUL MISCONDUCT, NEITHER PARTY HERETO WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, ARISING FROM OR RELATING TO THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

ARTICLE X

TERM AND TERMINATION

10.1 Term and Expiration. This Agreement shall be effective as of the Effective Date and unless terminated earlier pursuant to Section 10.2, this Agreement shall continue in effect until the expiration of all of uniQure’s and 4DMT’s payment obligations hereunder (the “Term”). Upon expiration, all licenses granted hereunder shall be fully paid-up, perpetual and irrevocable.

10.2 Termination.

(a) Termination of Agreement for Cause.

(i) This Agreement may be terminated at any time during the Term upon written notice by either Party (the “Non-Defaulting Party”) upon Default of the other Party (the “Defaulting Party”), which Default remains uncured for ninety (90) days after written notice requesting cure of such Default. The Non-Defaulting Party shall provide written notice to the Defaulting Party, which notice shall identify the Default, the intent to so terminate and the actions or conduct that it considers would be an acceptable cure of such Default. If the Defaulting Party disputes the Default under this Section 10.2(a), then the issue of whether the Non-Defaulting Party may properly terminate this Agreement on expiration of the applicable cure period shall be resolved in accordance with ARTICLE XI. If, as a result of such dispute resolution process, it is determined that the alleged Defaulting Party committed a Default and the Defaulting Party does not cure such Default within sixty (60) days after the date of such dispute resolution award (the “Additional Cure Period”), then such termination shall be effective as of the expiration of the Additional Cure Period. If the Parties dispute whether such Default was so cured, either Party alone may request the same tribunal to determine whether it was so cured, and the Parties shall cooperate to allow such determination to be made within thirty (30) days after such request by either Party. Any such dispute resolution proceeding does not suspend any obligation of either Party hereunder, and each Party shall use reasonable efforts to mitigate any damage. If, as a result of any such dispute resolution proceeding, it is determined that the alleged Defaulting Party did not commit such Default (or such Default was cured in accordance with this Section 10.2(a)), then no termination shall be effective, and this Agreement shall continue in full force and effect. Notwithstanding the foregoing, if 4DMT is the Non-Defaulting Party and the claimed Default by uniQure as the Defaulting Party relates to one or more Compounds or Products, and not this entire Agreement, then this Agreement shall be terminated only with respect to the Indication for which such Compound(s) or Product(s) were intended to treat and such Indication shall be removed from the Field.

(ii) Notwithstanding Section 10.2(a)(i), uniQure shall have the right to terminate this Agreement during the Research Term immediately upon written notice to 4DMT if David Schaffer ceases to be a representative of 4DMT on the JRSC or is otherwise unavailable to direct 4DMT’s Research Program activities during any consecutive fifteen (15) Business Day period, in each case for any reason other than his death, illness or disability, which shall be deemed a Default by 4DMT.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b) Termination for Bankruptcy. To the extent allowed under applicable Law, either Party shall have the right to terminate this Agreement in the event of the commencement of any proceeding in or for bankruptcy, insolvency, dissolution or winding up by or against the other Party (other than pursuant to a corporate restructuring) that is not dismissed or otherwise disposed of within sixty (60) days thereafter.

(c) Termination for Futility. uniQure shall have the right terminate this Agreement immediately upon written notice to 4DMT summarizing the basis for such termination if, at any point prior to the first (1^st) anniversary of the Effective Date, the JRSC determines that (i) it would be futile to continue the Research Program, including if the JRSC determines that any Candidate Success Criteria or Delivery Success Criteria cannot be met through use of the 4DMT Intellectual Property following the reasonable efforts of 4DMT to achieve such Candidate Success Criteria or Delivery Success Criteria or (ii) 4DMT is not making bona fide efforts to achieve the timelines set forth in the Research Plan.

(d) Termination for Convenience. uniQure shall have the right terminate this Agreement at any time after the Research Term, for any reason or for no reason, by giving 4DMT ninety (90) days’ prior written notice thereof.

(e) Special Termination Right of 4DMT. In the event that (i) uniQure B.V. does not complete an underwritten public offering of its ordinary shares pursuant to an effective registration statement under the U.S. Securities Act of 1933 and the listing of its ordinary shares on the Nasdaq Global Market by September 1, 2014, December 31, 2014, or December 31, 2015, as the case may be, and (ii) uniQure B.V. has not agreed in writing to pay the applicable “Cash-Out Amount” provided for in Article 4c of each of the Grant Letters in respect of options that will vest on the first vesting date following such applicable date, 4DMT shall have the right to terminate this Agreement by providing written notice thereof to uniQure within thirty (30) days following such applicable date, and any such termination shall be effective as of the thirtieth (30^th) day following such applicable date.

10.3 Effect of Termination

(a) If uniQure terminates this Agreement under Section 10.2(a) or Section 10.2(b):

(i) uniQure’s licenses pursuant to this Agreement shall continue; provided however that uniQure shall continue to fulfill uniQure’s payment obligations with respect to milestones and royalties under ARTICLE VI; and provided further that uniQure may reduce such payment obligations by the amount of monetary damage suffered by uniQure as a direct result of 4DMT’s Default, as determined (A) in a final decision of the arbitrators in accordance with Section 11.2 or, with respect to an Excluded Claim, a court of competent jurisdiction, which decision is not appealable or has not been appealed within the time allowed for appeal, or (B) by the Parties in a settlement agreement;

(ii) 4DMT shall, within [***] ([***]) days after the effective date of such termination, return or cause to be returned to uniQure, copies of all uniQure’s Confidential Information and uniQure Intellectual Property and all Materials provided by uniQure, except that 4DMT may retain one copy of uniQure’s Confidential Information solely for legal archive purposes and to exercise the licenses granted to 4DMT which survive termination of this Agreement;

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) For clarity, uniQure shall be released of its ongoing diligence obligations under Section 4.2 and uniQure and 4DMT shall be released of their disclosure and information exchange obligations under ARTICLE III and ARTICLE IV;

(iv) For clarity, the JRSC and its subcommittees shall not meet anymore;

(v) No further options under each Grant Letter shall vest from and after the effective date of such termination; and

(vi) If this Agreement is terminated pursuant to Section 10.2(a)(ii), uniQure shall continue to fund the FTEs included in the Research Plan pursuant to Section 6.2(b) for the [***] ([***]) months immediately following the effective date of such termination.

(b) Upon termination of this Agreement by uniQure under Section 10.2(c) or Section 10.2(d), or by 4DMT under Section 10.2(a), Section 10.2(b), or Section 10.2(e):

(i) For clarity, uniQure’s licenses pursuant to Section 5.1 and 4DMT’s exclusivity obligations pursuant to Section 5.6 shall terminate as of the effective date of such termination;

(ii) Effective as of the effective date of such termination, the license granted to 4DMT under Section 5.2(b) shall be automatically expanded to include the Selected Capsid Variants and all fields of use;

(iii) uniQure shall, within [***] ([***]) days after the effective date of such termination, return or cause to be returned to 4DMT, copies of all 4DMT’s Confidential Information and 4DMT Intellectual Property and all Materials provided by 4DMT; except that uniQure may retain one copy of the 4DMT Confidential Information solely for legal archive purposes;

(iv) 4DMT shall, within [***] ([***]) days after the effective date of such termination, return or cause to be returned to uniQure, copies of all uniQure’s Confidential Information and uniQure Intellectual Property and all Materials provided by uniQure, except that 4DMT may retain one copy of uniQure’s Confidential Information solely for legal archive purposes and to exercise the licenses granted to 4DMT which survive termination or are granted upon termination of this Agreement;

(v) For a period of [***] ([***]) months, if termination occurs after Regulatory Approval of Royalty Bearing Products, uniQure and its Affiliates shall be entitled to finish work in progress and to sell any of the Royalty Bearing Products remaining in inventory in accordance with the terms of this Agreement to the extent such Royalty Bearing Products were being sold in the Territory at the time of termination, provided that such sales shall be subject to the royalty and milestone provisions of this Agreement;

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(vi) If this Agreement is terminated pursuant to Section 10.2(c), (A) uniQure shall continue to fund the FTEs included in the Research Plan pursuant to Section 6.2(b) for the [***] ([***]) months immediately following the effective date of such termination, but in no event for less than [***] after the Effective Date, and (B) no further options under each Grant Letter shall vest from and after the date that [***] percent ([***]%) of all options under such Grant Letter have vested; and

(vii) If this Agreement is terminated pursuant to Section 10.2(e), uniQure shall continue to fund the FTEs included in the Research Plan pursuant to Section 6.2(b) for the [***] ([***]) months immediately following the effective date of such termination, but in no event for less than [***] after the Effective Date.

Notwithstanding the foregoing, if such termination is under Section 10.2(a) solely with respect to one or more given Indication(s), then uniQure’s licenses pursuant to Section 5.1 do not terminate but the Field is automatically narrowed to exclude the relevant Indication(s), and 4DMT’s exclusivity obligations pursuant to Section 5.6 terminate solely with respect to the relevant Indication(s); subsection (ii) shall not apply; the license granted to 4DMT under Section 5.2(b) shall be automatically expanded to include the relevant Indication(s) rather than all fields of use; and uniQure’s obligations under subsection (iii) shall be limited to copies of 4DMT’s Confidential Information and 4DMT Intellectual Property and Materials that relate solely to the relevant Indication(s).

10.4 Effect of Expiration or Termination; Survival.

(a) Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or termination. Any expiration or termination of this Agreement shall be without prejudice to the rights of either Party against the other accrued or accruing under this Agreement prior to expiration or termination, including the obligation to pay royalties for Royalty Bearing Product(s) sold prior to such expiration or termination. Termination of this Agreement shall be in addition to, and shall not prejudice, the Parties’ remedies at law or in equity, including the Parties’ ability to receive legal damages or equitable relief with respect to any breach of this Agreement, regardless of whether or not such breach was the reason for the termination.

(b) The provisions of ARTICLE I, ARTICLE VII, ARTICLE VIII, ARTICLE XI, ARTICLE XII, and Sections 4.5, 5.2(b), 5.4, 5.5, 6.2(c), 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 10.3 and 10.4 shall survive any expiration or termination of this Agreement, and with respect to those Royalty Bearing Products in such countries for which uniQure retains a Development and Commercialization license after the expiration or termination of this Agreement, the provisions of ARTICLE VI shall also survive.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

ARTICLE XI

DISPUTE RESOLUTION

11.1 Seeking Consensus. If any dispute arises out of, in connection with or related to this Agreement, including disputes over the interpretation, performance, enforcement or breach of this Agreement, including any dispute that is not within the jurisdiction of the JRSC, (a “Dispute”), excluding any dispute resolved in accordance with Section 2.5(c) (subject to Section 2.5(d)), then upon the written request of either Party, the matter shall be referred to the Executives, who shall meet in a good faith effort to resolve the dispute within [***] ([***]) days. If the Parties’ Executives cannot agree on a resolution of the Dispute within such [***] ([***]) day period, then it shall be resolved pursuant to the remaining provisions of this ARTICLE XI.

11.2 Arbitration. If the Parties do not fully settle a Dispute pursuant to Section 2.5 (only as to those matters that may be referred to arbitration) or 11.1, as applicable, and a Party wishes to pursue the matter, each such Dispute that is not an Excluded Claim (as defined below) shall be finally resolved by binding arbitration in accordance with the Rules of Arbitration of the ICC (International Chamber of Commerce) and judgment on the arbitration award may be entered in any court having jurisdiction thereof.

(a) The arbitration shall be conducted by a panel of three (3) persons. Within [***] ([***]) days after initiation of arbitration, each Party shall select one person to act as arbitrator and the two Party-selected arbitrators shall select a third arbitrator within [***] ([***]) days after their appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be appointed by the ICC. The place of arbitration shall be New York City, New York, and all proceedings and communications shall be in English.

(b) Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award is rendered or the Dispute is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of that Party pending the arbitration award. The scope of the authority of the arbitrators shall be limited to the strict application of law. The arbitrators shall have no authority to award punitive or any other type of damages not measured by a Party’s compensatory damages, except as permitted by Section 9.10. Each Party participating in an arbitration pursuant to the terms of this Agreement shall, [***]. The arbitrators shall have the power to award recovery of all costs (including reasonable attorney’s fees, administrative fees, arbitrators’ fees and court costs) to the prevailing Party.

(c) Neither Party shall be required to give general discovery of documents, but may be required to produce documents or testimony that are relevant or considered relevant by the arbitrators to the Dispute. It is the objective and intent of the Parties that any arbitration proceeding be conducted in such a manner that a decision will be rendered by the arbitrators within [***] ([***]) days after the third arbitrator is appointed to the panel, and the Parties and the panel selected in the manner provided above will adopt rules and procedures intended to implement such objective and intent.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(d) Except to the extent necessary to confirm or vacate an award or as may be required by Law (including applicable securities laws or the rules of any stock exchange on which a Party’s securities may then be listed), neither a Party nor an arbitrator may disclose the existence, content, or results of arbitration without the prior written consent of both Parties. In no event shall arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the dispute, controversy or claim would be barred by the applicable New York statute of limitations.

(e) The Parties agree that any payment made pursuant to this Agreement pending resolution of the Dispute shall be refunded or credited if the arbitrators or court determines that such payments are not due.

As used in this Section 11.2, the term “Excluded Claim” shall mean a Dispute that concerns (a) the validity, enforceability, scope or infringement of a patent, trademark or copyright; or (b) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory.

ARTICLE XII

MISCELLANEOUS

12.1 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York, other than any principle of conflict or choice of laws that would cause the application of the Laws of any other jurisdiction.

12.2 Waiver. Waiver by a Party of a breach hereunder by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provision. No delay or omission by a Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder shall operate as a waiver of any right, power or privilege by such Party. No waiver shall be effective unless made in writing with specific reference to the relevant provision(s) of this Agreement and signed by a duly authorized representative of the Party granting the waiver.

12.3 Notices. All notices, instructions and other communications hereunder or in connection herewith shall be in writing, shall be sent to the address specified in this Section 12.3 and shall be: (a) delivered personally; (b) transmitted by facsimile; (c) sent by registered or certified mail, return receipt requested, postage prepaid; or (d) sent via a reputable international overnight delivery service. Any such notice, instruction or communication shall be deemed to have been delivered (i) upon receipt if delivered by hand, (ii) when transmitted with electronic confirmation of receipt, if transmitted by facsimile (if such transmission is on a Business Day; otherwise, on the next Business Day following such transmission), provided that an original document is sent via an internationally recognized overnight delivery service (receipt requested), (iii) three (3) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) Business Day after it is sent via a reputable international overnight delivery service.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

If to 4DMT, to:		4D Molecular Therapeutics, Inc. 5858 Horton St. Emerystation North, Suite 460, Emeryville, CA 94608 Facsimile: (650) 463-2600
with a copy to:		Latham & Watkins LLP 140 Scott Drive Menlo Park, CA 94025 Attention: Alan Mendelson and Judith Hasko Facsimile: (650) 463-2600   And   [***]
If to uniQure, to:		uniQure biopharma B.V. P.O. Box 22506 1100 DA Amsterdam The Netherlands Attention: CEO Facsimile: +31 20 566 9272
with a copy to:		[***]

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith.

12.4 Entire Agreement; Amendment. This Agreement (including its Exhibits and Schedules) contains the complete understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings and writings relating to such subject matter. In particular, it supersedes and replaces the Prior Confidentiality Agreement and any and all term sheets relating to the transactions contemplated by this Agreement and exchanged between the Parties or their Affiliates prior to the Effective Date. No amendment, change or addition to this Agreement will be effective or binding on either Party unless reduced to writing and duly executed on behalf of both Parties.

12.5 Headings. Headings in this Agreement are for convenience of reference only and shall not be considered in construing this Agreement.

12.6 Severability. If any provision or portion thereof in this Agreement is for any reason held to be invalid, illegal or unenforceable, the same shall not affect any other portion of this Agreement, as it is the intent of the Parties that this Agreement shall be construed in such fashion as to maintain its existence, validity and enforceability to the greatest extent possible. In any such event, this Agreement shall be construed as if such clause of portion thereof had never been contained in this Agreement, and there shall be deemed substituted therefor such provision as will most nearly carry out the intent of the Parties as expressed in this Agreement to the fullest extent permitted by applicable Law.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

12.7 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned or otherwise transferred by any Party without the consent of the other Party; provided, however, that any Party may, without such consent, assign this Agreement, in whole or in part: (a) to any of its respective Affiliates; provided that the assigning Party shall remain jointly and severally liable with such Affiliate in respect of all obligations so assigned, or (b) to any successor in interest by way of merger, acquisition or sale of all or substantially all of its assets to which this Agreement relates (an “M&A Event”). Any assignment not in accordance with this Section 12.7 shall be void. Each Party agrees that, notwithstanding any provision of this Agreement to the contrary, neither the assignment of this Agreement by a Party in connection with an M&A Event, nor the occurrence of such M&A Event (whether or not a formal assignment of this Agreement occurs), shall provide the non-assigning Party with rights or access to any intellectual property or technology of the acquirer of the assigning Party or its Affiliates that were not Affiliates of the assigning Party prior to such M&A Event. If uniQure assigns its rights and obligations hereunder to an Affiliate or Third Party outside the United States or The Netherlands pursuant to this Section 12.7, and if such Affiliate or Third Party shall be required by applicable Law to withhold additional taxes from or in respect of any amount payable under this Agreement as a result of such assignment, then any such amount payable under this Agreement shall be increased to take into account the additional taxes withheld as may be necessary so that, after making all required withholdings, 4DMT receives an amount equal to the sum it would have received had no such assignment been made.

12.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission or in Adobe Portable Document Format (PDF) sent by electronic mail shall be deemed to be original signatures.

12.9 Force Majeure. No Party shall be liable for failure of or delay in performing obligations (other than payment obligations) set forth in this Agreement, and no Party shall be deemed in breach of its obligations, if such failure or delay is due to a natural disaster, explosion, fire, flood, tornado, thunderstorm, hurricane, earthquake, war, terrorism, riot, embargo, loss or shortage of power, labor stoppage, substance or material shortage, events caused by reason of laws of any Governmental Authority, events caused by acts or omissions of a Third Party or any other cause reasonably beyond the control of such Party, if the Party affected gives prompt notice of any such cause to the other Party. The Party giving such notice shall thereupon be excused from such of its obligations hereunder as it is thereby disabled from performing for so long as it is so disabled, provided, however, that such affected Party commences and continues to use its Commercially Reasonable Efforts to cure such cause.

12.10 Third Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or enforceable by any Third Party, other than a 4DMT Indemnitee under Section 9.5 or uniQure Indemnitee under Section 9.6. No such Third Party shall obtain any right under any provision of this Agreement or shall by reason of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either Party.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

12.11 Relationship of the Parties. Each Party shall bear its own costs incurred in the performance of its obligations hereunder without charge or expense to the other, except as expressly provided in this Agreement. Neither Party shall have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee compensation or benefits of the other Party’s employees. No employee or representative of a Party shall have any authority to bind or obligate the other Party for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said other Party’s approval. For all purposes, and notwithstanding any other provision of this Agreement to the contrary, the legal relationship under this Agreement of each Party to the other Party shall be that of independent contractor. Nothing in this Agreement shall be construed to establish a relationship of partners or joint ventures between the Parties.

12.12 Performance by Affiliates. To the extent that this Agreement imposes obligations on Affiliates of a Party or permits a Party to exercise its rights or perform its obligations through its Affiliates, such Party agrees to cause its Affiliates to perform such obligations and shall guarantee performance of this Agreement by its Affiliates. If any disagreement arises out of the performance of this Agreement by an Affiliate of a Party, or the alleged failure of an Affiliate to comply with the conditions and obligations of this Agreement, the Party seeking to resolve such dispute shall have the right do so directly with the other Party, without any obligation to first pursue an action against, or recovery from, the Affiliate which is alleged to have caused a breach of this Agreement.

12.13 Construction. Each Party acknowledges that it has been advised by counsel during the course of negotiation of this Agreement, and, therefore, that this Agreement shall be interpreted without regard to any presumption or rule requiring construction against the Party causing this Agreement to be drafted. Any reference in this Agreement to an ARTICLE, Section, subsection, paragraph, clause, or Schedule shall be deemed to be a reference to any article, section, subsection, paragraph, clause, schedule or exhibit, of or to, as the case may be, this Agreement. Except where the context otherwise requires, (a) wherever used, the use of any gender will be applicable to all genders; (b) the word “or” is used in the inclusive sense (and/or); (c) any definition of or reference to any agreement, instrument or other document refers to such agreement, instrument other document as from time to time amended, supplemented or otherwise modified (subject to any restriction on such amendments, supplements or modifications set forth herein or therein); (d) any reference to any Law refers to such Law as from time to time enacted, repealed or amended; (e) the words “herein”, “hereof” and hereunder”, and words of similar import, refer to this Agreement in its entirety and not to any particular provision hereof; and (f) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “but not limited to”, “without limitation” or words of similar import.

[Signature page follows]

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

IN WITNESS WHEREOF, the Parties have executed this Amended and Restated Collaboration and License Agreement as of the Amended CLA Effective Date.

 

UNIQURE BIOPHARMA B.V.   BY: /s/ Lilly Burggraaf                                                              NAME: Lilly Burggraaf TITLE: Vice President, Global Human Resources				4D MOLECULAR THERAPEUTICS, INC.   BY: /s/ David Kirn                                                          NAME: David Kirn, MD TITLE: Chief Executive Officer

List of Schedules

 

Exhibit A

Commitment Letter from uniQure B.V.

Schedule 1.5

4DMT Patent Rights

Schedule 1.41

Outline of Budget for Research Plan

Schedule 1.54

Draft Invoice

Schedule 1.76

Outline of Research Plan

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Exhibit A

COMMITMENT LETTER FROM UNIQURE B.V.

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Schedule 1.5

4DMT PATENT RIGHTS

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Schedule 1.41

OUTLINE OF BUDGET FOR RESEARCH PLAN

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Schedule 1.54

DRAFT INVOICE

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Schedule 1.76

OUTLINE OF RESEARCH PLAN

Omitted pursuant to Regulation S-K, Item 601(a)(5).

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

SCHEDULE 1.83

SELECTED CAPSID VARIANTS

Omitted pursuant to Regulation S-K, Item 601(a)(5).

Exhibit 10.7

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

Execution Copy

8-6-2019

CONFIDENTIAL

COLLABORATION AND LICENSE AGREEMENT

BY AND BETWEEN

4D MOLECULAR THERAPEUTICS, INC

AND

UNIQURE BIOPHARMA B.V.

August 6, 2019

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

COLLABORATION AND LICENSE AGREEMENT

This Collaboration and License Agreement (this “Agreement” or “New CLA”) is entered into and made effective on August 6, 2019 (the “New CLA Effective Date”), by and between 4D Molecular Therapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware and having a principal office located at 5858 Horton St, Emerystation North, Suite 460, Emeryville, CA 94608 (“4DMT”), and uniQure biopharma B.V., a corporation organized and existing under the laws of The Netherlands and having a principal office located at Paasheuvelweg 25a, 1105 BP Amsterdam, The Netherlands (“uniQure”).

INTRODUCTION

1. 4DMT is a biopharmaceutical company focused on research, development, manufacturing and marketing of novel adeno-associated viral vectors for delivery of nucleic acids to target cells and gene therapy biopharmaceutical products based thereon.

2. uniQure is a biopharmaceutical company focused on the research, development, manufacturing and marketing of gene therapy based biopharmaceutical products.

3. 4DMT and uniQure desire for 4DMT to conduct a new research program to identify improved AAV Capsid Variants (as defined below) for delivery to liver (in the case of some such AAV Capsid Variants) or the central nervous system (in the case of others).

4. 4DMT and uniQure have previously entered into a Collaboration and License Agreement effective on January 17th, 2014, (the “Original CLA”) pursuant to which, 4DMT and uniQure had a collaboration for the identification of novel AAV Capsid Variants for development and commercialization as therapeutic products in the Field (defined below), and the Parties are, concurrent with the execution of this Agreement, amending and restating the Original CLA in its entirety by entering into an Amended and Restated Collaboration and License Agreement, effective of even date herewith (the “Amended and Restated CLA”), and, through the execution of this Agreement and the Amended and Restated CLA, the Parties have resolved the matters that were referred to and described in correspondence between the Parties dated February 28, 2019 with respect to the Original CLA.

5. uniQure desires to receive from 4DMT exclusive rights under 4DMT’s intellectual property rights to research (subject to 4DMT’s retained rights to conduct research), develop, manufacture and commercialize certain gene therapy Products based on use of New Capsid Variants (defined below) to deliver Transgenes (defined below) based on Restricted Targets (defined below) in the Field pursuant to this Agreement, and subject to 4DMT’s Step-In Rights (defined below).

6. 4DMT desires to retain non-exclusive rights to, exclude from the exclusive grant described above the non-exclusive rights to, and/or receive from uniQure non-exclusive rights under uniQure’s intellectual property rights to, research, develop, manufacture and commercialize certain gene therapy products based on use of New Capsid Variants to deliver Transgenes based on Restricted Targets within and outside of the Field, in accordance with 4DMT’s Step-In Rights pursuant to this Agreement.

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7. uniQure also desires to receive from 4DMT non-exclusive rights under 4DMT’s intellectual property rights to research, develop, manufacture and commercialize certain gene therapy products based on use of New Capsid Variants to deliver Transgenes based on targets other than Restricted Targets (Non-Restricted Targets, more particularly defined below), in accordance with uniQure’s Step-In Rights pursuant to this Agreement.

8. 4DMT would retain all other rights to New Capsid Variants (e.g., rights to New Capsid Variants outside the Field and related to Non-Restricted Targets), subject to uniQure’s Step-In Rights for Non-Restricted Targets and information rights as described herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, 4DMT and uniQure agree as follows effective as of the Effective Date:

ARTICLE I

DEFINITIONS

Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:

1.1 “4DMT AAV Capsid Variant”. 4DMT AAV Capsid Variant means any AAV Capsid Variant that does not carry a Gene Therapy Construct contained in a Royalty Bearing Construct or Royalty Bearing Product.

1.2 “4DMT AAV Capsid Variant Library”. 4DMT AAV Capsid Variant Library means any AAV Capsid Variant Library constructed by or licensed to 4DMT, including all AAV Capsid Variant Libraries provided to 4DMT pursuant to the UCB Agreements.

1.3 “4DMT Intellectual Property”. 4DMT Intellectual Property means the 4DMT Know-How and the 4DMT Patent Rights.

1.4 “4DMT Know-How”. 4DMT Know-How means Know-How that is (a) Controlled by 4DMT or its Affiliates as of the Effective Date or during the Research Term, and (b) necessary or useful to conduct the Research Program or to research, Develop, make and have made, use or Commercialize any New Capsid Variant, or a Royalty Bearing Construct or Royalty Bearing Product due to the presence of such New Capsid Variant therein. 4DMT Know-How includes Core 4DMT Know-How but does not include Joint Know-How.

1.5 “4DMT Patent Right”. 4DMT Patent Right means any Patent Right Controlled by 4DMT or its Affiliates as of the Effective Date or during the Term that Covers 4DMT Know-How. 4DMT Patent Rights include Core 4DMT Patent Rights but do not include Joint Patent Rights.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.6 “4DMT Product”. 4DMT Product means a Royalty Bearing Product that (a) delivers a Transgene that Affects a Non-Restricted Target (or variant of a Non-Restricted Target), or (b) that delivers a Transgene that Affects a Restricted Target (or variant of a Restricted Target), and, in the case of (b) (but to avoid doubt, this is not required for (a)), 4DMT has obtained non-exclusive rights to Develop and Commercialize such Royalty-Bearing Product pursuant to the exercise of its Step-In Rights in Section 4.4. Notwithstanding anything express or implied, no 4DMT Product shall deliver a Transgene that relates to any Restricted Target for which 4DMT has not obtained rights to deliver as part of a Royalty-Bearing Product pursuant to the exercise of its Step-In Rights under Section 4.4.

1.7 “4D Product Patent”. 4D Product Patent means any Product Patent upon which 4DMT’s or its Affiliates’ personnel are properly named inventors (as determined under U.S. patent law) and uniQure’s and its Affiliates’ are not.

1.8 “AAV”. AAV means adeno-associated virus.

1.9 “AAV Capsid Variant”. AAV Capsid Variant means an AAV capsid that is modified as compared to the wild type sequence.

1.10 “AAV Capsid Variant Library”. AAV Capsid Variant Library means a collection of variant AAV capsid open reading frames inserted into an AAV genome in a manner that renders such variants genome replication-competent with the appropriate helper virus functions and capable of being selected and evolved to optimize their ability to deliver nucleic acid sequences to human or animal cells.

1.11 “Accounting Standards”. Accounting Standards means, with respect to uniQure and its Affiliates, International Financial Reporting Standards (“IFRS”) or, to the extent applicable, generally accepted accounting principles as practiced in the United States (“GAAP”), and with respect to 4DMT and its Affiliates, GAAP, in each case as they exist from time to time, consistently applied.

1.12 “Affects”. Affects, with respect to a Transgene and a Target, means that the Transgene (a) encodes such Target or a variant of such Target, (b) knocks down the mRNA corresponding to such Target or a variant of such Target, (c) encodes an antibody or other protein that specifically binds the protein encoded by such Target, or (d) otherwise directly affects such Target (e.g., via gene editing) or the protein that such Target encodes.

1.13 “Affiliate”. Affiliate means, with respect to a Party, any entity that directly or indirectly controls, is controlled by, or is under common control with such Party. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership of voting securities, by contract or otherwise. For purposes of this definition, “control” shall be presumed to exist if one of the following conditions are met: (a) in the case of corporate entities, direct or indirect ownership of more than fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of more than fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities.

1.14 “Animal POC”. Animal POC means demonstration of gene expression and/or gene function of a Transgene cassette for a Target, in an animal model or patient-derived cells; provided that such demonstration shall be in an established, relevant animal model of a disease, if available.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.15 “Business Day”. Business Day means a day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York, USA or Amsterdam, The Netherlands are authorized by Law to remain closed.

1.16 “Calendar Quarter”. Calendar Quarter means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31; provided, however, that the first Calendar Quarter hereunder shall commence on the Effective Date and the final Calendar Quarter hereunder shall end on the effective date of termination or expiration of this Agreement.

1.17 “Calendar Year”. Calendar Year means each successive period of twelve (12) months commencing on January 1 and ending on December 31; provided, however, that the first Calendar Year hereunder shall commence on the Effective Date and the final Calendar Quarter hereunder shall end on the effective date of termination or expiration of this Agreement

1.18 “CEO”. CEO means the Chief Executive Officer of a Party or, if there is no Chief Executive Officer of a Party, the Board Chairperson or senior-most executive officer or equivalent of such Party.

1.19 “CNS”. CNS means the central nervous system. [***]

1.20 “CNS Term”. The CNS Term means the period beginning on the New CLA Effective Date and ending on the later of (a) [***] ([***]) years from the date of initiation of work under the Research Plan for CNS, and (b) the date on which 4DMT delivers [***] ([***]) (i.e., when it has delivered [***]) New CNS Variants to uniQure with the Vector Characterization Data with respect to each of such [***] ([***]) New CNS Variants that the Research Plan for CNS requires 4DMT to provide. It is understood that the Selection Processes giving rise to such New CNS Variants shall be the Selection Processes directed at identifying CNS-targeted variants as defined and called for in the Research Plan, or, if such Selection Processes do not yield [***] ([***]) New CNS Variants meeting the Delivery Success Criteria (that can then proceed into the studies that generate Vector Characterization Data in accordance with the Research Plan for CNS), then Selection Processes for CNS-targeted AAV Capsid Variants that 4DMT conducts in addition or as follow-ups to (but in each case not in replacement or in lieu of) such CNS-directed Selection Processes called for in the Research Plan, and in any event meeting the requirements of Section 3.1. If 4DMT conducts such in-addition-to and/or follow-up CNS-directed Selection Processes, then the Vector Characterization Data that 4DMT would have to report to uniQure in order for the applicable New CNS Variants to count as one of the [***] ([***]) New CNS Variants of clause (b) of the first sentence of this definition, shall be equivalent to the Vector Characterization Data that 4DMT is required to report to uniQure under the Research Plan with respect to the New CNS Variants that it delivers thereunder. uniQure’s information and input rights as to any such additional Selection Processes that 4DMT may choose to conduct are as provided for in Section 3.1.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.21 “Commercially Reasonable Efforts”. Commercially Reasonable Efforts means, with respect to a Party, the efforts required in order to carry out a task in a diligent and sustained manner without undue interruption or delay, which level is at least commensurate with the level of effort that a similarly situated Third Party would devote to a product of similar market potential and having similar commercial and scientific advantages and disadvantages resulting from its own research efforts or to which it has rights, taking into account its safety and efficacy, regulatory status, the competitiveness of the marketplace, its proprietary position, pricing, reimbursement, launching strategy and other market-specific factors, and all other relevant factors.

1.22 “Commercialization” or “Commercialize”. Commercialization or Commercialize means any activity directed to obtaining pricing or reimbursement approvals, marketing, promoting, distributing, importing, exporting, offering to sell or selling a product, or to have any such activity performed. When used as a verb, “Commercialize” means to engage in Commercialization.

1.23 “Construct”. Construct means an AAV Capsid Variant carrying and comprising a Gene Therapy Construct.

1.24 “Confidential Information”. Confidential Information means any and all information and data, including all uniQure Know-How, 4DMT Know-How and Joint Know-How, and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data, whether communicated in writing or orally or by any other method, which is provided by one Party to the other Party in connection with this Agreement or the Prior Confidentiality Agreement. All Core uniQure Know-How shall be considered the Confidential Information of uniQure, with respect to which: (a) uniQure shall be considered the disclosing Party, (b) 4DMT shall be considered the receiving Party, and (c) clauses (b) and (e) of Section 8.2 shall not apply. All Core 4DMT Know-How shall be considered the Confidential Information of 4DMT, with respect to which: (i) 4DMT shall be considered the disclosing Party, (ii) uniQure shall be considered the receiving Party, and (iii) clauses (b) and (e) of Section 8.2 shall not apply.

1.25 “Control”. Control means, with respect to any item of or right under Patent Rights or Know-How, the possession (whether by ownership or license, other than a license pursuant to this Agreement) of the ability of a Party or, as applicable, its Affiliate (subject to Section 12.7), to grant access to, or a license or sublicense of, such items or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing at the time such Party would be required hereunder to grant the other Party such access or license or sublicense.

1.26 “Core 4DMT Intellectual Property”. Core 4DMT Intellectual Property means Core 4DMT Know-How and Core 4DMT Patent Rights.

1.27 “Core 4DMT Know-How”. Core 4DMT Know-How means [***].

1.28 “Core 4DMT Patent Right”. Core 4DMT Patent Right means any Patent Right that Covers the Core 4DMT Know-How, including New Variant Patents.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.29 “Core uniQure Intellectual Property”. Core uniQure Intellectual Property means Core uniQure Know-How and Core uniQure Patent Rights.

1.30 “Core uniQure Know-How”. Core uniQure Know-How means [***].

1.31 “Core uniQure Patent Right”. Core uniQure Patent Right means any Patent Right that Covers the Core uniQure Know-How. For clarity, Core uniQure Patent Rights excludes New Variant Patents.

1.32 “Cover”, “Covering” or “Covered”. Cover, Covering or Covered means, with respect to a product, technology, process or method that, in the absence of ownership of or a license granted under a Valid Claim, the manufacture, use, offer for sale, sale or importation of such product or the practice of such technology, process or method would infringe such Valid Claim (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if it were to issue). With respect to a composition, “Coverage” exists if the applicable Valid Claim claims such composition, its method of manufacture, or its methods of use.

1.33 “Default”. Default means with respect to a Party that (a) any representation or warranty of such Party set forth herein shall have been untrue in any material respect when made or (b) such Party shall have failed to perform any material obligation set forth in this Agreement.

1.34 “Delivery Success Criteria”. Delivery Success Criteria means the following criteria that determines whether a given AAV Capsid Variant demonstrates superior delivery to the CNS or liver for introduction into those additional validation and characterization studies that are defined in the applicable Research Plan: [***].

1.35 “Development” or “Develop”. Development or Develop means pre-clinical and clinical drug development activities, including: test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, development-stage manufacturing, quality assurance/quality control procedure development and performance with respect to clinical materials, statistical analysis and report writing and clinical studies, regulatory affairs, and all other pre-Regulatory Approval activities. When used as a verb, “Develop” means to engage in Development.

1.36 “EMA”. EMA means the European Medicines Agency, or any successor agency.

1.37 “European Union” or “EU”. European Union or EU means the countries that are members of the European Union, as redefined from time to time.

1.38 “FDA” or “Food and Drug Administration”. FDA or Food and Drug Administration means the United States Food and Drug Administration, or any successor agency.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.39 “Field”. Field means the delivery of Gene Therapy Constructs to cells in (a) the CNS or (b) the liver, in each case where such delivery is for the purpose of effecting expression of the applicable RNA or amino acid sequence in the targeted cells and is potentially useful for the diagnosis, treatment, cure, palliation or prevention of a disease or medical condition in humans or animals, irrespective of the administration site or mode of administration (e.g., intravenous, direct injection, subcutaneous or intrathecal) of the Construct used to effect delivery. For clarity, intravenous or intrathecal administration of any Construct targeted to cells in other organs (i.e., not specifically targeted to liver or CNS tissues), including for treatment of neoplastic and eye disorders, are excluded from the Field.

1.40 “First Commercial Sale”. First Commercial Sale means, with respect to any Royalty Bearing Product and a country, the first sale for end use or consumption of such Royalty Bearing Product in such country after all required approvals, including Regulatory Approval, have been granted by the Regulatory Authority of such country. For clarity, sales for test marketing, sampling and promotional uses, clinical trials purposes or compassionate use shall not constitute a First Commercial Sale.

1.41 “Gene Therapy Construct”. Gene Therapy Construct means any Transgene that is packaged into an AAV Capsid Variant to form a Construct, and is intended to be delivered to a targeted tissue to treat, cure, prevent or ameliorate a disease or condition of the CNS or liver by any gene therapy application or modality.

1.42 “Good Laboratory Practices”. Good Laboratory Practices means the then-current good laboratory practice standards promulgated or endorsed by the FDA, as defined in 21 C.F.R. Part 58 (or such other comparable regulatory standards in jurisdictions outside the U.S. to the extent applicable to the relevant study, as they may be updated from time to time).

1.43 “Governmental Authority”. Governmental Authority means any United States federal, state or local or any foreign government, or political subdivision thereof, or any multinational organization or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any governmental arbitrator or arbitral body.

1.44 “IGT”. IGT means Integrative Gene Therapeutics, Inc., a California corporation, which jointly owns with UC certain of the UC Patent Rights.

1.45 “Indication”. Indication means any disease, condition or syndrome.

1.46 “Invention”. Invention means any new and useful process, article of manufacture, Construct, composition of matter, formulation or apparatus, or any improvement thereof, discovery or finding, which is patentable.

1.47 “Invoice”. Invoice means an original invoice sent by 4DMT to uniQure with respect to any payment due hereunder substantially in the form attached hereto as Schedule 1.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.48 “Know-How”. Know-How means (a) any scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, that is not in the public domain, including databases, practices, methods, techniques, specifications, formulations, formulae, protein sequences, nucleic acid sequences, AAV Capsid Variants, AAV Capsid Variant Libraries, Gene Therapy Constructs, Constructs, knowledge, know-how, trade secrets, skill, experience, test data including pharmacological, medicinal chemistry, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data, stability data, studies and procedures, and manufacturing process and development information, results and data, and (b) any biological, chemical, or physical material or composition of matter that is not in the public domain or otherwise generally available to the public.

1.49 “Law”. Law means all laws, statutes, rules, codes, regulations, orders, judgments or ordinances applicable to a Party, this Agreement or the activities contemplated hereunder.

1.50 “Licensed IP”. Licensed IP means the 4DMT Intellectual Property, the Joint Intellectual Property, and the Intellectual Property licensed by uniQure to 4DMT pursuant to Section 5.2.

1.51 “Liver Term”. The Liver Term means the period beginning on the New CLA Effective Date and ending on the later of (a) [***] ([***]) years from the date of initiation of work under the Research Plan for Liver, and (b) the date on which 4DMT delivers [***] ([***]) (i.e., when it has delivered [***]) New Liver Variants to uniQure with the Vector Characterization Data with respect to each of such [***] ([***]) New Liver Variants that the Research Plan for Liver requires 4DMT to provide. It is understood that the Selection Processes giving rise to such New Liver Variants shall be the Selection Processes directed at identifying liver -targeted variants as defined and called for in the Research Plan, or, if such Selection Processes do not yield [***] ([***]) New Liver Variants meeting the Delivery Success Criteria (that can then proceed into the studies that generate Vector Characterization Data in accordance with the Research Plan for Liver), then Selection Processes for liver-targeted AAV Capsid Variants that 4DMT conducts in addition or as follow-ups to (but in each case not in replacement or in lieu of) such liver-directed Selection Processes called for in the Research Plan, and in any event meeting the requirements of Section 3.1. If 4DMT conducts such in-addition-to and/or follow-up liver -directed Selection Processes, then the Vector Characterization Data that 4DMT would have to report to uniQure in order for the applicable New Liver Variants to count as one of the [***] ([***]) New Liver Variants of clause (b) of the first sentence of this definition, shall be equivalent to the Vector Characterization Data that 4DMT is required to report to uniQure under the Research Plan with respect to the New Liver Variants that it delivers thereunder. uniQure’s information and input rights as to any such additional Selection Processes that 4DMT may choose to conduct are as provided for in Section 3.1.

1.52 “Materials”. Materials means any tangible chemical or biological research materials that are provided or otherwise made available by one Party to the other Party under the terms of Section 3.3 for use in performance of the Research Program; provided, however, that Materials will not include any AAV Capsid Variant Libraries.

1.53 “NDA”. NDA means a New Drug Application or Biologics License Application filed with the FDA or any other application required for the purpose of marketing or selling or commercially using a therapeutic or prophylactic product to be filed with a Regulatory Authority in a non-U.S. country or group of countries, including a Product License Application or Marketing Authorization Application (“MAA”) in the European Union or Japan.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.54 “Net Sales”. Net Sales means, with respect to a Royalty Bearing Product (either a uniQure Product or a 4DMT Product, as applicable), the gross amount of sales of such Royalty Bearing Product invoiced by a Party or its Affiliates to Third Parties, less the following to the extent related to such Royalty Bearing Product and incurred by such Party or its Affiliates and invoiced to the Third Party:

(a) sales returns and allowances actually paid, granted or accrued, including trade, quantity and cash discounts and any other adjustments, including those granted on account of price adjustments or billing errors;

(b) rejected goods, damaged or defective goods, recalls, returns;

(c) rebates, chargeback rebates, compulsory rebates, reimbursements or similar payments granted or given to wholesalers or other distributors, buying groups or health care insurance carriers;

(d) non-collectable receivables;

(e) customs or excise duties, sales tax, consumption tax, value added tax, and other taxes (except income taxes); or

(f) charges for packing, freight, shipping and insurance.

Each of the foregoing deductions shall be determined as incurred in the ordinary course of business in type and amount consistent with good industry practice and in accordance with Accounting Standards on a basis consistent with such Party’s audited consolidated financial statements. For clarity, sales by uniQure or its Affiliates of a Royalty Bearing Product to a Third Party Distributor of such Royalty Bearing Product in a given country shall be considered a sale to a Third Party customer. All such discounts, allowances, credits, rebates, and other deductions shall be fairly and equitably allocated to the Royalty Bearing Products and other products of uniQure and its Affiliates such that the Royalty Bearing Product does not bear a disproportionate portion of such deductions.

In the event any Royalty Bearing Product is sold for consideration other than cash, Net Sales for such sale shall be the average price of such Royalty Bearing Product sold for cash during the relevant period in the relevant country.

In the event that any discount, reduction, payment or rebate is offered for a Royalty Bearing Product where such Royalty Bearing Product is sold to a Third Party customer as part of a grouped set of products, the applicable discount, reduction, payment or rebate for such Royalty Bearing Product in such arrangement shall be based on the weighted average discount, reduction, payment or rebate of such grouped set of products.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Any Royalty Bearing Products used for promotional or advertising purposes (in reasonable and customary amounts) or used for Clinical Trials or other research purposes shall not be included in Net Sales. Donations for charity reasons or compassionate use shall also not be included in Net Sales.

1.55 “New Capsid Variant(s)”. New Capsid Variant means any New CNS Variant or New Liver Variant.

1.56 “New CNS Variant(s)”. New CNS Variant means any AAV Capsid Variant identified by 4DMT or its Affiliate, or any Third Party pursuant to rights granted by 4DMT or its Affiliate, during the CNS Term in a Selection Process designed to identify AAV Capsid Variants specifically targeting cells of the CNS, but excluding any such AAV Capsid Variants that are Selected Capsid Variants. An AAV Capsid Variant is “identified” in a Selection Process when it is sequenced. An AAV Capsid Variant does not need to satisfy (or necessarily have been tested against) the applicable Delivery Success Criteria to qualify as a New CNS Variant.

If data of the types listed in the definition of Vector Characterization Data that is generated by, for or under right from 4DMT demonstrate that an AAV Capsid Variant from any other Selection Process (i.e., one not under the Research Plan of this Agreement or one that was not designed to identify AAV Capsid Variants specifically targeting cells of the CNS) conducted by, for or under right from 4DMT during the CNS Term is improved or superior to the top [***] ([***]) New CNS Variants arising under the Research Program in the following ways, then 4DMT will share the Vector Characterization Data with uniQure:[***]

In that case, any such AAV Capsid Variant with respect to which 4DMT is required to share such data of the types listed in Vector Characterization Data demonstrating such improvement or superiority ((a) or (b) or (c)) shall be deemed a New CNS Variant, and such data shall be deemed Vector Characterization Data. It is understood that 4DMT is not under any obligation to generate such data (nor to have it generated for or under right from 4DMT), nor to perform any research or other activities not set forth in the Research Plan, but that, pursuant to the terms of this Agreement, uniQure may further investigate any such deemed New CNS Variants.

1.57 “New Liver Variant(s)”. New Liver Variant means any AAV Capsid Variant identified by 4DMT or its Affiliate, or any Third Party pursuant to rights granted by 4DMT or its Affiliate, during the Liver Term in a Selection Process designed to identify AAV Capsid Variants specifically targeting cells of the liver, but excluding any such AAV Capsid Variants that are Selected Capsid Variants. An AAV Capsid Variant is “identified” in a Selection Process when it is sequenced. An AAV Capsid Variant does not need to satisfy (or necessarily have been tested against) the applicable Delivery Success Criteria to qualify as a New Liver Variant.

If data of the types listed in the definition of Vector Characterization Data that is generated by, for or under right from 4DMT demonstrate that an AAV Capsid Variant from any other Selection Process (i.e., one not under the Research Plan of this Agreement or one that was not designed to identify AAV Capsid Variants specifically targeting cells of the liver) conducted by, for or under right from 4DMT during the Liver Term is improved or superior to the top [***] ([***]) New Liver Variants arising under the Research Program in the following ways, then 4DMT will share the Vector Characterization Data with uniQure:[***]

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

In that case, any such AAV Capsid Variant with respect to which 4DMT is required to share such data of the types listed in Vector Characterization Data demonstrating such improvement or superiority ((a) or (b) or (c)) shall be deemed a New Liver Variant, and such data shall be deemed Vector Characterization Data. It is understood that 4DMT is not under any obligation to generate such data (nor to have it generated for or under right from 4DMT), nor to perform any research or other activities not set forth in the Research Plan, but that, pursuant to the terms of this Agreement, uniQure may further investigate any such deemed New Liver Variants.

1.58 “New Variant Patent”. New Variant Patent means any Patent Right Covering one or more New Capsid Variants (for clarity, whether by their composition, method of use, or method of manufacture). It is understood that New Variant Patents (1) may include dependent claims directed to the combination of a New Capsid Variant and a Transgene and (2) do not include any Patent Rights claiming inventions that are conceived and reduced to practice solely by employees, agents and/or consultants of uniQure or its Affiliate independently and outside of the Research Program, without the use of information pertaining to a Selected Capsid Variant or New Capsid Variant sequence disclosed to uniQure under this Agreement or the Amended and Restated CLA.

1.59 “Non-Restricted Targets” means all Targets within the Field that are not Restricted Targets.

1.60 “Party” and “Parties”. Party means uniQure or 4DMT individually, and Parties means uniQure and 4DMT collectively.

1.61 “Patent Rights”. Patent Rights means patents, patent applications or provisional patent applications, utility models and utility model applications, petty patents, innovation patents, patents of addition, divisionals, continuations, continuation-in-part applications, continued prosecution applications, requests for continued examinations, reissues, renewals, reexaminations and extensions and supplementary protection certificates granted in relation thereto, in any country of the world. For clarity, Patent Rights shall include any Patent Right that claims priority to or common priority with such Patent Rights.

1.62 “Product”. Product means any preparation in final form, either for sale by prescription, over-the-counter or any other method, or for administration to human patients in clinical trials, for any and all uses, and in any and all formulations and combinations, which preparation contains a Construct.

1.63 “Product Patent”. Any Patent Right Covering an invention invented pursuant to the activities conducted under this Agreement, the independent claims of which Patent Right are specifically drawn to a Construct combining (i) a New Capsid Variant and (ii) the Gene Therapy Construct of a given Product, and that does not claim priority to any New Variant Patent.

1.64 “Prosecution and Maintenance”. Prosecution and Maintenance means, with respect to a Patent Right, the preparation, filing, prosecution and maintenance of such Patent Right, as well as reexaminations, reissues and the like with respect to such Patent Right, together with the conduct of interferences, the defense of oppositions and other similar proceedings with respect to the particular Patent Right; and “Prosecute and Maintain” shall have the correlative meaning.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.65 “Regulatory Authority”. Regulatory Authority means any applicable Governmental Authority involved in granting approvals for the manufacturing, marketing, reimbursement or pricing of a Royalty Bearing Product in the Territory or any portion thereof, including the FDA and EMA (as applicable), and any successor Governmental Authority having substantially the same function.

1.66 “Research Plan for CNS”. Research Plan for CNS means the research plan providing for one (1) or more Selection Processes intended to identify AAV Capsid Variants for delivery to the CNS, that is attached as Schedule 2.

1.67 “Research Plan for Liver”. Research Plan for Liver means the research plan providing for one (1) or more Selection Processes intended to identify AAV Capsid Variants for delivery to the liver, that is attached as Schedule 2.

1.68 “Research Program”. Research Program means, collectively, the program of research to be undertaken by 4DMT as described in the Research Plan for CNS and the Research Plan for Liver.

1.69 “Research Term”. Research Term means the period commencing on the New CLA Effective Date and ending on the date of expiration of the Liver Term or the CNS Term, whichever expires later.

1.70 “Research Year”. Research Year means a twelve (12) month period during the Research Term beginning on the Effective Date or on any anniversary thereof.

1.71 “Restricted Target(s)”, Restricted Target(s) means, the [***] ([***]) Targets to be selected by uniQure from within the Field, each of such [***] ([***]) Targets is to be selected by uniQure within the [***] ([***]) day period commencing on the New CLA Effective Date, and each of which must relate to a disease or condition of the CNS or the liver.

1.72 “Royalty Bearing Construct”. Royalty Bearing Construct means a Construct containing a New Capsid Variant and a Gene Therapy Construct that Affects a Restricted Target or a Non-Restricted Target (but not any Target that is not a Restricted Target or a Non-Restricted Target).

1.73 “Royalty Bearing Product”. Royalty Bearing Product means a Product containing a Royalty Bearing Construct.

1.74 “Royalty Term”. Royalty Term means, with respect to a Royalty Bearing Product, on a Royalty Bearing Product-by-Royalty Bearing Product and a country-by-country basis, the period beginning on the First Commercial Sale of such Royalty Bearing Product in such country by a Party or any of its Affiliates or Sublicensees, and ending on latest of: (a) the

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

expiration of the last Valid Claim within the Licensed IP Covering such Royalty Bearing Product in such country, (b) the expiration of any applicable exclusivity, including orphan drug status or data exclusivity, and any extension thereto, granted by a Regulatory Authority in such country with respect to such Royalty Bearing Product, or (c) the tenth (10^th) anniversary of the date of the First Commercial Sale by a Party or any of its Affiliates or Sublicensees of such Royalty Bearing Product in such country.

1.75 “Selected Capsid Variant”. Selected Capsid Variant means the AAV Capsid Variants listed in Schedule 3 to this Agreement.

1.76 “Selection Process”. Selection Process means the iterative evolution or isolation of lead AAV Capsid Variants from one or more AAV Capsid Variant Libraries in cells (cultured or primary) in vitro or in animals in vivo intended to result in the identification of AAV Capsid Variants demonstrating properties suitable to a specified target tissue. For clarity, a Selection Process can be one that is performed by 4DMT or its Affiliate either for itself or for, with or by any Third Party under rights granted by 4DMT to such Third Party, and need not be one that is conducted under the Research Program of this Agreement or designed for the same type of tissue in order to qualify under this definition. .

1.77 “Step-In Rights”. Step-In Rights means, on a AAV Capsid Variant-by-AAV Capsid Variant and Target-by-Target basis, the rights of uniQure or of 4DMT, respectively, to step-in and obtain non-exclusive license rights with respect to a New Capsid Variant for delivery of a Transgene that Affects a Non-Restricted Target (in the case of uniQure) or a Restricted Target (in the case of 4DMT), in each case pursuant to the provisions of Section 4.4.

1.78 “Sublicensee”. Sublicensee means, with respect to a Party, a Third Party to whom such Party (or its Affiliate or another of its Sublicensees) has granted a license or sublicense under the Licensed IP to Develop, make and have made, use or Commercialize a Royalty Bearing Product; provided, however, that a Sublicensee shall not include any Third Party Distributor.

1.79 “Target”. Target means the biological gene or genetic material of interest to affect a disease or condition of the CNS or liver.

1.80 “Territory”. Territory means all countries and territories in the world.

1.81 “Third Party”. Third Party means an entity other than uniQure, 4DMT and their respective Affiliates.

1.82 “Third Party Distributor”. Third Party Distributor means any Third Party that provides (but does not Develop) Royalty Bearing Products directly to customers under agreement with uniQure, its Affiliates or Sublicensees.

1.83 “Transgene”. Transgene means (a) a given nucleic acid sequence that encodes an RNA sequence, and (b) any functionally equivalent sequence variants of such given nucleic acid sequence, [***].

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.84 “UC AAV Capsid Variant”. UC AAV Capsid Variant means any AAV Capsid Variant provided to 4DMT pursuant to the UCB Agreements.

1.85 “UC Patent Right”. UC Patent Right means any Patent Right licensed to 4DMT pursuant to the UCB Agreements.

1.86 “UC Product”. UC Product means a Royalty Bearing Product that is Covered by a UC Patent Right.

1.87 “UCB Agreements”. UCB Agreements means (a) the Exclusive License and Bailment Agreement between 4DMT and the Regents of the University of California (“UC”), Agreement Control No. 2014-03-0089, dated December 19, 2013; (b) the Exclusive License and Bailment Agreement between 4DMT and UC, Agreement Control No. 2014-03-0090, dated December 19, 2013; and (c) the Agreement for Use of Certain Biological Materials between 4DMT and UC, Agreement Control No. 2014-30-0088, dated December 19, 2013, in each case in the form provided to uniQure by 4DMT as of the Effective Date.

1.88 “uniQure Intellectual Property”. uniQure Intellectual Property means uniQure Know-How and uniQure Patent Rights.

1.89 “uniQure Know-How”. uniQure Know-How means Know-How that is (a) Controlled by uniQure or its Affiliates as of the Effective Date or during the Research Term, and (b) necessary or useful to conduct the Research Program or to research, Develop, make and have made, use or Commercialize the relevant New Capsid Variant, or a Royalty Bearing Compound or Royalty Bearing Product due to the presence of such New Capsid Variant therein. uniQure Know-How includes Core uniQure Know-How but does not include Joint Know-How.

1.90 “uniQure Patent Right”. uniQure Patent Right means any Patent Right Controlled by uniQure or its Affiliates as of the Effective Date or during the Term that Covers uniQure Know-How. uniQure Patent Rights include Core uniQure Patent Rights but do not include Joint Patent Rights.

1.91 “uniQure Product”. uniQure Product means a Royalty Bearing Product that (a) delivers a Transgene that Affects a Restricted Target (or variant of a Restricted Target), or (b) that delivers a Transgene that Affects a Non-Restricted Target (or variant of a Non-Restricted Target), and in the case of (b) uniQure has obtained non-exclusive rights to Develop and Commercialize such Royalty-Bearing Product pursuant to the exercise of its Step-In Rights in Section 4.4. Notwithstanding anything express or implied, no uniQure Product shall deliver any Transgene that relates to any Non-Restricted Target for which uniQure has not obtained rights to deliver as part of a Royalty-Bearing Product pursuant to the exercise of its Step-In Rights under Section 4.4.

1.92 “uniQure Product Patent”. uniQure Product Patent means any Product Patent upon which uniQure’s or its Affiliates’ personnel are properly named inventors (as determined under U.S. patent law) and 4DMT and its Affiliates’ are not.

 

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1.93 “Valid Claim”. Valid Claim means (a) a claim of an issued patent that has not expired or been abandoned, or been revoked, held invalid or unenforceable by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period), or (b) a claim within a patent application which application has not been pending for more than [***] ([***]) years from the date of its priority filing date and which claim has not been irretrievably revoked, irretrievably cancelled, irretrievably withdrawn, held invalid or abandoned by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period), or finally determined to be unallowable in a decision from which an appeal cannot or can no longer be taken; provided, however, that with respect to the UC Patent Rights licensed under the Exclusive License and Bailment Agreement between 4DMT and UC, Agreement Control No. 2014-03-0089, the foregoing [***] ([***]) year limitation shall be extended to [***] ([***]) years.

“Vector Characterization Data” means any and all data, results and other Know-How that is generated either by or on behalf of a Party or its Affiliate, whether alone or together with, by or for any of its Third Party licensees, contractors or collaborators, with respect to any New Capsid Variant, in regards to any of the following with respect to such New Capsid Variant:[***]

1.94 Additional Definitions. Each of the following definitions is set forth in the section of this Agreement indicated below:

 

Definition:		Section:
4DMT		Preamble
4DMT Indemnitees		9.5
Additional Cure Period		10.2(a)
Agreement		Preamble
Audited Party		6.5
Auditing Party		6.5
Bankruptcy Code		5.4
CREATE Act		7.10
Damages		9.5
Defaulting Party		10.2(a)
Dispute		11.1
Effective Date		Preamble
Excluded Claim		11.2
Executives		2.3(b)
Fair Market Value		6.3(b)(iii)
GAAP		1.11
IFRS		1.11
Initiating Party		7.6(d)
Joint Counsel		7.5
Joint Intellectual Property		7.2(a)

 

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Definition:		Section:
Joint Know-How		7.2(a)
Joint Patent Rights		7.2(a)
JRSC		2.1(a)
M&A Event		12.7
MAA		1.53
Non-Defaulting Party		10.2(a)
Orange Book		7.9(a)
Paragraph IV Certification		7.9(b)
Paragraph IV Proceeding		7.9(b)(ii)
Records		3.5(a)(i)
SEC Filing		8.5(c)
Sublicense Consideration		6.3(b)
Sublicense Income Sharing Percentages		6.3(a)
Term		10.1
Third Party Claim		9.5
Trade Secret Election		7.3(b)
USPTO		7.10
UC		1.87
uniQure		Preamble
uniQure Indemnitees		9.6

ARTICLE II

GOVERNANCE

2.1 Joint Research Steering Committee.

(a) Composition. Promptly after the Effective Date, the Parties shall establish a joint research steering committee (the “JRSC”). The JRSC shall be comprised of at least [***] ([***]) named representatives of uniQure and at least [***] ([***]) named representatives of 4DMT, one of whom shall be David Schaffer (unless due to his death, illness or disability), or such other numbers as the Parties may agree in writing. As soon as practicable after the Effective Date (but in no event more than [***] ([***]) Business Days after the Effective Date), each Party shall designate by written notice to the other Party its initial representatives on the JRSC. Each Party may replace one or more of its non-mandatory representatives, in its sole discretion, effective upon written notice to the other Party of such change. These representatives shall have appropriate technical credentials, experience and knowledge, and ongoing familiarity with the Research Program. The JRSC shall be disbanded upon expiration of the Research Term.

(b) Function and Powers of the JRSC. During the Research Term, the JRSC’s responsibilities shall include: (i) providing a forum for discussion of the Research Plan for Liver and the Research Plan for CNS, the status of the Research Program, and relevant data (but not making any decisions with respect thereto, other than as provided in clause (iii) of this sentence

 

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or as provided in Section 2.6); (ii) serving as a forum for informal resolution of disagreements that may arise in the relation to the Parties’ activities under the Research Program (but not deciding any such disagreement); and (iii) amending the Research Plan for Liver and/or the Research Plan for CNS, solely in the circumstances described in and under the terms and conditions of Section 2.6.

2.2 Meetings. The JRSC shall each hold at least [***] per Calendar Quarter during the Research Term. Upon necessity, either Party shall be entitled to request additional meetings of the JRSC. Meetings of the JRSC shall be effective only if at least [***] ([***]) representatives of each Party are present or participating. The location of meetings shall be as agreed by the Parties, and may be held in person, alternating locations between the Parties, or by telephone conference call or by videoconference; provided, however, that at least [***] ([***]) meetings of the JRSC each Calendar Year are held in person. 4DMT’s costs and expenses incurred in connection with preparing for and participating in all such meetings shall be paid for by uniQure in accordance with the budget for the Research Plan for Liver or Research Plan for CNS, as applicable. Either Party may, from time to time, invite additional representatives or consultants to attend JRSC meetings; provided that at least [***] ([***]) Business Days’ prior written notice is given of a Party’s intention to invite such other representatives or consultants and providing full details about the name, employer and professional background of such other representatives or consultants. Each representative and consultant participating in or attending a JRSC meeting shall be bound by a written agreement with confidentiality obligations substantially the same as those set forth in ARTICLE VIII. The JRSC shall be co-chaired by a representative from each Party. The chairpersons shall set the agendas for the JRSC meeting in advance. Within ten (10) Business Days prior to each scheduled meeting, each Party shall, in accordance with Section 3.5(b), provide a report to the JRSC detailing its progress with respect to the Research Program. The Parties will rotate the responsibility for recording, preparing and issuing minutes for each JRSC meeting, to be circulated within [***] ([***]) Business Days after each meeting.

2.3 Decision-making.

(a) Initial Dispute Resolution Procedures. Subject to the provisions of this Section 2.3, actions to be taken by the JRSC shall be taken only following a unanimous vote, with each Party, through its representatives, having one (1) vote. Notwithstanding the foregoing, and subject to Section 2.6, in the circumstances described in such Section, [***] shall have the final say and final decision-making authority on any and all disputes pertaining to any amendments to the Research Plan for CNS or amendments to the Research Plan for Liver, and any such final decision by [***] on such matters shall not be subject to further review by referral to Executives or otherwise under this Section 2.3 or under any of the dispute resolution provisions of this Agreement.

(b) Referral of Unresolved Matters to Executives. If, in accordance with Section 2.3(a), the JRSC does not resolve any matter considered by it within [***] ([***]) Business Days after the matter is first considered by it, the matter may be referred by either Party to the CEO of 4DMT and CEO of uniQure (the “Executives”) to be resolved by negotiation in good faith as soon as practicable, but in no event later than [***] ([***]) Business Days after referral. Such resolution, if any, of a referred issue by the Executives shall be final and binding on the Parties. Any decision made by the Executives under this Section 2.3(b) shall be deemed a decision of the JRSC for purposes of this Agreement.

 

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(c) Final Decision-Making. If a dispute referred to the Executives pursuant to Section 2.3(b) has not been resolved in accordance with Section 2.3(b), then, subject to Section 2.3(d), [***] shall have the final decision-making authority. Any decision made by [***] pursuant to this Section 2.3(c) shall be deemed a decision of the JRSC for purposes of this Agreement.

(d) Exceptions. Notwithstanding Section 2.3(c), [***] shall not have the right to exercise such decision-making authority (i) in a manner that excuses [***] from any of its obligations specifically enumerated under this Agreement; (ii) in a manner that negates any consent rights or other rights specifically allocated to [***] under this Agreement; (iii) in a manner that would require [***] to perform activities (A) for which [***] (except as expressly set forth in this Agreement), (B) that [***], or (C) that [***]; (iv) in a manner that would take away [***]’s right to perform activities that [***] has previously agreed to perform as set forth in the Research Plan; (v) in a manner that would require [***] to perform any act that it reasonably believes to be inconsistent with any Law or any approval, order, policy, guidelines of a Regulatory Authority or ethical requirements or ethical guidelines; (vi) to determine that [***] has fulfilled any obligation under this Agreement or that [***] has breached any obligation under this Agreement; or (vii) to amend the relevant Delivery Success Criteria.

(e) This Section 2.3 (and each of its subsections) shall not be used to imply any greater decision-making authority on the part of the JRSC than is set forth in Section 2.1(b) (i.e., the JRSC’s sole decision-making authority is to decide upon amendments to the Research Plan for CNS and the Research Plan For Liver, subject always and solely in the circumstance and manner stated in Section 2.6).

2.4 Limitations on JRSC Authority. The JRSC shall have only the powers assigned expressly to it in this ARTICLE II and elsewhere in this Agreement, and shall not have any power to amend, modify or waive compliance with this Agreement. In furtherance thereof, each Party shall retain the rights, powers and discretion granted to it under this Agreement and no such rights, powers or discretion shall be delegated or vested in the JRSC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing.

2.5 Sharing of Vector Characterization and Other Data at the JRSC. Each Party shall share with and disclose to the other Party the Vector Characterization Data obtained by such Party with respect to New Capsid Variants, pursuant to the requirements of Section 4.3. Each Party shall do so during the Research Term and thereafter, and whether such Vector Characterization Data is generated within or outside of the Research Program. During the Research Term, 4DMT will keep the JRSC informed of: (a) any and all reasonably relevant data and information generated under the Research Program (including Vector Characterization Data; and (b) all New CNS Variants and New Liver Variants that have been identified by 4DMT, [***], in connection with the next JRSC meeting after their identification.

 

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2.6 Amendments to Research Plans. Notwithstanding anything express or implied in this Agreement, the JRSC shall only have the power to amend the Research Plan for CNS and the Research Plan for Liver in the following circumstances: (a) the then-current version of the applicable research plan (i.e., the Research Plan for CNS or the Research Plan for Liver) cannot be carried out as written; or (b) the JRSC achieves unanimous consensus (with no exercise of any final say) that a change needs to be made and as to the change.

ARTICLE III

RESEARCH PROGRAM

3.1 Objectives of the Research Program. The Research Program under this Agreement shall be defined, collectively, by the activities as described in the Research Plan for CNS and the Research Plan for Liver, each as appended to this Agreement as of the Effective Date (or as they may be amended in accordance with this Agreement). The objective of the Research Plan for CNS is for 4DMT to identify [***] ([***]) New CNS Variants that meet the applicable Delivery Success Criteria for entry into validation studies, the Vector Characterization Data from which validation studies will be the package of data that 4DMT is required to provide to uniQure in order to satisfy its obligation to present [***] ([***]) New CNS Variants with the required Vector Characterization Data. The objective for the Research Plan for Liver is to identify the New Liver Variants that meet the applicable Delivery Success Criteria, the Vector Characterization Data from which validation studies will be the package of data that 4DMT is required to provide to uniQure in order to satisfy its obligation to present [***] ([***]) New Liver Variants with the required Vector Characterization Data. As and to the extent provided for in the Research Plan, 4DMT would provide quantities of such New Capsid Variants to uniQure for testing. If the CNS Selection Processes or the liver Selection Processes of the Research Program do not yield at least [***] ([***]) New Capsid Variants meeting the applicable Delivery Success Criteria for entry into validation studies to generate the required Vector Characterization Data packages, then (a) if requested by 4DMT, uniQure may (but is not required to) [***]; and/or (b) [***].

3.2 Conduct of the Research Program.

(a) 4DMT shall initiate work on the Research Plan for Liver and the Research Plan for CNS within [***] ([***]) weeks after the New CLA Effective Date. Any amendments to the Research Plan for CNS or the Research Plan for Liver will be only as agreed by the JRSC.

(b) 4DMT shall use Commercially Reasonable Efforts to conduct the Research Program in accordance with the Research Plan for CNS and the Research Plan for Liver. 4DMT shall have an affirmative obligation during the term the Research Program and thereafter during the term of this Agreement to disclose all data and other information related to the Research Plan on a timely basis, including, without limitation, all Vector Characterization Data created pursuant to the Research Program, the Research Plan for Liver, and the Research Plan for CNS, as well as the existence and status of all New Capsid Variants generated outside the Research Program during the applicable CNS Term or Liver Term (as applicable based on whether the

 

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variant at issue is a New CNS Variant or a New Liver Variant), and all Vector Characterization Data associated with such New Capsid Variants. For clarity, New CNS Variants only arise during the CNS Term, and New Liver Variants only arise during the Liver Term, even though they, or the Vector Characterization Data with respect thereto, may be later reported between the Parties.

(c) Either Party shall have the right to utilize the services of any Third Party to perform its obligations under the Research Plan to the extent that such Third Party is specifically approved in the Research Plan or otherwise approved by the JRSC, provided that any permitted Third Party must have entered into a written agreement with such Party that includes terms and conditions (i) protecting and limiting use and disclosure of Confidential Information at least to the same extent as under ARTICLE VIII, and (ii) requiring the Third Party and its personnel to assign to such Party all right, title and interest in and to any intellectual property (and intellectual property rights) created or conceived in connection with performance of subcontracted activities. Each Party shall remain at all times fully liable for its responsibilities under this Agreement.

(d) 4DMT and uniQure shall conduct the Research Program in accordance with all applicable Laws, including, if and as applicable, Good Laboratory Practices. Each Party hereby certifies that it will not employ or otherwise use in any capacity in performing any activity hereunder the services of any person or entity known to it to be debarred under 21 USC §335a. For clarity, each of the New CNS Variants and each of the New Liver Variants to be entered into validation studies under the Research Program shall meet the applicable Delivery Success Criteria as defined in the Research Plans unless the Parties in their discretions agree otherwise in writing.

3.3 Materials and Know-How Transfer/Use of Constructs.

(a) In order to facilitate the Research Program, each Party shall, to the extent set forth in the Research Plan, provide to the other Party certain Materials and, subject to Section 3.4, Know-How Controlled by the supplying Party for use by the other Party in furtherance of the Research Program. All Materials and Know-How provided by one Party to the other Party remain the sole property of the supplying Party.

(b) All Materials transferred pursuant to the Research Program shall be used (i) only for the specific purpose provided for in the Research Plan, and (ii) solely under the control of the receiving Party. The Materials may not be used or delivered to or for the benefit of any Third Party without the prior written consent of the supplying Party, and shall not be used in research or testing involving human subjects, except as expressly contemplated in the Research Plan or in accordance with this Agreement. All Materials shall be returned to the supplying Party or destroyed (at the election of the supplying Party) promptly after completion of the use permitted under this Agreement.

(c) THE MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY.

 

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(d) At the end of the Research Term, to the extent that samples have not already been provided to uniQure under the Research Program, 4DMT shall promptly provide to uniQure samples of New Capsid Variants that are at that time in 4DMT’s possession. For clarity, this means the quantities specified in the Research Plan, not all quantities of New Capsid Variants at that time in 4DMT’s possession. Other than as may be provided in the Research Plan, 4DMT shall not be required to transfer any Royalty Bearing Constructs to uniQure, unless the Parties mutually otherwise agree in writing in their discretions at a later date.

3.4 Third Party Intellectual Property. The conduct of activities under the Research Plan may use Patent Rights or Know-How licensed by 4DMT pursuant to the UCB Agreements, subject to the terms and conditions of the UCB Agreements. 4DMT shall be solely responsible for all obligations under the UCB Agreements, including any and all payments and royalties due thereunder. In developing the Research Plan, the Parties shall discuss whether any Third Party Patent Rights or Know-How, other than Patent Rights or Know-How licensed by 4DMT pursuant to the UCB Agreements, will be utilized in the conduct of activities under the Research Plan. 4DMT shall disclose to uniQure the details of any restrictions on use or payment obligations of which it is aware that would be triggered by such use of Third Party Patent Rights or Know-How in the Research Program. If the Parties mutually agree to use any inventions claimed in any Patent Right or use any Know-How that is licensed to or has been acquired by 4DMT other than pursuant to the UCB Agreements, and if such use would require the payment of additional consideration to the Third Party from which the Patent Rights or Know-How was licensed or acquired, then such Patent Right or Know-How shall be deemed under the Control of 4DMT, provided that uniQure expressly agrees in writing to bear any such additional consideration actually to be paid by 4DMT to the Third Party (which amounts uniQure may offset pursuant to Section 6.2(c)(ii)) with respect to the Development, manufacture or Commercialization of Royalty Bearing Constructs or Royalty Bearing Products. For clarity, nothing in this Section 3.4 shall limit uniQure’s rights to obtain from a Third Party, independent of 4DMT, a license or other right with respect to such Third Party’s Patent Rights or Know-How.

3.5 Records and Reports.

(a) Records.

(i) 4DMT shall maintain records, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall fully and properly reflect all work done and results achieved in the performance of the Research Program by or on behalf of 4DMT (the “Records”), including the procedures, techniques and methodologies used, the progress made, and any Invention conceived or reduced to practice or otherwise made within the scope of or in connection with the Research Program. As part of keeping the Records, 4DMT shall ensure that all of its personnel, and all of its agents that are involved in the Research Program, will keep accurate laboratory notebooks, which laboratory notebooks: (A) shall be duly signed, dated and witnessed; and (B) shall be created and maintained in accordance with its standard operating procedures that would be sufficient to allow for said laboratory notebooks to be used in

 

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any proceeding before the United States Patent and Trademark Office or United States courts, in order to establish the date of invention for any Invention in accordance with the United States patent laws. During the Term, 4DMT shall, upon written request by uniQure, which shall not be unreasonably made: (1) make all Records available for inspection and review by uniQure during normal business hours in a timely manner; and (2) provide copies of the Records or any part thereof to uniQure, as reasonably requested by uniQure.

(ii) In connection with uniQure’s exercise of its back-up right for patent filing as relates to the New Variant Patents (if applicable), uniQure shall have the right to request that a copy of the relevant portions of the laboratory notebooks relating to all stages of the generation of the applicable New Capsid Variants be provided by 4DMT to uniQure. After such request by uniQure, 4DMT shall provide such copies of the laboratory notebooks promptly to uniQure, which shall be maintained by uniQure as 4DMT’s Confidential Information.

(b) Reports to the JRSC. Between [***] ([***]) and [***] ([***]) Business Days prior to each scheduled JRSC meeting, the Parties shall provide to the JRSC a written report on the progress of the Research Program, summarizing the work performed under the Research Program and evaluating the work performed in relation to the goals of the Research Program. Each Party shall provide such other information required by the Research Program or reasonably requested by the other Party and reasonably available, relating to the progress of the goals or performance of the Research Program.

ARTICLE IV

DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS; DILIGENCE

4.1 Responsibility.

(a) uniQure shall have the full right, but not the obligation, at its sole expense, for the worldwide research, Development, manufacturing and Commercialization of uniQure Products pursuant to the exercise by uniQure of its rights under this Agreement (including its ownership rights and/or its exercise of any of the licenses granted to uniQure under Section 5.1(b)) in accordance with the terms and conditions and limitations of such license rights, and, subject to the payment obligations under Article VI and all other relevant terms and conditions of this Agreement. For clarity, this does not apply to those 4D Products, if any, addressing Restricted Targets pursuant to 4DMT’s non-exclusive rights after an exercise of 4DMT’s Step-In Rights that results in 4DMT obtaining non-exclusive rights to such 4DMT Products addressing Restricted Targets. Moreover, it does not apply to any 4DMT Products directed to a Non-Restricted Target, even after an exercise by uniQure of its Step-In Rights related to a uniQure Product to such Non-Restricted Target.

(b) 4DMT shall have the full right, but not the obligation, at its sole expense, for the worldwide research, Development, manufacturing and Commercialization of 4DMT Products pursuant to the exercise by 4DMT of its rights under this Agreement (including its ownership rights and/or its exercise of any of the licenses granted to 4DMT under Section 5.2(c)) in accordance with the terms and conditions and limitations of such license rights, and

 

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subject to the payment obligations under Article VI and all other relevant terms and conditions of this Agreement. For clarity, this does not apply to those uniQure Products, if any, addressing Non-Restricted Targets pursuant to uniQure’s non-exclusive rights after an exercise of uniQure’s Step-In Rights that results in uniQure obtaining non-exclusive rights to such uniQure Products addressing Non-Restricted Targets.

4.2 Diligence. No Party will have any diligence obligations with respect to either 4DMT Products or uniQure Products, except as provided in Section 4.4 with respect to Proposed Products, and the circumstance in which either a not-stepping-in Party chooses to pursue a Proposed Product in lieu of allowing the other Party to obtain rights thereto pursuant to such other Party’s Step-In Rights, or in the circumstance in which the stepping-in Party obtains non-exclusive rights to such Proposed Product.

4.3 Obligation to Share Vector Characterization Data for AAV Capsid Variants.

(a) Commencing on the New CLA Effective Date and continuing throughout the Term, uniQure shall provide, within [***] ([***]) days after each January 31^st and July 31^st of each Calendar Year, a written report to 4DMT that summarizes the Vector Characterization Data generated by or on behalf of uniQure or its Affiliate or Sublicensee with respect to each New Capsid Variant for which any research, Development, Commercialization or other vector characterization activities were conducted by or on behalf of uniQure or its Affiliate or Sublicensee during the [***].

(b) Commencing on the New CLA Effective Date and continuing throughout the Term, 4DMT shall provide, within [***] ([***]) days after each January 31^st and July 31^st of each Calendar Year, a written report to uniQure that summarizes the Vector Characterization Data generated by or on behalf of uniQure or its Affiliate or Sublicensee with respect to each AAV Capsid Variant or New Capsid Variant for which any research, Development, Commercialization or other vector characterization activities were conducted by or on behalf of 4DMT or its Affiliate or Sublicensee during the [***].

(c) Either Party may terminate its obligation to provide written reports pursuant to this Section 4.3 after the Research Term, if it ceases all research, development, commercialization or other activities that would result in the generation of any further unreported Vector Characterization Data with respect to New Capsid Variants, and the Party provides written notice to the other Party so stating and also certifying that all Vector Characterization Data that is required to be reported with respect to New Capsid Variants has been so reported.

4.4 Step-In Rights of each Party for Proposed Products.

(a) Step-In Rights of 4DMT.

(i) At any time after the expiration of the CNS Term (for products based on New CNS Variants) or the Liver Term (for products based on New Liver Variants), 4DMT may make a bona fide proposal to uniQure for Developing and Commercializing a Product using a New Capsid Variant in the Field to deliver a Transgene that Affects any Restricted Target (each, a “4DMT Proposed Product”), including a development plan and a plan

 

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to finance such activities. Within [***] ([***]) days after receipt of a notice from 4DMT of a 4DMT Proposed Product, uniQure shall notify 4DMT whether uniQure is conducting or is interested in conducting research or Development of such 4DMT Proposed Product, or a Product that uniQure believes in good faith is or would be competitive with such 4DMT Proposed Product (a “Competitive Product”). 4DMT shall have the right to select a maximum total of [***] ([***]) Proposed Products as 4DMT Proposed Products per calendar year under this Section 4.4 and under Section 4.4 of the Amended and Restated CLA, such total to be determined in the aggregate under this Agreement and the Amended and Restated CLA, taken collectively.

(ii) If uniQure notifies 4DMT in good faith that uniQure is conducting or is interested in conducting research or Development of such 4DMT Proposed Product or Competitive Product, uniQure shall within [***] ([***]) months after such notice, deliver to 4DMT a plan (including projected timelines) for the research and Development thereof and, thereafter, shall use Commercially Reasonable Efforts to research, Develop, manufacture and Commercialize such 4DMT Proposed Product or Competitive Product in accordance with such plan. Each progress report provided to 4DMT under Section 4.3 from and after the date of uniQure’s notice under this Section shall contain a summary of the activities undertaken and the status of uniQure’s research and Development efforts with respect to such Third Party Proposed Product, 4DMT Proposed Product, uniQure Proposed Product or Competitive Product during the [***].

(iii) If uniQure notifies 4DMT that uniQure is not conducting and is not interested in conducting research or Development of such 4DMT Proposed Product, or Competitive Product, then the date of uniQure’s such written notice (or the deadline therefor, if uniQure is required to provide such notice and fails to provide notice by such date whether clause (ii) above or this clause (iii) would otherwise), then this shall be the “Effective Time” for such 4DMT Proposed Product and the applicable Restricted Target, and the license to 4DMT in Section 5.2(c) shall become effective as of the Effective Time.

(b) Step-In Rights of uniQure.

(i) At any time after the expiration of the CNS Term (for products based on New CNS Variants) or the Liver Term (for products based on New Liver Variants), uniQure may make a bona fide proposal to 4DMT for Developing and Commercializing a Product using a New Capsid Variant in the Field to deliver a Transgene that Affect any Non-Restricted Target (each, a “uniQure Proposed Product”), including a development plan and a plan to finance such activities. Within [***] ([***]) days after receipt of a notice from uniQure of a uniQure Proposed Product, 4DMT shall notify uniQure whether 4DMT is conducting or is interested in conducting research or Development of such uniQure Proposed Product, or a Product that 4DMT believes in good faith is or would be competitive with such uniQure Proposed Product (a “4D Competitive Product”). uniQure shall have the right to select a maximum total of [***] ([***]) Proposed Products as uniQure Proposed Products per year under this Section 4.4.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(ii) If 4DMT notifies uniQure in good faith that 4DMT is conducting or is interested in conducting research or Development of such uniQure Proposed Product or Competitive Product, 4DMT shall within [***] ([***]) months after such notice, deliver to uniQure a plan (including projected timelines) for the research and Development thereof and, thereafter, shall use Commercially Reasonable Efforts to research, Develop, manufacture and Commercialize such uniQure Proposed Product or Competitive Product in accordance with such plan. Each progress report provided to uniQure under Section 4.3 from and after the date of 4DMT’s notice under this Section shall contain a summary of the activities undertaken and the status of 4DMT’s research and Development efforts with respect to such Third Party Proposed Product, uniQure Proposed Product, 4DMT Proposed Product or Competitive Product during the [***].

(iii) If 4DMT notifies uniQure that 4DMT is not conducting and is not interested in conducting research or Development of such uniQure Proposed Product, or Competitive Product, then the date of 4DMT’s such written notice (or the deadline therefor, if 4DMT is required to provide such notice and fails to provide notice by such date whether clause (ii) above or this clause (iii) would otherwise apply), then this shall be the “UQ Effective Time” for such uniQure Proposed Product and the applicable Non-Restricted Target, and the license to uniQure in Section 5.1(b)(ii) shall become effective as of the UQ Effective Time.

(c) General Rights of 4DMT Related to Non-Restricted Targets. For clarity, 4DMT owns the New Variant Patents and has the right to pursue 4DMT Products delivering Transgenes that Affect Non-Restricted Targets, without the need to obtain any rights under this Section 4.4 (i.e., as a default matter 4DMT has the right to pursue 4DMT Products delivering Transgenes that Affect Non-Restricted Targets, with no need to “step in” to obtain such rights, and for that reason, 4DMT’s Step-In Rights under this Section 4.4 do not apply to 4DMT Products delivering Transgenes that Affect Non-Restricted Targets).

4.5 Pharmacovigilance. Within [***] ([***]) months after the Effective Date, the Parties shall enter into an agreement governing the exchange of adverse event safety data (including post-marketing spontaneous reports) received by a Party and its Affiliates, including such data received from, in the case of uniQure, its Sublicensees or, in the case of 4DMT, its licensees, relating to any AAV Capsid Variant provided to uniQure by 4DMT hereunder in order to monitor the safety of all Constructs and Products and to meet reporting requirements with any applicable Regulatory Authority. Such data sharing agreement shall not require the sharing of data that would disclose confidential know-how or trade secrets of a Party or its Affiliates, or in the case of uniQure, its Sublicensees or, in the case of 4DMT, its licensees, if such data may be cross-referenced, such as through a Drug Master File, to satisfy the requirements of Law and any applicable Regulatory Authority.

4.6 Marking. Prior to the issuance in the United States of Patent Rights included in the UC Patent Rights, uniQure agrees to mark Royalty Bearing Product(s) Covered by any UC Patent Right (or their containers or labels) sold in the United States under the licenses granted in this Agreement with the words “Patent Pending,” and following the issuance in the United States of one or more Patent Rights included in the UC Patent Rights, with the patent numbers of the UC Patent Right(s) Covering such Royalty Bearing Product. All Royalty Bearing Products Covered by any UC Patent Right sold in other countries will be marked in such manner as to conform with the patent Laws and practice of such countries.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

ARTICLE V

GRANTS OF RIGHTS

5.1 Licenses to uniQure.

(a) Research License to uniQure. Subject to the terms and conditions of this Agreement, 4DMT hereby grants to uniQure, and uniQure hereby accepts, during the Research Term, an exclusive (but not as to 4DMT), worldwide, royalty-free, non-sublicenseable license under the 4DMT Intellectual Property and 4DMT’s interest in the Joint Intellectual Property, solely to (i) conduct activities assigned to uniQure under the Research Plan for Liver or the Research Plan for CNS, (ii) evaluate Constructs, or (iii) evaluate the data developed in the conduct of activities under the Research Program or during the Research Term. This license is intended to include the right for uniQure to make sequence modifications to New Capsid Variants solely for the purpose of (1) adapting New Capsid Variants to insect cells or insect cell expression vectors and systems, and/or (2) modifying any “Selected Capsid Variants” as defined in the Amended and Restated CLA with or to include any motif, mutation, or substitution identified under this New CLA; provided that (x) uniQure shall promptly disclose to 4DMT all AAV Capsid Variants resulting from such activities, (y) such resulting AAV Capsid Variants shall be deemed New Capsid Variants for all purposes under this Agreement, and (z) the Patent Rights that may be filed with respect to such resulting deemed New Capsid Variants shall be deemed New Variant Patents for all purposes under this Agreement, and the Know-How with respect thereto shall be deemed the subject matter of New Variant Patents (whether or not Patent Rights are ever filed with respect to such Know-How) and therefore Core 4DMT Know-How, for all purposes under this Agreement. For clarity, the obligations of uniQure under the foregoing clauses (x), (y) and (z) with respect to any uniQure-modified New Capsid Variants or any uniQure-modified Selected Capsid Variants as described in the foregoing sentence shall not apply to any AAV Capsid Variant (or any modification or improvement thereof) that is identified or generated by uniQure or any of its Affiliates or Sublicensees independently and outside of the Research Program, without the use of any information disclosed to uniQure pursuant to this Agreement or the Amended and Restated CLA as to the sequence of any New Capsid Variant or Selected Capsid Variant.

(b) Development and Commercialization Licenses to uniQure.

Exclusive License for use of New Capsid Variants in connection with the Restricted Targets. Subject to the terms and conditions of this Agreement, and on a New Capsid Variant-by-New Capsid Variant basis, 4DMT hereby grants to uniQure, and uniQure hereby accepts, an exclusive (even as to 4DMT, except solely to the extent that 4DMT obtains non-exclusive rights within the scope of this license pursuant to an exercise of 4DMT’s Step-In Rights), worldwide, royalty-bearing license, including the right to grant sublicenses in accordance with Section 5.3, under the 4DMT Intellectual Property (including all Vector Characterization Data reported by 4DMT to uniQure under this Agreement) and 4DMT’s interest in the Joint Intellectual Property, to research (subject to 4DMT’s retained rights to conduct research under the Research Program and to research Constructs related to Restricted Targets for potential exercise of 4DMT’s Step-In Rights in relation thereto), Develop, make and have made, use, import, sell and Commercialize the New Capsid Variants, and any modifications or improvements thereto, as

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

and into Royalty Bearing Constructs and Royalty Bearing Products in the Field. For clarity, the license granted to uniQure under this paragraph shall expressly include the right to create improvements or modifications to the sequence or composition of matter of any New Capsid Variant, provided that such improved or modified sequence or composition of matter is used solely in connection with the applicable Restricted Target in the Field, and (x) uniQure shall promptly disclose to 4DMT all resulting AAV Capsid Variants made, (y) such resulting AAV Capsid Variants shall be deemed New Capsid Variants for all purposes under this Agreement, and (z) the Patent Rights that may be filed with respect to such resulting deemed New Capsid Variants shall be deemed New Variant Patents for all purposes under this Agreement, and the Know-How with respect thereto shall be deemed the subject matter of New Variant Patents (whether or not Patent Rights are ever filed with respect to such Know-How) and therefore Core 4DMT Know-How, for all purposes under this Agreement. For clarity, the obligations of uniQure under the foregoing clauses (x), (y) and (z) with respect to any uniQure-modified New Capsid Variants described in the foregoing sentence shall not apply to any AAV Capsid Variant (or any modification or improvement thereof) that is identified or generated by uniQure or any of its Affiliates or Sublicensees independently and outside of the Research Program, without the use of any information disclosed to uniQure pursuant to this Agreement or the Amended and Restated CLA as to the sequence of any New Capsid Variant or Selected Capsid Variant.

(c) Non-Exclusive License for Proposed Products elected by uniQure pursuant to its Step-In Rights under Section 4.4.

(i) Subject to the terms and conditions of this Agreement (including 4DMT’s retained rights related to Products delivering Transgenes related to the applicable Non-Restricted Target), and on a New Capsid Variant by New Capsid Variant basis, effective upon the UQ Effective Time for the applicable Non-Restricted Target and New Capsid Variant under Section 4.4(b), 4DMT hereby grants to uniQure, and uniQure hereby accepts, a non-exclusive, worldwide, royalty-bearing license, including the right to grant sublicenses in accordance with Section 5.3, under the 4DMT Intellectual Property (including all Vector Characterization Data reported by 4DMT to uniQure under this Agreement) and 4DMT’s interest in the Joint Intellectual Property, to research, Develop, make and have made, use and Commercialize the uniQure Proposed Product to the applicable Non-Restricted Target as Royalty Bearing Constructs and Royalty Bearing Products within the Field. Such license may become effective one (1) or more times, in connection with one (1) or more elections by uniQure under Section 4.4 that result in the UQ Effective Time occurring under Section 4.4(b) for the applicable uniQure Proposed Product, Non-Restricted Target, and New Capsid Variant. For clarity, the license granted under this paragraph to uniQure shall expressly include the right to create improvements or modifications to the sequence or composition of matter of any New Capsid Variant, provided that such improved or modified sequence or composition of matter is used solely in connection with the applicable Non-Restricted Target in the Field.

(ii) In order to enable uniQure to research Constructs related to Non-Restricted Targets for the potential exercise of uniQure’s Step-In Rights pursuant to Section 4.4, uniQure shall have, and 4DMT hereby grants to uniQure, a non-exclusive research-use-only license to use any and all Vector Characterization Data reported to uniQure by 4DMT and any other necessary 4DMT Intellectual Property, on a New Capsid Variant by New Capsid Variant basis, regardless of whether such New Capsid Variant was generated or identified under this Agreement or outside of this Agreement, to the extent necessary for uniQure to evaluate whether to exercise its Step-In Rights pursuant to Section 4.4.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(d) Recordation. Following the Effective Date or at any time during the Term, 4DMT at the request and expense of uniQure shall promptly register or record the licenses granted to uniQure under this Agreement with the appropriate patent offices in all applicable countries of the Territory; provided that such registration or recordation specifies the applicable limitations of such license, and provided further that such registration shall have no effect on the allocation of Prosecution and Maintenance rights and obligations set forth in ARTICLE VII. In the event any of the licenses granted to uniQure under this Agreement are terminated in accordance with the terms of this Agreement, uniQure shall promptly take such actions and execute such documents as are reasonably requested by 4DMT to cancel such registration(s) or recordation(s) in the applicable countries with respect to the terminated license grants.

(e) Grant-Back License to uniQure. 4DMT hereby grants to uniQure, and uniQure hereby accepts, a non-exclusive, worldwide, royalty-free license, including the right to grant sublicenses through multiple tiers, under the 4DMT Patent Rights and 4DMT Know-How that (i) arise from activities that are conducted under this Agreement in connection with Royalty Bearing Constructs and Royalty Bearing Products in the course of making modifications to New Capsid Variants and (ii) claim or cover compositions of matter or general methods of use of New Capsid Variants (for clarity, including such Patent Rights and Know-How claiming or covering compositions combining Gene Therapy Constructs in general and AAV Capsid Variants in general or general methods of making or using such combinations of Gene Therapy Constructs and AAV Capsid Variants), to research, Develop, make and have made, use, import, sell and Commercialize New Capsid Variants, and Products containing New Capsid Variants in connection solely with the Restricted Targets and any Non-Restricted Targets licensed to uniQure pursuant to the Step-In Rights under Section 4.4.

5.2 Licenses to 4DMT.

(a) Research License to 4DMT. Subject to the terms and conditions of this Agreement, uniQure hereby grants to 4DMT, and 4DMT hereby accepts, during the Research Term, a non-exclusive, worldwide, royalty-free, non-sublicenseable license under the uniQure Intellectual Property, solely to the extent necessary to conduct activities assigned to 4DMT under the Research Program during the Research Term.

(b) Grant-Back License to 4DMT. uniQure hereby grants to 4DMT, and 4DMT hereby accepts, a non-exclusive, worldwide, royalty-free license, including the right to grant sublicenses through multiple tiers, under the Patent Rights and Know-How Controlled by uniQure pursuant to the licenses granted by 4DMT to uniQure in Section 5.1 (including such Patent Rights and Know-How licensed to uniQure pursuant to Section 5.1 claiming or covering compositions combining Gene Therapy Constructs in general and AAV Capsid Variants in general or general methods of making or using such combinations of Gene Therapy Constructs and AAV Capsid Variants), and to use the Vector Characterization Data reported by uniQure to 4DMT under this Agreement, to research, Develop, make and have made, use and Commercialize New Capsid

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Variants, and Products containing New Capsid Variants, in all cases outside the Field or within 4D Products within the scope of rights within which 4DMT is entitled to research, Develop, and Commercialize 4D Products under this Agreement. For the avoidance of doubt, 4DMT’s practice of the foregoing license shall be subject to the license rights of uniQure under Section 5.1 and its right to grant sublicenses under Section 5.3.

(c) Non-Exclusive License for Proposed Products elected by 4DMT pursuant to its Step-In Rights under Section 4.4. Subject to the terms and conditions of this Agreement (including uniQure’s retained rights related to Products delivering Transgenes that Affect the applicable Restricted Target), and on a New Capsid Variant-by-New Capsid Variant basis, effective upon the Effective Time with respect to the given 4DMT Proposed Product and Restricted Target pursuant to Section 4.4(a), uniQure hereby grants to 4DMT, and 4DMT hereby accepts, a non-exclusive, worldwide, royalty-bearing license, including the right to grant sublicenses in accordance with Section 5.3, under the uniQure Intellectual Property that is necessary or useful due to the presence of the applicable New Capsid Variant (including all Vector Characterization Data reported by uniQure to 4DMT under this Agreement) and uniQure’s interest in the Joint Intellectual Property, to research, Develop, make and have made, use and Commercialize such 4DMT Proposed Products as Royalty Bearing Constructs and Royalty Bearing Products within the Field. Any licenses granted pursuant to this Section are limited to only uniQure Intellectual Property that specifically relates to New Capsid Variants, including patent claims specifying a New Capsid Variant (if any) or specifically claiming any methods of use or making any New Capsid Variants (if any), and excluding all other uniQure Intellectual Property, including compositions of matter or methods of making compositions of matter and methods of manufacturing Products (but not the New Capsid Variants therein) pursuant to this Agreement. Such license may become effective one (1) or more times, in connection with one (1) or more elections by 4DMT under Section 4.4 that result in the Effective Time occurring under Section 4.4(a)(iii) for the applicable Proposed Product and Restricted Target.

5.3 Sublicenses. Each Party shall have the right to grant sublicenses (through multiple tiers) under the license granted to it under Section 5.1(b) (in the case of uniQure) or Section 5.2(c) (in the case of 4DMT) to its Affiliates and Third Parties; provided that any sublicense granted to a Third Party under this Agreement shall be pursuant to a written agreement that subjects such Sublicensee to all relevant restrictions and limitations set forth in this Agreement. Each Party granting a sublicense shall provide the other Party with the name and address of each Sublicensee of its rights under this ARTICLE V, the date of the grant of the sublicense and a description of the rights granted promptly after the execution and delivery of the sublicense agreement. The Party granting the sublicense shall remain responsible for the performance of its Sublicensees, and shall ensure that each Sublicensee complies with the applicable terms and conditions of this Agreement.

5.4 Rights Retained by the Parties. Except as expressly set forth in this Agreement, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, in any Confidential Information of the other Party or under any Patent Right or Know-How in which such other Party or its Affiliates has rights. Without limiting the generality of the foregoing, any of 4DMT’s rights to 4DMT Intellectual Property not specifically licensed to uniQure shall be retained by 4DMT, and any of uniQure’s rights to uniQure Intellectual Property not specifically licensed to 4DMT shall be retained by uniQure.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

5.5 Section 365(n) of the Bankruptcy Code. All rights and licenses granted under or pursuant to any section of this Agreement are and will otherwise be deemed to be for purposes of Section 365(n) of the United States Bankruptcy Code (Title 11, U.S. Code), as amended or any comparable Law outside the United States (the “Bankruptcy Code”), licenses of rights to “intellectual property” as defined in Section 101(35A) of the Bankruptcy Code. The Parties will retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code. Each Party agrees that the other Party, as licensee of such rights under this Agreement, will retain and may fully exercise all of its rights and elections under the Bankruptcy Code or any other provisions of applicable Law outside the United States that provide similar protection for “intellectual property.” The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the Bankruptcy Code or analogous provisions of applicable Law outside the United States, the other Party will be entitled to a complete duplicate of (or complete access to, as appropriate) the intellectual property licensed to such other Party and all embodiments of such intellectual property, to the extent necessary for such other Party to practice the licenses granted to it pursuant to this Agreement under such intellectual property, which, if not already in such other Party’s possession, will be promptly delivered to it upon such other Party’s written request thereof. Any agreement supplemental hereto will be deemed to be “agreements supplementary to” this Agreement for purposes of Section 365(n) of the Bankruptcy Code

5.6 UCB Agreement Pass-Through Provisions. uniQure acknowledges that 4DMT has provided it with a copy of the executed UCB Agreements, and agrees that this Agreement is subject in all respects to the terms and conditions of the UCB Agreements. Notwithstanding the generality of the foregoing:

(a) uniQure acknowledges that UC (and, to the extent applicable, IGT) may publish any and all technical data resulting from any research performed by UC (and, to the extent applicable, IGT) relating to the inventions disclosed in the UC Patent Rights, and UC (and, to the extent applicable, IGT) expressly reserves the right to use such inventions, UC AAV Capsid Variants and related technology for its educational and research purposes, to disseminate the UC AAV Capsid Variants and other tangible materials associated with, or required to practice such inventions or the UC Patent Rights to researchers at nonprofit institutions for their educational and research purposes, and to permit other nonprofit institutions to use the UC AAV Capsid Variants to practice the UC Patent Rights for education and research purposes.

(b) uniQure shall keep 4DMT informed of its large/small entity status, as defined in 15 U.S.C. 632.

(c) uniQure acknowledges that certain of the inventions disclosed in the UC Patent Rights were funded in part by the U.S. Government, and agrees that in accordance with 35 U.S.C. 204, to the extent required by Law, any products covered by the UC Patent Rights and sold in the United States will be substantially manufactured in the United States.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(d) uniQure acknowledges that 4DMT’s exclusive rights, privileges, and licenses under the UCB Agreements will expire on the date of the last-to-expire Valid Claim under the UC Patent Rights covered in each agreement, respectively, unless earlier terminated.

(e) For any sublicense under the UC Patent Rights that uniQure grants under Section 5.3, uniQure shall ensure that (i) such further sublicense is subject to a written sublicense agreement and is bound by all of the applicable terms, conditions, obligations, restrictions and other covenants of the UCB Agreements that protect or benefit UC’s (and, if applicable, the U.S. Government’s) rights and interests to the same extent that this Agreement does, and (ii) it or the Sublicensee shall, within [***] ([***]) days after executing such sublicense agreement, furnish to 4DMT for delivery to UC, subject to any confidentiality provisions, all material terms of such sublicense pertaining to UC’s interests, including the Sublicensee’s name and address, and indemnification of UC as provided in this Agreement.

(f) The Parties acknowledge and agree that upon termination of the UCB Agreements for any reason, uniQure’s sublicenses under the UC Patent Rights under this Agreement will remain in effect and will be assigned to UC, except that UC will not be bound to perform any duties or obligations set forth herein that extend beyond the duties and obligations of UC set forth in the UCB Agreements.

(g) uniQure acknowledges that nothing contained in this Agreement will be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trademark, trade name, or other designation of UC (including any contraction, abbreviation, or simulation of any of the foregoing), and that unless required by Law, regulation, or rules of a securities exchange, or consented to in writing by UC, the use by uniQure of the name “The Regents of the University of California” or the name of any University of California campus in advertising, publicity or other promotional activities is expressly prohibited.

ARTICLE VI

PAYMENTS; ROYALTIES AND REPORTS

6.1 [Intentionally omitted].

6.2 Royalties.

(I) Royalties Payable by uniQure for uniQure Products.

On a Royalty Bearing Product-by-Royalty Bearing Product basis, uniQure shall pay to 4DMT royalties on worldwide Net Sales of uniQure Products as provided in this Section 6.2:

(a) Royalty Rate. uniQure shall pay to 4DMT royalties on Net Sales of each Royalty Bearing Product Commercialized by uniQure and its Affiliates equal to [***] percent ([***]%) of all such Net Sales of such Royalty Bearing Product achieved during the applicable Calendar Year.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b) Royalty Term. uniQure’s royalty obligations to 4DMT under this Section 6.2 for uniQure Products shall be in effect on a country-by-country and Royalty Bearing Product-by-Royalty Bearing Product basis during the relevant Royalty Term. Upon expiration of the Royalty Term for a Royalty Bearing Product in a country, the license under Section 5.1(b) shall be fully paid-up, irrevocable, perpetual and exclusive under the relevant Licensed IP for such Royalty Bearing Product in such country.

(c) Royalty Adjustments.

(i) Non-Patented Product. If a Royalty Bearing Product is sold in a country and the composition of matter, formulation, or method of use of such Royalty Bearing Product is not Covered by a Valid Claim within the Licensed IP in such country at the time of sale, then the royalty rate for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the applicable rate determined pursuant to Section 6.2(I)(a), unless such Royalty Bearing Product embodies an Invention with respect to which uniQure made a Trade Secret Election, in which case no such reduction shall apply.

(ii) Third Party Offset. If uniQure is required, in order to avoid infringement of any Patent Right not licensed hereunder that Covers the composition of matter, formulation, or method of use of a Royalty Bearing Product, to obtain a license from a Third Party in order to Develop, make, have made, use or Commercialize such Royalty Bearing Product in a country in the Territory and to pay a royalty or other consideration under such license (including in connection with the settlement of a patent infringement claim), then the royalty payments due under Section 6.2(I)(a) with respect to Net Sales for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the amounts payable by uniQure to such Third Party for such license that are reasonably and appropriately allocable to such Royalty Bearing Product in such country, provided that in no event shall the foregoing reduce the amount of royalties payable to 4DMT in any [***] by more than [***] percent ([***]%) of the amount determined pursuant to Section 6.2(I)(a), as adjusted by application of the terms of Section 6.2(I)(c)(i).

(iii) Limits on Deductions. Except as expressly provided in this Section 6.2, there shall not be any offset to or deduction from the royalties payable pursuant to this Section 6.2. Notwithstanding Sections 6.2(c)(i) and (ii) to the contrary, in no event shall the cumulative effect of the deductions in Sections 6.2(I)(c)6.2(c)(i) and (ii) reduce the royalties to less than [***] percent ([***]%) of the amounts determined pursuant to Section 6.2(I)(a).

(II) Royalties Payable by 4DMT for 4DMT Products.

On a Royalty Bearing Product-by-Royalty Bearing Product basis, for each 4DMT Product Commercialized by 4DMT and its Affiliates, 4DMT shall pay to uniQure royalties on annual worldwide Net Sales of such 4DMT Product as provided in this Section 6.2:

(a) Royalty Rate. 4DMT shall pay to uniQure royalties on Net Sales of each Royalty Bearing Product Commercialized by 4DMT and its Affiliates equal to [***] percent ([***]%) of all such Net Sales of such Royalty Bearing Product achieved during the applicable Calendar Year.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b) Royalty Term. 4DMT’s royalty obligations to uniQure under this Section 6.2 shall be in effect on a country-by-country and Royalty Bearing Product-by-Royalty Bearing Product basis during the relevant Royalty Term. Upon expiration of the Royalty Term for a Royalty Bearing Product in a country, the license under Section 5.2(c) shall be fully paid-up, irrevocable, perpetual and non-exclusive under the relevant Licensed IP for such Royalty Bearing Product in such country.

(c) Royalty Adjustments.

(i) Non-Patented Product. If a Royalty Bearing Product is sold in a country and the composition of matter, formulation, or method of use of such Royalty Bearing Product is not Covered by a Valid Claim within the Licensed IP in such country at the time of sale, then the royalty rate for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the applicable rate determined pursuant to Section 6.2(a), unless such Royalty Bearing Product embodies an Invention with respect to which 4DMT made a Trade Secret Election, in which case no such reduction shall apply.

(ii) Third Party Offset. If 4DMT is required, in order to avoid infringement of any Patent Right not licensed hereunder that Covers the composition of matter, formulation, or method of use of a Royalty Bearing Product, to obtain a license from a Third Party in order to Develop, make, have made, use or Commercialize such Royalty Bearing Product in a country in the Territory and to pay a royalty or other consideration under such license (including in connection with the settlement of a patent infringement claim), then the royalty payments due under Section 6.2(a) with respect to Net Sales for such Royalty Bearing Product in such country shall be reduced by [***] percent ([***]%) of the amounts payable by 4DMT to such Third Party for such license that are reasonably and appropriately allocable to such Royalty Bearing Product in such country, provided that in no event shall the foregoing reduce the amount of royalties payable to uniQure in any [***] by more than [***] percent ([***]%) of the amount determined pursuant to Section 6.2(a), as adjusted by application of the terms of Section 6.2(c)(i).

(iii) Limits on Deductions. Except as expressly provided in this Section 6.2, there shall not be any offset to or deduction from the royalties payable pursuant to this Section 6.2. Notwithstanding Sections 6.2(II)(c)(i) and (ii) to the contrary, in no event shall the cumulative effect of the deductions in Sections 6.2(c)(i) and (ii) reduce the royalties to less than [***] percent ([***]%) of the amounts determined pursuant to Section 6.2(II)(a).

6.3 Sublicense Consideration.

(a) uniQure shall pay to 4DMT the following percentages (“Sublicense Income Sharing Percentages”) of Sublicense Consideration received by uniQure for sublicenses under the Licensed IP under this Agreement:

(i) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Construct or Product that is subject of the sublicense and (B) does not require uniQure to manufacture any such Construct or Product for Clinical Trial or commercial purposes;

 

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(ii) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Construct or Product that is subject of the sublicense and (B) requires uniQure to manufacture any such Construct or Product for Clinical Trial or commercial purposes;

(iii) [***] percent ([***]%) for any sublicense that does not meet the criteria set forth in Section 6.3(a)(i) or Section 6.3(a)(ii) above;

provided, however, that none of subsections (i), (ii) or (iii) shall result in uniQure paying to 4DMT under this Section 6.3 a percentage of any Sublicense Consideration consisting of royalties from Sublicensees on sales of UC Products during the applicable Royalty Term that is less than [***] percent ([***]%) of Net Sales by such Sublicensee of such UC Products.

(b) The term “Sublicense Consideration” shall mean consideration of any kind received by uniQure from a Sublicensee for the grant of a sublicense under this Agreement, such as upfront fees, royalties or milestone fees and including any premium paid by the Sublicensee over the Fair Market Value (as defined below) for stock of uniQure in consideration for such sublicense; provided, however, the following are not included in Sublicense Consideration:

(i) Support for activities of uniQure relating to the research, Development, manufacturing or Commercialization of Royalty Bearing Products, which shall not exceed the fully burdened cost (and in the case of manufacturing costs, the Fully Burdened Manufacturing Cost) for undertaking such activities performed by or for uniQure (including Third Parties on uniQure’s behalf) by more than [***] percent ([***]%);

(ii) Proceeds derived from debt financing and any loans to uniQure by the Sublicensee;

(iii) Consideration received for the purchase of stock in uniQure or its Affiliate to the extent that the price per share for such equity does not exceed the Fair Market Value of such stock. The term “Fair Market Value” shall mean the average price at which the stock in question is publicly trading at for [***] ([***]) days prior to the earlier of (A) the date of the announcement of its purchase by the Sublicensee or (B) the date of its purchase by the Sublicensee, or if the stock is not publicly traded, the value of such stock as determined in good faith by the Board of Directors of uniQure or its applicable Affiliate as of the time of receipt of payment; and

(iv) Reimbursement of uniQure’s patent costs related to Patent Rights.

(c) 4DMT shall pay to uniQure the following percentages (“4D Sublicense Income Sharing Percentages”) of 4D Sublicense Consideration received by 4DMT for sublicenses under the Licensed IP under this Agreement:

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(i) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Construct or Product that is subject of the sublicense and (B) does not require 4DMT to manufacture any such Construct or Product for Clinical Trial or commercial purposes;

(ii) [***] percent ([***]%) for any sublicense that (A) is granted prior to initiating Animal POC for any Construct or Product that is subject of the sublicense and (B) requires 4DMT to manufacture any such Construct or Product for Clinical Trial or commercial purposes;

(iii) [***] percent ([***]%) for any sublicense that does not meet the criteria set forth in Section 6.3(a)(i) or Section 6.3(a)(ii) above;

provided, however, that none of subsections (i), (ii) or (iii) shall result in 4DMT paying to uniQure under this Section 6.3 a percentage of any 4D Sublicense Consideration consisting of royalties from Sublicensees on sales of UC Products during the applicable Royalty Term that is less than [***] percent ([***]%) of Net Sales by such Sublicensee of such UC Products.

(d) The term “4D Sublicense Consideration” shall mean consideration of any kind received by 4DMT from a Sublicensee for the grant of a sublicense under this Agreement, such as upfront fees, royalties or milestone fees and including any premium paid by the Sublicensee over the Fair Market Value (as defined below) for stock of 4DMT in consideration for such sublicense; provided, however, the following are not included in Sublicense Consideration:

(i) Support for activities of 4DMT relating to the research, Development, manufacturing or Commercialization of Royalty Bearing Products, which shall not exceed the fully burdened cost (and in the case of manufacturing costs, the Fully Burdened Manufacturing Cost) for undertaking such activities performed by or for 4DMT (including Third Parties on 4DMT’s behalf) by more than [***] percent ([***]%);

(ii) Proceeds derived from debt financing and any loans to 4DMT by the Sublicensee;

(iii) Consideration received for the purchase of stock in 4DMT or its Affiliate to the extent that the price per share for such equity does not exceed the Fair Market Value of such stock. The term “Fair Market Value” shall mean the average price at which the stock in question is publicly trading at for [***] ([***]) days prior to the earlier of (A) the date of the announcement of its purchase by the Sublicensee or (B) the date of its purchase by the Sublicensee, or if the stock is not publicly traded, the value of such stock as determined in good faith by the Board of Directors of 4DMT or its applicable Affiliate as of the time of receipt of payment; and

(iv) Reimbursement of 4DMT’s patent costs related to Patent Rights.

 

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(e) For purposes of this Article 6, “Sublicense Consideration received by uniQure” shall include Sublicense Consideration received by uniQure’s Affiliates (applying the definition of Sublicense Consideration mutatis mutandis to such Affiliates) and “4D Sublicense Consideration received by 4D” shall include 4D Sublicense Consideration received by 4DMT’s Affiliates (applying the definition of Sublicense Consideration mutatis mutandis to such Affiliates).

6.4 Reports; Payments. Within [***] ([***]) days after the end of each Calendar Quarter during which there are Net Sales giving rise to a payment obligation under Section 6.2 or uniQure (or 4DMT, as applicable) received Sublicense Consideration or 4D Sublicense Consideration giving rise to a payment obligation under Section 6.3, (a) uniQure (or 4DMT as applicable) shall submit to 4DMT (or uniQure as applicable) a report (i) identifying for each Royalty Bearing Product the Net Sales for such Royalty Bearing Product for each country for such Calendar Quarter, the calculation of royalties (including gross sales and all deductions taken from gross sales and all reductions pursuant to Section 6.2(c)), and the royalties payable to 4DMT (or uniQure as applicable) and (ii) identifying the Sublicense Consideration received by uniQure (or 4DMT as applicable) in such Calendar Quarter and the one or more Sublicense Income Sharing Percentages applicable to such Sublicense Consideration, or 4D Sublicense Income Sharing Percentages applicable to such 4D Sublicense Consideration and (b) uniQure (or 4DMT as applicable) shall pay to 4DMT (or uniQure as applicable) all royalties payable under Section 6.2 and portions of Sublicense Consideration or 4D Sublicense Consideration payable under Section 6.3.

6.5 Books and Records; Audit Rights. Each Party (the “Audited Party”) shall keep (and shall cause its Affiliates and Sublicensees to keep) complete, true and accurate books and records in accordance with its Accounting Standards in sufficient detail for the other Party (the “Auditing Party”) to determine the payments due under this Agreement. Each Auditing Party shall have the right, once annually at its own expense, to have an independent, certified public accounting firm of nationally recognized standing, selected by the Auditing Party and reasonably acceptable to the Audited Party, review any such records of the Audited Party in the location(s) where such records are maintained by the Audited Party upon reasonable notice (which shall be no less than [***] ([***]) days prior notice) and during regular business hours and under obligations of strict confidence, for the sole purpose of verifying the accuracy of the amounts paid under this Agreement within a [***] period preceding the date of the request for review. The report of such accounting firm shall be limited to a certificate stating whether any report made or invoice or payment submitted by the Audited Party during such period is accurate or inaccurate, and the amount of any Net Sales, Sublicense Consideration, 4D Sublicense Consideration, royalty or other payment discrepancy. No other information shall be provided to the Auditing Party. The Audited Party shall receive a copy of each such report concurrently with receipt by the Auditing Party. Should such inspection lead to the discovery of a discrepancy to the Auditing Party’s detriment, the Audited Party shall pay the amount of the discrepancy within [***] ([***]) days after its receipt from the accounting firm of the certificate showing the amount of the discrepancy. The Auditing Party shall pay the full cost of the review unless the audit determined an underpayment of royalties by the Audited Party which is greater than [***] percent ([***]%) of the amount due for the applicable period, in which case the Audited Party shall pay the reasonable costs charged by such accounting firm for such review. Any overpayment of royalties by uniQure (or 4DMT, as applicable) revealed by an inspection shall be fully creditable against future royalty payments by such Audited Party under Section 6.2.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

6.6 Withholding Taxes.

(a) Subject to the provisions of Section 12.7, if Laws require withholding by uniQure of taxes imposed upon 4DMT on account of any royalty or other payment paid under this Agreement, such taxes shall be deducted by uniQure as required by Law from such remittable royalty or other payment and shall be paid by uniQure to the proper tax authorities; provided that before making any such deduction or withholding, uniQure shall give 4DMT notice of the intention to make such deduction or withholding, which notice shall include the authority, basis and method of calculation for the proposed deduction or withholding, and shall be provided to the extent practicable at least a reasonable period of time before such deduction or withholding is required, in order for 4DMT to obtain reduction of or relief from such deduction or withholding. Official receipts of payment of withholding taxes shall be secured and sent to 4DMT as evidence of such payment. The Parties shall exercise their best efforts to ensure that any withholding tax imposed is reduced as far as possible under the provisions of any relevant tax treaty.

(b) Subject to the provisions of Section 12.7, if Laws require withholding by 4DMT of taxes imposed upon uniQure on account of any royalty or other payment paid under this Agreement, such taxes shall be deducted by 4DMT as required by Law from such remittable royalty or other payment and shall be paid by 4DMT to the proper tax authorities; provided that before making any such deduction or withholding, 4DMT shall give uniQure notice of the intention to make such deduction or withholding, which notice shall include the authority, basis and method of calculation for the proposed deduction or withholding, and shall be provided to the extent practicable at least a reasonable period of time before such deduction or withholding is required, in order for uniQure to obtain reduction of or relief from such deduction or withholding. Official receipts of payment of withholding taxes shall be secured and sent to uniQure as evidence of such payment. The Parties shall exercise their best efforts to ensure that any withholding tax imposed is reduced as far as possible under the provisions of any relevant tax treaty.

6.7 United States Dollars. All dollar ($) amounts specified in this Agreement are United States dollar amounts.

6.8 Payment Method and Currency Conversion. Except as otherwise provided herein, all payments due to a Party hereunder shall be due and payable within [***] ([***]) days after receipt of an invoice from the other Party and shall be paid via a bank wire transfer to such bank account as such Party shall designate. For the purposes of determining the amount of any payment due hereunder for the relevant Calendar Quarter under Section 6.2 or Section 6.3, amounts received by a Party in any foreign currency shall be converted into United States dollars in accordance with the normal business practice of such Party, as applied consistently across its business.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

6.9 Blocked Payments. (a) If, by reason of applicable Laws in any country in the Territory, it becomes impossible or illegal for uniQure or any of its Affiliates or Sublicensees to transfer, or have transferred on its behalf, royalties or other payments to 4DMT, uniQure shall promptly notify 4DMT of the conditions preventing such transfer and such royalties or other payments shall be deposited in local currency in the relevant country to the credit of 4DMT in a recognized banking institution with a good creditworthiness, such banking institution to be designated by 4DMT or, if none is designated by 4DMT within [***] ([***]) days, in a recognized banking institution selected by uniQure or its Affiliate or Sublicensee, as the case may be, and identified in a written notice given to 4DMT. If so deposited in a foreign country, uniQure shall provide, or cause its Affiliate or Sublicensee to provide, reasonable cooperation to 4DMT so as to allow 4DMT to assume control over such deposit as promptly as practicable.

(b) If, by reason of applicable Laws in any country in the Territory, it becomes impossible or illegal for 4DMT or any of its Affiliates or Sublicensees to transfer, or have transferred on its behalf, royalties or other payments to uniQure, 4DMT shall promptly notify uniQure of the conditions preventing such transfer and such royalties or other payments shall be deposited in local currency in the relevant country to the credit of uniQure in a recognized banking institution with a good creditworthiness, such banking institution to be designated by uniQure or, if none is designated by uniQure within [***] ([***]) days, in a recognized banking institution selected by 4DMT or its Affiliate or Sublicensee, as the case may be, and identified in a written notice given to uniQure. If so deposited in a foreign country, 4DMT shall provide, or cause its Affiliate or Sublicensee to provide, reasonable cooperation to uniQure so as to allow uniQure to assume control over such deposit as promptly as practicable.

6.10 Late Payments. Any payment not made within [***] ([***]) Business Days after the due date for such payment pursuant to the terms of this Agreement shall bear interest at a rate of the thirty-day U.S. dollar LIBOR rate effective for the date that payment was due (as published in The Wall Street Journal, Eastern Edition) plus [***] per annum. Calculation of interest will be made for the exact number of days the payment was past due based on a year of 360 days (actual days/360).

ARTICLE VII

PATENTS

7.1 Disclosure. Each Party shall promptly disclose to the other Party any Inventions that it or its Affiliates or Sublicensees or their employees, independent contractors, or agents solely or jointly make, conceive, reduce to practice, or otherwise discover under this Agreement, and each Party shall maintain and make available to the other Party records regarding any Inventions that it has an obligation to assign under Section 7.2(a).

7.2 Ownership.

(a) uniQure shall solely own all Core uniQure Intellectual Property, and 4DMT shall solely own all Core 4DMT Intellectual Property. Without limiting the generality of the foregoing, this means that 4DMT shall own the New Variant Patents, and uniQure shall own the uniQure Product Patents. All other Inventions arising under this Agreement or the Parties’ activities hereunder, shall be owned by inventorship. Without additional consideration, each Party

 

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shall assign and hereby does assign to the other Party such of its right, title, and interest in and to such Inventions, Know-How and Patent Rights (and shall require its Affiliates and Sublicensees, and all employees, independent contractors and their employees, and agents of such Party and its Affiliates and Sublicensees to so assign to the other Party such of their right, title, and interest) and agrees to take all necessary actions and execute any documents as is necessary to effectuate the allocation of right, title, and interest as set forth in this Section 7.2(a).

(b) Except as otherwise expressly set forth in Section 7.2(a), as between the Parties, (i) each Party shall solely own all Know-How and Inventions invented solely by employees, agents and consultants of such Party or its Affiliates, and any Patent Right related thereto, subject to the licenses granted under ARTICLE V, and (ii) Know-How and Inventions invented jointly by employees, agents, or consultants of the Parties or their Affiliates (“Joint Intellectual Property”, which includes any Patent Right Covering such Know-How and Inventions (“Joint Patent Rights”) and any Know-How included in such Joint Intellectual Property (“Joint Know-How”)) shall be jointly owned, subject to the licenses granted under ARTICLE V. Inventorship shall be determined in accordance with U.S. patent Laws for purposes of determining ownership in accordance with the foregoing. Except as explicitly provided for herein, the nature of the ownership rights in Joint Patent Rights shall be equivalent to the rights of co-inventors under U.S. patent law in the absence of a written agreement.

(c) Except as expressly provided in this Agreement, and subject to any restriction herein (including the licenses granted under ARTICLE V), (i) each joint owner may engage in research, Development, manufacturing and Commercialization activities relating to Joint Intellectual Property, and (ii) each may assign, license, sell or otherwise encumber or transfer any such interest without the prior written approval of the other Party and without obligation to account or provide compensation to the other Party.

7.3 uniQure Prosecution and Maintenance of Patent Rights.

(a) uniQure shall be solely responsible for the Prosecution and Maintenance of the uniQure Patent Rights, including the Core uniQure Patent Rights, at its sole expense and its sole discretion. uniQure shall give 4DMT an opportunity to review the text of each application, office action response or other substantive document for a Core uniQure Patent Right specifically relating to [***] (but not any other uniQure Patent Right) before filing with any patent office in the Territory, shall consider 4DMT’s reasonable comments with respect thereto, and shall supply 4DMT with a copy of each such application, office action response or other substantive document as filed, together with notice of its filing date and serial number.

(b) uniQure shall have the sole right to determine whether any patent application is filed with respect to any Core uniQure Know-How and whether to maintain any Invention included in the Core uniQure Know-How as a trade secret. uniQure shall provide 4DMT with written notice if uniQure elects not to file a patent application claiming any particular Invention included in the Core uniQure Know-How (each, a “Trade Secret Election”).

 

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(c) Notwithstanding anything express or implied and provided that a Patent Right has not been filed hereunder with respect to a New Capsid Variant, uniQure shall give reasonable notice to 4DMT (no less than [***] ([***]) days) prior to filing a uniQure Product Patent disclosing a New Capsid Variant, and the Parties shall cooperate reasonably in the filing of such uniQure Product Patent, including coordinating the timely filing of a Patent Right with respect to a New Capsid Variant and, where appropriate, the simultaneous filing of such patents by each Party.

7.4 4DMT Prosecution and Maintenance of Patent Rights.

(a) 4DMT shall be solely responsible for the Prosecution and Maintenance of the 4DMT Patent Rights, including the Core 4DMT Patent Rights, at its sole expense and its sole discretion. 4DMT will reasonably inform uniQure regarding the Prosecution and Maintenance of 4DMT Patent Rights ([***]). Notwithstanding the foregoing, the Parties acknowledge that UC will handle the Prosecution and Maintenance of the UC Patent Rights in accordance with the terms of the UCB Agreements.

(b) 4DMT shall have the sole right to determine whether any patent application is filed with respect to any Core 4DMT Know-How and whether to maintain any Invention included in the Core 4DMT Know-How as a trade secret. 4DMT shall provide uniQure with written notice if 4DMT elects not to file a patent application claiming any particular Invention included in the Core 4DMT Know-How specifically relating to compositions of matter of, methods of use of, or methods of making any New Capsid Variant because 4DMT prefers to maintain such Invention as a trade secret (each, a “Trade Secret Election”).

(c) 4DMT shall notify uniQure at least [***] ([***]) days in advance of any applicable deadline if (i) 4DMT decides that it does not wish to continue the Prosecution and Maintenance of a published Core 4DMT Patent Right specifically relating to [***] for which no substitute has been filed, or (ii) 4DMT decides that it intends to abandon claim scope in a [***], which claim scope is intended to be maintained by uniQure, in which case, with respect to this clause (ii), uniQure may assume responsibility for such claim scope by filing a divisional application restricted to such claim scope. In such cases (i) or (ii), 4DMT shall allow uniQure to assume responsibility for Prosecution and Maintenance of such Core 4DMT Patent Right or divisional application [***]. If uniQure assumes such responsibility, then uniQure may designate any counsel of its choice reasonably acceptable to 4DMT to handle the Prosecution and Maintenance of such Core 4DMT Patent Right or divisional application (which shall otherwise continue to be part of the Core 4DMT Patent Rights).

7.5 Prosecution and Maintenance of Joint Patent Rights. The Prosecution and Maintenance of any Joint Patent Right shall be through a mutually selected patent counsel. Within [***] ([***]) days following the Effective Date, the Parties shall agree on a patent counsel (“Joint Counsel”) who shall be engaged by both Parties for the Prosecution and Maintenance of all such Joint Patent Rights. The following terms shall apply to each Joint Patent Right:

(a) The Parties shall instruct Joint Counsel to conduct its activities as follows: The Joint Counsel shall give uniQure and 4DMT (or each Party’s designee) an opportunity to review the text of each application, office action response or other substantive document for a Joint Patent Right before filing with any patent office in the Territory, shall

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

incorporate uniQure’s and 4DMT’s (or each Party’s designee) reasonable comments with respect thereto, and shall supply uniQure and 4DMT (or each Party’s designee) with a copy of each such application, office action response or other substantive document as filed, together with notice of its filing date and serial number. In the event that 4DMT and uniQure provide Joint Counsel with conflicting instructions regarding the Prosecution and Maintenance of a Joint Patent Right, Joint Counsel shall make the Parties aware of such conflicting instructions and, if the Parties are not able to resolve such conflict within a reasonable time prior to the applicable filing deadline, the Joint Counsel shall take such action as would reasonably be expected to maximize the scope, extent and coverage of such Joint Patent Right.

(b) Both Parties shall cooperate with Joint Counsel in Prosecution and Maintenance of patent applications for Joint Patent Rights, including providing Joint Counsel with data and other information as appropriate with respect thereto.

(c) Joint Counsel shall keep uniQure and 4DMT advised of the status of the Prosecution and Maintenance of Joint Patent Rights, including actual and prospective patent filings for Joint Patent Rights, and shall provide each Party with advance copies of any and all papers related thereto. Joint Counsel shall promptly give notice to uniQure and 4DMT of the grant, lapse, revocation, surrender, invalidation or abandonment of any Joint Patent Right.

(d) The Parties shall equally share all fees and costs charged by Joint Counsel with respect to the Prosecution and Maintenance of Joint Patent Rights and all other mutually agreed and approved out-of-pocket costs and expenses incurred by either Party in connection with such Prosecution and Maintenance of Joint Patent Rights.

(e) uniQure shall notify 4DMT and Joint Counsel at least [***] ([***]) days in advance of the next deadline if (A) uniQure decides that it does not wish to continue paying for the Prosecution and Maintenance of a particular Joint Patent Right for which no substitute has been filed, or (B) uniQure decides that it intends to abandon claim scope in a Joint Patent Right which claim scope is intended to be maintained by 4DMT, in which case, with respect to this clause (B), 4DMT may assume responsibility for such claim scope by filing a divisional application restricted to such claim scope. In such cases (A) or (B), uniQure shall allow 4DMT to assume responsibility for Prosecution and Maintenance of the respective Patent Rights, including [***]. If 4DMT assumes such responsibility, then: (i) 4DMT may designate any counsel of its choice to handle the Prosecution and Maintenance of such Joint Patent Right or of the divisional application and it shall cease to be a part of the Joint Patent Rights; (ii) uniQure shall lose its licenses to such former Joint Patent Right or divisional application under ARTICLE V and such former Joint Patent Right or divisional application shall be deemed a 4DMT Patent Right; and (iii) uniQure shall and hereby does transfer and assign all right, title and interest in said former Joint Patent Right or of the divisional application to 4DMT as the sole owner. If 4DMT decides not to assume such responsibility, then it shall instruct Joint Counsel to abandon the Prosecution and Maintenance of such Joint Patent Right or not to file such divisional application.

 

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(f) 4DMT shall notify uniQure and Joint Counsel at least [***] ([***]) days in advance of the next deadline if (A) 4DMT decides that it does not wish to continue paying for the Prosecution and Maintenance of a particular Joint Patent Right for which no substitute has been filed, or (B) 4DMT decides that it intends to abandon claim scope in a Joint Patent Right which claim scope is intended to be maintained by uniQure, in which case, with respect to this clause (B), uniQure may assume responsibility for such claim scope by filing a divisional application restricted to such claim scope. In such cases (A) or (B), 4DMT shall allow uniQure to assume responsibility for Prosecution and Maintenance of the respective Patent Rights, including [***]. If uniQure assumes such responsibility, then: (i) uniQure may designate any counsel of its choice to handle the Prosecution and Maintenance of such Joint Patent Right or of the divisional application and it shall cease to be a part of the Joint Patent Rights and no further uniQure royalty obligations shall exist under this Agreement with respect thereto; (ii) 4DMT shall lose its licenses to such former Joint Patent Right or divisional application under ARTICLE V and such former Joint Patent Right or divisional application shall be deemed a uniQure Patent Right; and (iii) 4DMT shall and hereby does transfer and assign all right, title and interest in said former Joint Patent Right or of the divisional application to uniQure as the sole owner. If uniQure decides not to assume such responsibility, then it shall instruct Joint Counsel to abandon the Prosecution and Maintenance of such Joint Patent Right or not to file such divisional application.

7.6 Third Party Infringement.

(a) Notice. Each Party shall promptly report in writing to the other Party any known or suspected (i) infringement of any of the 4DMT Patent Rights, uniQure Patent Rights or Joint Patent Rights, or (ii) unauthorized use or misappropriation of any of the 4DMT Know-How, uniQure Know-How or Joint Know-How, of which such Party becomes aware and shall provide the other Party with all available evidence regarding such known or suspected infringement or unauthorized use.

(b) Enforcement of Solely Owned Patent Rights. uniQure shall have the sole right to enforce the uniQure Patent Rights, including the Core uniQure Patent Rights. Subject to UC’s rights under the UCB Agreements with respect to any UC Patent Right included in the 4DMT Patent Rights, 4DMT shall have the sole right to enforce any 4DMT Patent Right, including the Core 4DMT Patent Rights. Each Party shall cooperate in the prosecution of any such suit brought by the enforcing Party as may be reasonably requested by the enforcing Party; provided that the enforcing Party shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by the non-enforcing Party in connection with such cooperation.

(c) Enforcement of Joint Patent Rights.

(i) Restricted Target Products. uniQure shall have the first right, but not the obligation, to initiate a lawsuit or take other reasonable action to enforce the Joint Patent Rights against any infringement in the Field by a Product that delivers a Transgene related to a Restricted Target. 4DMT shall cooperate in the prosecution of any such suit as may be reasonably requested by uniQure, including joining any action as party-plaintiff at uniQure’s sole discretion; provided that uniQure shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by 4DMT in connection with such cooperation.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(ii) Non-Restricted Target Products. 4DMT shall retain any and all rights to initiate a lawsuit or take other reasonable action to enforce the Joint Patent Rights against any infringement that is (A) outside the Field, and/or (B) by Products related to Non-Restricted Targets. uniQure shall cooperate in the prosecution of any such suit as may be reasonably requested by 4DMT, including joining any action as party-plaintiff at 4DMT’s sole discretion; provided that 4DMT shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by uniQure in connection with such cooperation.

(iii) Step-In Right of 4D. If uniQure does not initiate a lawsuit or take other reasonable action pursuant to this Section 7.6(c) regarding infringement or alleged infringement of a New Variant Patent, then 4DMT shall have the right, but not the obligation, to initiate such lawsuit or take such other action, after providing [***] ([***]) days’ notice to uniQure and giving good faith consideration to uniQure’s reason(s) for not initiating a lawsuit or taking other action. For this purpose, uniQure shall cooperate in the prosecution of any such suit as may be reasonably requested by 4DMT, including joining any action as party-plaintiff if needed for standing purposes; provided, that 4DMT shall promptly reimburse all out-of-pocket expenses (including reasonable counsel fees and expenses) actually incurred by uniQure in connection with such cooperation.

(d) Conduct of Certain Actions; Costs. The Party initiating legal action shall have the sole and exclusive right to select counsel for any suit initiated by it pursuant to Section 7.6(b) or 7.6(c) (the “Initiating Party”). The Initiating Party shall bear its own out-of-pocket costs incurred in any such legal action, including the fees and expenses of the counsel selected by it. The other Party shall have the right to participate and be represented in any such legal action (in cases where such other Party has standing) by its own counsel at its own expense. The Initiating Party shall have the final say about the strategy and decisions in the suit and any settlement.

(e) Recoveries. Any amount recovered in any action or settlement of any such action shall be allocated first to equally reimburse each Party’s actual out-of-pocket costs (including reasonable attorneys’ fees and expenses) incurred in such action and any amount remaining shall be allocated to the Initiating Party; provided that for recoveries for infringement within the Field, the amount of remaining recovery received by the Initiating Party or its Affiliate will be [***].

7.7 Patent Invalidity Claim. Each Party shall promptly notify the other in the event of any legal or administrative action by any Third Party against a 4DMT Patent Right, uniQure Patent Right or Joint Patent Right of which it becomes aware, including any nullity, revocation, reexamination or compulsory license proceeding. To the extent such action is in connection with an enforcement of such Patent Right under Section 7.6, the Parties’ rights with respect to defending any such Patent Right in any such proceeding shall correspond to those set forth in Section 7.6.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7.8 Patent Term Extensions.

(a) uniQure shall have full and exclusive right to determine and control all filings of requests for any patent term extension or supplemental patent certificate or their equivalents in any country in the Territory for any uniQure Patent Right, including any Core uniQure Patent Right, and all costs and expenses relating thereto shall be paid by uniQure.

(b) 4DMT shall have full and exclusive right to determine and control all filings of requests for any patent term extension or supplemental patent certificate or their equivalents in any country in the Territory for any 4DMT Patent Right, including any Core 4DMT Patent Right, and all costs and expenses relating thereto shall be paid by 4DMT.

(c) The Parties shall jointly determine how to defend any such action relating to any Joint Patent Right.

(d) The Parties shall reasonably cooperate with each other in obtaining patent term extensions or supplemental protection certificates or their equivalents in any country in the Territory.

7.9 Orange Book; Paragraph IV Certification.

(a) uniQure shall have the right, but not the obligation, to list any uniQure Patent Rights in the then-current edition of the FDA publication “Approved Drug Products With Therapeutic Equivalence Evaluations” (the “Orange Book”), or equivalent patent listings in other countries. 4DMT shall have the right, but not the obligation, to list any 4DMT Patent Rights in the then-current edition of the Orange Book, or equivalent patent listings in other countries.

(b) With respect to any notification provided by a Third Party to uniQure or 4DMT under 21 U.S.C. § 355(j)(2)(B) making a certification described in 21 U.S.C. § 355(j)(2)(A)(vii)(IV) with respect to any uniQure Patent Right that is listed for a Royalty Bearing Product in the Orange Book, or equivalent actions in other countries, (each a “Paragraph IV Certification”), the following shall apply notwithstanding Sections 7.6 and 7.7:

(i) Without any avoidable delay, however at the latest within [***] ([***]) Business Days after receipt of any notification of a Paragraph IV Certification, such Party shall notify the other Party in writing and attach of copy of such notification. uniQure and 4DMT shall thereafter consult and cooperate fully to determine a course of action with respect to any such proceeding, including the negotiation of the offer of confidential access.

(ii) With respect to any uniQure Patent Right, uniQure shall have the sole right to initiate any infringement proceeding as a result of such Paragraph IV Certification (a “Paragraph IV Proceeding”) with respect to a Royalty Bearing Product, including by commencing a patent infringement action under 35 U.S.C. § 271(e)(2)(A), and shall bear the expense of any such Paragraph IV Proceeding and, if legally required, may commence such action in 4DMT’s or the relevant 4DMT Affiliate’s name and on 4DMT’s or the relevant 4DMT Affiliate’s behalf.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) Section 7.6(e) shall apply if any amount is recovered in any Paragraph IV Proceeding or settlement of any Paragraph IV Proceeding under this Section 7.9(b).

7.10 CREATE Act. Each Party acknowledges and agrees that this Agreement is a “joint research agreement” as contemplated by 35 U.S.C. § 102(c), and that all Inventions are intended to have the benefit of the rights and protections conferred by the Cooperative Research and Enhancement Act of 2004 (the “CREATE Act”). In the event that a Party seeks to rely on the foregoing and to invoke the CREATE Act with respect to any Invention, such Party will give prior written notice to the other Party of its intent to invoke the CREATE Act and of each submission or disclosure such Party intends to make to the United States Patent and Trademark Office (the “USPTO”) pursuant to the CREATE Act, including: (a) any disclosure of the existence or contents of this Agreement to the USPTO, (b) the disclosure of any “subject matter developed by the other Party” (as such term is used in the CREATE Act) in an information disclosure statement or otherwise, or (c) the filing of any terminal disclaimer over the intellectual property of the other Party, it being agreed that no such submission, disclosure or filing shall be made by such Party without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed, except that no such consent shall be required to disclose to the USPTO, through an information disclosure statement or otherwise, any “subject matter developed by the other Party” that was previously published or included in a published patent application by the other Party. The other Party will provide reasonable cooperation to such Party in connection with such Party’s efforts to invoke and rely on the CREATE Act.

ARTICLE VIII

CONFIDENTIALITY AND PUBLICATION

8.1 Confidentiality Obligations. Each Party shall (a) maintain in confidence the Confidential Information of the other Party to the same extent such Party maintains its own confidential information, (b) not disclose such Confidential Information to any Third Party without the prior written consent of the other Party, and (c) not use such Confidential Information for any purpose except those permitted by this Agreement. Such obligations shall survive for a period of [***] ([***]) years after termination or expiration of this Agreement, except that such obligations shall survive with respect to any Confidential Information identified by the disclosing Party as a trade secret for so long as such Confidential Information remains a trade secret.

8.2 Exceptions to Confidentiality. Notwithstanding the foregoing, the obligations of confidentiality set forth in Section 8.1 shall not apply to information that, in each case as demonstrated by competent written documentation:

(a) is publicly disclosed or made generally available to the public by the disclosing Party, either before or after it becomes known to the receiving Party;

(b) was known to the receiving Party, without any obligation to keep it confidential, prior to the date of first disclosure by the disclosing Party to the receiving Party, as shown by the receiving Party’s files and records;

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(c) is subsequently disclosed to the receiving Party by a Third Party lawfully in possession thereof without obligation to keep it confidential and without a breach of such Third Party’s obligations of confidentiality;

(d) has been publicly disclosed or made generally available to the public other than through any act or omission of the receiving Party or its Affiliates in breach of this Agreement; or

(e) has been independently developed by the receiving Party without the aid, application or use of the disclosing Party’s Confidential Information (the competent written proof of which must be contemporaneous with such independent development).

8.3 Authorized Disclosure. Notwithstanding Section 8.1, a Party may disclose Confidential Information of the other Party to the extent such disclosure is reasonably necessary in the following instances:

(a) Prosecuting and Maintaining Patent Rights in accordance with this Agreement;

(b) making filings with Regulatory Authorities in accordance with this Agreement;

(c) complying with applicable Laws or submitting information to tax or other Governmental Authorities; provided that if a Party is required by Law to make any public disclosure of Confidential Information of the other Party, to the extent it may legally do so, it will give reasonable advance notice to the other Party of such disclosure and will use its reasonable efforts to secure confidential treatment of such Confidential Information prior to its disclosure (whether through protective orders or otherwise);

(d) to its Affiliates, and to prospective and actual acquirers, licensees, sublicensees, employees, consultants, agents, accountants, lawyers, advisors, investors and underwriters, on a need to know basis, each of whom prior to disclosure must be bound by written or professional ethical obligations of confidentiality and non-use equivalent in scope to those set forth in this ARTICLE VIII and that are of reasonable duration in view of the circumstances of the disclosure; or

(e) to the extent mutually agreed to in writing by the Parties.

8.4 Scientific Publications. During the Research Term, neither Party shall first publish or first present in a public forum the scientific or technical results of any activity performed pursuant to this Agreement without the opportunity for prior review and comment by and obtaining the permission of the other Party, except that either Party may publish or first present in a public forum any information related to the Research Program and/or any pre-clinical or clinical results obtained by such Party pertaining to any New Capsid Variants, without the need to obtain the other Party’s review or permission, provided that the publication or presentation does not disclose the sequence of any New Capsid Variant for which a Patent Right has not yet been filed under this Agreement, and provided in the case of uniQure that the publication must

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

only present data and information as to a Royalty-Bearing Construct or Royalty-Bearing Product for which uniQure at that time holds a commercialization license under this Agreement, not a New Capsid Variant outside the context of a Royalty-Bearing Construct or Royalty-Bearing Product for which uniQure at that time holds a commercialization license under this Agreement.

8.5 Press Releases and Other Permitted Disclosures.

(a) 4DMT and uniQure each agree not to disclose any of the terms and conditions of this Agreement to any Third Party, except as described below in this Section 8.5. The Parties will cooperate in the release of a mutually agreed upon press release announcing the collaboration contemplated by this Agreement as soon as practicable after the Effective Date. Subject to the other provisions of this Agreement, no other press release, public statement or public disclosure concerning the existence or terms of this Agreement shall be made, either directly or indirectly, by either Party, without first obtaining the written approval of the other Party, which such approval shall not be unreasonably withheld or delayed beyond [***] ([***]) Business Days (or [***] ([***]) Business Days if the Party wishing to make such disclosure or any of its controlling Affiliates is then a public company) following submission to the approving Party of a draft of the respective press release, public statement or public disclosure. In no event shall any such subsequent press release, public statement or public disclosure by 4DMT disclose, if previously undisclosed, the identity of any Construct or Product or the stage of development of any Construct or Product that uniQure is researching, Developing, manufacturing, or Commercializing; provided that for clarity, uniQure may disclose, without the written approval of 4DMT, the identity of any Construct or Product or the stage of development of any Construct or Product that uniQure is researching, Developing, manufacturing, or Commercializing. In no event shall any such subsequent press release, public statement or public disclosure by a Party disclose, if previously undisclosed, the financial terms of this Agreement; provided that 4DMT may disclose the receipt of, and uniQure may disclose the payment of, any payment but not the amount of such payment; provided, further, however, that if disclosure of the amount of a payment is required by applicable Law, by applicable stock exchange regulation, or by order or other ruling of a competent court, as set forth in Section 8.5(c), then 4DMT or uniQure, as the case may be, may also disclose such amount in a public statement or disclosure. Once any public statement or public disclosure has been approved in accordance with this Section 8.5, then either Party may appropriately communicate information contained in such permitted statement or disclosure.

(b) Either Party may disclose the existence and terms of this Agreement in confidence to its attorneys, to UC, and to each of the following, under an agreement with terms of confidentiality and non-use no less rigorous than the terms contained in this Agreement and, as applicable, to use such information solely for the purpose permitted pursuant to the applicable subsection of this Section 8.5(b):

(i) professional accountants, consultants, or auditors;

(ii) bankers or other financial advisors, in connection with an initial public offering, private financing or other strategic transaction, or corporate valuation for internal purposes;

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) potential acquirers (and their respective attorneys and professional advisors), in connection with a potential merger, acquisition or reorganization; provided that the Party making the disclosure has a bona fide offer (e.g., a signed term sheet or letter of intent, even if non-binding) from such Third Party for such a transaction;

(iv) to actual or potential investors, lenders or permitted assignees of such Party (and their respective attorneys and professional advisors); or

(v) to actual or potential licensees or sublicensees of such Party (and their respective attorneys and professional advisors); provided that such disclosure in the case of 4DMT shall not include any financial terms, the Delivery Success Criteria, nor any other contents of the Research Plan for Liver nor the Research Plan for CNS.

(c) Notwithstanding the foregoing provisions of this ARTICLE VIII, a Party may disclose the existence and terms of this Agreement, however excluding, as far as legally possible, Schedule 2, or the Parties’ activities under this Agreement, where required, as reasonably determined by the legal counsel of the disclosing Party, by applicable Law, by applicable stock exchange regulation or by order or other ruling of a competent court, although, to the extent practicable, the other Party shall be given [***] ([***]) Business Days advance notice of any such legally required disclosure to comment and reasonably consider such comments provided by such other Party on the proposed disclosure. In case either Party is obliged to publish this Agreement as a “material agreement” in accordance with the U.S. stock exchange regulations (“SEC Filing”), this Agreement shall be redacted by the filing Party as far as legally possible, and the filing Party shall cooperate with the other Party reasonably in advance to such SEC Filing to enable the other Party to review and comment on the scope of such redaction.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

9.1 Representations and Warranties of the Parties. uniQure and 4DMT each represent, warrant and covenant to the other that:

(a) as of the Effective Date, it has the authority and right to enter into and perform this Agreement and grant the rights embodied herein, and it is not aware of any legal impediment that could inhibit its ability to perform its obligations under this Agreement;

(b) as of the Effective Date, its execution, delivery and performance of this Agreement does not conflict with, or constitute a breach of, any order, judgment, agreement or instrument to which it is a party or is otherwise bound;

(c) it shall comply in all material respects with all Laws applicable to its actions under this Agreement; and

(d) as of the Effective Date, no consent of any Third Party is required for such Party to grant the licenses and rights granted to the other Party under this Agreement or to perform its obligations hereunder.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

9.2 Representations and Warranties of 4DMT. 4DMT represents, warrants and covenants to uniQure that:

(a) [Intentionally omitted.]

(b) as of the Effective Date, 4DMT has not previously assigned, transferred, conveyed or otherwise encumbered its right, title and interest in 4DMT Intellectual Property in a manner inconsistent with the terms hereof;

(c) as of the Effective Date, 4DMT has valid and existing licenses, free and clear of all liens, charges and encumbrances, to the 4DMT Patent Rights not owned by 4DMT;

(d) as of the Effective Date, to 4DMT’s knowledge, the conception, development and reduction to practice of the 4DMT Intellectual Property has not constituted or involved the misappropriation of trade secrets of any Third Party or the infringement of issued Patent Rights of any Third Party;

(e) as of the Effective Date, 4DMT has not received any written notice of any unauthorized use, infringement, or misappropriation by any person or entity, including any current or former employee or consultant of 4DMT, of any 4DMT Intellectual Property;

(f) as of the Effective Date, to 4DMT’s knowledge, there are no claims, judgments, settlements pending or any action with respect to the 4DMT Intellectual Property;

(g) as of the Effective Date, to 4DMT’s knowledge, uniQure’s use of the 4DMT Intellectual Property, as reasonably anticipated to be used in the conduct of the Research Program, will not infringe any valid Patent Right existing as of the Effective Date and owned by any Third Party;

(h) all of 4DMT’s personnel and employees, and Third Parties, including agents and consultants, hired by 4DMT and involved in the Research Program are, or when hired will be, under a written obligation to assign to 4DMT any right they may have in any Invention first invented, discovered, made, conceived or reduced to practice in the conduct of activities pursuant to the Research Program, and all intellectual property rights therein;

(i) it will not, after the Effective Date, enter into any written or oral contractual obligation with any Third Party that would be inconsistent with the obligations that arise on its part out of this Agreement or that would deprive uniQure of the benefits of or rights granted under this Agreement;

(j) as of the Effective Date, each of the UCB Agreements is in full force and effect, and 4DMT will not, after the Effective Date, terminate, amend or otherwise modify any of the terms thereof without prior written consent from uniQure, or take any action or refrain from taking any action that would permit UC to terminate any UCB Agreement (it being recognized that if the New Capsid Variants are not UC AAV Capsid Variants, and UC terminates any UCB Agreement, 4DMT shall not be deemed to be in breach of the foregoing), and 4DMT shall promptly provide uniQure with a copy of each notice it receives from UC under any UCB Agreement; and

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(k) if, during the Term, 4DMT has reason to believe that it or any of its employees, officers, subcontractors, or consultants rendering services hereunder (i) is or shall be debarred or convicted of a crime under 21 U.S.C. Section 335a, or (ii) is or shall be under indictment under said Section 335a, then 4DMT shall immediately notify uniQure in writing.

For purposes of this Section 9.2, “knowledge” shall mean the actual knowledge of 4DMT, including [***].

9.3 Representations and Warranties of uniQure. uniQure represents, warrants and covenants to 4DMT that:

(a) all of uniQure’s personnel and employees, and Third Parties, including agents and consultants, hired by uniQure and involved in the Research Program are, or when hired will be, under a written obligation to assign to uniQure any right they may have in any Invention first invented, discovered, made, conceived or reduced to practice in the conduct of activities pursuant to the Research Program, and all intellectual property rights therein;

(b) it will not, after the Effective Date, enter into any written or oral contractual obligation with any Third Party that would be inconsistent with the obligations that arise on its part out of this Agreement or that would deprive 4DMT of the benefits of or rights granted under this Agreement;

(c) if, during the Term, uniQure has reason to believe that it or any of its employees, officers, subcontractors, or consultants rendering services hereunder (i) is or shall be debarred or convicted of a crime under 21 U.S.C. Section 335a, or (ii) is or shall be under indictment under said Section 335a, then uniQure shall immediately notify 4DMT in writing.

9.4 No Other Warranties.

(a) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY THAT PRODUCT(S) WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF PRODUCT(S) ARE DEVELOPED, WITH RESPECT TO SUCH PRODUCT(S), THE PARTIES DISCLAIM ALL IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

(b) uniQure acknowledges that UC has not warranted to 4DMT under the UCB Agreements as to the validity of any Patent Rights or that practice under such Patent Rights shall be free of infringement. UNIQURE, ITS AFFILIATES AND ITS SUBLICENSEE(S) AGREE THAT (I) THE LICENSES GRANTED PURSUANT TO THE UCB AGREEMENTS, THE UC AAV CAPSID VARIANTS, AND THE ASSOCIATED INVENTIONS ARE PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESSED OR IMPLIED; (II)

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

UC MAKES NO REPRESENTATION OR WARRANTY THAT ANY INVENTION CLAIMED BY THE UC PATENT RIGHTS, THE UC AAV CAPSID VARIANTS, THE UC PATENT RIGHTS, OR THE UC PRODUCTS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT; AND (III) IN NO EVENT WILL UC BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THE LICENSES GRANTED PURSUANT TO THE UCB AGREEMENTS OR THE USE OF ANY INVENTION CLAIMED BY THE UC PATENT RIGHTS, THE UC AAV CAPSID VARIANTS, THE UC PATENT RIGHTS, OR THE UC PRODUCTS.

9.5 Indemnification by uniQure. uniQure shall indemnify, hold harmless and defend 4DMT, its Affiliates and all of their respective officers, directors, employees, agents and shareholders (collectively, the “4DMT Indemnitees”) from and against any and all losses, damages, liabilities, judgments, fines, amounts paid in settlement, expenses and costs of defense (including reasonable attorneys’ fees and witness fees) (collectively, “Damages”) resulting from any demand, claim, action or proceeding brought or initiated by a Third Party (each a “Third Party Claim”) against any 4DMT Indemnitee to the extent arising out of: (a) a Default by uniQure; (b) the negligence or willful misconduct of a uniQure Indemnitee; or (c) the use, Development, Commercialization, storage or other exploitation of any Construct or Product by uniQure, its Affiliates, Sublicensees, Third Party Distributors, or Third Party independent contractors; provided that (i) the 4DMT Indemnitees shall comply with the procedures set forth in Section 9.7(a); and (ii) such indemnity shall not apply to the extent such Third Party Claim is subject to indemnification by 4DMT under Section 9.6.

9.6 Indemnification by 4DMT. 4DMT shall indemnify, hold harmless and defend uniQure, its Affiliates and all of their respective officers, directors, employees, agents, and shareholders (collectively, the “uniQure Indemnitees”) from and against any and all Damages resulting from any Third Party Claim against any uniQure Indemnitee to the extent arising out of: (a) a Default by 4DMT; (b) the negligence or willful misconduct of a 4DMT Indemnitee; or (c) the use, Development, Commercialization, storage or other exploitation of any 4DMT AAV Capsid Variant, Construct or Product (other than a uniQure Product Developed, or Commercialized by uniQure, its Affiliate, or Sublicensee) by 4DMT, its Affiliates, Sublicensees or Third Party independent contractors; provided that (i) the uniQure Indemnitees shall comply with the procedures set forth in Section 9.7(b); and (ii) such indemnity shall not apply to the extent such Third Party Claim is subject to indemnification by uniQure under Section 9.5.

9.7 Procedure.

(a) To be eligible for the 4DMT Indemnitees to be indemnified hereunder, 4DMT shall provide uniQure with prompt notice of the Third Party Claim giving rise to the indemnification obligation under Section 9.5 and the exclusive ability to defend or settle any such claim; provided however that uniQure shall not enter into any settlement for damages, or that imposes upon 4DMT any obligation or liability, without 4DMT’s prior written consent, such consent not to be unreasonably withheld, delayed or conditioned. 4DMT shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by uniQure.

 

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(b) To be eligible for the uniQure Indemnitees to be indemnified hereunder, uniQure shall provide 4DMT with prompt notice of the Third Party Claim giving rise to the indemnification obligation under Section 9.6 and the exclusive ability to defend or settle any such claim; provided however that 4DMT shall not enter into any settlement for damages, or that imposes upon uniQure any obligation or liability, without uniQure’s prior written consent, such consent not to be unreasonably withheld, delayed or conditioned. uniQure shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by 4DMT.

9.8 uniQure Indemnity to UC. uniQure shall, and shall require its Sublicensees to, indemnify, defend, and hold harmless UC and IGT, and their officers, employees, and agents; sponsor(s) of the research that led to the inventions disclosed in the UC Patent Rights and the UC AAV Capsid Variants; and the inventors of any UC Patent Rights and their employers against any and all losses, damages, costs, fees, and expenses resulting from Third Party claims and suits arising out of uniQure’s activities under this Agreement or of any Sublicensee activities under any sublicense agreement granting rights under the UC Patent Rights or the UC AAV Capsid Variants, or any use or possession of the UC AAV Capsid Variants resulting from uniQure’s exploitation of its rights thereto. This indemnification will include any product liability claims. uniQure will keep UC informed of its defense of any claims pursuant to this Section 9.8, and UC will cooperate reasonably in any such suit. If UC invokes the provisions of this Section 9.8, UC will not make any admissions or take any actions in such claim or suit that may prejudice or impair uniQure’s ability to defend such claim or suit without uniQure’s prior written consent, and uniQure will not admit liability or wrongdoing on behalf of UC without UC’s prior written consent.

9.9 Insurance. Each Party shall procure and maintain insurance or self-insurance, including general liability insurance and product liability insurance, adequate to cover its obligations hereunder and that are consistent with normal business practices of prudent companies similarly situated, at all times during which any Research Construct, Royalty Bearing Construct, or Royalty Bearing Product is being Developed, clinically tested in human subjects or Commercialized by or on behalf of such Party, its Affiliates or sublicensees, including, in the case of uniQure, its Sublicensees. It is understood that any such insurance or self-insurance shall not be construed to create a limit of a Party’s liability with respect to its indemnification obligations under this ARTICLE IX. Each Party shall provide the other Party with written evidence of such insurance or self-insurance upon request. Each Party shall provide the other Party with written notice at least [***] ([***]) days prior to the cancellation, non-renewal or material change in such insurance or self-insurance which could adversely affect rights hereunder. Without limiting the generality of the foregoing:

(a) uniQure, at its sole cost and expense, will ensure that the applicable entity performing activities in connection with any work performed hereunder, whether uniQure, an Affiliate, or a Sublicensee, will obtain, keep in force, and maintain the following insurance:

(i) prior to the start of Clinical Trials of a UC Product, commercial form general liability insurance (contractual liability included) with limits as follows:

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Each Occurrence		$[***]
Products/Completed Operations Aggregate		$[***]
Personal and Advertising Injury		$[***]
General Aggregate		$[***]

(ii) Upon the start of any Clinical Trials of a UC Product, commercial form general liability insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence		$[***]
Products/Completed Operations Aggregate		$[***]
Personal and Advertising Injury		$[***]
General Aggregate		$[***]

(iii) Upon the First Commercial Sale of a UC Product, commercial form general liability insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence		$[***]
Products/Completed Operations Aggregate		$[***]
Personal and Advertising Injury		$[***]
General Aggregate		$[***]

If the above insurance is written on a claims-made form, it shall continue for [***] ([***]) years following termination or expiration of this Agreement.

(iv) worker’s compensation as legally required in the jurisdiction in which uniQure, an Affiliate, or a Sublicensee, as applicable, is doing business.

uniQure will promptly notify UC of any material reduction in the insurance coverages below the amounts required hereunder.

(b) Within [***] ([***]) days after the Effective Date, uniQure will furnish 4DMT with certificates of insurance evidencing compliance with all requirements. Such certificates will:

(i) where possible, provide for [***] ([***]) days’ ([***] ([***]) days for non-payment of premium) advance written notice to 4DMT and UC of any cancellation of insurance coverages described above in Section 9.9(a);

(ii) indicate that 4DMT and UC have been endorsed as additional insureds under the coverage described above in Section 9.9(a); and

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(iii) include a provision that the coverages described above in Section 9.9(a) will be primary and will not participate with, nor will be excess over, any valid and collectable insurance or program of self-insurance maintained by 4DMT or UC.

9.10 No Consequential or Punitive Damages. EXCEPT WITH RESPECT TO (a) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDER THIS AGREEMENT WITH RESPECT TO THIRD PARTY CLAIMS, (b) A BREACH OF THE CONFIDENTIALITY OBLIGATIONS OF ARTICLE VIII, (c) A BREACH OF SECTION 5.6, OR (d) A PARTY’S WILLFUL MISCONDUCT, NEITHER PARTY HERETO WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, ARISING FROM OR RELATING TO THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.

ARTICLE X

TERM AND TERMINATION

10.1 Term and Expiration. This Agreement shall be effective as of the Effective Date and unless terminated earlier pursuant to Section 10.2, this Agreement shall continue in effect until the expiration of all of uniQure’s and 4DMT’s payment obligations hereunder (the “Term”). Upon expiration, all licenses granted hereunder shall be fully paid-up, perpetual and irrevocable.

10.2 Termination.

(a) Termination of Agreement for Cause.

(i) This Agreement may be terminated at any time during the Term upon written notice by either Party (the “Non-Defaulting Party”) upon Default of the other Party (the “Defaulting Party”), which Default remains uncured for ninety (90) days after written notice requesting cure of such Default. The Non-Defaulting Party shall provide written notice to the Defaulting Party, which notice shall identify the Default, the intent to so terminate and the actions or conduct that it considers would be an acceptable cure of such Default. If the Defaulting Party disputes the Default under this Section 10.2(a), then the issue of whether the Non-Defaulting Party may properly terminate this Agreement on expiration of the applicable cure period shall be resolved in accordance with ARTICLE XI. If, as a result of such dispute resolution process, it is determined that the alleged Defaulting Party committed a Default and the Defaulting Party does not cure such Default within sixty (60) days after the date of such dispute resolution award (the “Additional Cure Period”), then such termination shall be effective as of the expiration of the Additional Cure Period. If the Parties dispute whether such Default was so cured, either Party alone may request the same tribunal to determine whether it was so cured, and the Parties shall cooperate to allow such determination to be made within thirty (30) days after such request by either Party. Any such dispute resolution proceeding does not suspend any obligation of either Party hereunder, and each Party shall use reasonable efforts to mitigate any damage. If, as a result of any such dispute resolution proceeding, it is determined that the alleged Defaulting Party did not commit such Default (or such Default was cured in accordance with this Section 10.2(a)), then no termination shall be effective, and this Agreement shall continue in full force and effect.

 

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Notwithstanding the foregoing, if the claimed Default relates to one or more Royalty-Bearing Constructs or Royalty-Bearing Products, and not this entire Agreement, then this Agreement shall be terminated only with respect to the Indication for which such Royalty-Bearing Construct(s) or Royalty-Bearing Product(s) were intended to treat and if uniQure was the Defaulting Party then additionally such Indication shall be removed from the Field.

(b) Termination for Bankruptcy. To the extent allowed under applicable Law, either Party shall have the right to terminate this Agreement in the event of the commencement of any proceeding in or for bankruptcy, insolvency, dissolution or winding up by or against the other Party (other than pursuant to a corporate restructuring) that is not dismissed or otherwise disposed of within sixty (60) days thereafter.

(c) Termination for Futility. uniQure shall have the right terminate this Agreement immediately upon written notice to 4DMT summarizing the basis for such termination if, at any point prior to the first (1^st) anniversary of the Effective Date, the JRSC determines that (i) it would be futile to continue the Research Program, including if the JRSC determines that any Delivery Success Criteria cannot be met through use of the 4DMT Intellectual Property following the reasonable efforts of 4DMT to achieve such Delivery Success Criteria or (ii) 4DMT is not making bona fide efforts to achieve the timelines set forth in the Research Plan.

(d) Termination for Convenience. uniQure shall have the right terminate this Agreement at any time after the Research Term, for any reason or for no reason, by giving 4DMT ninety (90) days’ prior written notice thereof.

10.3 Effect of Termination

(a) If uniQure terminates this Agreement under Section 10.2(a) or Section 10.2(b):

(i) uniQure’s licenses pursuant to this Agreement shall continue; provided however that uniQure shall continue to fulfill uniQure’s payment obligations with respect to royalties and Sublicense Consideration under ARTICLE VI; and provided further that uniQure may reduce such payment obligations by the amount of monetary damage suffered by uniQure as a direct result of 4DMT’s Default, as determined (A) in a final decision of the arbitrators in accordance with Section 11.2 or, with respect to an Excluded Claim, a court of competent jurisdiction, which decision is not appealable or has not been appealed within the time allowed for appeal, or (B) by the Parties in a settlement agreement;

(ii) 4DMT shall, within [***] ([***]) days after the effective date of such termination, return or cause to be returned to uniQure, copies of all uniQure’s Confidential Information and uniQure Intellectual Property and all Materials provided by uniQure, except that 4DMT may retain one copy of uniQure’s Confidential Information solely for legal archive purposes and to exercise the licenses granted to 4DMT which survive termination of this Agreement;

 

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(iii) For clarity, uniQure shall be released of its ongoing diligence obligations under Section 4.4 (if any) and uniQure and 4DMT shall be released of their disclosure and information exchange obligations under ARTICLE III and ARTICLE IV;

(iv) For clarity, the JRSC and its subcommittees shall not meet anymore; and

Notwithstanding the foregoing, if such termination is under Section 10.2(a) solely with respect to one or more given Indication(s), then uniQure’s licenses pursuant to Section 5.1 will not terminate but the Field is automatically narrowed to exclude the relevant Indication(s); the license granted to 4DMT under Section 5.2(b) shall be automatically adjusted to include the relevant Indication(s) rather than all fields of use; and uniQure’s obligations under subsection (ii) shall be limited to copies of 4DMT’s Confidential Information and 4DMT Intellectual Property and Materials that relate solely to the relevant Indication(s).

(b) Upon termination of this Agreement by uniQure under Section 10.2(c) or Section 10.2(d), or by 4DMT under Section 10.2(a) or Section 10.2(b):

(i) For clarity, uniQure’s licenses pursuant to Section 5.1 and Step-In Rights under Section 4.4 shall terminate as of the effective date of such termination;

(ii) Effective as of the effective date of such termination, the license granted to 4DMT under Section 5.2(b) shall be automatically expanded to include the New Capsid Variants and all fields of use;

(iii) uniQure shall, within [***] ([***]) days after the effective date of such termination, return or cause to be returned to 4DMT, copies of all 4DMT’s Confidential Information and 4DMT Intellectual Property and all Materials provided by 4DMT; except that uniQure may retain one copy of the 4DMT Confidential Information solely for legal archive purposes;

(iv) 4DMT shall, within [***] ([***]) days after the effective date of such termination, return or cause to be returned to uniQure, copies of all uniQure’s Confidential Information and uniQure Intellectual Property and all Materials provided by uniQure, except that 4DMT may retain one copy of uniQure’s Confidential Information solely for legal archive purposes and to exercise the licenses granted to 4DMT which survive termination or are granted upon termination of this Agreement; and

(v) For a period of [***] ([***]) months, if termination occurs after Regulatory Approval of Royalty Bearing Products, uniQure and its Affiliates shall be entitled to finish work in progress and to sell any of the Royalty Bearing Products remaining in inventory in accordance with the terms of this Agreement to the extent such Royalty Bearing Products were being sold in the Territory at the time of termination, provided that such sales shall be subject to the royalty provisions of this Agreement.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

10.4 Effect of Expiration or Termination; Survival.

(a) Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or termination. Any expiration or termination of this Agreement shall be without prejudice to the rights of either Party against the other accrued or accruing under this Agreement prior to expiration or termination, including the obligation to pay royalties for Royalty Bearing Product(s) sold prior to such expiration or termination. Termination of this Agreement shall be in addition to, and shall not prejudice, the Parties’ remedies at law or in equity, including the Parties’ ability to receive legal damages or equitable relief with respect to any breach of this Agreement, regardless of whether or not such breach was the reason for the termination.

(b) The provisions of ARTICLE I, ARTICLE VII (but not Sections 7.4(c) nor 7.6-7.9), ARTICLE VIII, ARTICLE XI, ARTICLE XII, and Sections 4.5, 5.2(b), 5.4, 5.5, 5.6, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 10.3 and 10.4 shall survive any expiration or termination of this Agreement, and with respect to those Royalty Bearing Products in such countries for which uniQure retains a Development and Commercialization license after the expiration or termination of this Agreement, the provisions of ARTICLE VI shall also survive as to uniQure Products in such countries.

ARTICLE XI

DISPUTE RESOLUTION

11.1 Seeking Consensus. If any dispute arises out of, in connection with or related to this Agreement, including disputes over the interpretation, performance, enforcement or breach of this Agreement, including any dispute that is not within the jurisdiction of the JRSC, (a “Dispute”), excluding any dispute resolved in accordance with Section 2.3(c) (subject to Section 2.3(d)), then upon the written request of either Party, the matter shall be referred to the Executives, who shall meet in a good faith effort to resolve the dispute within [***] ([***]) days. If the Parties’ Executives cannot agree on a resolution of the Dispute within such [***] ([***]) day period, then it shall be resolved pursuant to the remaining provisions of this ARTICLE XI.

11.2 Arbitration. If the Parties do not fully settle a Dispute pursuant to Section 2.3 (only as to those matters that may be referred to arbitration) or 11.1, as applicable, and a Party wishes to pursue the matter, each such Dispute that is not an Excluded Claim (as defined below) shall be finally resolved by binding arbitration in accordance with the Rules of Arbitration of the ICC (International Chamber of Commerce) and judgment on the arbitration award may be entered in any court having jurisdiction thereof.

(a) The arbitration shall be conducted by a panel of three (3) persons. Within [***] ([***]) days after initiation of arbitration, each Party shall select one person to act as arbitrator and the two Party-selected arbitrators shall select a third arbitrator within [***] ([***]) days after their appointment. If the arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be appointed by the ICC. The place of arbitration shall be New York City, New York, and all proceedings and communications shall be in English.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b) Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award is rendered or the Dispute is otherwise resolved. Either Party also may, without waiving any remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of that Party pending the arbitration award. The scope of the authority of the arbitrators shall be limited to the strict application of law. The arbitrators shall have no authority to award punitive or any other type of damages not measured by a Party’s compensatory damages, except as permitted by Section 9.10. Each Party participating in an arbitration pursuant to the terms of this Agreement shall, [***]. The arbitrators shall have the power to award recovery of all costs (including reasonable attorney’s fees, administrative fees, arbitrators’ fees and court costs) to the prevailing Party.

(c) Neither Party shall be required to give general discovery of documents, but may be required to produce documents or testimony that are relevant or considered relevant by the arbitrators to the Dispute. It is the objective and intent of the Parties that any arbitration proceeding be conducted in such a manner that a decision will be rendered by the arbitrators within [***] ([***]) days after the third arbitrator is appointed to the panel, and the Parties and the panel selected in the manner provided above will adopt rules and procedures intended to implement such objective and intent.

(d) Except to the extent necessary to confirm or vacate an award or as may be required by Law (including applicable securities laws or the rules of any stock exchange on which a Party’s securities may then be listed), neither a Party nor an arbitrator may disclose the existence, content, or results of arbitration without the prior written consent of both Parties. In no event shall arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the dispute, controversy or claim would be barred by the applicable New York statute of limitations.

(e) The Parties agree that any payment made pursuant to this Agreement pending resolution of the Dispute shall be refunded or credited if the arbitrators or court determines that such payments are not due.

As used in this Section 11.2, the term “Excluded Claim” shall mean a Dispute that concerns (a) the validity, enforceability, scope or infringement of a patent, trademark or copyright; or (b) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory.

ARTICLE XII

MISCELLANEOUS

12.1 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York, other than any principle of conflict or choice of laws that would cause the application of the Laws of any other jurisdiction.

12.2 Waiver. Waiver by a Party of a breach hereunder by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provision. No delay or omission by a Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder shall operate as a waiver of any right, power or privilege by such Party. No waiver shall be effective unless made in writing with specific reference to the relevant provision(s) of this Agreement and signed by a duly authorized representative of the Party granting the waiver.

 

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12.3 Notices. All notices, instructions and other communications hereunder or in connection herewith shall be in writing, shall be sent to the address specified in this Section 12.3 and shall be: (a) delivered personally; (b) transmitted by facsimile; (c) sent by registered or certified mail, return receipt requested, postage prepaid; or (d) sent via a reputable international overnight delivery service. Any such notice, instruction or communication shall be deemed to have been delivered (i) upon receipt if delivered by hand, (ii) when transmitted with electronic confirmation of receipt, if transmitted by facsimile (if such transmission is on a Business Day; otherwise, on the next Business Day following such transmission), provided that an original document is sent via an internationally recognized overnight delivery service (receipt requested), (iii) three (3) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) Business Day after it is sent via a reputable international overnight delivery service.

 

If to 4DMT, to:		4D Molecular Therapeutics, Inc. 5858 Horton St Emerystation North, Suite 460 Emeryville, CA 94608 Attention: CEO Facsimile:
with a copy to:		Latham & Watkins LLP 140 Scott Drive Menlo Park, CA 94025 Attention: [***] Facsimile: [***]
And a required email copy to:		[***]
If to uniQure, to:		uniQure biopharma B.V. P.O. Box 22506 1100 DA Amsterdam The Netherlands Attention: CEO Facsimile: [***]
with a copy to:		[***]

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

12.4 Entire Agreement; Amendment. This Agreement (including its Exhibits and Schedules) contains the complete understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings and writings relating to such subject matter. In particular, it supersedes and replaces the Prior Confidentiality Agreement and any and all term sheets relating to the transactions contemplated by this Agreement and exchanged between the Parties or their Affiliates prior to the Effective Date. No amendment, change or addition to this Agreement will be effective or binding on either Party unless reduced to writing and duly executed on behalf of both Parties.

12.5 Headings. Headings in this Agreement are for convenience of reference only and shall not be considered in construing this Agreement.

12.6 Severability. If any provision or portion thereof in this Agreement is for any reason held to be invalid, illegal or unenforceable, the same shall not affect any other portion of this Agreement, as it is the intent of the Parties that this Agreement shall be construed in such fashion as to maintain its existence, validity and enforceability to the greatest extent possible. In any such event, this Agreement shall be construed as if such clause of portion thereof had never been contained in this Agreement, and there shall be deemed substituted therefor such provision as will most nearly carry out the intent of the Parties as expressed in this Agreement to the fullest extent permitted by applicable Law.

12.7 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned or otherwise transferred by any Party without the consent of the other Party; provided, however, that any Party may, without such consent, assign this Agreement, in whole or in part: (a) to any of its respective Affiliates; provided that the assigning Party shall remain jointly and severally liable with such Affiliate in respect of all obligations so assigned, or (b) to any successor in interest by way of merger, acquisition or sale of all or substantially all of its assets to which this Agreement relates (an “M&A Event”). Any assignment not in accordance with this Section 12.7 shall be void. Each Party agrees that, notwithstanding any provision of this Agreement to the contrary, neither the assignment of this Agreement by a Party in connection with an M&A Event, nor the occurrence of such M&A Event (whether or not a formal assignment of this Agreement occurs), shall provide the non-assigning Party with rights or access to any intellectual property or technology of the acquirer of the assigning Party or its Affiliates that were not Affiliates of the assigning Party prior to such M&A Event. If uniQure assigns its rights and obligations hereunder to an Affiliate or Third Party outside the United States or The Netherlands pursuant to this Section 12.7, and if such Affiliate or Third Party shall be required by applicable Law to withhold additional taxes from or in respect of any amount payable under this Agreement as a result of such assignment, then any such amount payable under this Agreement shall be increased to take into account the additional taxes withheld as may be necessary so that, after making all required withholdings, 4DMT receives an amount equal to the sum it would have received had no such assignment been made.

12.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission or in Adobe Portable Document Format (PDF) sent by electronic mail shall be deemed to be original signatures.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

12.9 Force Majeure. No Party shall be liable for failure of or delay in performing obligations (other than payment obligations) set forth in this Agreement, and no Party shall be deemed in breach of its obligations, if such failure or delay is due to a natural disaster, explosion, fire, flood, tornado, thunderstorm, hurricane, earthquake, war, terrorism, riot, embargo, loss or shortage of power, labor stoppage, substance or material shortage, events caused by reason of laws of any Governmental Authority, events caused by acts or omissions of a Third Party or any other cause reasonably beyond the control of such Party, if the Party affected gives prompt notice of any such cause to the other Party. The Party giving such notice shall thereupon be excused from such of its obligations hereunder as it is thereby disabled from performing for so long as it is so disabled, provided, however, that such affected Party commences and continues to use its Commercially Reasonable Efforts to cure such cause.

12.10 Third Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or enforceable by any Third Party, other than a 4DMT Indemnitee under Section 9.5 or uniQure Indemnitee under Section 9.6. No such Third Party shall obtain any right under any provision of this Agreement or shall by reason of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either Party.

12.11 Relationship of the Parties. Each Party shall bear its own costs incurred in the performance of its obligations hereunder without charge or expense to the other, except as expressly provided in this Agreement. Neither Party shall have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee compensation or benefits of the other Party’s employees. No employee or representative of a Party shall have any authority to bind or obligate the other Party for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said other Party’s approval. For all purposes, and notwithstanding any other provision of this Agreement to the contrary, the legal relationship under this Agreement of each Party to the other Party shall be that of independent contractor. Nothing in this Agreement shall be construed to establish a relationship of partners or joint ventures between the Parties.

12.12 Performance by Affiliates. To the extent that this Agreement imposes obligations on Affiliates of a Party or permits a Party to exercise its rights or perform its obligations through its Affiliates, such Party agrees to cause its Affiliates to perform such obligations and shall guarantee performance of this Agreement by its Affiliates. If any disagreement arises out of the performance of this Agreement by an Affiliate of a Party, or the alleged failure of an Affiliate to comply with the conditions and obligations of this Agreement, the Party seeking to resolve such dispute shall have the right do so directly with the other Party, without any obligation to first pursue an action against, or recovery from, the Affiliate which is alleged to have caused a breach of this Agreement.

12.13 Construction. Each Party acknowledges that it has been advised by counsel during the course of negotiation of this Agreement, and, therefore, that this Agreement shall be interpreted without regard to any presumption or rule requiring construction against the Party causing this Agreement to be drafted. Any reference in this Agreement to an ARTICLE, Section, subsection, paragraph, clause, or Schedule shall be deemed to be a reference to any article, section, subsection, paragraph, clause, schedule or exhibit, of or to, as the case may be, this

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Agreement. Except where the context otherwise requires, (a) wherever used, the use of any gender will be applicable to all genders; (b) the word “or” is used in the inclusive sense (and/or); (c) any definition of or reference to any agreement, instrument or other document refers to such agreement, instrument other document as from time to time amended, supplemented or otherwise modified (subject to any restriction on such amendments, supplements or modifications set forth herein or therein); (d) any reference to any Law refers to such Law as from time to time enacted, repealed or amended; (e) the words “herein”, “hereof” and hereunder”, and words of similar import, refer to this Agreement in its entirety and not to any particular provision hereof; and (f) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “but not limited to”, “without limitation” or words of similar import.

[Signature page follows]

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

IN WITNESS WHEREOF, the Parties have executed this Collaboration and License Agreement as of the New CLA Effective Date.

 

UNIQURE BIOPHARMA B.V.						4D MOLECULAR THERAPEUTICS, INC.
BY:		/s/ Lilly Burggraaf				BY:		/s/ David Kirn
NAME: Lilly Burggraaf						NAME: David Kirn, MD
TITLE: Vice President, Global Human Resources						TITLE: Chief Executive Officer

 

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

SCHEDULE 1

DRAFT INVOICE

Omitted pursuant to Regulation S-K, Item 601(a)(5).

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

SCHEDULE 2

RESEARCH PLAN

Omitted pursuant to Regulation S-K, Item 601(a)(5).

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

SCHEDULE 3

SELECTED CAPSID VARIANTS

Omitted pursuant to Regulation S-K, Item 601(a)(5).

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Exhibit 10.8

 

Agreement Control No. 2014-03-0089   UNIVERSITY OF CALIFORNIA, BERKELEY   OFFICE OF TECHNOLOGY LICENSING

 

 

EXCLUSIVE LICENSE AND BAILMENT AGREEMENT

BETWEEN

4D MOLECULAR THERAPEUTICS, LLC

AND

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

FOR

[***]

UC Case No.: B03-104

 

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

TABLE OF CONTENTS

 

1.		Background			3
2.		Definitions			4
3.		Grant			8
4.		Sublicenses			9
5.		License Issue Fee			12
6.		Royalties			13
7.		Due Diligence			16
8.		Progress and Royalty Reports			18
9.		Books and Records			19
10.		Life of the Agreement			20
11.		Termination by Regents			20
12.		Termination by Licensee			21
13.		Disposition of Licensed Products upon Termination			21
14.		Patent Prosecution and Maintenance			21
15.		Marking			23
16.		Use of Names and Trademarks			23
17.		Limited Warranties and Covenants			23
18.		Patent Infringement			25
19.		Indemnification and Insurance			26
20.		Compliance with Laws			28
21.		Government Approval or Registration			28
22.		Assignment			29
23.		Notices			29
24.		Late Payments			29

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

25.		Waiver			29
26.		Confidentiality			30
27.		Force Majeure			31
28.		Severability			31
29.		Applicable Law; Venue; Attorneys’ Fees			31
30.		Electronic Copy; Counterparts			32
31.		Scope of Agreement; Amendment; Waiver			32

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

UNIVERSITY OF CALIFORNIA, BERKELEY   OFFICE OF TECHNOLOGY LICENSING

 

 

EXCLUSIVE LICENSE AND BAILMENT AGREEMENT

FOR

[***]

UC Case No.: B03-104

 

 

This exclusive license agreement (“Agreement”) is effective December 19, 2013 (“Effective Date”), by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California corporation, whose legal address is 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through its Office of Technology Licensing, at the University of California, Berkeley, 2150 Shattuck Avenue, Suite 510, Berkeley, CA 94704-1347 (“REGENTS”) and 4D MOLECULAR THERAPEUTICS LLC, a Delaware limited liability company having a principal place of business at 19 Rima Court, Danville, CA 94526 (“LICENSEE”). The parties agree as follows:

 

1.	BACKGROUND

 

1.1

An invention, generally described as “[***]” and disclosed in REGENTS’ Case No. B03-104 (the “INVENTION”), was jointly made in the course of research at the University of California, Berkeley by [***], employed by REGENTS, and at Integrative Gene Therapeutics, San Diego, California (“IGT”) by [***], employed by Integrative Gene Therapeutics.

 

1.2

REGENTS’ employees [***] have assigned to REGENTS their undivided interest in PATENT RIGHTS (as defined below).

 

1.3

IGT’s employee [***] has assigned his undivided interest to IGT in PATENT RIGHTS.

 

1.4

REGENTS and IGT entered into an Interinstitutional Agreement (the “IIA”) on August 28, 2003, Agreement Control No.: 2004-18-0020, that is attached to this Agreement as Exhibit A, under which IGT agrees not to license its undivided interest in PATENT RIGHTS during the term of the IIA.

 

1.5

LICENSEE entered into a letter agreement with REGENTS effective March 5, 2013, terminating on December 5, 2013, for the purpose of evaluating the INVENTION and granting LICENSEE an exclusive right to negotiate an exclusive license in PATENT RIGHTS to the INVENTION, which letter agreement covers LICENSEE’s commitment to reimburse REGENTS’ patent costs during such period.

 

Page 3 of 35

 

4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

1.6

LICENSEE has provided REGENTS with a commercialization plan for the INVENTION and business strategy in order to evaluate its capabilities as a LICENSEE.

 

1.7

REGENTS, IGT and LICENSEE wish to have the INVENTION perfected and marketed as soon as reasonably practicable so that products resulting therefrom may be available for public use and benefit.

 

1.8

LICENSEE wishes to acquire, and REGENTS wishes to grant to LICENSEE, an exclusive license under PATENT RIGHTS and an exclusive bailment of the BIOLOGICAL MATERIAL included in the REGENTS’ PROPERTY RIGHTS for the purpose of undertaking development and to make, have made, use, sell, offer for sale, import, and export LICENSED PRODUCTS as defined below.

 

1.9

REGENTS and LICENSEE are simultaneously entering into a license agreement covering the inventions under REGENTS’ Case No. B13-135 (the “OTHER LICENSE AGREEMENT”).

 

2.	DEFINITIONS

 

2.1

“PATENT RIGHTS” means the intellectual property rights in the following patents and patent applications:

 

2.1.1

[***];

 

2.1.2

[***];

 

2.1.3

[***];

 

2.1.4

[***];

 

2.1.5

[***];

 

2.1.6

[***];

 

2.1.7

[***];

 

2.1.8

[***];

 

2.1.9

[***];

 

2.1.10

[***]; and

 

2.1.11

All continuing applications of the foregoing, including divisionals, substitutions, extensions and continuation-in-part applications (only to the

 

Page 4 of 35

 

4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

---

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

extent, however, that claims in the continuation-in-part applications are entitled to the priority filing date of the parent patent application); any patents issuing on said application or continuing applications, including all reexaminations, reissues, and extensions thereof; and any corresponding foreign patents or applications.

 

2.2

“LICENSED PRODUCTS” means all kits, compositions of matter, articles of manufacture, materials, and products, the manufacture, use, SALE, offer for SALE, or import of which: (a) would require the performance of the LICENSED METHOD; or (b) but for the license granted pursuant to this Agreement, would infringe, or contribute to or induce the infringement of, a VALID CLAIM of any issued, unexpired patent under PATENT RIGHTS or a VALID CLAIM being prosecuted in a pending patent application under PATENT RIGHTS.

 

2.3

“LICENSED METHOD” means any process or method, the use or practice of which, but for the license pursuant to this Agreement, would infringe, or contribute to or induce the infringement of, a VALID CLAIM of any issued patent or pending patent application under PATENT RIGHTS in that country in which the LICENSED METHOD is used or practiced.

 

2.4

“VALID CLAIM” means (i) a claim in an issued and unexpired patent included in the PATENT RIGHTS that has not been disclaimed, abandoned or withdrawn and has not been held unenforceable or invalid by a final judgment of a court or other governmental agency of competent jurisdiction from which no appeal can be or is taken, and has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise, or (ii) a claim in a pending patent application included within the PATENT RIGHTS that has been filed in good faith and has not been abandoned or finally disallowed without the possibility of appeal or refiling, which application has not been pending for more than [***] ([***]) years after its priority date, provided that for clarity, any claim of a pending patent application that is pending for more than [***] ([***]) years after its priority date shall be eligible to become a VALID CLAIM if it later issues and otherwise falls within subsection (i).

 

2.5

“LICENSED FIELD OF USE” means all fields of use, except the ophthalmic field of use.

 

2.6

“NET SALES” means the gross invoice price charged by, and the fair market value of non-cash consideration paid to, LICENSEE for SALES of LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS, less the sum of the following actual and customary deductions where applicable: (i) the actual amount of write-offs for bad debts (in accordance with generally accepted accounting principles and that would reasonably be taken by a similarly situated company) related to such SALES; (ii) cash, prompt pay, trade or quantity discounts; (iii) sales tax, use tax, consumption tax, Deductible Value Added Tax, tariffs, import/export duties or other excise taxes when included in gross sales, but not income taxes derived from such sales; (iv) transportation charges; and

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(v) allowances or credits to customers because of rejections or returns. For purposes of calculating NET SALES, NET SALES shall not include any SALE of LICENSED PRODUCTS, LICENSED SERVICES, or LICENSED METHODS used for development purposes (including, without limitation for clinical studies) or provided as samples or free goods (including, without limitation, product transferred in connection with patient assistance programs or other charitable purposes); and a SALE to a sublicensee that is not intended for end use shall not be included in NET SALES. “Deductible Value Added Tax” is value added tax to the extent that is not subject to a tax credit, refund or deduction by a taxing authority.

In the event that LICENSED PRODUCTS, LICENSED SERVICES or LICENSED METHODS are COMBINATION PRODUCTS, the NET SALES of such COMBINATION PRODUCT, for the purposes of determining royalty payments pursuant to this Agreement, shall be determined by multiplying the NET SALES of the COMBINATION PRODUCT (as defined below) during the applicable royalty reporting period, by the fraction A/(A+B), where A is the fair market value of the LICENSED PRODUCTS, LICENSED SERVICES or LICENSED METHODS, and B is the fair market value of all OTHER COMPONENTS included in the COMBINATION PRODUCT. If a COMBINATION PRODUCT is sold, whether or not the OTHER COMPONENTS are also sold separately, LICENSEE shall make a good faith determination of the respective fair market values of the LICENSED PRODUCT, LICENSED SERVICES or LICENSED METHODS and all OTHER COMPONENTS included in the COMBINATION PRODUCT, and shall notify REGENTS of such determination and provide REGENTS with data to support such determination.

 

2.7

“COMBINATION PRODUCT” means a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD that incorporates at least one OTHER COMPONENT. For clarity, all references to “LICENSED PRODUCTS, LICENSED SERVICES or LICENSED METHODS” in this Agreement shall be deemed to include COMBINATION PRODUCTS.

 

2.8

“OTHER COMPONENT” means a proprietary active therapeutic ingredient or a delivery device, in each case that is not itself a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD.

 

2.9

“AFFILIATE” of LICENSEE means any entity that, directly or indirectly, Controls LICENSEE, is Controlled by LICENSEE, or is under common Control with LICENSEE. “Control” means (i) having the actual, present capacity to elect a majority of the directors of such affiliate, (ii) having the power to direct at least fifty percent (50%) of the voting rights entitled to elect directors, or (iii) in any country where the local law will not permit foreign equity participation of a majority, ownership or control, directly or indirectly, of the maximum percentage of such outstanding stock or voting rights permitted by local law.

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

2.10

“LICENSED TERRITORY” means United States of America, its territories and possessions, and subject to Paragraph 14.4, any foreign countries where PATENT RIGHTS exist.

 

2.11

“SALE” means, for LICENSED PRODUCTS and LICENSED SERVICES, the act of selling, leasing or otherwise transferring, providing, or furnishing such product or service, and for LICENSED METHODS, the act of performing such method for any consideration. Correspondingly, “SELL” means to make or cause to be made a SALE, and “SOLD” means to have made or caused to be made a SALE.

 

2.12

“LICENSED SERVICE” means a service provided using LICENSED PRODUCTS or LICENSED METHODS.

 

2.13

“NON-ROYALTY SUBLICENSE REVENUE” means any cash consideration, and subject to Paragraph 4.3(b), the cash equivalent of all other consideration, received by LICENSEE under each sublicense for the grant of rights under the PATENT RIGHTS, but excluding: (a) any royalty payments on sales of LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS by a sublicensee (which shall be included as EARNED ROYALTY SUBLICENSE REVENUE); (b) any amounts paid by a sublicensee as bona fide reimbursement for research and development costs at fair market value for materials and full time equivalents; (c) bona fide loans or any payments in consideration for a grant of equity of the LICENSEE at fair market value; (d) amounts paid for supplies of product or other tangible materials; (e) amounts paid as reimbursement for expenses directly related to the pursuit, maintenance, and/or defense of PATENT RIGHTS; (f) milestone payments by a sublicensee for a product, service, or method that is not a LICENSED PRODUCT, LICENSED SERVICE, or LICENSED METHOD; (g) payments by a sublicensee for use of the BIOLOGICAL MATERIALS to identity or optimize products, services, or methods that are not LICENSED PRODUCTS, LICENSED SERVICES, or LICENSED METHODS; (h) withholding taxes and any other amounts by a sublicensee from amounts otherwise payable to LICENSEE under such sublicense agreement other than past due payments; and (i) payments for the supply of LICENSED PRODUCTS or materials used in the performance of LICENSED SERVICES or LICENSED METHODS. Without limiting the foregoing, the parties agree that NON-ROYALTY SUBLICENSE REVENUE shall not include consideration received by LICENSEE from a sublicensee that is not received in consideration for the grant of rights under the PATENT RIGHTS to make, use, offer for SALE, import, and SELL LICENSED PRODUCTS and LICENSED SERVICES, and to practice LICENSED METHODS.

 

2.14

“EARNED ROYALTY SUBLICENSE REVENUE” means any royalty payments received by LICENSEE pursuant to an agreement between LICENSEE and a sublicensee pursuant to which such sublicensee receives a sublicense under the PATENT RIGHTS, on SALES of LICENSED PRODUCTS, LICENSED

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

SERVICES and LICENSED METHODS by such sublicensee (which sales shall not be included as NET SALES).

 

2.15

“FIRST QUALIFIED ROUND” occurs on the first date on which the LICENSEE has received, in aggregate in excess of [***] US Dollars ($[***]) from any one of or combination of equity financing, convertible debt financing, unrestricted grants, or the acquisition of all or substantially all of LICENSEE’s limited liability company interests, assets or business; provided, however, that [***].

 

2.16

“FOUNDERS” means [***] and [***].

 

2.17

“PHASE I CLINICAL TRIAL” means a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(a).

 

2.18

“PHASE IIB CLINICAL TRIAL” means a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(b) and that is designed to support and immediately precede the initiation of a Phase III Clinical Trial without any further phase II trials by evaluating the dose-dependent effectiveness of a pharmaceutical product for a particular indication or indications in patients with the disease or condition under study and to determine the common side effects and risks associated with the pharmaceutical product.

 

2.19

“PHASE III CLINICAL TRIAL” means a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(c).

 

2.20

“REGENTS’ PROPERTY RIGHTS” means all of REGENTS’ personal property rights in the tangible property in the INVENTION licensed hereunder and to the BIOLOGICAL MATERIALS. REGENTS’ PROPERTY RIGHTS do not include PATENT RIGHTS.

 

2.21

“BIOLOGICAL MATERIALS” shall have the meaning set forth in Article 1 of the Letter Agreement between REGENTS and LICENSEE, dated as of even date herewith (the “MTA”).

 

3.

GRANT

 

3.1        (a)

Subject to the limitations set forth in this Agreement, and the rights reserved in Paragraph 3.3, REGENTS hereby grants and LICENSEE hereby accepts an exclusive license under PATENT RIGHTS to make, use, offer for SALE, import, and SELL LICENSED PRODUCTS and LICENSED SERVICES, and to practice LICENSED METHODS, in the LICENSED FIELD OF USE in the LICENSED TERRITORY.

 

(b)

Subject to the limitations set forth in this Agreement, REGENTS hereby grants and LICENSEE hereby accepts an exclusive bailment and license under REGENTS’ PROPERTY RIGHTS to possess, make and use the BIOLOGICAL MATERIAL. LICENSEE acknowledges that the

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

REGENTS is and will remain the sole owner of the BIOLOGICAL MATERIAL and the title of the material is not transferred to LICENSEE under this Agreement.

 

(c)

REGENTS have provided the LICENSEE with BIOLOGICAL MATERIAL in quantities as set forth in the MTA. No additional obligation is required of REGENTS’ with respect to bailment of the BIOLOGICAL MATERIAL.

This Agreement is subject to IGT’s rights under the IIA.

 

3.2

The licenses under Paragraph 3.1 will be exclusive for a term commencing on the Effective Date and ending on the date of the last-to-expire VALID CLAIM under PATENT RIGHTS.

 

3.3

Nothing in this Agreement will be deemed to limit the right of REGENTS and IGT to publish any and all technical data resulting from any research performed by REGENTS and IGT relating to the INVENTION and the BIOLOGICAL MATERIAL REGENTS and IGT expressly reserve the right to use the INVENTION, the BIOLOGICAL MATERIAL and related technology for its educational and research purposes; to disseminate the BIOLOGICAL MATERIAL and other tangible materials associated with, or required to practice the INVENTION and/or the PATENT RIGHTS to researchers at nonprofit institutions for their educational and research purposes and to permit other nonprofit institutions to use such BIOLOGICAL MATERIAL to practice the PATENT RIGHTS for education and research purposes.

 

3.4

This Agreement will terminate immediately if LICENSEE files a claim asserting that any portion of the PATENT RIGHTS is invalid or unenforceable where the filing is by the LICENSEE, a third party on behalf of the LICENSEE, or a third party at the written urging of the LICENSEE.

 

3.5

LICENSEE will have a continuing responsibility to keep REGENTS informed of the large/small entity status, as defined in 15 U.S.C. 632, of itself and its sublicensees.

 

4.	SUBLICENSES

 

4.1

REGENTS also grants to LICENSEE the right to sublicense to AFFILIATES and third parties the right to make, use, offer for SALE, import, and SELL LICENSED PRODUCTS and LICENSED SERVICES, and to practice LICENSED METHODS, provided that LICENSEE has exclusive rights under this Agreement at the time of sublicensing. LICENSEE will notify REGENTS of each sublicense granted hereunder and furnish to REGENTS a copy of each such sublicense agreement, which shall be treated as confidential information of LICENSEE. Every such sublicense will include:

 

Page 9 of 35

 

4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

---

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(a)

a statement setting forth the term after which LICENSEE’s exclusive rights, privileges, and license hereunder will expire;

 

(b)

as applicable, all the rights of, and require the performance of all the obligations due to, REGENTS under this Agreement, other than those rights and obligations specified in Article 5 (License Issue Fee) and Article 6 (Royalties), for which LICENSEE shall remain responsible; and

 

(c)

the same provision for indemnification of REGENTS as has been provided for in this Agreement.

 

4.2

To the extent permitted under the sublicense agreement, a sublicensee shall have the right to grant further sublicenses to its AFFILIATE and third parties to the extent such sublicensee deems such further sublicense to be commercially reasonable, useful or necessary for the development and/or commercialization of LICENSED PRODUCT(S) or LICENSED METHOD(S) in accordance with this Agreement; provided that (i) such further sublicense is subject to a written sublicense agreement and is bound by all of the applicable terms, conditions, obligations, restrictions and other covenants of this Agreement that protect or benefit the REGENTS’ rights and interests under this Agreement, and (ii) the sublicensee shall, within [***] ([***]) days after issuing any further sublicense, furnish to LICENSEE for delivery to REGENTS, subject to any confidentiality provisions with third parties, all material terms of any such sublicenses, pertaining to the REGENTS’ interests, including the sublicensee’s name and address, and indemnification of REGENTS as provided in this Agreement.

 

4.3

LICENSEE will pay to REGENTS (i) [***] percent ([***]%) of NON-ROYALTY SUBLICENSE REVENUE and (ii) [***] percent ([***]%) of EARNED ROYALTY SUBLICENSE REVENUE, provided that in no event will the EARNED ROYALTY SUBLICENSE REVENUE due to REGENTS on sales of LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS by a sublicensee be less than [***] percent ([***]%) of net sales of such sublicensee (which for purposes of this Paragraph 4.3 shall be calculated as though such sublicensee were LICENSEE under Paragraph 2.6.

 

(a)

In the event LICENSEE sublicenses the PATENT RIGHTS along with its own patent rights or those of other third parties, LICENSEE may reasonably determine in good faith the percentage of compensation received under such sublicense that represents consideration due for the grant of the rights under the PATENT RIGHTS, which percentage will be based upon the value of the PATENT RIGHTS licensed to the sublicensee relative to the value of LICENSEE’s own patent rights or the other third party patent rights licensed to the sublicensee. When making payment under this Paragraph 4.3(a), LICENSEE shall provide REGENTS with all supporting information and documentation used to determine any such percentage (or shall reference previously provided supporting information and documentation).

 

Page 10 of 35

 

4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

---

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Notwithstanding the foregoing, in no case will LICENSEE be permitted to reduce the compensation to REGENTS under this Paragraph 4.3(a) in connection with LICENSEE’s own patent rights or those of third parties by more than [***] percent ([***]%).

 

(b)

If the consideration received is equity and approval to accept equity is granted by REGENTS, then the LICENSEE will transfer [***] percent ([***]%) of the equity LICENSEE receives to REGENTS or REGENTS’ nominee. REGENTS will promptly notify the LICENSEE upon REGENTS’ Office of the President’s approval for the equity. If equity is not accepted, then the LICENSEE will pay REGENTS’ portion in cash once the equity is liquidated.

 

(c)

LICENSEE shall not be required to pay REGENTS more than [***] percent ([***]%) of NON-ROYALTY SUBLICENSE REVENUE and [***] percent ([***]%) of EARNED ROYALTY SUBLICENSE REVENUE even if LICENSEE sublicenses the PATENT RIGHTS under this Agreement and the patent rights under the OTHER LICENSE AGREEMENT. All amounts paid under this Paragraph 4.3 shall be credited against amounts due for the same LICENSED PRODUCT, LICENSED METHOD or LICENSED SERVICE under Paragraph 4.3 of the OTHER LICENSE AGREEMENT.

 

4.4

AFFILIATES will have no licenses under PATENT RIGHTS except as granted by sublicense pursuant to this Agreement.

 

4.5

For the purposes of this Agreement, the activities of all sublicensees pursuant to any sublicense shall be deemed to be the activities of LICENSEE, for which LICENSEE shall be responsible.

 

4.6

LICENSEE will collect payment of all monies and other consideration due REGENTS from sublicensees, and deliver all reports due REGENTS and received from sublicensees.

 

4.7

Upon termination of this Agreement for any reason, all sublicenses that are granted by LICENSEE pursuant to this Agreement, where the sublicensee is in compliance with its sublicense agreement as of the date of such termination, will remain in effect and will be assigned to REGENTS, except that REGENTS will not be bound to perform any duties or obligations set forth in any sublicenses that extend beyond the duties and obligations of REGENTS set forth in this Agreement.

 

4.8

If REGENTS (to the extent of the actual knowledge of the licensing professional responsible for administration of this case) discovers, or a third party discovers and notifies that licensing professional, that the INVENTION is [***] for an application covered by the LICENSED FIELD OF USE, but for which LICENSED PRODUCTS have not been developed or are not currently under development by LICENSEE, then REGENTS, as represented by the Office of Technology

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Licensing, shall give written notice to LICENSEE, except for: (1) information that is subject to restrictions of confidentiality with third parties, and (2) information which originates with REGENTS’ personnel who do not assent to its disclosure to LICENSEE. REGENTS shall endeavor to provide to LICENSEE, at a minimum, a description of the nature and scope of the proposed sublicense sufficient for LICENSEE to evaluate its desire to develop and commercialize products for the relevant application as provided in this Paragraph 4.8.

LICENSEE shall have [***] ([***]) days to give REGENTS written notice stating whether LICENSEE elects to develop LICENSED PRODUCTS for such application.

If LICENSEE elects to develop and commercialize the proposed LICENSED PRODUCTS for such application, LICENSEE shall submit progress reports with respect thereto to REGENTS pursuant to Article 8.

If LICENSEE elects not to develop and commercialize the proposed LICENSED PRODUCTS for such application, REGENTS may seek a third party(ies) to develop and commercialize the proposed LICENSED PRODUCTS for such application. If REGENTS is successful in finding a third party, it shall refer such third party to LICENSEE. If the third party requests a sublicense under this Agreement for such application, then LICENSEE shall report the request to REGENTS within [***] ([***]) days from the date of such written request. If the request results in a sublicense, then LICENSEE shall notify REGENTS pursuant to Paragraph 4.1.

If LICENSEE refuses to grant a sublicense to such third party, then within [***] ([***]) days after such refusal, LICENSEE shall submit to REGENTS a report specifying the license terms proposed by the third party and a written justification for LICENSEE’s refusal to grant the proposed sublicense. If REGENTS, [***], determines that [***], then REGENTS shall [***], provided that [***].

 

5.	LICENSE ISSUE FEE

 

5.1

LICENSEE will pay to REGENTS a non-creditable, non-refundable license issue fee as follows:

 

(a)

Five Thousand U.S. Dollars ($5,000) within [***] ([***]) days following the Effective Date of this Agreement;

 

(b)

If approval to accept equity in LICENSEE is granted by REGENTS in accordance with this Agreement, then within [***] ([***]) days following the date on which the ACCEPTANCE NOTICE (as defined below) is received by the LICENSEE, LICENSEE shall issue to REGENTS’ nominee (under the terms of a mutually agreed upon unit purchase agreement to be executed by the parties), an interest in LICENSEE (a “MEMBERSHIP INTEREST”) which shall be non-voting, with an allocation percentage with

 

Page 12 of 35

 

4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

respect to profits and losses equal to three percent (3%) as of close of the FIRST QUALIFIED ROUND; if all or a portion of the FIRST QUALIFIED ROUND involves convertible securities which will not convert into MEMBERSHIP INTERESTS until a subsequent financing event, then at the time of the conversion of those securities into MEMBERSHIP INTERESTS, the LICENSEE shall issue additional MEMBERSHIP INTERESTS to REGENTS such that REGENTS’ allocation percentage with respect to profits and losses continues to equal three percent (3%) as of the FIRST QUALIFIED ROUND (following the conversion of any convertible securities such as convertible debt issued at the FIRST QUALIFIED ROUND). LICENSEE further agrees that as holders of MEMBERSHIP INTERESTS REGENTS shall receive the same anti-dilution treatment as any other MEMBERSHIP INTERESTS held by either of the FOUNDERS as of the date of this Agreement. REGENTS may transfer or direct LICENSEE to transfer an inventor share portion of the MEMBERSHIP INTERESTS to be issued pursuant to this Section 5.1(b) under REGENTS’ patent policy of the shares otherwise due to REGENTS to the REGENTS’ inventors of PATENT RIGHTS notwithstanding the provisions of other contracts associated with the transfer of the shares.

LICENSEE will promptly notify REGENTS following the close of the FIRST QUALIFIED ROUND. Following receipt of notice of the closing of the FIRST QUALIFIED ROUND, REGENTS will promptly notify the LICENSEE upon REGENTS’ Office of the President’s approval for the equity (the “ACCEPTANCE NOTICE”). If REGENTS’ Office of the President does not provide an ACCEPTANCE NOTICE to LICENSEE within [***] ([***]) days following the close of the FIRST QUALIFIED ROUND, then Fifty Thousand U.S. Dollars ($50,000) shall be due [***] in lieu of the MEMBERSHIP INTERESTS to be issued under this Section 5.1(b).

 

5.2

LICENSEE will also pay to REGENTS a license maintenance fee of Five Thousand U.S. Dollars ($5,000) on the one (1) year anniversary date of the Effective Date and on each anniversary of the Effective Date thereafter. Notwithstanding the foregoing, the license maintenance fee will not be due and payable on any anniversary of the Effective Date, if on such date the LICENSEE or a sublicensee is selling or otherwise exploiting LICENSED PRODUCTS or LICENSED METHODS, and LICENSEE pays an earned royalty to REGENTS on the NET SALES of such LICENSED PRODUCTS or LICENSED METHODS or a payment on EARNED ROYALTY SUBLICENSE REVENUE.

 

6.

ROYALTIES

 

6.1

LICENSEE will pay to REGENTS earned royalties at the rate of [***] percent ([***]%) of NET SALES of LICENSEE, subject to the following:

 

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UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(a)

If LICENSEE is required to make any payment (including royalties or other license fees) to a third party to obtain any intellectual property rights in the absence of which LICENSEE could not practice PATENT RIGHTS, such third party payments will be credited against royalties owed hereunder by LICENSEE to REGENTS, provided that in no one [***] will the total of such credits reduce earned royalties owed by LICENSEE to REGENTS by more than [***] percent ([***]%).

 

(b)

In the event a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD are SOLD to end users, and the total combined royalty burden to LICENSEE on NET SALES (including royalties due to REGENTS under this Agreement and royalties due to third parties on such NET SALES) exceeds [***] percent ([***]%), the earned royalty due to REGENTS will be adjusted, according to the following formula, [***]:

Adjusted royalty = [***]

For example, [***].

 

(c)

Only one royalty will be due to REGENTS on any given LICENSED PRODUCT, LICENSED METHOD and LICENSED SERVICE. All amounts paid under this Paragraph 6.1 shall be credited against amounts due for the same LICENSED PRODUCT, LICENSED METHOD or LICENSED SERVICE under Paragraph 6.1 of the OTHER LICENSE AGREEMENT.

 

6.2

Royalties accruing to REGENTS will be paid to REGENTS [***] within [***] ([***]) days after the end of each [***].

 

6.3

Royalties will be payable on NET SALES of LICENSED PRODUCTS, LICENSED METHODS and LICENSED SERVICES covered by VALID CLAIMS of both pending patent applications and issued patents.

 

6.4

LICENSEE will pay to REGENTS milestone payments as follows, provided that all amounts paid under this Paragraph 6.4 shall be credited against amounts due with respect to NON-ROYALTY SUBLICENSE REVENUE pursuant to Paragraph 4.3:

 

(a)

LICENSEE shall pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD and;

 

(b)

LICENSEE shall pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD;

 

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4D Molecular Therapeutics LLC		Exclusive License
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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(c)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD;

 

(d)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD;

 

(e)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD; and

 

(f)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD, [***].

Only the milestones listed in this Paragraph 6.4 will be due on any given LICENSED PRODUCT or LICENSED METHOD, even if such milestone is payable under this Agreement and under the OTHER LICENSE AGREEMENT. All amounts paid under this Paragraph 6.4 shall be credited against amounts due for the same LICENSED PRODUCT or LICENSED METHOD under Paragraph 6.4 of the OTHER LICENSE AGREEMENT.

 

6.5

Beginning in the first calendar year after the year in which the first occurrence of NET SALES takes place, and each succeeding calendar year thereafter, LICENSEE will pay to the REGENTS a minimum annual royalty of [***] U.S. Dollars ($[***]), increasing by [***] Dollars ($[***]) every year thereafter but capped at a total of One Hundred Thousand Dollars ($100,000) per year in minimum royalties for the remainder of the term of this Agreement. This minimum annual royalty will be paid to REGENTS by [***] of the year following each applicable calendar year and will be credited against by the earned royalties (including royalty payments based on NET SALES and payments based on EARNED ROYALTY SUBLICENSE REVENUE due pursuant to Sections 6.1 and 4.3, respectively) paid for the [***] calendar year for which the minimum payment is made, whether under this Agreement or the OTHER LICENSE AGREEMENT.

Only one minimum annual royalty will be due under this Agreement and under the OTHER LICENSE AGREEMENT. All amounts paid under this Paragraph 6.5 shall be credited against amounts due under Paragraph 6.5 of the OTHER LICENSE AGREEMENT.

 

6.6

All payments due REGENTS will be payable in United States dollars. When LICENSED PRODUCTS, LICENSED SERVICES, or LICENSED METHODS are SOLD for monies other than United States dollars, earned royalties will first be determined in the foreign currency of the country in which the SALE was made and then converted into equivalent United States dollars. The exchange rate will be that rate quoted in the Wall Street Journal on the last business day of the reporting period.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

6.7

In the event that any royalties or other payments due to REGENTS are subject to withholding tax required by applicable law to be paid by LICENSEE to the taxing authority of any foreign country on REGENTS’ behalf, LICENSEE may deduct the amount of such tax from the applicable royalties or other payment otherwise payable to REGENTS. In such event, LICENSEE shall pay the taxes to the proper taxing authority and shall send evidence of the obligation together with proof of payment to REGENTS following such payment and shall reasonably cooperate with REGENTS in its efforts to avoid or minimize such withholding obligations and/or to obtain credit for payment thereof. To the extent that such amounts are so withheld and remitted to the proper taxing authority by LICENSEE, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the party in respect of whom such deduction and withholding was made. LICENSEE will be responsible for all bank transfer charges.

 

6.8

LICENSEE will make all payments under this Agreement by check payable to “The Regents of the University of California” and sent to REGENTS at the address shown in Article 23 (Notices).

 

6.9

For the avoidance of doubt, if any patent or patent application, or any claim thereof, included within PATENT RIGHTS expires or is held invalid in a final decision by a court of competent jurisdiction and last resort and from which no appeal has been or can be taken, all obligation to pay royalties based on such patent, patent application or claim, or any claims patentably indistinct therefrom will cease as of the date of such expiration or final decision. LICENSEE will not, however, be relieved from paying any royalties that accrued before such expiration or decision or that are based on another valid patent or claim not expired or involved in such decision.

 

6.10

No royalties will be collected or paid hereunder on LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS distributed to or used by the United States Government. LICENSEE agrees to reduce the amount charged for LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS distributed to the United States Government by an amount equal to the royalty for such LICENSED PRODUCTS otherwise due REGENTS as provided herein.

 

7.	DUE DILIGENCE

 

7.1

LICENSEE, upon execution of this Agreement, will diligently proceed with the development, manufacture, and SALE of LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS, and will diligently market them in quantities sufficient to meet the market demand.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7.2

In addition to its obligations under Paragraph 7.1, LICENSEE will perform the following due diligence activities under this Agreement, through itself and/or its sublicensees:

 

(a)

[***] within [***] ([***]) months after the Effective Date.

 

(b)

[***] within [***] ([***]) months of [***].

 

(c)

[***] within [***] ([***]) months after [***].

 

(d)

[***] within [***] ([***]) months of [***].

 

(e)

[***] within [***] ([***]) months after [***].

If LICENSEE has failed to meet any of its diligence obligations set forth in Paragraphs 7.1 and 7.2, through itself and/or its sublicensees, as applicable, then REGENTS will so notify LICENSEE in writing of its failure to perform.

 

7.3

LICENSEE will have the right and option to extend the target date of any such due diligence obligation (and each subsequent milestone due thereafter) for a period of [***] ([***]) months upon the payment of [***] dollars ($[***]) within [***] ([***]) days after the date to be extended, for each such extension option exercised by LICENSEE. LICENSEE may further extend the target date of any diligence obligation (and each subsequent milestone due thereafter) for an additional [***] ([***]) months upon payment of an additional [***] dollars ($[***]). These payments are in addition to the minimum royalty payments specified in Paragraph 6.5. Additional extensions may be granted only by mutual written agreement of the parties to this Agreement. In the event that Licensee is unable to meet the timeframes in Paragraph 7.2, as extended by this Paragraph 7.3, despite using diligent efforts to do so, taking into account delays which are due to factors (including technical or regulatory issues) which are outside of the reasonable control of LICENSEE, REGENTS and LICENSEE agree to discuss extending such timeframes and target dates in good faith; provided, however, that in no case is REGENTS bound to agree to cumulative extensions longer than [***] ([***]) years unless REGENTS concludes in its sole discretion that such an extension is appropriate.

 

7.4

Should LICENSEE opt not to extend such timeframes or fail to use diligent efforts to meet a diligence obligation by the extended target date, then subject to Paragraph 7.6, REGENTS will have the right and option either to terminate this Agreement or to reduce LICENSEE’s exclusive license to a non-exclusive royalty-bearing license. This right, if exercised by REGENTS, supersedes the rights granted in Article 3. The right to terminate this Agreement or reduce LICENSEE’s exclusive license granted hereunder to a non-exclusive license will be REGENTS’ sole remedy for breach of Paragraphs 7.1 or 7.2.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

7.5

At the request of either party, any controversy or claim arising out of or relating to the diligence provisions of Paragraphs 7.1 and 7.2 will be settled by arbitration conducted in San Francisco, California in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association but such arbitration must be requested by a party within the sixty (60) day cure period set forth in Paragraph 7.6, except as otherwise provided in Paragraph 7.6 or unless the parties mutually agree later to arbitration hereunder. Judgment upon the award rendered by the arbitrator(s) will be binding on the parties and may be entered by either party in any court having jurisdiction. In determination of due diligence, the arbitrator may determine solely the issues of fact or law with respect to LICENSEE’s rights under this Agreement but will not have the authority to award monetary damages or grant equitable relief.

 

7.6

To exercise either the right to terminate this Agreement or to reduce the license to a non-exclusive license for lack of diligence under Paragraphs 7.1 or 7.2, REGENTS will give LICENSEE written notice of the deficiency. LICENSEE thereafter has sixty (60) days to cure the deficiency or to request arbitration in accordance with Paragraph 7.5. If REGENTS has not received a written request for arbitration or satisfactory tangible evidence that the deficiency has been cured by the end of the sixty (60) day period, then REGENTS may, at its option, either terminate this Agreement or reduce LICENSEE’s exclusive license to a non-exclusive license by giving further written notice to LICENSEE. These notices will be subject to Article 23 (Notices). Notwithstanding the foregoing, in the event that LICENSEE disputes in good faith whether the deficiency was timely cured, it may seek resolution of such dispute pursuant to Article 7.5, and in such event, no termination of this Agreement pursuant to this Article 7.6 may occur unless and until completion of such dispute resolution results in a determination that such deficiency has not been timely cured.

 

8.	PROGRESS AND ROYALTY REPORTS

 

8.1

For each [***] period beginning July 1, 2014, LICENSEE will submit to REGENTS a [***] progress report covering LICENSEE’s activities related to the development and testing of all LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS and the obtaining of necessary governmental approvals, if any, for marketing in the United States. These progress reports will be made for all development activities until the first SALE occurs in the United States.

 

8.2

Each progress report will be a sufficiently detailed summary of activities of LICENSEE and any sublicensees so that REGENTS may evaluate and determine LICENSEE’s progress in development of LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS, and in meeting its diligence obligations under Article 7, and will include (but not be limited to) the following: summary of work completed and in progress; current schedule of anticipated events and milestones, including diligence milestones under Paragraph 7.2; anticipated market introduction dates for the LICENSED TERRITORY; and sublicensees’ activities during the reporting period.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

8.3

LICENSEE also will report to REGENTS in its subsequent progress and royalty reports, the date of first SALE.

 

8.4

After the first SALE anywhere in the world, LICENSEE will make [***] royalty reports to REGENTS within [***] ([***]) days after [***]. Each such royalty report will include at least the following:

 

(a)

The number of LICENSED PRODUCTS manufactured and the number SOLD;

 

(b)

Gross revenue from SALE of LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS;

 

(c)

NET SALES pursuant to Paragraph 2.6;

 

(d)

Total royalties due REGENTS; and

 

(e)

Names and addresses of any new sublicensees.

 

8.5

If no SALES have occurred during the reporting period, a statement to this effect is required in the royalty report for that period.

 

8.6

All reports under this Article 8 shall be treated as confidential information of LICENSEE.

 

9.	BOOKS AND RECORDS

 

9.1

LICENSEE will keep full, true, and accurate books and records containing all particulars that are necessary for the purpose of showing the amount of royalties payable to REGENTS and LICENSEE’s compliance with other obligations under this Agreement. Said books and records will be kept at LICENSEE’s principal place of business or the principal place of business of the appropriate division of LICENSEE to which this Agreement relates. Said books and records and the supporting data will be open at all reasonable times during normal business hours upon reasonable notice, for [***] ([***]) years following the end of the calendar year to which they pertain, for the inspection and audit by a mutually acceptable independent auditor engaged by REGENTS for the purpose of verifying LICENSEE’s royalty statement or compliance in other respects with this Agreement. Such auditor will be bound to hold all information in confidence except as necessary to communicate LICENSEE’s non-compliance with this Agreement to REGENTS.

 

9.2

The fees and expenses of REGENTS’ mutually acceptable independent auditor performing such an examination will be borne by REGENTS. However, if an error

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

in underpaid royalties to REGENTS of more than [***] percent ([***]%) of the total royalties due for any year is discovered, then the fees and expenses of such auditor will be borne by LICENSEE.

 

10.	LIFE OF THE AGREEMENT

 

10.1

Unless otherwise terminated by the operation of law or by acts of the parties in accordance with the terms of this Agreement, this Agreement will be in force from the Effective Date and will remain in effect until the expiration of the last VALID CLAIM under this Agreement.

 

10.2

Any termination of this Agreement shall not affect the rights and obligations set forth in the following articles or paragraphs:

 

Article 2		Definitions
Article 4		Sublicenses (only as to Paragraphs 4.2 and 4.7)
Article 9		Books and Records
Article 10		Life of the Agreement (only as to Paragraphs 10.2 and 10.3)
Article 13		Disposition of Licensed Products Upon Termination
Article 16		Use of Names and Trademarks
Article 17		Limited Warranties
Article 19		Indemnification and Insurance
Article 23		Notices
Article 24		Late Payments (only as to outstanding payments)
Article 26		Confidentiality
Article 28		Severability
Article 29		Applicable Law; Venue; Attorney’s Fees

 

10.3

Any termination of this Agreement will not relieve LICENSEE of its obligation to pay any monies due or owing at the time of such termination and will not relieve any obligations, of either party to the other party, established prior to termination.

 

11.	TERMINATION BY REGENTS

 

11.1

Except for breach of diligence obligations, which is set forth in Article 7, if LICENSEE should violate or fail to perform any term of this Agreement, then

 

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UC Case No.: B03-104		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

REGENTS may give written notice of such default (“Notice of Default”) to LICENSEE. If LICENSEE should fail to repair such default within sixty (60) days of the effective date of such notice, REGENTS will have the right to terminate this Agreement, and the licenses herein, by a second written notice (“Notice of Termination”) to LICENSEE. If a Notice of Termination is sent to LICENSEE, this Agreement will automatically terminate on the effective date of such notice. Such termination will not relieve LICENSEE of its obligation to pay any royalty or license fees accrued at the time of such termination and will not impair any accrued rights of REGENTS. These notices will be subject to Article 23 (Notices).

 

12.	TERMINATION BY LICENSEE

 

12.1

LICENSEE will have the right at any time to terminate this Agreement in whole or as to any portion of PATENT RIGHTS by giving notice in writing to REGENTS. Such notice of termination will be subject to Article 23 (Notices) and termination of this Agreement will be effective ninety (90) days after the effective date of such notice.

 

12.2

Any termination pursuant to Paragraph 12.1 will not relieve LICENSEE of any obligation or liability accrued hereunder prior to such termination or rescind anything done by LICENSEE or any payments made to REGENTS hereunder prior to the time such termination becomes effective, and such termination will not affect in any manner any rights of REGENTS arising under this Agreement prior to such termination.

 

13.	DISPOSITION OF LICENSED PRODUCTS UPON TERMINATION

 

13.1

Upon termination of this Agreement by either party, for a period of [***] ([***]) days after the date of termination, LICENSEE may complete and SELL any partially made LICENSED PRODUCTS and continue to render any previously commenced LICENSED SERVICES, and continue the practice of LICENSED METHODS; provided, however, that all such SALES will be subject to the terms of this Agreement including, but not limited to, the payment of royalties at the rate and at the time provided herein and the rendering of reports thereon.

 

14.	PATENT PROSECUTION AND MAINTENANCE

 

14.1

REGENTS will diligently prosecute and maintain the United States and foreign patent applications and patents under PATENT RIGHTS, subject to LICENSEE’S reimbursement of REGENTS’ out of pocket costs under Article 14.3 below. All patent applications and patents under PATENT RIGHTS will be held in the name of REGENTS and IGT. REGENTS will have sole responsibility for retaining and instructing patent counsel, but continued use of such counsel at any point in the patent prosecution process, subsequent to the initial filing of a U.S. patent application covering the INVENTION, shall be subject to the approval of LICENSEE. If LICENSEE rejects [***] of REGENTS’ choice of prosecution counsel, then REGENTS may select new prosecution counsel without

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

LICENSEE’s consent. REGENTS shall promptly provide LICENSEE with copies of all relevant documentation, including all responses at least [***] ([***]) days prior to the anticipated filing deadline to the extent such advance notice is available, so that LICENSEE may be currently informed and apprised of the continuing prosecution of PATENT RIGHTS. LICENSEE agrees to keep this documentation confidential in accordance with Article 26. LICENSEE may comment upon such documentation, and REGENTS will reasonably consider all such comments made by LICENSEE; provided, however, that if LICENSEE has not commented upon such documentation in reasonable time for REGENTS to sufficiently consider LICENSEE’s comments prior to the deadline for filing a response with the relevant government patent office, REGENTS will be free to respond appropriately without consideration of LICENSEE’s comments. LICENSEE and LICENSEE’s patent counsel will have the right to consult with patent counsel chosen by REGENTS. REGENTS will file foreign counterparts of the REGENTS’ PATENT RIGHTS in countries selected by LICENSEE, subject to Paragraph 14.4.

 

14.2

REGENTS will use reasonable efforts to prepare or amend any patent application to include claims reasonably requested by LICENSEE to protect the LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS contemplated to be SOLD or to be practiced under this Agreement. REGENTS will not abandon a patent application (unless filing a continuation or divisional filing or an equivalent thereof) or fail to maintain a patent without LICENSEE’s prior written consent.

 

14.3

Subject to Paragraph 14.4, one half (1/2) of the past, unreimbursed costs for preparing, filing, prosecuting, and maintaining all United States and foreign patent applications and patents under PATENT RIGHTS will be paid by LICENSEE within [***] ([***]) days of the Effective Date of this Agreement. The remaining other one half (1/2) of the past, unreimbursed costs for preparing, filing, prosecuting, and maintaining all United States and foreign patent applications and patents under PATENT RIGHTS will be paid by LICENSEE within [***] ([***]) days of [***]. If, however, REGENTS grants additional exclusive license by [***], the second half installment of the past, unreimbursed patents costs will be not be due to REGENTS. To date, the remaining total past patent costs paid by REGENTS are about [***] U.S. Dollars ($[***]). Subject to Paragraph 14.4, all future costs for preparing, filing, prosecuting, and maintaining all United States and foreign patent applications and patents under PATENT RIGHTS will be borne by LICENSEE. If, however, REGENTS grants additional exclusive license, the costs of preparing, filing, prosecuting and maintaining such patent applications and patents will be divided equally among the exclusive licensees from the effective date of such subsequently granted license agreement. In addition, if, REGENTS reduces the exclusive license granted herein to non-exclusive licenses pursuant to Paragraphs 7.3 7.4, 7.5 or 7.6, and REGENTS grants additional license(s), the costs of preparing, filing, prosecuting and maintaining such patent applications and patents will be divided equally among the licensed parties from the effective date of each subsequently granted license agreement. Payments are due within [***] ([***]) days after receipt of invoice from REGENTS.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

14.4

LICENSEE’s obligation to underwrite and to pay all domestic and foreign patent filing, prosecution, and maintenance costs will continue for so long as this Agreement remains in effect; provided, however, that LICENSEE may terminate its obligations with respect to any given patent application or patent in any or all designated countries upon [***] ([***]) months’ written notice to REGENTS. REGENTS will use its best efforts to curtail patent costs when such a notice is received from LICENSEE. REGENTS may continue prosecution and/or maintenance of such applications or patents at its sole discretion and expense; provided, however, that LICENSEE will have no further right or licenses thereunder.

 

15.

MARKING

 

15.1

Prior to the issuance in the United States of patents under PATENT RIGHTS, LICENSEE agrees to mark LICENSED PRODUCT(S) (or their containers or labels) SOLD by it in the United States under the license granted in this Agreement with the words “Patent Pending,” and following the issuance in the United States of one or more patents under PATENT RIGHTS, with the patent numbers of the PATENT RIGHTS. All LICENSED PRODUCTS SOLD in other countries will be marked in such manner as to conform with the patent laws and practice of such countries.

 

16.	USE OF NAMES AND TRADEMARKS

 

16.1

Nothing contained in this Agreement will be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trademark, trade name, or other designation of either party hereto by the other (including any contraction, abbreviation, or simulation of any of the foregoing). Unless required by law, regulation, or rules of a securities exchange, or consented to in writing by REGENTS, the use by LICENSEE of the name “The Regents of the University of California” or the name of any University of California campus in advertising, publicity or other promotional activities is expressly prohibited.

 

17.	LIMITED WARRANTIES AND COVENANTS

 

17.1

REGENTS warrants to LICENSEE that (a) to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement, it has the lawful right to grant the licenses granted to LICENSE pursuant to this Agreement, (b) to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement, it has not previously granted to any third party any rights that conflict with the licenses granted to LICENSEE pursuant to this Agreement, and (c) to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement and of REGENTS’ patent prosecution counsel, no third party who is not designated in filings with relevant patent authorities as an inventor of the PATENT RIGHTS is, or has claimed or asserted in writing to REGENTS that it is, an inventor of the PATENT RIGHTS.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

17.2

Except as expressly provided in this Agreement, the licenses granted pursuant to this Agreement, the BIOLOGICAL MATERIAL, and the associated INVENTION are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESSED OR IMPLIED. REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT THE INVENTION, THE BIOLOGICAL MATERIAL, PATENT RIGHTS, LICENSED PRODUCTS, LICENSED SERVICES OR LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

 

17.3

EXCEPT FOR LICENSEE’S OBLIGATION TO INDEMNIFY AGAINST CLAIMS OF THIRD PARTIES UNDER ARTICLE 19 (INDEMNIFICATION AND INSURANCE), IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THE LICENSES GRANTED PURSUANT TO THIS AGREEMENT OR THE USE OF THE INVENTION, THE BIOLOGICAL MATERIAL, PATENT RIGHTS, LICENSED METHODS, LICENSED SERVICES OR LICENSED PRODUCTS. THE REGENTS WILL NOT BE LIABLE FOR DIRECT DAMAGES TO THE OTHER PARTY CAUSED BY AN ASSIGNMENT BY THE REGENTS’ INVENTORS OF THE PATENT RIGHTS TO A THIRD PARTY.

 

17.4

Nothing in this Agreement is or will be construed as:

 

(a)

A warranty or representation by REGENTS as to the validity, enforceability or scope of any PATENT RIGHTS; or

 

(b)

A warranty or representation that anything made, used, or SOLD under any license granted in this Agreement is or will be free from infringement of patents of third parties; or

 

(c)

An obligation to bring or prosecute actions or suits against third parties for patent infringement, except as provided in Article 18; or

 

(d)

Conferring by implication, estoppel, or otherwise any license or rights under any patents of REGENTS or IGT other than PATENT RIGHTS as defined herein, regardless of whether such patents are dominant or subordinate to PATENT RIGHTS; or

 

(e)

An obligation to furnish any know-how not provided in the patents and patent applications under PATENT RIGHTS and REGENTS’ PROPERTY RIGHTS.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

17.5

REGENTS shall promptly notify LICENSEE in the event (to the extent of the actual knowledge of the licensing professional responsible for administration of this agreement) that IGT (a) files in any court or agency pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency, for reorganization, or for an arrangement or appointment of a receiver or trustee of IGT or of its assets; (b) is served with an involuntary petition against it, filed in any insolvency proceeding; (c) proposes or is a party to any dissolution or liquidation; or (d) makes an assignment for the benefit of its creditors. REGENTS shall promptly notify LICENSEE upon any termination of the IIA, or receipt of notice of termination thereof.

 

18.	PATENT INFRINGEMENT

 

18.1

In the event that either party (and in the case of REGENTS, to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement) learns of the infringement of any PATENT RIGHTS under this Agreement, such party will promptly provide the other party with notice and reasonable evidence of such infringement (“Infringement Notice”). During the period and in a jurisdiction where LICENSEE has exclusive rights under this Agreement, neither party will notify a third party, including the infringer, of the infringement without first obtaining consent of the other party, which consent will not be unreasonably withheld; provided, however, that LICENSEE may notify any then-existing sublicensees under the relevant PATENT RIGHTS of such infringement without REGENTS’ prior consent if such sublicensee is bound by obligations of confidentiality with respect to such information. Both parties will use diligent efforts, in cooperation with each other, to terminate such infringement without litigation.

 

18.2

If the infringing activity of potential commercial significance has not been abated within [***] ([***]) days following the effective date of the Infringement Notice, LICENSEE may institute suit for patent infringement against the infringer. In accordance with the terms of the IIA, REGENTS and/or IGT may voluntarily join such suit at its own expense, but may not thereafter commence suit against the infringer for the acts of infringement that are the subject of LICENSEE’s suit or any judgment rendered in that suit. [***]. If, in a suit initiated by LICENSEE, REGENTS is involuntarily joined [***].

If, within [***] ([***]) days following the effective date of the Infringement Notice, the infringing activity of potential commercial significance has not been abated and LICENSEE has not brought suit against the infringer, REGENTS or IGT may institute suit for patent infringement against the infringer. If REGENTS or IGT institutes such suit, LICENSEE may not join such suit without REGENTS’ or IGT’s consent, as applicable, and may not thereafter commence suit against the infringer for the acts of infringement that are the subject of REGENTS’ or IGT’s suit or any judgment rendered in that suit.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded

information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Notwithstanding the foregoing, the parties may by mutual agreement, at any time, bring and control such suit jointly against an infringer of the PATENT RIGHTS, sharing costs in such manner as they may then agree.

 

18.3

Such legal action as is decided upon will be at the expense of the party instituting the suit pursuant to Paragraph 18.2, and all recoveries recovered thereby will [***], provided that legal action brought jointly by REGENTS and/or IGT and LICENSEE, and participated in by each, will be [***] and all recoveries will be allocated in the following order: (a) to each party pro rata reimbursement of the attorney’s costs, fees, and other related expenses to the extent each party paid for such costs, fees, and expenses, until all such costs, fees, and expenses are reimbursed to each party; and (b) [***].

 

18.4

Each party will cooperate with the other in litigation instituted hereunder but at the expense of the party instituting the suit pursuant to Paragraph 18.2. Such litigation will be controlled by the party instituting such suit, but the other party may be represented by counsel of its choice. In no event may either party admit liability or wrongdoing on behalf of the other party without the other party’s prior written consent.

 

18.5

Any agreement made by LICENSEE for the purposes of settling litigation or other dispute shall comply with the requirements of Article 4 (Sublicenses) of this Agreement.

 

19.	INDEMNIFICATION AND INSURANCE

 

19.1

LICENSEE will, and will require its sublicensees to, indemnify, hold harmless, and defend REGENTS and IGT and their officers, employees, and agents; sponsor(s) of the research that led to the INVENTION and BIOLOGICAL MATERIAL included in PROPERTY RIGHTS; and the inventors of any patents and patent applications under PATENT RIGHTS and their employers against any and all losses, damages, costs, fees, and expenses resulting from third party claims and suits arising out of exercise of this license or any sublicense or any use or possession of the BIOLOGICAL MATERIAL. This indemnification will include, but not be limited to, any product liability claims.

 

19.2

LICENSEE, at its sole cost and expense, will ensure that the applicable entity performing activities in connection with any work performed hereunder, whether LICENSEE, an AFFILIATE, or a sublicensee, will obtain, keep in force, and maintain the following insurance:

 

(a)

prior to the start of clinical trials of a LICENSED PRODUCT, Commercial Form General Liability Insurance (contractual liability included) with limits as follows:

 

Each Occurrence			$[***]
Products/Completed Operations Aggregate			$[***]
Personal and Advertising Injury			$[***]
General Aggregate			$[***]

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(b)

upon the start of any clinical trials of a LICENSED PRODUCT, Commercial Form General Liability Insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence			$[***]
Products/Completed Operations Aggregate			$[***]
Personal and Advertising Injury			$[***]
General Aggregate			$[***]

 

(c)

upon the first commercial sale of a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD, Commercial Form General Liability Insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence			$[***]
Products/Completed Operations Aggregate			$[***]
Personal and Advertising Injury			$[***]
General Aggregate			$[***]

If the above insurance is written on a claims-made form, it shall continue for [***] ([***]) years following termination or expiration of this Agreement.

 

(d)

worker’s compensation as legally required in the jurisdiction in which LICENSEE, an AFFILIATE, or a sublicensee, as applicable, is doing business.

LICENSEE will promptly notify REGENTS of any material reduction in the insurance coverages below the amounts required hereunder.

 

19.3

The coverage and limits referred to in Paragraph 19.2 above will not in any way limit the liability of LICENSEE under Paragraph 19.1. Upon the execution of this Agreement, LICENSEE will furnish REGENTS with certificates of insurance evidencing compliance with all requirements. Such certificates will:

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

(a)

where possible, provide for [***] ([***]) days’ ([***] ([***]) days for non-payment of premium) advance written notice to REGENTS of any cancellation of insurance coverages;

 

(b)

indicate that REGENTS has been endorsed as an additional insured under the coverage described above in Paragraph 19.2; and

 

(c)

include a provision that the coverage will be primary and will not participate with, nor will be excess over, any valid and collectable insurance or program of self-insurance maintained by REGENTS.

 

19.4

REGENTS will promptly notify LICENSEE in writing of any claim or suit brought against REGENTS for which REGENTS intends to invoke the provisions of Paragraph 19.1. LICENSEE will keep REGENTS informed of its defense of any claims pursuant to Paragraph 19.1, and REGENTS will cooperate reasonably in any such suit. If REGENTS invokes the provisions of Paragraph 19.1, REGENTS will not make any admissions or take any actions in such claim or suit that may prejudice or impair LICENSEE’s ability to defend such claim or suit without LICENSEE’s prior written consent, and LICENSEE will not admit liability or wrongdoing on behalf of REGENTS without REGENTS’ prior written consent.

 

20.	COMPLIANCE WITH LAWS

 

20.1

LICENSEE will comply with all applicable international, national, state, regional, and local laws and regulations in performing its obligations hereunder and in its use, manufacture, SALE or import of the LICENSED PRODUCTS, LICENSED SERVICES, or practice of the LICENSED METHODS. LICENSEE understands that REGENTS is subject to United States laws and regulations (including the Arms Export Control Act, as amended, and the Export Administration Act of 1979), controlling the export of technical data, computer software, laboratory prototypes and other commodities, and REGENTS’ obligations under this Agreement are contingent on compliance with such laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by LICENSEE that LICENSEE will not export such technical data and/or commodities to certain foreign countries without prior approval of such agency. REGENTS neither represents that a license will not be required nor that, if required, it will be issued.

 

21.	GOVERNMENT APPROVAL OR REGISTRATION

 

21.1

If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, LICENSEE will assume all legal obligations to do so. LICENSEE will notify REGENTS if it becomes aware that this Agreement is subject to a United States or foreign government reporting or approval requirement. LICENSEE will make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process.

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

22.	ASSIGNMENT

 

22.1

This Agreement is binding upon and shall inure to the benefit of REGENTS, and its successors and assigns. This Agreement will be personal to LICENSEE and assignable by LICENSEE only with the written consent of REGENTS, except that LICENSEE may freely assign this Agreement to its AFFILIATE or to an acquirer of all or substantially all of LICENSEE’s stock, assets or business to which this Agreement relates. If LICENSEE assigns this Agreement to a non-AFFILIATE third party, then upon execution of the assignment agreement, LICENSEE will (i) provide REGENTS with the updated contact information, and (ii) [***].

 

23.

NOTICES

 

23.1

All notices under this Agreement will be deemed to have been fully given and effective when done in writing and delivered in person, or three (3) business days after mailed by registered or certified U.S. mail, or one (1) business day after deposited with an express carrier service requiring signature by recipient, and addressed as follows:

 

To REGENTS:		Office of Technology Licensing
		2150 Shattuck Avenue, Suite 510
		Berkeley, CA 94704-1347
		Attn.: Director (UC Case No.: B03-104)
To LICENSEE:		4D Molecular Therapeutics LLC
		444 Laverne Avenue
		Mill Valley, CA 94941
		Attn.: [***]

Either party may change its address upon written notice to the other party.

 

24.	LATE PAYMENTS

 

24.1

If monies owed to REGENTS under this Agreement are not received by REGENTS when due, LICENSEE will pay to REGENTS interest charges at a rate of [***] percent ([***]%) per annum, or less if required by applicable law. Such interest will be calculated from the date payment was due until actually received by REGENTS. Such accrual of interest will be in addition to, and not in lieu of, enforcement of any other rights of REGENTS related to such late payment. Acceptance of any late payment will not constitute a waiver under Article 25 (Waiver) of this Agreement.

 

25.

WAIVER

 

25.1

The failure of either party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement will not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

by the other party. None of the terms and conditions of this Agreement can be waived except by the written consent of the party waiving compliance.

 

26.	CONFIDENTIALITY

 

26.1

Each party will hold the other party’s proprietary business and technical information, patent prosecution material and other proprietary information, including the negotiated terms of this Agreement, in confidence and against disclosure to third parties (except to those employees or authorized representatives having a need to know such information and who are bound by confidentiality obligations with respect thereto) with at least the same degree of care as it exercises to protect its own data and license agreements of a similar nature. Each party will only use such information of the other party in accordance with the terms of this Agreement. These obligations will expire [***] ([***]) years after the termination or expiration of this Agreement.

 

26.2

Nothing contained herein will in any way restrict or impair the right of LICENSEE or REGENTS to use, disclose, or otherwise deal with any information or data which:

 

(a)

at the time of disclosure to the receiving party is generally available to the public or thereafter becomes generally available to the public by publication or otherwise, through no act or omission of the receiving party;

 

(b)

the receiving party can show by its contemporaneous written records was in its possession, without confidentiality restrictions, prior to the time of disclosure to it hereunder, and was not acquired directly or indirectly from the disclosing party;

 

(c)

is independently made available to the receiving party, without confidentiality restrictions, as a matter of right by a third party under no obligation of confidentiality to the disclosing party;

 

(d)

is independently developed by the receiving party without any use of the information disclosed, as shown by the receiving party’s contemporaneous written records; or

 

(e)

is subject to disclosure under the California Public Records Act, court order, or other requirements of law, regulation, or rules of a securities exchange, provided that the receiving party promptly informs the disclosing party of such request.

 

26.3

Notwithstanding anything to the contrary in Paragraph 26.1, LICENSEE may disclose proprietary information it receives pursuant to this Agreement, and the terms of this Agreement, to its actual or potential investors, acquirers, and sublicensees who are bound by obligations of confidentiality with respect thereto. Moreover, REGENTS has the right to share such information with IGT under the

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

confidentiality terms in the IIA. REGENTS will be free to release to IGT, the inventors, and senior administrators employed by REGENTS the terms and conditions of this Agreement upon their request. If such request is made, REGENTS will inform such employees of the confidentiality obligations set forth above and will request that they do not disclose such terms and conditions to others. Should a third party inquire whether a license to PATENT RIGHTS is available, REGENTS may disclose the existence of this Agreement and the extent of the grant in Articles 3 and 4 to such third party, but will not disclose the name of LICENSEE unless LICENSEE has already made such disclosure publicly, except where REGENTS is required to release information under either the California Public Records Act or other applicable law, provided REGENTS gives prior written notice to LICENSEE of such disclosure.

 

26.4

LICENSEE and REGENTS agree to destroy or return to the disclosing party proprietary information received from the other in its possession within [***] ([***]) days following the effective date of termination of this Agreement. However, each party may retain one copy of proprietary information of the other solely for archival purposes in non-working files for the sole purpose of verifying the ownership of the proprietary information, provided such proprietary information will be subject to the confidentiality provisions set forth in this Article 26. LICENSEE and REGENTS agree to provide each other, within [***] ([***]) days following termination of this Agreement, with a written notice that such proprietary information has been returned or destroyed.

 

27.	FORCE MAJEURE

 

27.1

Except for LICENSEE’s obligation to make any payments to REGENTS hereunder, the parties to this Agreement shall be excused from any performance required hereunder if such performance is rendered impossible or unfeasible due to any catastrophes or other major events beyond their reasonable control, including, without limitation, war, riot, and insurrection; laws, proclamations, edicts, ordinances, or regulations; strikes, lockouts, or other serious labor disputes; and floods, fires, explosions, or other natural disasters. When such events have abated, the parties’ respective obligations hereunder will resume.

 

28.	SEVERABILITY

 

28.1

The provisions of this Agreement are severable, and in the event that any provision of this Agreement will be determined to be invalid or unenforceable under any controlling body of law, such invalidity or enforceability will not in any way affect the validity or enforceability of the remaining provisions hereof.

 

29.	APPLICABLE LAW; VENUE; ATTORNEYS’ FEES

 

29.1

THIS AGREEMENT WILL BE CONSTRUED, INTERPRETED, AND APPLIED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, excluding any choice of law rules that would direct the application of the laws of

 

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information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

another jurisdiction, but the scope and validity of any patent or patent application under PATENT RIGHTS will be determined by the applicable law of the country of such patent or patent application. Any legal action brought by the parties relating to this Agreement will be conducted in San Francisco, California. The prevailing party in any legal action under this Agreement will be entitled to recover its reasonable attorneys’ fees in addition to its costs and necessary disbursements.

 

30.	ELECTRONIC COPY; COUNTERPARTS

 

30.1

The parties to this document agree that a copy of the original signature to this Agreement (including an electronic copy) may be used for any and all purposes for which the original signature may have been used. The parties further waive any right to challenge the admissibility or authenticity of this document in a court of law based solely on the absence of an original signature.

 

30.2

This Agreement may be executed in two or more counterparts, including by facsimile or electronic exchange of signed copies in PDF format, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument.

 

31.	SCOPE OF AGREEMENT; AMENDMENT; WAIVER

 

31.1

This Agreement, together with the OTHER LICENSE AGREEMENT and the MTA, incorporates the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior agreements, discussions and writings in respect thereof, including without limitation the Letter Agreement dated May 8, 2013.

 

31.2

This Agreement may be altered or modified only by written amendment duly executed by the parties hereto. A waiver of any breach or default of this Agreement shall not constitute a waiver of any other right hereunder or any subsequent breach or default.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate originals by their duly authorized officers or representatives.

 

THE REGENTS OF THE UNIVERSITY, OF CALIFORNIA						4D MOLECULAR THERAPEUTICS LLC
By		/s/ Carol Mimura				By		/s/ David H. Kirn

		Carol Mimura, Ph.D.
		Assistant Vice Chancellor				Printed Name		David H. Kirn
		Office of Technology Licensing

						Title		Co-Founder, Executive Chair

Date		Dec. 19, 2013				Date		December 19, 2013

 

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Exhibit A

Omitted pursuant to Regulation S-K, Item 601(a)(5).

 

1

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Exhibit 10.9

 

Agreement Control No. 2014-16-0090   UNIVERSITY OF CALIFORNIA, BERKELEY   OFFICE OF TECHNOLOGY LICENSING

 

 

EXCLUSIVE LICENSE AND BAILMENT AGREEMENT

BETWEEN

4D MOLECULAR THERAPEUTICS, LLC

AND

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

FOR

[***]

UC Case No.: B13-135

 

 

---

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

TABLE OF CONTENTS

 

1.		Background			3
2.		Definitions			4
3.		Grant			8
4.		Sublicenses			9
5.		License Issue Fee			12
6.		Royalties			13
7.		Due Diligence			16
8.		Progress and Royalty Reports			18
9.		Books and Records			19
10.		Life of the Agreement			19
11.		Termination by Regents			20
12.		Termination by Licensee			20
13.		Disposition of Licensed Products upon Termination			21
14.		Patent Prosecution and Maintenance			21
15.		Marking			22
16.		Use of Names and Trademarks			22
17.		Limited Warranties			23
18.		Patent Infringement			24
19.		Indemnification and Insurance			25
20.		Compliance with Laws			27
21.		Government Approval or Registration			27
22.		Assignment			28
23.		Notices			28
24.		Late Payments			28

 

i

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

25.		Waiver			28
26.		Confidentiality			29
27.		Force Majeure			30
28.		Severability			30
29.		Applicable Law; Venue; Attorneys’ Fees			30
30.		Electronic Copy; Counterparts			31
31.		Scope of Agreement; Amendment; Waiver			31

 

ii

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

UNIVERSITY OF CALIFORNIA, BERKELEY   OFFICE OF TECHNOLOGY LICENSING

 

 

EXCLUSIVE LICENSE AND BAILMENT AGREEMENT

FOR

[***]

UC Case No.: B13-135                

 

 

This exclusive license agreement (“Agreement”) is effective December 19, 2013 (“Effective Date”), by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California corporation, whose legal address is 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200, acting through its Office of Technology Licensing, at the University of California, Berkeley, 2150 Shattuck Avenue, Suite 510, Berkeley, CA 94704-1347 (“REGENTS”) and 4D MOLECULAR THERAPEUTICS LLC, a Delaware limited liability company having a principal place of business at 19 Rima Court, Danville, CA 94526 (“LICENSEE”). The parties agree as follows:

 

1.	BACKGROUND

 

1.1

REGENTS has an assignment of “[***]” invented by [***], employed by the University of California, Berkeley (the “INVENTION”), as described in REGENTS’ Case No. B13-135, and to the patents and patent applications under REGENTS’ PATENT RIGHTS (as defined below), which are directed to the INVENTION.

 

1.2

LICENSEE entered into a letter agreement with REGENTS effective May 6, 2013, terminating on November 6, 2013, for the purpose of evaluating the INVENTION and granting LICENSEE an exclusive right to negotiate an option or exclusive license in REGENTS’ PATENT RIGHTS to the INVENTION, which letter agreement covers LICENSEE’s commitment to reimburse REGENTS’ patent costs during the period of good faith negotiation for an exclusive option or license.

 

1.3

LICENSEE has provided REGENTS with a commercialization plan for the INVENTION and business strategy in order to evaluate its capabilities as a LICENSEE.

 

1.4

The development of the INVENTION was sponsored in part by various grants by U.S. Government agencies, and as a consequence, REGENTS elected to retain title to the INVENTION subject to the rights of the U.S. Government under 35 USC 200-212 and implementing regulations, including that REGENTS, in turn, has granted back to the U.S. Government a non-exclusive, non-transferable,

 

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irrevocable, paid-up license to practice or have practiced the INVENTION for or on behalf of the U.S. Government throughout the world. These U.S. Government grants are National Institutes of Health Contract No. HL081527.

 

1.5

REGENTS and LICENSEE wish to have the INVENTION perfected and marketed as soon as reasonably practicable so that products resulting therefrom may be available for public use and benefit.

 

1.6

LICENSEE wishes to acquire, and REGENTS wishes to grant to LICENSEE, an exclusive license under the REGENTS’ PATENT RIGHTS and an exclusive bailment of the BIOLOGICAL MATERIAL included in the REGENTS’ PROPERTY RIGHTS for the purpose of undertaking development and to make, have made, use, sell, offer for sale, import, and export LICENSED PRODUCTS as defined below.

 

1.7

REGENTS and LICENSEE are simultaneously entering into a license agreement covering the inventions under REGENTS’ Case No. B03-104 (the “OTHER LICENSE AGREEMENT”).

 

2.	DEFINITIONS

 

2.1

“REGENTS’ PATENT RIGHTS” means REGENTS’ rights in [***] and assigned to REGENTS; continuing applications thereof, including divisionals, substitutions, extensions and continuation-in-part applications (only to the extent, however, that claims in the continuation-in-part applications are entitled to the priority filing date of the parent patent application); any patents issuing on said application or continuing applications, including all reexaminations, reissues, and extensions thereof; and any corresponding foreign patents or applications.

 

2.2

“LICENSED PRODUCTS” means all kits, compositions of matter, articles of manufacture, materials, and products, the manufacture, use, SALE, offer for SALE, or import of which: (a) would require the performance of the LICENSED METHOD; or (b) but for the license granted pursuant to this Agreement, would infringe, or contribute to or induce the infringement of, a VALID CLAIM of any issued, unexpired patent under REGENTS’ PATENT RIGHTS or a VALID CLAIM being prosecuted in a pending patent application under REGENTS’ PATENT RIGHTS.

 

2.3

“LICENSED METHOD” means any process or method, the use or practice of which, but for the license pursuant to this Agreement, would infringe, or contribute to or induce the infringement of, a VALID CLAIM of any issued patent or pending patent application under REGENTS’ PATENT RIGHTS in that country in which the LICENSED METHOD is used or practiced.

 

2.4

“VALID CLAIM” means (i) a claim in an issued and unexpired patent included in the REGENTS’ PATENT RIGHTS that has not been disclaimed, abandoned or withdrawn and has not been held unenforceable or invalid by a final judgment of a

 

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court or other governmental agency of competent jurisdiction from which no appeal can be or is taken, and has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise, or (ii) a claim in a pending patent application included within the REGENTS’ PATENT RIGHTS that has been filed in good faith and has not been abandoned or finally disallowed without the possibility of appeal or refiling, which application has not been pending for more than [***] ([***]) years after its priority date, provided that for clarity, any claim of a pending patent application that is pending for more than [***] ([***]) years after its priority date shall be eligible to become a VALID CLAIM if it later issues and otherwise falls within subsection (i).

 

2.5

“LICENSED FIELD OF USE” means all fields of use.

 

2.6

“NET SALES” means the gross invoice price charged by, and the fair market value of non-cash consideration paid to, LICENSEE for SALES of LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS, less the sum of the following actual and customary deductions where applicable: (i) the actual amount of write-offs for bad debts (in accordance with generally accepted accounting principles and that would reasonably be taken by a similarly situated company) related to such SALES; (ii) cash, prompt pay, trade or quantity discounts; (iii) sales tax, use tax, consumption tax, Deductible Value Added Tax, tariffs, import/export duties or other excise taxes when included in gross sales, but not income taxes derived from such sales; (iv) transportation charges; and (v) allowances or credits to customers because of rejections or returns. For purposes of calculating NET SALES, NET SALES shall not include any SALE of LICENSED PRODUCTS, LICENSED SERVICES, or LICENSED METHODS used for development purposes (including, without limitation for clinical studies) or provided as samples or free goods (including, without limitation, product transferred in connection with patient assistance programs or other charitable purposes); and a SALE to a sublicensee that is not intended for end use shall not be included in NET SALES. “Deductible Value Added Tax” is value added tax to the extent that is not subject to a tax credit, refund or deduction by a taxing authority.

In the event that LICENSED PRODUCTS, LICENSED SERVICES or LICENSED METHODS are COMBINATION PRODUCTS, the NET SALES of such COMBINATION PRODUCT, for the purposes of determining royalty payments pursuant to this Agreement, shall be determined by multiplying the NET SALES of the COMBINATION PRODUCT (as defined below) during the applicable royalty reporting period, by the fraction A/(A+B), where A is the fair market value of the LICENSED PRODUCTS, LICENSED SERVICES or LICENSED METHODS, and B is the fair market value of all OTHER COMPONENTS included in the COMBINATION PRODUCT. If a COMBINATION PRODUCT is sold, whether or not the OTHER COMPONENTS are also sold separately, LICENSEE shall make a good faith determination of the respective fair market values of the LICENSED PRODUCT, LICENSED SERVICES or LICENSED METHODS and all OTHER COMPONENTS included in the COMBINATION

 

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PRODUCT, and shall notify REGENTS of such determination and provide REGENTS with data to support such determination.

 

2.7

“COMBINATION PRODUCT” means a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD that incorporates at least one OTHER COMPONENT. For clarity, all references to “LICENSED PRODUCTS, LICENSED SERVICES or LICENSED METHODS” in this Agreement shall be deemed to include COMBINATION PRODUCTS.

 

2.8

“OTHER COMPONENT” means a proprietary active therapeutic ingredient or a delivery device, in each case that is not itself a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD.

 

2.9

“AFFILIATE” of LICENSEE means any entity that, directly or indirectly, Controls LICENSEE, is Controlled by LICENSEE, or is under common Control with LICENSEE. “Control” means (i) having the actual, present capacity to elect a majority of the directors of such affiliate, (ii) having the power to direct at least fifty percent (50%) of the voting rights entitled to elect directors, or (iii) in any country where the local law will not permit foreign equity participation of a majority, ownership or control, directly or indirectly, of the maximum percentage of such outstanding stock or voting rights permitted by local law.

 

2.10

“LICENSED TERRITORY” means United States of America, its territories and possessions, and subject to Paragraph 14.4, any foreign countries where REGENTS’ PATENT RIGHTS exist.

 

2.11

“SALE” means, for LICENSED PRODUCTS and LICENSED SERVICES, the act of selling, leasing or otherwise transferring, providing, or furnishing such product or service, and for LICENSED METHODS, the act of performing such method for any consideration. Correspondingly, “SELL” means to make or cause to be made a SALE, and “SOLD” means to have made or caused to be made a SALE.

 

2.12

“LICENSED SERVICE” means a service provided using LICENSED PRODUCTS or LICENSED METHODS.

 

2.13

“NON-ROYALTY SUBLICENSE REVENUE” means any cash consideration, and subject to Paragraph 4.3(b), the cash equivalent of all other consideration, received by LICENSEE under each sublicense for the grant of rights under the REGENTS’ PATENT RIGHTS, but excluding: (a) any royalty payments on sales of LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS by a sublicensee (which shall be included as EARNED ROYALTY SUBLICENSE REVENUE); (b) any amounts paid by a sublicensee as bona fide reimbursement for research and development costs at fair market value for materials and full time equivalents; (c) bona fide loans or any payments in consideration for a grant of equity of the LICENSEE at fair market value; (d) amounts paid for supplies of product or other tangible materials; (e) amounts paid as reimbursement for expenses directly related to the pursuit, maintenance, and/or

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

defense of REGENTS’ PATENT RIGHTS; (f) milestone payments by a sublicensee for a product, service, or method that is not a LICENSED PRODUCT, LICENSED SERVICE, or LICENSED METHOD; (g) payments by a sublicensee for use of the BIOLOGICAL MATERIALS to identity or optimize products, services, or methods that are not LICENSED PRODUCTS, LICENSED SERVICES, or LICENSED METHODS; (h) withholding taxes and any other amounts by a sublicensee from amounts otherwise payable to LICENSEE under such sublicense agreement other than past due payments; and (i) payments for the supply of LICENSED PRODUCTS or materials used in the performance of LICENSED SERVICES or LICENSED METHODS. Without limiting the foregoing, the parties agree that NON-ROYALTY SUBLICENSE REVENUE shall not include consideration received by LICENSEE from a sublicensee that is not received in consideration for the grant of rights under the REGENTS’ PATENT RIGHTS to make, use, offer for SALE, import, and SELL LICENSED PRODUCTS and LICENSED SERVICES, and to practice LICENSED METHODS.

 

2.14

“EARNED ROYALTY SUBLICENSE REVENUE” means any royalty payments received by LICENSEE pursuant to an agreement between LICENSEE and a sublicensee pursuant to which such sublicensee receives a sublicense under the PATENT RIGHTS, on SALES of LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS by such sublicensee (which sales shall not be included as NET SALES).

 

2.15

“FIRST QUALIFIED ROUND” occurs on the first date on which the LICENSEE has received, in aggregate in excess of [***] US Dollars ($[***]) from any one of or combination of equity financing, convertible debt financing, unrestricted grants, or the acquisition of all or substantially all of LICENSEE’s limited liability company interests, assets or business; provided, however, that [***].

 

2.16

“FOUNDERS” means [***] and [***].

 

2.17

“PHASE I CLINICAL TRIAL” means a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(a).

 

2.18

“PHASE IIB CLINICAL TRIAL” means a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(b) and that is designed to support and immediately precede the initiation of a Phase III Clinical Trial without any further phase II trials by evaluating the dose-dependent effectiveness of a pharmaceutical product for a particular indication or indications in patients with the disease or condition under study and to determine the common side effects and risks associated with the pharmaceutical product.

 

2.19

“PHASE III CLINICAL TRIAL” means a human clinical trial in any country that would satisfy the requirements of 21 CFR 312.21(c).

 

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UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

2.20

“REGENTS’ PROPERTY RIGHTS” means all of REGENTS’ personal property rights in the tangible property in the INVENTION licensed hereunder and to the BIOLOGICAL MATERIALS. REGENTS’ PROPERTY RIGHTS do not include REGENTS’ PATENT RIGHTS.

 

2.21

“BIOLOGICAL MATERIALS” shall have the meaning set forth in Article 1 of the Letter Agreement between REGENTS and LICENSEE, dated as of even date herewith (the “MTA”).

 

3.

GRANT

 

3.1        (a)

Subject to the limitations set forth in this Agreement, including the license granted to the U.S. Government and the rights reserved in Paragraph 3.3, REGENTS hereby grants and LICENSEE hereby accepts an exclusive license under REGENTS’ PATENT RIGHTS to make, use, offer for SALE, import, and SELL LICENSED PRODUCTS and LICENSED SERVICES, and to practice LICENSED METHODS, in the LICENSED FIELD OF USE in the LICENSED TERRITORY.

 

(b)

Subject to the limitations set forth in this Agreement and subject to the license granted to the U.S. Government, REGENTS hereby grants and LICENSEE hereby accepts an exclusive bailment and license under REGENTS’ PROPERTY RIGHTS to possess, make and use the BIOLOGICAL MATERIAL. LICENSEE acknowledges that the REGENTS is and will remain the sole owner of the BIOLOGICAL MATERIAL and the title of the material is not transferred to LICENSEE under this Agreement.

 

(c)

REGENTS have provided the LICENSEE with BIOLOGICAL MATERIAL in quantities as set forth in the MTA. No additional obligation is required of REGENTS’ with respect to bailment of the BIOLOGICAL MATERIAL.

 

3.2

The licenses under Paragraph 3.1 will be exclusive for a term commencing on the Effective Date and ending on the date of the last-to-expire VALID CLAIM under REGENTS’ PATENT RIGHTS.

 

3.3

Nothing in this Agreement will be deemed to limit the right of REGENTS to publish any and all technical data resulting from any research performed by REGENTS relating to the INVENTION and the BIOLOGICAL MATERIAL REGENTS expressly reserves the right to use the INVENTION, the BIOLOGICAL MATERIAL and related technology for its educational and research purposes; to disseminate the BIOLOGICAL MATERIAL and other tangible materials associated with, or required to practice the INVENTION and/or the REGENTS’ PATENT RIGHTS to researchers at nonprofit institutions for their educational and research purposes and to permit other nonprofit institutions to use such BIOLOGICAL MATERIAL to practice the REGENTS’ PATENT RIGHTS for education and research purposes.

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

3.4

This Agreement will terminate immediately if LICENSEE files a claim asserting that any portion of the REGENTS’ PATENT RIGHTS is invalid or unenforceable where the filing is by the LICENSEE, a third party on behalf of the LICENSEE, or a third party at the written urging of the LICENSEE.

 

3.5

LICENSEE will have a continuing responsibility to keep REGENTS informed of the large/small entity status, as defined in 15 U.S.C. 632, of itself and its sublicensees.

 

3.6

The INVENTION was funded in part by the U.S. Government. In accordance with 35 U.S.C. 204, to the extent required by law or regulation, any products covered by patent applications or patents claiming the INVENTION and sold in the United States will be substantially manufactured in the United States.

 

4.	SUBLICENSES

 

4.1

REGENTS also grants to LICENSEE the right to sublicense to AFFILIATES and third parties the right to make, use, offer for SALE, import, and SELL LICENSED PRODUCTS and LICENSED SERVICES, and to practice LICENSED METHODS, provided that LICENSEE has exclusive rights under this Agreement at the time of sublicensing. LICENSEE will notify REGENTS of each sublicense granted hereunder and furnish to REGENTS a copy of each such sublicense agreement, which shall be treated as confidential information of LICENSEE. Every such sublicense will include:

 

(a)

a statement setting forth the term after which LICENSEE’s exclusive rights, privileges, and license hereunder will expire;

 

(b)

as applicable, all the rights of, and require the performance of all the obligations due to, REGENTS (and, if applicable, the United States Government) under this Agreement, other than those rights and obligations specified in Article 5 (License Issue Fee) and Article 6 (Royalties), for which LICENSEE shall remain responsible; and

 

(c)

the same provision for indemnification of REGENTS as has been provided for in this Agreement.

 

4.2

To the extent permitted under the sublicense agreement, a sublicensee shall have the right to grant further sublicenses to its AFFILIATE and third parties to the extent such sublicensee deems such further sublicense to be commercially reasonable, useful or necessary for the development and/or commercialization of LICENSED PRODUCT(S) or LICENSED METHOD(S) in accordance with this Agreement; provided that (i) such further sublicense is subject to a written sublicense agreement and is bound by all of the applicable terms, conditions,

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

obligations, restrictions and other covenants of this Agreement that protect or benefit the REGENTS’ (and, if applicable, the U.S. Government’s) rights and interests under this Agreement, and (ii) the sublicensee shall, within [***] ([***]) days after issuing any further sublicense, furnish to LICENSEE for delivery to REGENTS, subject to any confidentiality provisions with third parties, all material terms of any such sublicenses, pertaining to the REGENTS’ interests, including the sublicensee’s name and address, and indemnification of REGENTS as provided in this Agreement.

 

4.3

LICENSEE will pay to REGENTS (i) [***] percent ([***]%) of NON-ROYALTY SUBLICENSE REVENUE and (ii) [***] percent ([***]%) of EARNED ROYALTY SUBLICENSE REVENUE, provided that in no event will the EARNED ROYALTY SUBLICENSE REVENUE due to REGENTS on sales of LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS by a sublicensee be less than [***] percent ([***]%) of net sales of such sublicensee (which for purposes of this Paragraph 4.3 shall be calculated as though such sublicensee were LICENSEE under Paragraph 2.6.

 

(a)

In the event LICENSEE sublicenses the REGENTS’ PATENT RIGHTS along with its own patent rights or those of other third parties, LICENSEE may reasonably determine in good faith the percentage of compensation received under such sublicense that represents consideration due for the grant of the rights under the REGENTS’ PATENT RIGHTS, which percentage will be based upon the value of the REGENTS’ PATENT RIGHTS licensed to the sublicensee relative to the value of LICENSEE’s own patent rights or the other third party patent rights licensed to the sublicensee. When making payment under this Paragraph 4.3(a), LICENSEE shall provide REGENTS with all supporting information and documentation used to determine any such percentage (or shall reference previously provided supporting information and documentation). Notwithstanding the foregoing, in no case will LICENSEE be permitted to reduce the compensation to REGENTS under this Paragraph 4.3(a) in connection with LICENSEE’s own patent rights or those of third parties by more than [***] percent ([***]%).

 

(b)

If the consideration received is equity and approval to accept equity is granted by REGENTS, then the LICENSEE will transfer [***] percent ([***]%) of the equity LICENSEE receives to REGENTS or REGENTS’ nominee. REGENTS will promptly notify the LICENSEE upon REGENTS’ Office of the President’s approval for the equity. If equity is not accepted, then the LICENSEE will pay REGENTS’ portion in cash once the equity is liquidated.

 

(c)

LICENSEE shall not be required to pay REGENTS more than [***] percent ([***]%) of NON-ROYALTY SUBLICENSE REVENUE and [***] percent ([***]%) of EARNED ROYALTY SUBLICENSE REVENUE even if LICENSEE sublicenses the REGENTS’ PATENT RIGHTS under

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

this Agreement and the patent rights under the OTHER LICENSE AGREEMENT. All amounts paid under this Paragraph 4.3 shall be credited against amounts due for the same LICENSED PRODUCT, LICENSED METHOD or LICENSED SERVICE under Paragraph 4.3 of the OTHER LICENSE AGREEMENT.

 

4.4

AFFILIATES will have no licenses under REGENTS’ PATENT RIGHTS except as granted by sublicense pursuant to this Agreement.

 

4.5

For the purposes of this Agreement, the activities of all sublicensees pursuant to any sublicense shall be deemed to be the activities of LICENSEE, for which LICENSEE shall be responsible.

 

4.6

LICENSEE will collect payment of all monies and other consideration due REGENTS from sublicensees, and deliver all reports due REGENTS and received from sublicensees.

 

4.7

Upon termination of this Agreement for any reason, all sublicenses that are granted by LICENSEE pursuant to this Agreement, where the sublicensee is in compliance with its sublicense agreement as of the date of such termination, will remain in effect and will be assigned to REGENTS, except that REGENTS will not be bound to perform any duties or obligations set forth in any sublicenses that extend beyond the duties and obligations of REGENTS set forth in this Agreement.

 

4.8

If REGENTS (to the extent of the actual knowledge of the licensing professional responsible for administration of this case) discovers, or a third party discovers and notifies that licensing professional, that the INVENTION is [***] for an application covered by the LICENSED FIELD OF USE, but for which LICENSED PRODUCTS have not been developed or are not currently under development by LICENSEE, then REGENTS, as represented by the Office of Technology Licensing, shall give written notice to LICENSEE, except for: (1) information that is subject to restrictions of confidentiality with third parties, and (2) information which originates with REGENTS’ personnel who do not assent to its disclosure to LICENSEE. REGENTS shall endeavor to provide to LICENSEE, at a minimum, a description of the nature and scope of the proposed sublicense sufficient for LICENSEE to evaluate its desire to develop and commercialize products for the relevant application as provided in this Paragraph 4.8.

LICENSEE shall have [***] ([***]) days to give REGENTS written notice stating whether LICENSEE elects to develop LICENSED PRODUCTS for such application.

If LICENSEE elects to develop and commercialize the proposed LICENSED PRODUCTS for such application, LICENSEE shall submit progress reports with respect thereto to REGENTS pursuant to Article 8.

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

If LICENSEE elects not to develop and commercialize the proposed LICENSED PRODUCTS for such application, REGENTS may seek a third party(ies) to develop and commercialize the proposed LICENSED PRODUCTS for such application. If REGENTS is successful in finding a third party, it shall refer such third party to LICENSEE. If the third party requests a sublicense under this Agreement for such application, then LICENSEE shall report the request to REGENTS within [***] ([***]) days from the date of such written request. If the request results in a sublicense, then LICENSEE shall notify REGENTS pursuant to Paragraph 4.1.

If LICENSEE refuses to grant a sublicense to such third party, then within [***] ([***]) days after such refusal, LICENSEE shall submit to REGENTS a report specifying the license terms proposed by the third party and a written justification for LICENSEE’s refusal to grant the proposed sublicense. If REGENTS, [***], determines that [***], then REGENTS shall [***], provided that [***].

 

5.	LICENSE ISSUE FEE

5.1 LICENSEE will pay to REGENTS a non-creditable, non-refundable license issue fee as follows:

 

(a)

Five Thousand U.S. Dollars ($5,000) within [***] ([***]) days following the Effective Date of this Agreement;

 

(b)

If approval to accept equity in LICENSEE is granted by REGENTS in accordance with this Agreement, then within [***] ([***]) days following the date on which the ACCEPTANCE NOTICE (as defined below) is received by the LICENSEE, LICENSEE shall issue to REGENTS’ nominee (under the terms of a mutually agreed upon unit purchase agreement to be executed by the parties), an interest in LICENSEE (a “MEMBERSHIP INTEREST”) which shall be non-voting, with an allocation percentage with respect to profits and losses equal to three percent (3%) as of close of the FIRST QUALIFIED ROUND; if all or a portion of the FIRST QUALIFIED ROUND involves convertible securities which will not convert into MEMBERSHIP INTERESTS until a subsequent financing event, then at the time of the conversion of those securities into MEMBERSHIP INTERESTS, the LICENSEE shall issue additional MEMBERSHIP INTERESTS to REGENTS such that REGENTS’ allocation percentage with respect to profits and losses continues to equal three percent (3%) as of the FIRST QUALIFIED ROUND (following the conversion of any convertible securities such as convertible debt issued at the FIRST QUALIFIED ROUND). LICENSEE further agrees that as holders of MEMBERSHIP INTERESTS REGENTS shall receive the same anti-dilution treatment as any other MEMBERSHIP INTERESTS held by either of the FOUNDERS as of the date of this Agreement. REGENTS may transfer or direct LICENSEE to transfer an inventor share portion of the MEMBERSHIP INTERESTS to be issued pursuant to this Section 5.1(b)

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

under REGENTS’ patent policy of the shares otherwise due to REGENTS to the REGENTS’ inventors of REGENTS’ PATENT RIGHTS notwithstanding the provisions of other contracts associated with the transfer of the shares.

LICENSEE will promptly notify REGENTS following the close of the FIRST QUALIFIED ROUND. Following receipt of notice of the closing of the FIRST QUALIFIED ROUND, REGENTS will promptly notify the LICENSEE upon REGENTS’ Office of the President’s approval for the equity (the “ACCEPTANCE NOTICE”). If REGENTS’ Office of the President does not provide an ACCEPTANCE NOTICE to LICENSEE within [***] ([***]) days following the close of the FIRST QUALIFIED ROUND, then Fifty Thousand U.S. Dollars ($50,000) shall be due [***] in lieu of the MEMBERSHIP INTERESTS to be issued under this Section 5.1(b).

 

5.2

LICENSEE will also pay to REGENTS a license maintenance fee of Five Thousand U.S. Dollars ($5,000) on the one (1) year anniversary date of the Effective Date and on each anniversary of the Effective Date thereafter. Notwithstanding the foregoing, the license maintenance fee will not be due and payable on any anniversary of the Effective Date, if on such date the LICENSEE or a sublicensee is selling or otherwise exploiting LICENSED PRODUCTS or LICENSED METHODS, and LICENSEE pays an earned royalty to REGENTS on the NET SALES of such LICENSED PRODUCTS or LICENSED METHODS or a payment on EARNED ROYALTY SUBLICENSE REVENUE.

 

6.

ROYALTIES

 

6.1

LICENSEE will pay to REGENTS earned royalties at the rate of [***] percent ([***]%) of NET SALES of LICENSEE, subject to the following:

 

(a)

If LICENSEE is required to make any payment (including royalties or other license fees) to a third party to obtain any intellectual property rights in the absence of which LICENSEE could not practice REGENTS’ PATENT RIGHTS, such third party payments will be credited against royalties owed hereunder by LICENSEE to REGENTS, provided that in no one [***] will the total of such credits reduce earned royalties owed by LICENSEE to REGENTS by more than [***] percent ([***]%).

 

(b)

In the event a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD are SOLD to end users, and the total combined royalty burden to LICENSEE on NET SALES (including royalties due to REGENTS under this Agreement and royalties due to third parties on such NET SALES) exceeds [***] percent ([***]%), the earned royalty due to REGENTS will be adjusted, according to the following formula, [***]:

Adjusted royalty = [***]

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

For example, [***].

 

(c)

Only one royalty will be due to REGENTS on any given LICENSED PRODUCT, LICENSED METHOD and LICENSED SERVICE. All amounts paid under this Paragraph 6.1 shall be credited against amounts due for the same LICENSED PRODUCT, LICENSED METHOD or LICENSED SERVICE under Paragraph 6.1 of the OTHER LICENSE AGREEMENT.

 

6.2

Royalties accruing to REGENTS will be paid to REGENTS [***] within [***] ([***]) days after the end of each [***].

 

6.3

Royalties will be payable on NET SALES of LICENSED PRODUCTS, LICENSED METHODS and LICENSED SERVICES covered by VALID CLAIMS of both pending patent applications and issued patents.

 

6.4

LICENSEE will pay to REGENTS milestone payments as follows, provided that all amounts paid under this Paragraph 6.4 shall be credited against amounts due with respect to NON-ROYALTY SUBLICENSE REVENUE pursuant to Paragraph 4.3:

 

(a)

LICENSEE shall pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD and;

 

(b)

LICENSEE shall pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD;

 

(c)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD;

 

(d)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD;

 

(e)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD; and

 

(f)

LICENSEE will pay to REGENTS a milestone payment of [***] U.S. Dollars ($[***]) within [***] ([***]) days of [***] for the first LICENSED PRODUCT or LICENSED METHOD, [***].

Only the milestones listed in this Paragraph 6.4 will be due on any given LICENSED PRODUCT or LICENSED METHOD, even if such milestone is

 

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UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

payable under this Agreement and under the OTHER LICENSE AGREEMENT. All amounts paid under this Paragraph 6.4 shall be credited against amounts due for the same LICENSED PRODUCT or LICENSED METHOD under Paragraph 6.4 of the OTHER LICENSE AGREEMENT.

 

6.5

Beginning in the first calendar year after the year in which the first occurrence of NET SALES takes place, and each succeeding calendar year thereafter, LICENSEE will pay to the REGENTS a minimum annual royalty of [***] U.S. Dollars ($[***]), increasing by [***] Dollars ($[***]) every year thereafter but capped at a total of One Hundred Thousand Dollars ($100,000) per year in minimum royalties for the remainder of the term of this Agreement. This minimum annual royalty will be paid to REGENTS by [***] of the year following each applicable calendar year and will be credited against by the earned royalties (including royalty payments based on NET SALES and payments based on EARNED ROYALTY SUBLICENSE REVENUE due pursuant to Sections 6.1 and 4.3, respectively) paid for the [***] calendar year for which the minimum payment is made, whether under this Agreement or the OTHER LICENSE AGREEMENT.

Only one minimum annual royalty will be due under this Agreement and under the OTHER LICENSE AGREEMENT. All amounts paid under this Paragraph 6.5 shall be credited against amounts due under Paragraph 6.5 of the OTHER LICENSE AGREEMENT.

 

6.6

All payments due REGENTS will be payable in United States dollars. When LICENSED PRODUCTS, LICENSED SERVICES, or LICENSED METHODS are SOLD for monies other than United States dollars, earned royalties will first be determined in the foreign currency of the country in which the SALE was made and then converted into equivalent United States dollars. The exchange rate will be that rate quoted in the Wall Street Journal on the last business day of the reporting period.

 

6.7

In the event that any royalties or other payments due to REGENTS are subject to withholding tax required by applicable law to be paid by LICENSEE to the taxing authority of any foreign country on REGENTS’ behalf, LICENSEE may deduct the amount of such tax from the applicable royalties or other payment otherwise payable to REGENTS. In such event, LICENSEE shall pay the taxes to the proper taxing authority and shall send evidence of the obligation together with proof of payment to REGENTS following such payment and shall reasonably cooperate with REGENTS in its efforts to avoid or minimize such withholding obligations and/or to obtain credit for payment thereof. To the extent that such amounts are so withheld and remitted to the proper taxing authority by LICENSEE, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the party in respect of whom such deduction and withholding was made. LICENSEE will be responsible for all bank transfer charges.

 

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4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

6.8

LICENSEE will make all payments under this Agreement by check payable to “The Regents of the University of California” and sent to REGENTS at the address shown in Article 23 (Notices).

 

6.9

For the avoidance of doubt, if any patent or patent application, or any claim thereof, included within REGENTS’ PATENT RIGHTS expires or is held invalid in a final decision by a court of competent jurisdiction and last resort and from which no appeal has been or can be taken, all obligation to pay royalties based on such patent, patent application or claim, or any claims patentably indistinct therefrom will cease as of the date of such expiration or final decision. LICENSEE will not, however, be relieved from paying any royalties that accrued before such expiration or decision or that are based on another valid patent or claim not expired or involved in such decision.

 

6.10

No royalties will be collected or paid hereunder on LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS distributed to or used by the United States Government. LICENSEE agrees to reduce the amount charged for LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS distributed to the United States Government by an amount equal to the royalty for such LICENSED PRODUCTS otherwise due REGENTS as provided herein.

 

7.	DUE DILIGENCE

 

7.1

LICENSEE, upon execution of this Agreement, will diligently proceed with the development, manufacture, and SALE of LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS, and will diligently market them in quantities sufficient to meet the market demand.

 

7.2

In addition to its obligations under Paragraph 7.1, LICENSEE will perform the following due diligence activities under this Agreement, through itself and/or its sublicensees:

 

(a)

[***] within [***] ([***]) months after the Effective Date.

 

(b)

[***] within [***] ([***]) months of [***].

 

(c)

[***] within [***] ([***]) months after [***].

 

(d)

[***] within [***] ([***]) months of [***].

 

(e)

[***] within [***] ([***]) months after [***].

If LICENSEE has failed to meet any of its diligence obligations set forth in Paragraphs 7.1 and 7.2, through itself and/or its sublicensees, as applicable, then REGENTS will so notify LICENSEE in writing of its failure to perform.

 

7.3

LICENSEE will have the right and option to extend the target date of any such due diligence obligation (and each subsequent milestone due thereafter) for a period of

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

[***] ([***]) months upon the payment of [***] dollars ($[***]) within [***] ([***]) days after the date to be extended, for each such extension option exercised by LICENSEE. LICENSEE may further extend the target date of any diligence obligation (and each subsequent milestone due thereafter) for an additional [***] ([***]) months upon payment of an additional [***] dollars ($[***]). These payments are in addition to the minimum royalty payments specified in Paragraph 6.5. Additional extensions may be granted only by mutual written agreement of the parties to this Agreement. In the event that Licensee is unable to meet the timeframes in Paragraph 7.2, as extended by this Paragraph 7.3, despite using diligent efforts to do so, taking into account delays which are due to factors (including technical or regulatory issues) which are outside of the reasonable control of LICENSEE, REGENTS and LICENSEE agree to discuss extending such timeframes and target dates in good faith; provided, however, that in no case is REGENTS bound to agree to cumulative extensions longer than [***] ([***]) years unless REGENTS concludes in its sole discretion that such an extension is appropriate.

 

7.4

Should LICENSEE opt not to extend such timeframes or fail to use diligent efforts to meet a diligence obligation by the extended target date, then subject to Paragraph 7.6, REGENTS will have the right and option either to terminate this Agreement or to reduce LICENSEE’s exclusive license to a non-exclusive royalty-bearing license. This right, if exercised by REGENTS, supersedes the rights granted in Article 3. The right to terminate this Agreement or reduce LICENSEE’s exclusive license granted hereunder to a non-exclusive license will be REGENTS’ sole remedy for breach of Paragraphs 7.1 or 7.2.

 

7.5

At the request of either party, any controversy or claim arising out of or relating to the diligence provisions of Paragraphs 7.1 and 7.2 will be settled by arbitration conducted in San Francisco, California in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association but such arbitration must be requested by a party within the sixty (60) day cure period set forth in Paragraph 7.6, except as otherwise provided in Paragraph 7.6 or unless the parties mutually agree later to arbitration hereunder. Judgment upon the award rendered by the arbitrator(s) will be binding on the parties and may be entered by either party in any court having jurisdiction. In determination of due diligence, the arbitrator may determine solely the issues of fact or law with respect to LICENSEE’s rights under this Agreement but will not have the authority to award monetary damages or grant equitable relief.

 

7.6

To exercise either the right to terminate this Agreement or to reduce the license to a non-exclusive license for lack of diligence under Paragraphs 7.1 or 7.2, REGENTS will give LICENSEE written notice of the deficiency. LICENSEE thereafter has sixty (60) days to cure the deficiency or to request arbitration in accordance with Paragraph 7.5. If REGENTS has not received a written request for arbitration or satisfactory tangible evidence that the deficiency has been cured by the end of the sixty (60) day period, then REGENTS may, at its option, either

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

terminate this Agreement or reduce LICENSEE’s exclusive license to a non-exclusive license by giving further written notice to LICENSEE. These notices will be subject to Article 23 (Notices). Notwithstanding the foregoing, in the event that LICENSEE disputes in good faith whether the deficiency was timely cured, it may seek resolution of such dispute pursuant to Article 7.5, and in such event, no termination of this Agreement pursuant to this Article 7.6 may occur unless and until completion of such dispute resolution results in a determination that such deficiency has not been timely cured.

 

8.	PROGRESS AND ROYALTY REPORTS

 

8.1

For each [***] period beginning July 1, 2014, LICENSEE will submit to REGENTS a [***] progress report covering LICENSEE’s activities related to the development and testing of all LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS and the obtaining of necessary governmental approvals, if any, for marketing in the United States. These progress reports will be made for all development activities until the first SALE occurs in the United States.

 

8.2

Each progress report will be a sufficiently detailed summary of activities of LICENSEE and any sublicensees so that REGENTS may evaluate and determine LICENSEE’s progress in development of LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS, and in meeting its diligence obligations under Article 7, and will include (but not be limited to) the following: summary of work completed and in progress; current schedule of anticipated events and milestones, including diligence milestones under Paragraph 7.2; anticipated market introduction dates for the LICENSED TERRITORY; and sublicensees’ activities during the reporting period.

 

8.3

LICENSEE also will report to REGENTS in its subsequent progress and royalty reports, the date of first SALE.

 

8.4

After the first SALE anywhere in the world, LICENSEE will make [***] royalty reports to REGENTS within [***] ([***]) days after [***]. Each such royalty report will include at least the following:

 

(a)

The number of LICENSED PRODUCTS manufactured and the number SOLD;

 

(b)

Gross revenue from SALE of LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS;

 

(c)

NET SALES pursuant to Paragraph 2.6;

 

(d)

Total royalties due REGENTS; and

 

(e)

Names and addresses of any new sublicensees.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

8.5

If no SALES have occurred during the reporting period, a statement to this effect is required in the royalty report for that period.

 

8.6

All reports under this Article 8 shall be treated as confidential information of LICENSEE.

 

9.	BOOKS AND RECORDS

 

9.1

LICENSEE will keep full, true, and accurate books and records containing all particulars that are necessary for the purpose of showing the amount of royalties payable to REGENTS and LICENSEE’s compliance with other obligations under this Agreement. Said books and records will be kept at LICENSEE’s principal place of business or the principal place of business of the appropriate division of LICENSEE to which this Agreement relates. Said books and records and the supporting data will be open at all reasonable times during normal business hours upon reasonable notice, for [***] ([***]) years following the end of the calendar year to which they pertain, for the inspection and audit by a mutually acceptable independent auditor engaged by REGENTS for the purpose of verifying LICENSEE’s royalty statement or compliance in other respects with this Agreement. Such auditor will be bound to hold all information in confidence except as necessary to communicate LICENSEE’s non-compliance with this Agreement to REGENTS.

 

9.2

The fees and expenses of REGENTS’ mutually acceptable independent auditor performing such an examination will be borne by REGENTS. However, if an error in underpaid royalties to REGENTS of more than [***] percent ([***]%) of the total royalties due for any year is discovered, then the fees and expenses of such auditor will be borne by LICENSEE.

 

10.	LIFE OF THE AGREEMENT

 

10.1

Unless otherwise terminated by the operation of law or by acts of the parties in accordance with the terms of this Agreement, this Agreement will be in force from the Effective Date and will remain in effect until the expiration of the last VALID CLAIM under this Agreement.

 

10.2

Any termination of this Agreement shall not affect the rights and obligations set forth in the following articles or paragraphs:

 

Article

2       Definitions

 

Article

4       Sublicenses (only as to Paragraphs 4.2 and 4.7)

 

Article

9       Books and Records

 

Article

10     Life of the Agreement (only as to Paragraphs 10.2 and 10.3)

 

Article

13     Disposition of Licensed Products Upon Termination

 

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Article

16     Use of Names and Trademarks

 

Article

17     Limited Warranties

 

Article

19     Indemnification and Insurance

 

Article

23     Notices

 

Article

24     Late Payments (only as to outstanding payments)

 

Article

26     Confidentiality

 

Article

28     Severability

 

Article

29 Applicable Law; Venue; Attorney’s Fees

 

10.3

Any termination of this Agreement will not relieve LICENSEE of its obligation to pay any monies due or owing at the time of such termination and will not relieve any obligations, of either party to the other party, established prior to termination.

 

11.	TERMINATION BY REGENTS

 

11.1

Except for breach of diligence obligations, which is set forth in Article 7, if LICENSEE should violate or fail to perform any term of this Agreement, then REGENTS may give written notice of such default (“Notice of Default”) to LICENSEE. If LICENSEE should fail to repair such default within sixty (60) days of the effective date of such notice, REGENTS will have the right to terminate this Agreement, and the licenses herein, by a second written notice (“Notice of Termination”) to LICENSEE. If a Notice of Termination is sent to LICENSEE, this Agreement will automatically terminate on the effective date of such notice. Such termination will not relieve LICENSEE of its obligation to pay any royalty or license fees accrued at the time of such termination and will not impair any accrued rights of REGENTS. These notices will be subject to Article 23 (Notices).

 

12.	TERMINATION BY LICENSEE

 

12.1

LICENSEE will have the right at any time to terminate this Agreement in whole or as to any portion of REGENTS’ PATENT RIGHTS by giving notice in writing to REGENTS. Such notice of termination will be subject to Article 23 (Notices) and termination of this Agreement will be effective ninety (90) days after the effective date of such notice.

 

12.2

Any termination pursuant to Paragraph 12.1 will not relieve LICENSEE of any obligation or liability accrued hereunder prior to such termination or rescind anything done by LICENSEE or any payments made to REGENTS hereunder prior to the time such termination becomes effective, and such termination will not affect in any manner any rights of REGENTS arising under this Agreement prior to such termination.

 

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13.	DISPOSITION OF LICENSED PRODUCTS UPON TERMINATION

 

13.1

Upon termination of this Agreement by either party, for a period of [***] ([***]) days after the date of termination, LICENSEE may complete and SELL any partially made LICENSED PRODUCTS and continue to render any previously commenced LICENSED SERVICES, and continue the practice of LICENSED METHODS; provided, however, that all such SALES will be subject to the terms of this Agreement including, but not limited to, the payment of royalties at the rate and at the time provided herein and the rendering of reports thereon.

 

14.	PATENT PROSECUTION AND MAINTENANCE

 

14.1

REGENTS will diligently prosecute and maintain the United States and foreign patent applications and patents under REGENTS’ PATENT RIGHTS, subject to LICENSEE’S reimbursement of REGENTS’ out of pocket costs under Article 14.3 below. All patent applications and patents under REGENTS’ PATENT RIGHTS will be held in the name of REGENTS. REGENTS will have sole responsibility for retaining and instructing patent counsel, but continued use of such counsel at any point in the patent prosecution process, subsequent to the initial filing of a U.S. patent application covering the INVENTION, shall be subject to the approval of LICENSEE. If LICENSEE rejects [***] of REGENTS’ choice of prosecution counsel, then REGENTS may select new prosecution counsel without LICENSEE’s consent. REGENTS shall promptly provide LICENSEE with copies of all relevant documentation, including all responses at least [***] ([***]) days prior to the anticipated filing deadline to the extent such advance notice is available, so that LICENSEE may be currently informed and apprised of the continuing prosecution of the REGENTS’ PATENT RIGHTS. LICENSEE agrees to keep this documentation confidential in accordance with Article 26. LICENSEE may comment upon such documentation, and REGENTS will reasonably consider all such comments made by LICENSEE; provided, however, that if LICENSEE has not commented upon such documentation in reasonable time for REGENTS to sufficiently consider LICENSEE’s comments prior to the deadline for filing a response with the relevant government patent office, REGENTS will be free to respond appropriately without consideration of LICENSEE’s comments. LICENSEE and LICENSEE’s patent counsel will have the right to consult with patent counsel chosen by REGENTS. REGENTS will file foreign counterparts of the REGENTS’ PATENT RIGHTS in countries selected by LICENSEE, subject to Paragraph 14.4.

 

14.2

REGENTS will use reasonable efforts to prepare or amend any patent application to include claims reasonably requested by LICENSEE to protect the LICENSED PRODUCTS, LICENSED SERVICES and LICENSED METHODS contemplated to be SOLD or to be practiced under this Agreement. REGENTS will not abandon a patent application (unless filing a continuation or divisional filing or an equivalent thereof) or fail to maintain a patent without LICENSEE’s prior written consent.

 

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14.3

Subject to Paragraph 14.4, all past, present, and future costs for preparing, filing, prosecuting, and maintaining all United States and foreign patent applications and patents under REGENTS’ PATENT RIGHTS will be borne by LICENSEE, so long as the licenses granted to LICENSEE herein are exclusive. If, however, REGENTS reduces the exclusive licenses granted herein to non-exclusive licenses pursuant to Paragraph 7.6, and REGENTS grants additional license(s), the costs of preparing, filing, prosecuting and maintaining such patent applications and patents will be divided equally among the licensed parties from the effective date of each subsequently granted license agreement. Payments are due within [***] ([***]) days after receipt of invoice from REGENTS.

 

14.4

LICENSEE’s obligation to underwrite and to pay all domestic and foreign patent filing, prosecution, and maintenance costs will continue for so long as this Agreement remains in effect; provided, however, that LICENSEE may terminate its obligations with respect to any given patent application or patent in any or all designated countries upon [***] ([***]) months’ written notice to REGENTS. REGENTS will use its best efforts to curtail patent costs when such a notice is received from LICENSEE. REGENTS may continue prosecution and/or maintenance of such applications or patents at its sole discretion and expense; provided, however, that LICENSEE will have no further right or licenses thereunder.

 

15.

MARKING

 

15.1

Prior to the issuance in the United States of patents under REGENTS’ PATENT RIGHTS, LICENSEE agrees to mark LICENSED PRODUCT(S) (or their containers or labels) SOLD by it in the United States under the license granted in this Agreement with the words “Patent Pending,” and following the issuance in the United States of one or more patents under REGENTS’ PATENT RIGHTS, with the patent numbers of the REGENTS’ PATENT RIGHTS. All LICENSED PRODUCTS SOLD in other countries will be marked in such manner as to conform with the patent laws and practice of such countries.

 

16.	USE OF NAMES AND TRADEMARKS

 

16.1

Nothing contained in this Agreement will be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trademark, trade name, or other designation of either party hereto by the other (including any contraction, abbreviation, or simulation of any of the foregoing). Unless required by law, regulation, or rules of a securities exchange, or consented to in writing by REGENTS, the use by LICENSEE of the name “The Regents of the University of California” or the name of any University of California campus in advertising, publicity or other promotional activities is expressly prohibited.

 

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17.	LIMITED WARRANTIES

 

17.1

REGENTS warrants to LICENSEE that (a) to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement, it has the lawful right to grant the licenses granted to LICENSE pursuant to this Agreement, (b) to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement, it has not previously granted to any third party any rights that conflict with the licenses granted to LICENSEE pursuant to this Agreement, and (c) to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement and of REGENTS’ patent prosecution counsel, no third party who is not designated in filings with relevant patent authorities as an inventor of the REGENTS’ PATENT RIGHTS is, or has claimed or asserted in writing to REGENTS that it is, an inventor of the REGENTS’ PATENT RIGHTS.

 

17.2

Except as expressly provided in this Agreement, the licenses granted pursuant to this Agreement, the BIOLOGICAL MATERIAL, and the associated INVENTION are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESSED OR IMPLIED. REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT THE INVENTION, THE BIOLOGICAL MATERIAL, REGENTS’ PATENT RIGHTS, LICENSED PRODUCTS, LICENSED SERVICES OR LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

 

17.3

EXCEPT FOR LICENSEE’S OBLIGATION TO INDEMNIFY AGAINST CLAIMS OF THIRD PARTIES UNDER ARTICLE 19 (INDEMNIFICATION AND INSURANCE), IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THE LICENSES GRANTED PURSUANT TO THIS AGREEMENT OR THE USE OF THE INVENTION, THE BIOLOGICAL MATERIAL, REGENTS’ PATENT RIGHTS, LICENSED METHODS, LICENSED SERVICES OR LICENSED PRODUCTS. THE REGENTS WILL NOT BE LIABLE FOR DIRECT DAMAGES TO THE OTHER PARTY CAUSED BY AN ASSIGNMENT BY THE REGENTS’ INVENTORS OF THE REGENTS’ PATENT RIGHTS TO A THIRD PARTY.

 

17.4

Nothing in this Agreement is or will be construed as:

 

(a)

A warranty or representation by REGENTS as to the validity, enforceability or scope of any REGENTS’ PATENT RIGHTS; or

 

(b)

A warranty or representation that anything made, used, or SOLD under any license granted in this Agreement is or will be free from infringement of patents of third parties; or

 

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(c)

An obligation to bring or prosecute actions or suits against third parties for patent infringement, except as provided in Article 18; or

 

(d)

Conferring by implication, estoppel, or otherwise any license or rights under any patents of REGENTS other than REGENTS’ PATENT RIGHTS as defined herein, regardless of whether such patents are dominant or subordinate to REGENTS’ PATENT RIGHTS; or

 

(e)

An obligation to furnish any know-how not provided in the patents and patent applications under REGENTS’ PATENT RIGHTS and REGENTS’ PROPERTY RIGHTS.

 

18.	PATENT INFRINGEMENT

 

18.1

In the event that either party (and in the case of REGENTS, to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement) learns of the infringement of any REGENTS’ PATENT RIGHTS under this Agreement, such party will promptly provide the other party with notice and reasonable evidence of such infringement (“Infringement Notice”). During the period and in a jurisdiction where LICENSEE has exclusive rights under this Agreement, neither party will notify a third party, including the infringer, of the infringement without first obtaining consent of the other party, which consent will not be unreasonably withheld; provided, however, that LICENSEE may notify any then-existing sublicensees under the relevant REGENTS’ PATENT RIGHTS of such infringement without REGENTS’ prior consent if such sublicensee is bound by obligations of confidentiality with respect to such information. Both parties will use diligent efforts, in cooperation with each other, to terminate such infringement without litigation.

 

18.2

If the infringing activity of potential commercial significance has not been abated within [***] ([***]) days following the effective date of the Infringement Notice, LICENSEE may institute suit for patent infringement against the infringer. REGENTS may voluntarily join such suit at its own expense, but may not thereafter commence suit against the infringer for the acts of infringement that are the subject of LICENSEE’s suit or any judgment rendered in that suit. [***] If, in a suit initiated by LICENSEE, REGENTS is involuntarily joined [***].

If, within [***] ([***]) days following the effective date of the Infringement Notice, the infringing activity of potential commercial significance has not been abated and LICENSEE has not brought suit against the infringer, REGENTS may institute suit for patent infringement against the infringer. If REGENTS institutes such suit, LICENSEE may not join such suit without REGENTS’ consent and may not thereafter commence suit against the infringer for the acts of infringement that are the subject of REGENTS’ suit or any judgment rendered in that suit.

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

Notwithstanding the foregoing, the parties may by mutual agreement, at any time, bring and control such suit jointly against an infringer of the REGENTS’ PATENT RIGHTS, sharing costs in such manner as they may then agree.

 

18.3

Such legal action as is decided upon will be at the expense of the party instituting the suit pursuant to Paragraph 18.2, and all recoveries recovered thereby will [***], provided that legal action brought jointly by REGENTS and LICENSEE, and participated in by both, will be [***] and all recoveries will be allocated in the following order: (a) to each party pro rata reimbursement of the attorney’s costs, fees, and other related expenses to the extent each party paid for such costs, fees, and expenses, until all such costs, fees, and expenses are reimbursed to each party; and (b) [***].

 

18.4

Each party will cooperate with the other in litigation instituted hereunder but at the expense of the party instituting the suit pursuant to Paragraph 18.2. Such litigation will be controlled by the party instituting such suit, but the other party may be represented by counsel of its choice. In no event may either party admit liability or wrongdoing on behalf of the other party without the other party’s prior written consent.

 

18.5

Any agreement made by LICENSEE for the purposes of settling litigation or other dispute shall comply with the requirements of Article 4 (Sublicenses) of this Agreement.

 

19.	INDEMNIFICATION AND INSURANCE

 

19.1

LICENSEE will, and will require its sublicensees to, indemnify, hold harmless, and defend REGENTS and its officers, employees, and agents; sponsor(s) of the research that led to the INVENTION and BIOLOGICAL MATERIAL included in REGENTS’ PROPERTY RIGHTS; and the inventors of any patents and patent applications under REGENTS’ PATENT RIGHTS and their employers against any and all losses, damages, costs, fees, and expenses resulting from third party claims and suits arising out of exercise of this license or any sublicense or any use or possession of the BIOLOGICAL MATERIAL. This indemnification will include, but not be limited to, any product liability claims.

 

19.2

LICENSEE, at its sole cost and expense, will ensure that the applicable entity performing activities in connection with any work performed hereunder, whether LICENSEE, an AFFILIATE, or a sublicensee, will obtain, keep in force, and maintain the following insurance:

 

(a)

prior to the start of clinical trials of a LICENSED PRODUCT, Commercial Form General Liability Insurance (contractual liability included) with limits as follows:

 

Each Occurrence			$[***]
Products/Completed Operations Aggregate			$[***]
Personal and Advertising Injury			$[***]
General Aggregate			$[***]

 

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(b)

upon the start of any clinical trials of a LICENSED PRODUCT, Commercial Form General Liability Insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence			$[***]
Products/Completed Operations Aggregate			$[***]
Personal and Advertising Injury			$[***]
General Aggregate			$[***]

 

(c)

upon the first commercial sale of a LICENSED PRODUCT, LICENSED SERVICE or LICENSED METHOD, Commercial Form General Liability Insurance (contractual liability included), and product liability insurance if not otherwise included, with limits as follows:

 

Each Occurrence			$[***]
Products/Completed Operations Aggregate			$[***]
Personal and Advertising Injury			$[***]
General Aggregate			$[***]

If the above insurance is written on a claims-made form, it shall continue for [***] ([***]) years following termination or expiration of this Agreement.

 

(d)

worker’s compensation as legally required in the jurisdiction in which LICENSEE, an AFFILIATE, or a sublicensee, as applicable, is doing business.

LICENSEE will promptly notify REGENTS of any material reduction in the insurance coverages below the amounts required hereunder.

 

19.3

The coverage and limits referred to in Paragraph 19.2 above will not in any way limit the liability of LICENSEE under Paragraph 19.1. Upon the execution of this Agreement, LICENSEE will furnish REGENTS with certificates of insurance evidencing compliance with all requirements. Such certificates will:

 

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(a)

where possible, provide for [***] ([***]) days’ ([***] ([***]) days for non-payment of premium) advance written notice to REGENTS of any cancellation of insurance coverages;

 

(b)

indicate that REGENTS has been endorsed as an additional insured under the coverage described above in Paragraph 19.2; and

 

(c)

include a provision that the coverage will be primary and will not participate with, nor will be excess over, any valid and collectable insurance or program of self-insurance maintained by REGENTS.

 

19.4

REGENTS will promptly notify LICENSEE in writing of any claim or suit brought against REGENTS for which REGENTS intends to invoke the provisions of Paragraph 19.1. LICENSEE will keep REGENTS informed of its defense of any claims pursuant to Paragraph 19.1, and REGENTS will cooperate reasonably in any such suit. If REGENTS invokes the provisions of Paragraph 19.1, REGENTS will not make any admissions or take any actions in such claim or suit that may prejudice or impair LICENSEE’s ability to defend such claim or suit without LICENSEE’s prior written consent, and LICENSEE will not admit liability or wrongdoing on behalf of REGENTS without REGENTS’ prior written consent.

 

20.	COMPLIANCE WITH LAWS

 

20.1

LICENSEE will comply with all applicable international, national, state, regional, and local laws and regulations in performing its obligations hereunder and in its use, manufacture, SALE or import of the LICENSED PRODUCTS, LICENSED SERVICES, or practice of the LICENSED METHODS. LICENSEE understands that REGENTS is subject to United States laws and regulations (including the Arms Export Control Act, as amended, and the Export Administration Act of 1979), controlling the export of technical data, computer software, laboratory prototypes and other commodities, and REGENTS’ obligations under this Agreement are contingent on compliance with such laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by LICENSEE that LICENSEE will not export such technical data and/or commodities to certain foreign countries without prior approval of such agency. REGENTS neither represents that a license will not be required nor that, if required, it will be issued.

 

21.	GOVERNMENT APPROVAL OR REGISTRATION

 

21.1

If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, LICENSEE will assume all legal obligations to do so. LICENSEE will notify REGENTS if it becomes aware that this Agreement is subject to a United States or foreign government reporting or approval requirement. LICENSEE will make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process.

 

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22.	ASSIGNMENT

 

22.1

This Agreement is binding upon and shall inure to the benefit of REGENTS, and its successors and assigns. This Agreement will be personal to LICENSEE and assignable by LICENSEE only with the written consent of REGENTS, except that LICENSEE may freely assign this Agreement to its AFFILIATE or to an acquirer of all or substantially all of LICENSEE’s stock, assets or business to which this Agreement relates. If LICENSEE assigns this Agreement to a non-AFFILIATE third party, then upon execution of the assignment agreement, LICENSEE will (i) provide REGENTS with the updated contact information, and [***].

 

23.

NOTICES

 

23.1

All notices under this Agreement will be deemed to have been fully given and effective when done in writing and delivered in person, or three (3) business days after mailed by registered or certified U.S. mail, or one (1) business day after deposited with an express carrier service requiring signature by recipient, and addressed as follows:

 

To REGENTS:		Office of Technology Licensing
		2150 Shattuck Avenue, Suite 510
		Berkeley, CA 94704-1347
		Attn.: Director (UC Case No.: B13-135)
To LICENSEE:		4D Molecular Therapeutics LLC
		444 Laverne Avenue
		Mill Valley, CA 94941
		Attn.: [***]

Either party may change its address upon written notice to the other party.

 

24.	LATE PAYMENTS

 

24.1

If monies owed to REGENTS under this Agreement are not received by REGENTS when due, LICENSEE will pay to REGENTS interest charges at a rate of [***] percent ([***]%) per annum, or less if required by applicable law. Such interest will be calculated from the date payment was due until actually received by REGENTS. Such accrual of interest will be in addition to, and not in lieu of, enforcement of any other rights of REGENTS related to such late payment. Acceptance of any late payment will not constitute a waiver under Article 25 (Waiver) of this Agreement.

 

25.

WAIVER

 

25.1

The failure of either party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement will not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition

 

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by the other party. None of the terms and conditions of this Agreement can be waived except by the written consent of the party waiving compliance.

 

26.	CONFIDENTIALITY

 

26.1

Each party will hold the other party’s proprietary business and technical information, patent prosecution material and other proprietary information, including the negotiated terms of this Agreement, in confidence and against disclosure to third parties (except to those employees or authorized representatives having a need to know such information and who are bound by confidentiality obligations with respect thereto) with at least the same degree of care as it exercises to protect its own data and license agreements of a similar nature. Each party will only use such information of the other party in accordance with the terms of this Agreement. These obligations will expire [***] ([***]) years after the termination or expiration of this Agreement.

 

26.2

Nothing contained herein will in any way restrict or impair the right of LICENSEE or REGENTS to use, disclose, or otherwise deal with any information or data which:

 

(a)

at the time of disclosure to the receiving party is generally available to the public or thereafter becomes generally available to the public by publication or otherwise, through no act or omission of the receiving party;

 

(b)

the receiving party can show by its contemporaneous written records was in its possession, without confidentiality restrictions, prior to the time of disclosure to it hereunder, and was not acquired directly or indirectly from the disclosing party;

 

(c)

is independently made available to the receiving party, without confidentiality restrictions, as a matter of right by a third party under no obligation of confidentiality to the disclosing party;

 

(d)

is independently developed by the receiving party without any use of the information disclosed, as shown by the receiving party’s contemporaneous written records; or

 

(e)

is subject to disclosure under the California Public Records Act, court order, or other requirements of law, regulation, or rules of a securities exchange, provided that the receiving party promptly informs the disclosing party of such request.

 

26.3

Notwithstanding anything to the contrary in Paragraph 26.1, LICENSEE may disclose proprietary information it receives pursuant to this Agreement, and the terms of this Agreement, to its actual or potential investors, acquirers, and sublicensees who are bound by obligations of confidentiality with respect thereto. REGENTS will be free to release to the inventors, and senior administrators

 

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[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

employed by REGENTS the terms and conditions of this Agreement upon their request. If such request is made, REGENTS will inform such employees of the confidentiality obligations set forth above and will request that they do not disclose such terms and conditions to others. Should a third party inquire whether a license to REGENTS’ PATENT RIGHTS is available, REGENTS may disclose the existence of this Agreement and the extent of the grant in Articles 3 and 4 to such third party, but will not disclose the name of LICENSEE unless LICENSEE has already made such disclosure publicly, except where REGENTS is required to release information under either the California Public Records Act or other applicable law, provided REGENTS gives prior written notice to LICENSEE of such disclosure.

 

26.4

LICENSEE and REGENTS agree to destroy or return to the disclosing party proprietary information received from the other in its possession within [***] ([***]) days following the effective date of termination of this Agreement. However, each party may retain one copy of proprietary information of the other solely for archival purposes in non-working files for the sole purpose of verifying the ownership of the proprietary information, provided such proprietary information will be subject to the confidentiality provisions set forth in this Article 26. LICENSEE and REGENTS agree to provide each other, within [***] ([***]) days following termination of this Agreement, with a written notice that such proprietary information has been returned or destroyed.

 

27.	FORCE MAJEURE

 

27.1

Except for LICENSEE’s obligation to make any payments to REGENTS hereunder, the parties to this Agreement shall be excused from any performance required hereunder if such performance is rendered impossible or unfeasible due to any catastrophes or other major events beyond their reasonable control, including, without limitation, war, riot, and insurrection; laws, proclamations, edicts, ordinances, or regulations; strikes, lockouts, or other serious labor disputes; and floods, fires, explosions, or other natural disasters. When such events have abated, the parties’ respective obligations hereunder will resume.

 

28.	SEVERABILITY

 

28.1

The provisions of this Agreement are severable, and in the event that any provision of this Agreement will be determined to be invalid or unenforceable under any controlling body of law, such invalidity or enforceability will not in any way affect the validity or enforceability of the remaining provisions hereof.

 

29.	APPLICABLE LAW; VENUE; ATTORNEYS’ FEES

 

29.1

THIS AGREEMENT WILL BE CONSTRUED, INTERPRETED, AND APPLIED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, excluding any choice of law rules that would direct the application of the laws of another jurisdiction, but the scope and validity of any patent or patent application

 

Page 30 of 33

 

4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

---

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

 

under REGENTS’ PATENT RIGHTS will be determined by the applicable law of the country of such patent or patent application. Any legal action brought by the parties relating to this Agreement will be conducted in San Francisco, California. The prevailing party in any legal action under this Agreement will be entitled to recover its reasonable attorneys’ fees in addition to its costs and necessary disbursements.

 

30.	ELECTRONIC COPY; COUNTERPARTS

 

30.1

The parties to this document agree that a copy of the original signature to this Agreement (including an electronic copy) may be used for any and all purposes for which the original signature may have been used. The parties further waive any right to challenge the admissibility or authenticity of this document in a court of law based solely on the absence of an original signature.

 

30.2

This Agreement may be executed in two or more counterparts, including by facsimile or electronic exchange of signed copies in PDF format, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument.

 

31.	SCOPE OF AGREEMENT; AMENDMENT; WAIVER

 

31.1

This Agreement, together with the OTHER LICENSE AGREEMENT and the MTA, incorporates the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior agreements, discussions and writings in respect thereof, including without limitation the Letter Agreement dated May 8, 2013.

 

31.2

This Agreement may be altered or modified only by written amendment duly executed by the parties hereto. A waiver of any breach or default of this Agreement shall not constitute a waiver of any other right hereunder or any subsequent breach or default.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate originals by their duly authorized officers or representatives.

 

THE REGENTS OF THE UNIVERSITY, OF CALIFORNIA						4D MOLECULAR THERAPEUTICS LLC
By		/s/ Carol Mimura				By		/s/ David H. Kirn

		Carol Mimura, Ph.D.
		Assistant Vice Chancellor				Printed Name		David H. Kirn
		Office of Technology Licensing

						Title		Co-Founder, Executive Chair
Date		Dec. 19, 2013				Date		December 19, 2013

 

Page 31 of 33

 

4D Molecular Therapeutics LLC		Exclusive License
UC Case No.: B13-135		Confidential

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form S-1 of 4D Molecular Therapeutics, Inc. of our report dated June 19, 2020, except for (i) the effects of disclosing net loss per share information, (ii) the segment information, and (iii) the matters that raise substantial doubt about the Company’s ability to continue as a going concern discussed in Notes 14, 2, and 1, respectively, to the financial statements, as to which the date is October 14, 2020, relating to the financial statements of 4D Molecular Therapeutics, Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

San Jose, California

November 17, 2020